BANKING REGULATION ACT 1949
separate Act for Banking in India. Till 1949,
by Indian Companies Act 1956.
of banking enquiry committee (inadequate capital, dishonest management,
speculative business )
was introduced in parliament in March 1948.
Passed in parliament in February 1949 and The Banking Regulation Act 1949 came
to exist from 16 th March 1949.
Important Provisions of Act:
of Capital Management
of Liquid Assets.
of New Banks.
Regarding Loans and Advances.
the Reserve Bank of India.
to Be Submitted.
up of Banking Companies.
Definition of Banking:
Sec 5 (b)
of the Act defines Banking as, ―Accepting
for the purpose of lending or investment, of deposits of money from the
public, repayable on demand or other wise, and withdrawable by cheque , draft,
order or otherwise.‖
Banking Company: Sec 5 (c) of the Act defines Banking as, ―A company
which transacts the
of banking in India.‖
Forms of business:SEC 5 (c) and 6
, raising up money& lending of money with or without security.
and issuing of letters of credit.
and selling of foreign exchange.
holding, issuing on commission regarding all investments.
of loans and advances.
Act as an
agent of the government, local authority or person.
a good rapport between employees & banks.
cannot carrying on trading activities. (Sec 8)
It cannot hold any immovable property except for
its own use exceeding 7 years .(Sec 9) (Sec 10) KINDS of business CANNOT BE
1 PROVISIONS OF CAPITAL
Banking Companies Incorporated In
value of paid up capital reserve should be Rs 50,000.
minimum paid capital and reserves of Rs 5,00,000, plus in respect of each place
of business .
of an overall limit of Rs 10,00,000.
Incorporated OUTSIDE India:
minimum paid up capital and reserves of Rs 20,00,000 (Bombay or Calcutta or
minimum paid up capital and reserves of Rs 15,00,000. Incorporated OUTSIDE
shares& pay dividend
voting rights of all the share holders shall not exceed 1 %
Reserve Fund: Sec 17
declaring dividend, transfer a sum not less than 20% of its net profit
Management of banking company
Management: Sec 10 A,
special knowledge or practical experience in Accountancy, agriculture , rural
economy, banking, economics and law.
least 2 of them have in cooperation and small scale industry.
shall not have any substantial interest or connection with anyone of any
company or firm.
should have a Director as its whole time or part time chairman of the banking
Maintainance of liquidity :
Statutory liquidity ratio: Sec 24,
Every banking company in India is required to
maintain cash, gold, or unencumbered approved security, valued at a price not
exceeding the current market price and not less than 23 % of its time and
Cash Reserve: Sec 18
Every banking company should maintain 4.25% of total
of its time and demand deposits in the form of cash reserves with RBI.
2 Powers of the Reserve Bank
the reserve bank Election of New Directors.
issue license to new banks.
give permission for starting new branches.
call for information.
Licensing of banks
license from the RBI before commencing the business.
license only after the detailed inspection considering so many factors.
obtain prior permission from Reserve Bank of India for opening new place of
business either in or abroad and also for changing the location.
Entry norms for private banks
Ø Initial minimum paid up capital should be 200 Crore and have to be raised to 300
years of commencement of Business.
contribution should be minimum of 40% paid up capital,
participation in banks equity shall not be exceed than 40 %.
industrial house can promote a new bank.
submit returns on the last Friday of every month or
just preceding day if that day is a public holiday.
Acquisition of business (Sec 36 AE
to 36 AJ)
government shall give a reasonable opportunity to the bank to explain their
Winding up of business ( Section