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Banking regulation-act-1949
The document summarizes key aspects of the Banking Regulation Act of 1949 in India. It defines banking as accepting deposits from the public that are repayable on demand. The main objectives of the Act are to ensure sound banking through regulation of branch openings and liquid asset maintenance. It prohibits banks from engaging in trade and allows the Reserve Bank of India to regulate advances, inspect banks, and wind up banks not operating in depositors' interests. At least 51% of bank directors must have expertise in areas like accountancy, banking, or law. The Chairman must be a full-time employee and cannot hold the position for more than 5 years.
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Banking regulation-act-1949
- 1. BANKING REGULATION ACT1949 GROUP-6 GROUP MEMBERS ʹ SANIL JAMES AAKAMSH.S.NAIR ELDHO MATTAI DHANYA VEENA GINAL
- 2. BANKING COMPANIES ININDIA IS GOVERNED BY TWO MAIN LEGISLATIONS : Banking Regulation Act 1949 The reserve Bank of India Act 1934
- 3. BANKING REGULATION ACT-1949 BANKINGDEFINED : ͞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 ͞
- 4. Main Objective ofthe Act To ensure sound banking through regulation covering the opening of branches and maintenance of liquid asset .
- 5. Sec-6 Permitted businessof 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.
- 6. ‡ Managing ,sellingand 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
- 7. Business prohibited forBanks ‡ 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 -19 RESTRICTION ON SUBSIDIARY COMPAANIES Banking company shall not form any EXCEPT subsidiary company
- 8. UNDER FOLLOWING CONDITIONS 1.Sub-section (1) of sec -6 is permissible 2. With the permission in writing of RBI 3. Reserve bank may with prior approval of the central government (To spread the banking in India)
- 9. SEC -22 LICENSINGOF 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
- 10. ‡ The companyshould 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.
- 11. RBI would cancelthe 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)
- 12. Sec-23 OPENING OFBRANCHES ‡ 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)
- 13. Conditions for openingup 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
- 14. Sec-27 RETURNS ‡ Everybanking 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.
- 15. Sec-35 INSPECTION ‡ RBIpossess 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
- 16. Subsection (1) ‡ EmpowersRBI to conduct scrutiny by any one or more officials of RBI of the affairs of banking company and its books and accounts ‡ If the inspection is carried out at the instance of Central Government ,then the report is to be sent to Central Government
- 17. If Central Governmentis in the opinion that the banking business is being conducted detrimental to the interests of depositors then it may instruct to: Prohibit the banking company from receiving deposits Direct the Reserve Bank to apply under Section 38 for the winding up of the banking company
- 18. Sec-20 RESTRICTION ONLOANS 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 ofͶ 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
- 19. Sec-21 POWER OFRESERVE 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
- 20. ‡ RBI mayindicate 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
- 21. Contd:d) Maximum amountup 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
- 22. Sec-10 MANAGEMENT OF BANKINGCOMPANIES ‡ 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
- 23. be proprietors ofany 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
- 24. Sec 10B APPOINTMENTOF 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
- 25. A person willbe 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
- 26. ‡ Directors/chairman appointedunder sec-10A and 10B by RBI can hold office of more than one banking company
- 27. CONCLUSION ‡ The BankingRegulation 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
- 28.