BANKING

REGULATION ACT
1949

PRESENTED BY
BHAVYA GUPTA (1695)
MBI SEM 3

BANKING DEFINED :
accepting for the purpose of
lending or investment ,of deposits
of
money
from
the
public
,repayable
on
demand
or
otherwise ,and withdrawal by
cheque ,draft ,order or otherwise

Main Objective of the Act

To ensure sound banking

through regulation covering the
opening
of branches
and
maintenance of liquid asset .

DIFFERENT PROVISIONS

Sec-6 Permitted business

of Banks
Banking for borrowing ,raising or
taking up of money ,selling
,collecting and dealing in bills of
exchange
,promissory
notes,
railway
reciepts.Dealing
in
shrares ,bonds,debentures.
Acting as agents for government
Contracting for public and private
loans and issuing the same.

 Managing ,selling and realizing any

property which may come into the
possession of the company .
Undertaking and executing trusts
Establishing and supporting or
aiding in the establishment and
support of associations ,funds ,trust.
Dealing with Acquisition,
construction and maintenance of
building

Business prohibited for

Banks
No
banking
company
shall
directly or indirectly deal in the
buying and selling or bartering
of goods or engage in any kind
of trade or buy.

SEC -22 LICENSING OF

BANKING COMPANIES
RBI issues license to a banking
company after inspecting the
books of the banking company .
And after satisfaction of the
following conditions.
Company is in a position to
settle all the claims
Company should not act against
the interest of the depositors

 The company should have

adequate capital structure and
earning prospects
Public interest should be saved
To follow any other condition the
bank has to take prior
permission of RBI.

RBI would cancel the

license if
The company ceases to carry out
business in India
If the company fails to comply with
the condition imposed upon it
under sub sec (1)
Unfulfillment of the conditions
stated in sec(3)

Sec-23 OPENING OF
BRANCHES
To obtain permission from the RBI for
opening up branches both in domestic
and foreign
Exceptions
A change of location within same
city,town or village
A temporary business service offered
by a banking company
(mela,conference)

Conditions for opening up

branches
The general character of the
management
The financial position of the bank
Maintenance of capital adequacy
norms and earning prospects of the
bank
Maintenance of public interest in
opening up new branches

Sec-27 RETURNS
Every banking company required
to submit a monthly statement
in a prescribed format by RBI
showing its assets and liability
position in the last Friday of the
month.

Sec-35 INSPECTION
RBI possess the right to call for
an inspection of any banking
company and its books and
accounts
To safeguard the interests of the
depositors or its shareholders

Sec-20 RESTRICTION ON
LOANS & ADVANCES
No banking company shall:Grant loans and advances on the
security of its own shares ,or
Enter into any commitment for granting
any loan/advance to or on behalf of
i)Any of its directors
ii)Directors interested as
partner,manager,employee or guarantor
iii)Any individual in respect of whom any
of its directors is a partner/guarantor

Sec-21 POWER OF RESERVE BANK

TO CONTROL ADVANCES BY
BANKING COMPANIES
Act gives RBI enough power to
issue directives to the banking
companies to regulate advances
RBI may determine the policy to
check speculation and rising
prices which the banking
companies shall bound to follow
to disburse loans

 RBI may indicate the following in

that directives:a)The purpose for which advances
may or may not be made
b)Margins to be maintained in
respect of secured advances
c)The max. amount of advances or
other financial accomodation

Contd:d) Maximum amount up to which

,guarantees may be given by a
banking company on behalf of any
one company,firm,association of
persons or individual
e) The rate of interest and other
terms and conditions on which
advances may be
made/guarantees may be given

Sec-10 MANAGEMENT OF
BANKING COMPANIES
Prohibited employment of managing
agents
Section 10A:51% of directors in every board of directors
of banking companies shall satisfy the
following:
shall have knowledge/practical experience
in respect of one or more of the following
matters namelyaccountancy,banking,agriculture & rural
economy,co-operation,law,finance,ssi

 be proprietors of any
trading,commercial or industrial
concern,not being a small scale
industrial concern
Shall not have substantial interest
in,or be connected with,whether as
employee,manager or managing
agent

Sec 10B APPOINTMENT OF

CHAIRMAN
Every banking company must
have a Chairman
Chairman must be in hole time
employment of the banking
company
His period in office cannot
exceed more than 5 yrs though
he can be reappointed

A person will be disqualified as

a chairman if he:
a) Is a director of any company other
than a company referred to in the
proviso to subsection(2)
b) Is a partner of any firm which carries
on any trade ,business or industry or
c) Has substantial interest in any other
company or firm
d) Is directed in any other business or
vocation

 Directors/chairman appointed
under sec-10A and 10B by RBI
can hold office of more than one
banking company

CONCLUSION
The Banking Regulation Act has been
able to ensure effective supervision of
banking in our country to a large extent
Failures of banks though small in
number in the last decade point to the
need for further strengthening of
regulatory frame work
Ongoing globalization provides
opportunities and challenges for the
growth of banking industry in India

THANK
YOU