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Legal and regulatory aspects of banking pdf

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Unit 1 LEGAL FRAMEWORK OF REGULATION OF BANKS: 1. Banking definition – Banking Regulation Act – sec. 5 (b) – acceptance of deposits for lending or. Legal & Regulatory Aspects of Banking - Download as PDF File .pdf), Text File . txt) or read online. Legal and Regulatory Aspects of Banking - JAIIB - Ebook download as PDF File ( .pdf), Text File .txt) or read book online. LEGAL AND REGULATORY ASPECTS.


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ROBO B OOK S M ONO G RA P H DATABASE A DM INIS TRAT ION R AM PANT T ECH P RESS E B OO K PAGE II Oracle DBA Made. could hardly do better than Marcus, the ruler of the Roman. Empire for almost two decades and The reigning emperor, Ha. Third paper: Legal & Regulatory Aspects of Banking – . 3) Regulation of Banking Business - Power of RBI to Issue Directions; Acceptance of.

A public sector bank is a body corporate created under a special statute. Separate nomination for each term deposit having separate account opening form should be taken. In Corporation Bank vs D. Constitution of banks Banks in India fall under one of the following categories: The board has to report to the central board on a half yearly timeline. Licensing of Co-operative banks:

Public Sector Bank. The government has direct and indirect control over banks. Banks may be subject to the control of other regulatory agencies in the conduct of their business.

Banking means acceptance of deposits of money from the public for lending or investment. For instance.

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Central Government has substantial control over the management of these banks. In public sector banks like the State Bank of India and its subsidiaries. Apart from banking. Body Corporate. The study herein is. In the case of non-banking business of the banks. Regional Rural Bank. As provided in Section 6 of the Banking Regulation Act. If the Bank desires to raise capital through public issue.

Such deposits may be repayable on demand or may be for a period of time as agreed to. Banks are constituted as companies registered under the Companies Act. Company Law Board 1. Central Government can give direction to the Reserve Bank. Authorities under the Companies Act.

State Bank. Company Law Board iv Business which a banking company may undertake other than banking is as stipulated by Reserve Bank. All kinds of business of banks is regulated only by the Reserve Bank. State i ii iii whether the following statements are True or False. On cancellation of licence of any bank.

A public sector bank is a body corporate created under a special statute. Reserve Bank iv Company matters of a banking company are regulated by Reserve Bank. Fill in the gaps choosing the answers from the brackets. Central Government is the primary regulator of banks. BR Act. Registrar of Companies.

RBI Act. State governments have no control over co-operative banks. Multi-State Co-operative Societies Act. State i ii iii iv v whether the following statements are True or False. A banking company is registered under the Banking Regulation Act. Central Bank of India. BR Act is applicable to co-operative banks to the extent as provided in the state laws on co-operative societies.

For the purposes of the BR Act. Banking companies operating in India are constituted in the form of body corporate constituted under a special statute. Under the Reserve Bank of India Act. A co-operative society registered under the Multi-State Co-operative Societies Act is prohibited from undertaking banking business. Central Government may give directions to the Reserve Bank when considered necessary in public interest only after consulting the Governor of Reserve Bank. One of the essential characteristics of banking is lending to traders.

A multi-state co-operative bank means a multi-state co-operative society which is a primary co-operative bank. Companies Act applies to banking companies notwithstanding the provisions of the Banking Regulation Act. Reserve Bank regulates acceptance of deposits by all companies.

Reserve Bank may have to be satisfied by an inspection of the books of the banking company or otherwise in respect of the following matters: There are further regulations over the paid-up capital and reserves. Conditions to be Satisfied: Before granting a licence under Section Discretion of Reserve Bank: The granting of licence by the Reserve Bank may be subject to such conditions as the RBI may think fit in each case.

Only if the decision is based on extraneous considerations or is perverse. To start with. When the Act came into force. AI R Mad 8. Sajjan Bank Pvt. The requirement of licence was meant to ensure the continuance of only those banks. The refusal of licence to a company would make it ineligible to undertake banking business. Ahmedabad AIR Guj License Requirement from RBI: To commence or carry on. Reserve Bank has the discretion to grant or refuse the licence and when such decision based on relevant.

It is open to the RBI to consider the defects or improvements revealed in an inspection held under Section 35 of the BR Act while disposing of an application for licence. Commencing or carrying on a banking business without a licence is prohibited. Apart from the above. Cancellation of Licence: Sub-Section 4 of Section 22 of the Banking Regulation Act authorises the Reserve Bank to cancel the licence granted to any banking company.

These arc banking companies operating only in a limited geographical area. Before cancellation of a licence for non-compliance with any of the conditions as above.

These are: Local Area Banks: The Reserve Bank has recognised the concept of local area banks and licensed a few four such banks. Foreign Banks: In the case of companies incorporated outside India applying for a licence.

The cancellation of licence may be on any one or more of the following grounds: The licence issued to these banks would restrict their operations to the specified local area to ensure adequate banking services in that area. Although Section 11 of BR Act specifies the minimum capital and reserves requirements of a banking company.

Public interest. While granting permission for opening or shifting a branch. Opening of a temporary place of business up to one month for purpose of affording banking facilities for any exhibition.

The amounts stipulated have reference to the places of business. General character of its management. Any company wanting to commence banking business has to comply with these requirements. Apart from the requirement of licence for commencing or carrying on banking business.

Under Section 23 of the Banking Regulation Act. Apart from this. When approved. The present guidelines from RBI provide that Banks should submit their request for new branches. ATMs once in a year for consideration of RBI as against the earlier practice of making individual applications for each and every branch.

The securities deposited can be replaced by other unencumbered. This may be done by an inspection of the bank under Section 35 or otherwise. The amount has to be kept in cash.

If any bank fails to comply with such conditions. These restrictions also apply to foreign branches of banking companies incorporated in India. In the case of regional rural banks. For granting permission under Section In the case of any dispute regarding computation of paid-up capital and reserves of any banking company. Adequacy of capital structure and earning prospects.

Section 12 2 of the Act puts certain restrictions on voting rights of shareholders. It only puts a limit on voting rights. The provisions of the Companies Act also govern transfer of shares of banking companies. Banks have been permitted by RBI to raise capital even in the from of innovative debt instruments which are perpetual and perpetual non-cumulative preference shares in addition to the equity capital.

This provision does not in any way affect the transfer of shares or the registration of such transfers. Voting rights of shareholders: There is no specified ceiling on a person's holding of shares in a banking company under the Banking Regulation Act or any other law.

Since Kolkata or both. Section 12 1 of the Banking Regulation Act stipulates that the subscribed capital of a banking company shall not be less than half of its authorised capital. Indian Banks: In case of banking companies incorporated in India.

Rupees l lac for its principal place of business. Paid-up Capital. For banking companies commencing business after the commencement of the Act. Section 12 3 bars suits or other proceedings against registered shareholders by any other person claiming title except by a transferee of shares. On the cessation of business by any foreign bank for any reason.

During Banking companies are permitted to have only ordinary or equity shares. The Central Government can exempt any foreign bank from this requirement on the recommendation of the Reserve Bank for a specified period if the amounts deposited already by it are considered adequate. Now preference shares and other capital instruments are also allowed. If capital is increased. Subscribed Capital and Authorised Capital: If the bank has only one place of business.

Acknowledgement by Resarvc Bank: Reserve Bank has instructed banking companies that when. Formation of Subsidiaries: There are certain restrictions under Section 19 of the Banking Regulation Act on the formation of subsidiaries by banking companies.

Prior permission of the Reserve Bank is a must for t h i s banking business. Such report should contain the full particulars and extent of value of shares held directly or indirectly and of any change in the extent of holding or of any variation in the rights attaching thereto.

The undertaking of any business by a subsidiary will not be deemed to amount to the bank itself taking up that business directly or indirectly for the purpose of Section 8. Reports on shareholding: A report regarding the particulars of shareholding of the chairman. RBI has given detailed eligibility criteria for declaration of dividend by banks and also guidelines on the quantum of dividend that can be declared by banks.

Section 13 of the Banking Regulation Act imposes a ceiling on the commission. This is for purpose of preventing banks from carrying on trading activities by acquiring a controlling interest in non-banking companies.

Reserve Bank may permit only such other business which it considers conducive to the spread of banking in India or otherwise useful or necessary in the public interest. This is with a view to ensure that the controlling interest in a banking company does not change hands without the knowledge and approval of the Reserve Bank. The banks shall not transfer the shares without receiving Reserve Bank's acknowledgement. Such expenses include preliminary expenses.

The Reserve Bank may also order for any other information relating to those shares. There are also certain restrictions on the payment of dividend to the shareholders of banking companies.

Reconstitution of Board: When the board of a banking company is not constituted in accordance with the requirements of Section 10A of the BR Act. Section 1 OA of the Banking Regulation Act stipulates certain qualifications for directors of banking companies. The proprietors of trading. Substantial interest: The directors of a banking company shall not have a substantial interest in or be connected with as employee.

In the case of firms. Accordingly at least fifty-one per cent of the total number of directors shall be persons. Period of office: The directors of a banking company shall not hold office for more than eight years continuously. If any director has to be retired for such a reconstitution.

If the Reserve Bank is of the opinion that the board of any banking company does not fulfil the requirements. When the chairman or a whole-time director of a bank is removed from office.

Shareholding in other companies: Apart from the restriction on subsidiaries. Although the chairman is in full-time employment of the bank. Section I OB of the Banking Regulation Act provides that every banking company should have a full-time or part-time chairman. Temporary vacancies: In cases where the wholetime chairman or the managing director dies or. The Reserve Bank may also permit the whole-time chairman or the managing director to undertake part-time honorary work not likely to interfere with the duties of the chairman or the managing director.

The chairman. If the banking company does not comply with the order within two months. In the absence of a chairman. The whole-time chairman and a managing director shall hold office for a period not exceeding five years as the board may fix and is also eligible for reelection or reappointment. The whole-time chairman or the managing director will be disqualified under the following circumstances: The whole-time chairman or the managing director of a banking company should have special knowledge or practical experience of the working of a banking company or the State Bank or a subsidiary bank or a financial institution or financial.

The order of the Government where an appeal is filed and the order of the Reserve Bank. Such a chairman or managing director would continue in office. The exercise of powers by the whole-time chairman or managing director is subject to the superintendence. If the Reserve Bank is of the opinion that the person elected to be the chairman of the board of directors and appointed on a whole time basis or the managing director is not a fit and proper person to hold such office.

The chairman on a part-time basis has to be appointed with the prior approval of the Reserve Bank and such an appointment shall be subject to any conditions that may be imposed by the Reserve Bank while granting approval. The banking company or the person affected by the Reserve Bank s order may appeal to the Central Government within thirty days. Qualification shares: The whole-time chairman or the managing director of a banking company is exempted under Section IOC of the Banking Regulation Act from the requirement of holding qualification shares.

Subject to this. Any person affected by any action taken under these provisions is not entitled to any compensation for any loss or for termination of office. If the chairman or the managing director so appointed is not a director of the banking company.

Overriding provisions: The provisions of Section 10A. There is also a provision for reappointment after the initial period. Power of Reserve Bank to appoint 'hairman: In certain cases. Similar exemption is also available to a director of a banking company appointed by Reserve Bank under Section 10A of the Act.

The Banking Regulation Act Section 10 prohibits employment of managing agents and imposes restrictions on employment of certain type of persons.

This may adversely affect the interests of the banking company. The additional directors are protected from any liability or obligation for executing their functions in good faith. They hold office during the pleasure of the Reserve Bank. The directors so appointed shall not require any qualification shares.

If the Reserve Bank is of the opinion that continuation of such vacancy is likely to be against the interests of the banking company. One or more additional directors may be so appointed when the bank is of the opinion that it is necessary to do so in the interest of: The chairman or the managing director so appointed may be removed from office only by the Reserve Bank and shall draw pay and allowances from the banking company.

Such appointment may be for a period not exceeding three years. The provisions of Section 36AB have overriding effect over other laws. Where an urgent action is required and delay would be against the interests of the company or its depositors. The above restrictions are applicable to workmen as well as management personnel. Such an appeal has to be filed within thirty days from the date of communication of the order.

The Reserve Bank has to pass such an order recording the reasons in writing. The bank RBI has the discretionary power to remove management and other personnel in the following circumstances: Power to remove Management and other personnel: For this purpose. Before forming an opinion regarding the remuneration. An appeal against the order of removal lies with the Central Government. The person so removed shall not be entitled to any compensation for loss of office notwithstanding anything contained in any law.

Commission paid to brokers. Persons who are directors of any company other than a subsidiary of a banking company or company registered under Section 25 of the Companies Act are also prohibited from managing a banking company. Before passing the order..

The appellate decision of the Central Government. The Concept: Corporate governance is a dynamic concept involving promotion of corporate fairness. In the equitable treatment of shareholders are included the minority and foreign shareholders. To recognise the rights of stakeholders. To protect and facilitate the exercise of shareholders' rights. Contravention of the order is punishable with a fine of Rs.

Strategic guidance of the company. These principles are applicable to all types of companies including banks. Corporate governance can be seen as kthe way in which boards oversee the running of a company by its managers.

The concept has evolved since the first major study by the Cadbury Committee in Timely and accurate disclosures made on all material matters. The OECD principles of corporate governance. It is a concept of recent origin. Such appointee shall not incur any obligation or liability for action taken in good faith in the execution of the duties of his office.

To promote transparent and efficient markets which are consistent with the rule of law. Effect of the order of removal: On the Reserve Bank passing a removal order. Such person shall hold office at the pleasure of the Reserve Bank. Appointment of a suitable person: When any chairman. The DECO principles of corporate governance published in Any higher level of. The RBI guidelines on ownership and governance in the private sector banks released on February Verma which submitted its report in January.

Patil had submitted its report in March. Ganguly with a view to strengthen the internal supervisory role of the boards of banks. The report of the group was transmitted to all the banks for their consideration in June. This provides an added impetus for convergence in standards internationally.

Reserve Bank's approach: Following the formal policy announcement in regard to corporate governance. This guidance. Corporate Governance and Banks: Banks hold a special position in corporate governance as they accept and deploy large amounts of public funds in fiduciary capacity and also leverage such funds through credit creation.

The position of banks is also important for the smooth functioning of the payment system. There were also some relevant observations by the advisory group on banking supervision under the chairmanship of Shri M. Keeping all these recommendations in view and the cross-country experience. Securities and Exchange Board of India in respect of listed entities are involved apart from the Reserve Bank in respect of banks.

The Basel Committee on Banking Supervision has issued guidance February for promoting the adoption of sound practices of corporate governance by banking institutions. In almost all countries. Shareholding i The RBI guidelines on acknowledgement for acquisition or transfer of shares issued on 3 February.

Apart from the fiduciary role of banks. RBI may permit a higher level of shareholding. With regard to public sector banks. Where the ownership is that of a financial entity the objective will be to ensure that it is a well-established regulated entity.

While the respective entities should perform the roles envisaged for them. The Act as amended provides for shareholder directors to be a person having Tit and proper' status and the Reserve Bank has to notify the 'Fit and Proper' criteria Section 9 2 1. The Reserve Bank has powers to remove the chairman and appoint a suitable person in his place in certain cases.

The directors should not have substantial interest in other companies or firms. The commission or brokerage payable on selling shares is restricted to two and half per cent of the paid-up value of the shares.

A licence once given may also be cancelled after giving the bank an opportunity to be heard. The Reserve Bank has the discretion to reject licence or approve the licence on such conditions as it thinks fit.

Banking companies have to have minimum capital and reserves as specified in the Banking Regulation Act. The principles of corporate governance including the Tit and proper' criteria for directors apply to banking companies as well as public sector banks. Section 6 I a to o of the BR Act. Reserve Bank has to be satisfied by inspection or otherwise of the suitability of the company for licence.

Authorised Capital. The Reserve Bank is empowered to reconstitute the board. The shareholders of a banking company are entitled to dividends only after all the capitalised expenses are written off.

The board of directors of a bank has to be constituted with persons hav ing special knowledge or experience in accountancy. The Reserve Bank also has powers to remove the directors or managerial personnel or other employees of banking companies. Before granting licence. The maximum period of office is limited to eight years continuously.

Hvery banking company should have a full-time chairman or a full-time managing director. Subscribed Capital. Say whether True or False. Place of Business: Substantial Interest. Overriding Provisions.

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Reserve Bank has to. Fill in the gaps choosing the answer from the brackets. SEBI has stipulated the Tit and proper' criteria for directors of banking companies. A banking company can form subsidiaries for undertaking any business approved by its board of directors. A banking company can form subsidiaries for undertaking any business mentioned in Section 6 1 a to o of the BR Act. A banking company does not require the permission of the Reserve Bank to form a subsidiary for doing banking business exclusively outside India.

The chairman of a banking company can be on part-time basis and a managing director can be appointed on whole-time basis who shall be entrusted with the whole of the affairs of the banking company. Reserve Bank. Reserve Bank is not empowered to cancel the licence granted to a banking company on the ground that.

The chairman of a banking company can be on part-time basis and the whole of the affairs of the banking company shall be entrusted to a committee of the board of directors. A bank requires permission of the Reserve Bank for opening a new branch or shifting an existing branch. Choose the correct statements from the following. In the case of a banking company. The circulars of the Reserve Bank giving instructions to banks where it has statutory powers to give such instructions are also binding on the banks.

There are also provisions for maintenance of cash reserve. The court found that the action of the banks violated the Reserve Bank's instructions and held that the violations would not invalidate the contracts with third parties but would render the banks liable to prosecution.

Paras 3. The Custodian AIR SC in the context of some banks entering into certain repo transactions against the circulars of the Reserve Bank prohibiting such transactions.

Section 35A gives wide powers generally to regulate banking companies. The Reserve Bank's powers to issue directions are over the banks. The effect of directions will be prospective and not retrospective in the absence of any statutory provisions providing for retrospective operation of directions. While Section 21 gives the power to regulate advances by banking companies. Regulation of deposits and loans and advances are discussed below See. The Banking Regulation: Nature of Directions: The Banking Regulation Act also imposes certain restrictions on loans and advances to the directors of banking companies.

The Reserve Bank has been issuing directions from time to time under Section 21 read with Section 35A regulating rates of interest and other terms and conditions of acceptance of deposits and making of loans and advances.

The Act contains provisions for creation of a reserve fund and transfer of a percentage of profits to that fund. Section 35A which authorises the Reserve Bank to give directions is wide enough to cover acceptance of deposits. In that case the Court considered the power of the Reserve Bank to issue directions for superseding the board of a co-operative bank for securing its proper management and upheld the action taken by the Reserve Bank on the finding that it was without mala fide.

The Reserve Bank issues directions from time to time regulating the rates of interest applicable to deposits. The powers of the Reserve Bank to issue directions have to be exercised with bonafide intentions. Returns on unclaimed deposits: Banks have to file a return every year on their unclaimed deposits under Section 26 of the Banking Regulation Act.

The definition of "banking" in Section 5 b of the Banking Regulation Act acknowledges this position. The directions issued by the Reserve Bank may also stipulate conditions regarding minimum or maximum periods for which deposits may be accepted.

Bank Ltd. As discussed in unit I.

Aspects regulatory pdf banking and of legal

In the case of fixed deposits the period of ten years starts from the expiry of the period of the deposit. The return has to be filed within thirty days of the end of each calendar year in the form and manner prescribed and should cover all deposits not operated for ten years. Types of Deposits: Banks accept different types of deposits. Regulation of acceptance of deposits: The Banking Regulation Act does not contain any specific provisions for regulation of acceptance of deposits of banks.

The period of the deposit and rate of interest applicable to the deposit are matters to be agreed between the depositor and the bank under the terms of the deposit. AIR Guj NRI deposits. While time deposits. Caution and Advice: Apart from giving directions. Section 36 of the Banking Regulation Act provides that the Reserve Bank may caution or prohibit banking companies generally or any banking company in particular against any transaction or class of transactions.

Payment by a bank in accordance with these provisions gives a valid discharge to the bank. Rules 3 and 4 of the Banking Companies Nomination Rules. The Reserve Bank may determine the policy in relation to advances and issue directions when it is satisfied that it is necessary to give directions: Such directions may be issued to banking companies generally or to any particular banking company.

Rule 2 of the Banking Companies Nomination Rules. Unless the nomination is varied or cancelled. The nomination has to be in the prescribed manner and on return of articles kept in safe custody or removal of contents of locker by nominees as provided.

Repayment of Deposits: Section 45ZA of the Banking Regulation Act provides that a depositor or depositors of a banking company including co-operative banks may nominate one person in the prescribed manner as nominee to whom the deposit may be returned in the event of death of the sole depositor or depositors.

In the case of minor nominees. Articles in Safe Custody and Safety Lockers: There are also provisions in the Banking Regulation Act for nomination in respect of articles kept in safe custody with banks and safety lockers. Sections 45ZC and 45ZE provide that any person who leaves any article in safe custody and in safety lockers respectively with a banking company. The policy on these matters may be specified having regard to the paid-up capital.

Regulation of Loans and Advances a The Reserve Bank is empowered under Section 21 of the Banking Regulation Act to issue directions to control advances by banking companies. The definition of "banking' in Section 5 b of the Banking Regulation Act indicates that acceptance of deposits may be for lending or investment.

Lending may be for short term or long term. In the case of Co-operative banks. If the director of a banking company is a partner or guarantor of any individual. Selective credit control seeks to influence the demand for credit by i making borrowing more costly for certain purposes which are considered relatively inessential. Restrictions on loans and advances: Section 20 of the Banking Regulation Act imposes certain restrictions on loans and advances.

These cover the quantum of credit that can be extended and also the rate at which it can be extended. Public Sector Banks and Co-operative Banks. The Reserve Bank of India and the Government of India exercise control over banks from the opening of banks to their winding up by virtue of the powers conferred under these statutes. The applicability of the provisions of these Acts to a bank depends on its constitution. These characteristics are not equivalent to a definition.

Such deposits may be repayable on demand or otherwise and withdrawable by cheque. All the regulatory provisions are not uniformly applicable to all banks. Deposits Withdrawable by Cheque: Definition of Banking: Banking is defined in Section 5 b of the Banking Regulation Act as the acceptance of deposits of money from the public for the purpose of lending or investment.

In terms of the definition. Paget's Law of Banking. The deposits may be repayable on demand or for a period of time as agreed by the banker and the customer. The "Know Your Customer" guidelines issued by the Reserve Bank require banks to follow certain customer identification procedure for opening of accounts for protecting the banks from frauds.

In this unit. The Savings Bank. There is no exhaustive definition of "banking" in Common Law of England. Licence for Banking: In India. Scheme run by the government. Permitted Business: Every banking company has to use the word "bank" as part of its name See. The forms of business permissible under Section 6 1 of the Banking Regulation Act.

Section 7 of the Act and no company other than a banking company can use the words "bank". This prohibition does not apply to acceptance of deposits by those who are mainly engaged in manufacturing or trading. Acceptance of Deposits by Non-banking Entities: There are also non-banking companies. Subsidiaries of banks and association of banks in certain cases as also Primary Credit Societies are exempted from this restriction.

Banks in India fall under one of the following categories: The Reserve Bank may extend this period by another five years. The banking company shall be required to dispose of such property within the permitted period. Prohibited Business: Section 8 of the Banking Regulation Act prohibits a banking company from engaging directly or indirectly in trading activities and undertaking trading risks. It can also buy or sell or barter for others in connection with: The Central Government has accordingly specified leasing and factoring as permissible business for banks.

As regards immoveable properties. Buying or selling or bartering of goods directly or indirectly is prohibited. Section 9 prohibits a banking company from holding such property. Goods for the purpose of this Section means every kind of moveable property. Section 18 of the Act provides for direct discount of bills of exchange and promissory notes when a special occasion arises. Banking Companies: A banking company. Public Sector Banks: The public sector banks including nationalised banks.

The Act deals with the constitution. Such company may be a company constituted under Section 3 of the Companies Act or a foreign company within the meaning of Section of that Act. In other cases. All the private sector banks are banking companies. The regional rural banks are constituted under the Regional Rural Banks Act. Co-operative Banks: A co-operative bank is a co-operative society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-state co-operative societies.

The details are discussed in Unit 5. The Reserve Bank of India Act. The Act came into force on 6th March State Bank of India and its associates subsidiaries and the Regional Rural Banks fall in the first category.

The Act. If a co-operative bank is operating in more than one state. A "multi-state cooperative bank" under this Act means a multi-state co-operative society which is a primary cooperative bank. These banks are governed by the statutes creating them as also some of the provisions of the Banking Regulation Act and the Reserve Bank of India Act. It does not directly deal with regulation of the banking system except for Section These banks are governed by the Companies Act.

The Act has been amended from time to time to meet the demands of changing times. The Act regulates entry into banking business by licensing as provided in Section 22 thereof. In short. There are several provisions in the Act regulating the business of banking such as restriction on loans and advances. Companies Act. The provisions of the Act are applicable to banking companies in addition to other laws which are applicable to such companies.

The Banking Regulation Act. The Act also puts restrictions on the shareholding. The Bank has its central office in Mumbai and offices in Mumbai. There are provisions regarding audit and inspection and submission of balance sheets and accounts.

The Act provides for control over the management of banking companies and also deals with the procedure for winding up of the business of the banks and penalties for violation of its provisions.

The Reserve Bank is a body corporate having perpetual succession and common seal and shall sue and be sued in its name. The whole capital of the bank is held by the Central Government.

Delhi and Chennai. The bank functions under the general superintendence and directions of the Central Board of. Section The Reserve Bank is the primary regulator of banks. The bank also inspects banks and exercises supervisory powers.

Executive Directors and other officers in different grades assist the Governor in the discharge of the Bank's functions. In the case of state governments. The bank is the banker to the Central Government under Section 20 of the Act. The Deputy Governors. In exercise of the powers under that Act the bank regulates the entry into banking business by licensing.

Apart from the Central Board. The role of the bank as regulator of banking sector is mainly by virtue of the provisions of the Banking Regulation Act. The board shall consist of a Governor and not more than four Deputy Governors to be appointed by Central Government and other directors nominated by the Central Government. Bank provides ways and means of advances to the Central and state governments. The bank has to abide by the directions given by the Central Government in public interest after consultation with the Governor of the bank.

The government holds the entire capital of the Reserve Bank and appoints the Governor and the mr. The major powers of the Reserve Bank in the different roles as regulator and supervisor can be summed up as under: Such notes shall be legal tender at any place in India.

These are temporary advances to meet immediate needs when there is interval between expenditure and flow of revenue. The Governor has the power of general superintendence and direction of the affairs of the bank and exercise all powers of the bank unless otherwise provided in the regulations made by the Central Board. The bank may issue notes of different denominations from Rs.

The Registrar of co-operative societies under the Co-operative Societies Act exercises a wide range of powers on co-operative societies from registration to winding up. In that case.

In the case of co-operative banks which are registered under the Deposit Insurance and Credit Guarantee Corporation Act. Cooperative banks operating in one state only are registered under the State co-operative Societies Act concerned. While the formation and management of co-operative societies operating in one state only including those conducting banking business are under the control of the State Government.

The government has also the power to notify other forms of business which a bank may undertake under Section 6 1 o of the Act. These are in addition to the powers conferred on the government as majority shareholder or full owner of public sector banks under the statutes constituting them. In the case of co-operative banks operating in more than one state. The above provisions confer wide powers on the Central Government to regulate banks. A co-operative bank is a co-operative society engaged in the business of banking and may be a primary Co-operative bank.

There are also other provisions under which the Central Government exercises powers as under: Rule-making powers under Sections 52 and 45Y are vested in the Central Government. With the introduction of Section 56 in the Banking Regulation Act. The circumstances in which Reserve Bank may require winding up are mentioned in Section 13D of the Act. The formation of such banks as well as their management and control over personnel is regulated by the co-operative law of the state.

Apart from banking. Nationalised Bank. Such deposits may be repayable on demand or may be for a period of time as agreed to. The government has direct and indirect control over banks. It can exercise indirect control through the Reserve Bank and also act directly in appeals arising from decisions of the Reserve Bank under the various provisions of the Banking Regulation Act.

Reserve Bank of India is the central bank of the country and the primary regulator for the banking sector. In that regard also.

Banking Company. Co-operative Bank. In the case of non-banking business of the banks. Body Corporate. Co-operative banks operating in one state only are registered under the State Co-operative Societies Act and are subject to the control of the State Government as also the Reserve Bank.

Banks are. As provided in Section 6 of the Banking Regulation Act. The study herein is. Regional Rural Bank. Banks may be subject to the control of other regulatory agencies in the conduct of their business.

And regulatory aspects of banking pdf legal

Central Government has substantial control over the management of these banks. Only certain provisions of the BR Act are applicable to these banks as indicated in that Act. Banking means acceptance of deposits of money from the public for lending or investment. If the Bank desires to raise capital through public issue. For instance. Banks are also liable to pay income tax like cash transaction tax. The extent of applicability of the regulatory provisions under the Banking Regulation Act and the Reserve Bank of India Act to a bank depends on the constitution of the bank.

In public sector banks like the State Bank of India and its subsidiaries. Banks are constituted as companies registered under the Companies Act. Public Sector Bank. In case of Insurance Business. Multi-State Co-operative Societies Act. Central Bank of i Co-operative banks operating in different states are registered under India. Registrar of Companies. Reserve Bank Reserve Bank. RBI Act. State whether the following statements are True or False. Fill in the gaps choosing the answers from the brackets.

State Bank. Company Law Board 1. BR Act. For the purposes of the BR Act. Under the Reserve Bank of India Act. Apart from the above. AI R Mad 8. Ahmedabad AIR Guj License Requirement from RBI: To commence or carry on. Sajjan Bank Pvt. Reserve Bank has the discretion to grant or refuse the licence and when such decision based on relevant.

The refusal of licence to a company would make it ineligible to undertake banking business. To start with. Commencing or carrying on a banking business without a licence is prohibited. Conditions to be Satisfied: Before granting a licence under Section Reserve Bank may have to be satisfied by an inspection of the books of the banking company or otherwise in respect of the fnllnwintr matters-.

When the Act came into force. Only if the decision is based on extraneous considerations or is perverse. It is open to the RBI to consider the defects or improvements revealed in an inspection held under Section 35 of the BR Act while disposing of an application for licence.

There are further regulations over the paid-up capital and reserves. Discretion of Reserve Bank: The granting of licence by the Reserve Bank may be subject to such conditions as the RBI may think fit in each case.

The requirement of licence was meant to ensure the continuance of only those banks. Local Area Banks: The Reserve Bank has recognised the concept of local area banks and licensed a few four such banks. Foreign Banks: In the case of companies incorporated outside India applying for a licence. Before cancellation of a licence for non-compliance with any of the conditions as above.

The licence issued to these banks would restrict their operations to the specified local area to ensure adequate banking services in that area. These are banking companies operating only in a limited geographical area. The cancellation of licence may be on any one or more of the following grounds: These are: Cancellation of Licence: Sub-Section 4 of Section 22 of the Banking Regulation Act authorises the Reserve Bank to cancel the licence granted to any banking company.

Although Section 11 of BR Act specifies the minimum capital and reserves requirements of a banking company. In the case of any dispute regarding computation of paid-up capital and reserves of any banking company. The amounts stipulated have reference to the places of business. While granting permission for opening or shifting a branch.

Any company wanting to commence banking business has to comply with these requirements. If any bank fails to comply with such conditions. Opening of a temporary place of business up to one month for purpose of affording banking facilities for any exhibition. In the case of regional rural banks.

The present guidelines from RBI provide that Banks should submit their request for new branches. When approved.

ATMs once in a year for consideration of RBI as against the earlier practice of making individual applications for each and every branch.

These restrictions also apply to foreign branches of banking companies incorporated in India. Apart from the requirement of licence for commencing or carrying on banking business. For granting permission under Section This may be done by an inspection of the bank under Section 35 or otherwise.

The amount has to be kept in cash. The securities deposited can be replaced by other unencumbered. Apart from this. Under Section 23 of the Banking Regulation Act. Since Now preference shares and other capital instruments are also allowed.

If capital is increased. Banking companies are permitted to have only ordinary or equity shares. For banking companies commencing business after the commencement of the Act.

Section 12 3 bars suits or other proceedings against registered shareholders by any other person claiming title except by a transferee of shares.

The Central Government can exempt any foreign bank from this requirement on the recommendation of the Reserve Bank for a specified period if the amounts deposited already by it are considered adequate. Acknowledgement by Reserve Bank: Reserve Bank has instructed banking companies that when. It only puts a limit on voting rights. Section 12 2 of the Act puts certain restrictions on voting rights of shareholders.

This provision does not in any way affect the transfer of shares or the registration of such transfers.

Indian Banks: In case of banking companies incorporated in India. Section 12 1 of the Banking Regulation Act stipulates that the subscribed capital of a banking company shall not be less than half of its authorised capital. If the bank has only one place of business. Voting rights of shareholders: There is no specified ceiling on a person's holding of shares in a banking company under the Banking Regulation Act or any other law. On the cessation of business by any foreign bank for any reason.

Kolkata or both. During Subscribed Capital and Authorised Capital: Rupees 1 lac for its principal place of business. Paid-up Capital. Banks have been permitted by RBI to raise capital even in the from of innovative debt instruments which are perpetual and perpetual non-cumulative preference shares in addition to the equity capital. The provisions of the Companies Act also govern transfer of shares of banking companies. Prior permission of the Reserve Bank is a must for this banking business.

Reserve Bank may permit only such other business which it considers conducive to the spread of banking in India or otherwise useful or necessary in the public interest. There are also certain restrictions on the payment of dividend to the shareholders of banking companies. Formation of Subsidiaries: There are certain restrictions under Section 19 of the Banking Regulation Act on the formation of subsidiaries by banking companies.

Such report should contain the full particulars and extent of value of shares held directly or indirectly and of any change in the extent of holding or of any variation in the rights attaching thereto. RBI has given detailed eligibility criteria for declaration of dividend by banks and also guidelines on the quantum of dividend that can be declared by banks.

Reports on shareholding: A report regarding the particulars of shareholding of the chairman. The Reserve Bank may also order for any other information relating to those shares.

Legal & Regulatory Aspects of Banking

This is for purpose of preventing banks from carrying on trading activities by acquiring a controlling interest in non-banking companies. This is with a view to ensure that the controlling interest in a banking company does not change hands without the knowledge and approval of the Reserve Bank.

The undertaking of any business by a subsidiary will not be deemed to amount to the bank itself taking up that business directly or indirectly for the purpose of Section 8. Such expenses include preliminary expenses. Section 13 of the Banking Regulation Act imposes a ceiling on the commission.

The banks shall not transfer the shares without receiving Reserve Bank's acknowledgement. Section lOAofthe Banking RegulationAct stipulates certain qualifications fordirectors of banking companies.

In the case of firms. If any director has to be retired for such a reconstitution. Accordingly at least fifty-one per cent of the total number of directors shall be persons. Period of office: The directors of a banking company shall not hold office for more than eight years continuously.

If the Reserve Bank is of the opinion that the board of any banking company does not fulfil the requirements. The proprietors of trading. When the chairman or a whole-time director of a bank is removed from office. Reconstitution of Board: When the board of a banking company is not constituted in accordance with the requirements of Section 10A of the BR Act. Substantial interest: The directors of a banking company shall not have a substantial interest in or be connected with as employee.

Shareholding in other companies: Apart from the restriction on subsidiaries. If the Reserve Bank is of the opinion that the person elected to be the chairman of the board of directors and appointed on a whole time basis or the managing director is not a fit and proper person to hold such office. Such a chairman or managing director would continue in office. The chairman on a part-time basis has to be appointed with the prior approval of the Reserve Bank and such an appointment shall be subject to any conditions that may be imposed by the Reserve Bank while granting approval.

The Reserve Bank may also permit the whole-time chairman or the managing director to undertake part-time honorary work not likely to interfere with the duties of the chairman or the managing director. In the absence of a chairman. The banking company or the person affected by the Reserve Bank's order may appeal to the Central Government within thirty days.

If the banking company does not comply with the order within two months. The whole-time chairman or the managing director of a banking company should have special knowledge or practical experience of the working of a banking company or the State Bank or a subsidiary bank or a financial institution or financial. Although the chairman is in full-time employment of the bank.

The order of the Government where an appeal is filed and the order of the Reserve Bank. The whole-time chairman and a managing director shall hold office for a period not exceeding five years as the board may fix and is also eligible for reelection or reappointment.

Temporary vacancies: In cases where the wholetime chairman or the managing director dies or. Section 1 OB of the Banking Regulation Act provides that every banking company should have a full-time or part-time chairman. The chairman. The whole-time chairman or the managing director will be disqualified under the following circumstances: The exercise of powers by the whole-time chairman or managing director is subject to the superintendence.

The chairman or the managing director so appointed may be removed from office only by the Reserve Bank and shall draw pay and allowances from the banking company. Power of Reserve Bank to appoint Chairman: In certain cases. Any person affected by any action taken under these provisions is not entitled to any compensation for any loss or for termination of office. The Banking Regulation Act Section 10 prohibits employment of managing agents and imposes restrictions on employment of certain type of persons.

The provisions of Section 36AB have overriding effect over other laws. There is also a provision for reappointment after the initial period. If the chairman or the managing director so appointed is not a director of the banking company.

If the Reserve Bank is of the opinion that continuation of such vacancy is likely to be against the interests of the banking company. Overriding provisions: The provisions of Section 10A. Such appointment may be for a period not exceeding three years. One or more additional directors may be so appointed when the bank is of the opinion that it is necessary to do so in the interest of: The additional directors are protected from any liability or obligation for executing their functions in good faith.

They hold office during the pleasure of the Reserve Bank. This may adversely affect the interests of the banking company. The directors so appointed shall not require any qualification shares. Similar exemption is also available to a director of a banking company appointed by Reserve Bank under Section 10A of the Act. Qualification shares: The whole-time chairman or the managing director of a banking company is exempted under Section IOC of the Banking Regulation Act from the requirement of holding qualification shares.

Subject to this. The appellate decision of the Central Government. Before forming an opinion regarding the remuneration. Where an urgent action is required and delay would be against the interests of the company or its depositors.

Before passing the order. For this purpose. Persons who are directors of any company other than a subsidiary of a banking company or company registered under Section 25 of the Companies Act are also prohibited from managing a banking company.. Commission paid to brokers. The bank RBI has the discretionary power to remove management and other personnel in the following circumstances: The person so removed shall not be entitled to any compensation for loss of office notwithstanding anything contained in any law.

An appeal against the order of removal lies with the Central Government. Such an appeal has to be filed within thirty days from the date of communication of the order. The above restrictions are applicable to workmen as well as management personnel.

The Reserve Bank has to pass such an order recording the reasons in writing. Power to remove Management and other personnel: It is a concept of recent origin. Appointment of a suitable person: When any chairman. The OECD principles of corporate governance. Effect of the order of removal: On the Reserve Bank passing a removal order. In the equitable treatment of shareholders are included the minority and foreign shareholders.

Corporate governance can be seen as 'the way in which boards oversee the running of a company by its managers. The concept has evolved since the first major study by the Cadbury Committee in To recognise the rights of stakeholders. Contravention of the order is punishable with a fine of Rs.

The Concept: Corporate governance is a dynamic concept involving promotion of corporate fairness. Strategic guidance of the company. Timely and accurate disclosures made on all material matters.

Banking legal of and pdf regulatory aspects

Such appointee shall not incur any obligation or liability for action taken in good faith in the execution of the duties of his office. These principles are applicable to all types of companies including banks.

The DECO principles of corporate governance published in To promote transparent and efficient markets which are consistent with the rule of law. To protect and facilitate the exercise of shareholders' rights. Such person shall hold office at the pleasure of the Reserve Bank. This guidance. Corporate Governance and Banks: Banks hold a special position in corporate governance as they accept and deploy large amounts of public funds in fiduciary capacity and also leverage such funds through credit creation.

The Basel Committee on Banking Supervision has issued guidance February for promoting the adoption of sound practices of corporate governance by banking institutions. Ganguly with a view to strengthen the internal supervisory role of the boards of banks. The report of the group was transmitted to all the banks for their consideration in June. This provides an added impetus for convergence in standards internationally. The RBI guidelines on ownership and governance in the private sector banks released on February Verma which submitted its report in January.

Reserve Bank's approach: Following the formal policy announcement in regard to corporate governance. The position of banks is also important for the smooth functioning of the payment system.

Shareholding i The RBI guidelines on acknowledgement for acquisition or transfer of shares issued on 3 February.

There were also some relevant observations by the advisory group on banking supervision under the chairmanship of Shri M. In almost all countries. Apart from the fiduciary role of banks. Keeping all these recommendations in view and the cross-country experience. Patil had submitted its report in March. Securities and Exchange Board of India in respect of listed entities are involved apart from the Reserve Bank in respect of banks.

Any higher level of. The Act as amended provides for shareholder directors to be a person having 'fit and proper' status and the Reserve Bank has to notify the 'Fit and Proper' criteria [Section 9 2 ]. With regard to public sector banks. While the respective entities should perform the roles envisaged for them. Where the ownership is that of a financial entity the objective will be to ensure that it is a well-established regulated entity. In addition. RBI may permit a higher level of shareholding.

The board of directors of a bank has to be constituted with persons having special knowledge or experience in accountancy. Overriding Provisions. The principles of corporate governance including the 'fit and proper' criteria for directors apply to banking companies as well as public sector banks.

Before granting licence. Authorised Capital. The maximum period of office is limited to eight years continuously. Say whether True or False. The commission or brokerage payable on selling shares is restricted to two and half per cent of the paid-up value of the shares.

Subscribed Capital. Section 6 1 a to o of the BR Act. A licence once given may also be cancelled after giving the bank an opportunity to be heard.

Substantial Interest. The Reserve Bank is empowered to reconstitute the board. Place of Business. The shareholders of a banking company are entitled to dividends only after all the capitalised expenses are written off.

Reserve Bank has to be satisfied by inspection or otherwise of the suitability of the company for licence. The Reserve Bank has powers to remove the chairman and appoint a suitable person in his place in certain cases. The Reserve Bank also has powers to remove the directors or managerial personnel or other employees of banking companies.

The Reserve Bank has the discretion to reject licence or approve the licence on such conditions as it thinks fit. Every banking company should have a full-time chairman or a full-time managing director. The directors should not have substantial interest in other companies or firms.

Banking companies have to have minimum capital and reserves as specified in the Banking Regulation Act. Fill in the gaps choosing the answer from the brackets. SEBI has stipulated the 'fit and proper' criteria for directors of banking companies.

In addition to the requirements as to minimum capital and reserves under Section 11 of the BR Act. In the case of a banking company. Choose the correct statements from the following. While Section 21 gives the power to regulate advances by banking companies.

Regulation of deposits and loans and advances are discussed below See. The Reserve Bank's powers to issue directions are over the banks. Section 35A gives wide powers generally to regulate banking companies.

The court found that the action of the banks violated the Reserve Bank's instructions and held that the violations would not invalidate the contracts with third parties but would render the banks liable to prosecution.

The circulars of the Reserve Bank giving instructions to banks where it has statutory powers to give such instructions are also binding on the banks. The Banking Regulation Act also imposes certain restrictions on loans and advances to the directors of banking companies. Nature of Directions: The Custodian AIR SC in the context of some banks entering into certain repo transactions against the circulars of the Reserve Bank prohibiting such transactions. Paras 3. The Banking Regulation: The effect of directions will be prospective and not retrospective in the absence of any statutory provisions providing for retrospective operation of directions.

The Act contains provisions for creation of a reserve fund and transfer of a percentage of profits to that fund. There are also provisions for maintenance of cash reserve. The Reserve Bank has been issuing directions from time to time under Section 21 read with Section 35A regulating rates of interest and other terms and conditions of acceptance of deposits and making of loans and advances. In that case the Court considered the power of the Reserve Bank to issue directions for superseding the board of a co-operative bank for securing its proper management and upheld the action taken by the Reserve Bank on the finding that it was without mala fide.

NRI deposits. The definition of "banking" in Section 5 b of the Banking Regulation Act acknowledges this position. The Reserve Bank issues directions from time to time regulating the rates of interest applicable to deposits. Types of Deposits: Banks accept different types of deposits. Returns on unclaimed deposits: Banks have to file a return every year on their unclaimed deposits under Section 26 of the Banking Regulation Act.

The powers of the Reserve Bank to issue directions have to be exercised with bonafide intentions. While time deposits. The period of the deposit and rate of interest applicable to the deposit are matters to be agreed between the depositor and the bank under the terms of the deposit.

Regulation of acceptance of deposits: The Banking Regulation Act does not contain any specific provisions for regulation of acceptance of deposits of banks. In the case of fixed deposits the period of ten years starts from the expiry of the period of the deposit. Caution and Advice: Apart from giving directions. Bank Ltd.

Legal and Regulatory Aspects of Banking - JAIIB

AIR Guj The return has to be filed within thirty days of the end of each calendar year in the form and manner prescribed and should cover all deposits not operated for ten years. The directions issued by the Reserve Bank may also stipulate conditions regarding minimum or maximum periods for which deposits may be accepted. As discussed in unit I.

Section 35 A which authorises the Reserve Bank to give directions is wide enough to cover acceptance of deposits.

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Section 36 of the Banking Regulation Act provides that the Reserve Bank may caution or prohibit banking companies generally or any banking company in particular against any transaction or class of transactions. The Reserve Bank may determine the policy in relation to advances and issue directions when it is satisfied that it is necessary to give directions: Sections 45ZC and 45ZE provide that any person who leaves any article in safe custody and in safety lockers respectively with a banking company.

The policy on these matters may be specified having regard to the paid-up capital. Unless the nomination is varied or cancelled.

The nomination has to be in the prescribed manner and on return of articles kept in safe custody or removal of contents of locker by nominees as provided. The definition of 'banking' in Section 5 b of the Banking Regulation Act indicates that acceptance of deposits may be for lending or investment.

Repayment of Deposits: Section 45ZA of the Banking Regulation Act provides that a depositor or depositors of a banking company including co-operative banks may nominate one person in the prescribed manner as nominee to whom the deposit may be returned in the event of death of the sole depositor or depositors.

In the case of minor nominees. Rules 3 and 4 of the Banking Companies Nomination Rules. Regulation of Loans and Advances a The Reserve Bank is empowered under Section 21 of the Banking Regulation Act to issue directions to control advances by banking companies.

In the case of Co-operative banks. Articles in Safe Custody and Safety Lockers: There are also provisions in the Banking Regulation Act for nomination in respect of articles kept in safe custody with banks and safety lockers.

Lending may be for short term or long term. Such directions may be issued to banking companies generally or to any particular banking company. Rule 2 of the Banking Companies Nomination Rules. Payment by a bank in accordance with these provisions gives a valid discharge to the bank. This is with a view to check the undue rise of prices of such sensitive commodities. If the director of a banking company is a partner or guarantor of any individual.

These cover the quantum of credit that can be extended and also the rate at which it can be extended. The tools employed for exercising selective credit control are: In this case. The quantum and cost of credit are regulated by operating these tools of control.

Selective credit control seeks to influence the demand for credit by i making borrowing more costly for certain purposes which are considered relatively inessential.

To ensure that prices of essential commodities like food grains. Selective Credit Control a Purpose: Banks have been traditionally financing trade and commerce and against items they deal in even before the country started industrializing. Restrictions on loans and advances: Section 20 of the Banking Regulation Act imposes certain restrictions on loans and advances.

Price control: With self-sufficiency achieved by our country over the years in almost all of the above. The Reserve Bank issues directions from time to time regulating the lending operations of banking companies in exercise of these powers vested under Section RBI had taken them out of the purview of selective credit control and currently restrictions are there only in case of levy sugar.

The prohibition also applies to loans and advances to: The Reserve Bank tightens the regulations or gives relaxations thereby permitting banks to decide the rates on their own. In so doing the bank has to consider the nature of the transaction. Interest on deposits: The rates of interest on deposits were not regulated by the Reserve Bank until It is open to the Reserve Bank to specify any transaction as not being a loan or advance for this purpose by a general or special order.

Interest rate on loans and advances: Interest rate on loans and advances is subject to regulation specifically under Section 21 2 e of the Banking Regulation Act apart from the general provisions of Section 35A. Thereafter the Reserve Bank has been issuing directions from time to time regulating rates of interest applicable to different types of deposits.

This includes rates of interest for loans and advances as well as deposits. Restrictions on power to remit debt: For remitting any debt to its directors.

Of late. Any remission made in contravention of Section 20 is void and will have no effect. Currently the directions of RBI regarding interest rates of advances cover only finance to exporters and small loans with limits up to Rs 2 lac and DRI loans.

If there is any doubt or dispute as to whether a transaction is a loan or advance. While giving directions on interest rates. The Reserve Bank has been issuing directions from time to time under Section 21 read with Section 35A of the Act regulating different aspects of lending including lending rates.

Any differential treatment should be justifiable in law as not being against the principles of equality. Permission is also required for remission of loans to: The law has been made to protect the weaker borrowers from the powerful moneylenders. Although the lending rates of banks are regulated by the Reserve Bank. The Usurious Loans Act. The clearing houses are now functioning under the uniform clearing house rules and regulations framed by the mutual consent of members and no statutory rules or regulations have been framed.

Section 21A was held to be valid and not ultra vires the Constitution by the Supreme Court. Board for regulation and supervision of Payment and Settlement Systems: The Reserve Bank.

Protection to interest rate: Section 21A of the Banking Regulation Act provides that a transaction between a banking company and its debtor cannot be reopened by any court on the ground that the rate of interest charged is excessive. Section 58 empowers the Bank to make regulations for giving effect to the provisions of the Act and Clause g of the sub-Section 2 thereof.

This provision is given an overriding effect over the provisions of the Usurious Loans Act. Section 21A was inserted in the Banking Regulation Act to make the rates of interest charged by banking companies beyond the scrutiny of courts.

In the absence of specific powers under the Act. Usurious loans Act. Financial institution for this purpose will have the same meaning as provided in the Clause c of Section 45 of the Reserve Bank of India Act. The Board has the Governor of the Bank as its chairman and its functions include prescribing policies relating to the regulation and supervision of all types of payment and settlement systems.

This was coming in the way of the monetary policy decided by the central bank. The court further held that where the Reserve Bank fixes both minimum and maximum rates of interest. Gowda [ 5 SCC ]. In Corporation Bank vs D. The position is that of an independent and non-partisan officer who deals with specific complaints from the public against administrative injustice and maladministration.

These guidelines cover: These guidelines apply. All commercial banks. Every director or member or other body for the time being vested with the management of the affairs of the agencies falling under Section 45 W has to comply with the directions given by the Reserve Bank and submit the information or statement or particulars as required. Grounds of complaint: