Beruflich Dokumente
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SUBMITTED TO:
SUBMITTED BY: BHAVYA GUPTA
MRS. REENA AGGARWAL KANSAL
ROLLNO. 6915
MBI FACULTY
MBI SEM 3
INTRODUCTION
The Banking Regulation Act, 1949 is legislation in India that
regulates all banking firms in India. Initially, the law was
applicable only to banking companies. But, 1965 it was amended
to make it applicable to cooperative banks and to introduce other
changes.
The Act provides a framework using which commercial banking in
India is supervised and regulated. The Act supplements the
[Companies Act 1956]. Primary Agricultural Credit Society and
cooperative land mortgage banks are excluded from the Act.
The Act gives the Reserve Bank of India (RBI) to power to license
banks, have regulation over shareholding and voting rights of
shareholders; supervise the appointment of the boards and
management; regulate the operations of banks; lay down
instructions for audits; control moratorium, mergers and
liquidation; issue directives in the interests of public good and on
banking policy, and impose penalties.
In 1965, the Act was amended to include cooperative banks under
its purview by adding the Section 56. Cooperative banks, which
operate only in one state, are formed and run by the state
government. But, RBI controls the licensing and regulates the
The banking regulation act 1949 has ten parts,each dealing with a specific topic.
The following is the picture of same at a glance:
Principal Provisions of
Banking Regulation Act, 1949
1. Prohibition of Trading (Sec. 8):
According to Sec. 8 of the Banking Regulation Act, a banking
company cannot directly or indirectly deal in buying or selling or
bartering of goods. But it may, however, buy, sell or barter the
(a) Accountancy;
(b) Agriculture and Rural Economy;
(c) Banking;
(d) Cooperative;
(e) Economics;
(f) Finance;
(g) Law;
(h) Small Scale Industry
The Section also states that at least not less than two directors
should have special knowledge or practical experience relating to
agriculture and rural economy and cooperative. Sec. 10(b) (1)
further states that every banking company shall have one of its
directors as Chairman of its Board of Directors.
(ii) If it has all its places of business in one State, none of which is
in Mumbai or Kolkata, Rs. 1 lakh in respect of its principal place of
business plus Rs. 10,000 in respect of each of its other places of
business in the same district in which it has its principal place of
business, plus Rs. 25,000 in respect of each place of business
elsewhere in the State.
No such banking company shall be required to have paid-up
capital and reserves exceeding Rs. 5 lakhs and no such banking
(iii) If it has all its places of business in one State, one or more of
which are in Mumbai or Kolkata, Rs. 5 lakhs plus Rs. 25,000 in
respect of each place of business outside Mumbai or Kolkata? No
such banking company shall be required to have paid-up capital
and reserve excluding Rs. 10 lakhs.
(a) Its subscribed capital is not less than half of its authorized
capital, and its paid-up capital is not less than half of its
subscribed capital.
(c) The voting right of any shareholder shall not exceed 5% of the
total voting right of all the shareholders of the company.
(c) Write-off bad debts in any case where adequate provision for
such debts has been made to the satisfaction of the auditors of
the banking company.
Floating Charges:
The above Sections of the Banking Regulation Act deal with the
accounts and audit. Every banking company, incorporated in
India, at the end of a financial year expiring after a period of 12
months as the Central Government may by notification in the
Official Gazette specify, must prepare a Balance Sheet and a
Profit and Loss Account as on the last working day of that year, or,
according to the Third Schedule, or, as circumstances permit.
At the same time, every banking company, which is incorporated
outside India, is required to prepare a Balance Sheet and also a
Profit and Loss Account relating to its branch in India also. We
know that Form A of the Third Schedule deals with form of
Balance Sheet and Form B of the Third Schedule deals with form
of Profit and Loss Account.
CONCLUSION
Any attempt to cover all aspects of regulatory measures in banking within
the limited scope of this write-up is not possible but an effort has been made
to narrate all the important provisions of banking regulation act 1949.
Moreover, banking in India is a perfect mixture of law and practic3es since
legislation of banking activities has an age old practices. During post
reforms era ,banking in India has got a paradigm shift to make it viable in
the present competition particularly where the existence of private banks,
foreign banks and new generation private banks have parallel existence with
the public sector banks. A number of policy measures have been
implemented as part of the first generation and second generation reforms
and all attempts are being made to make the Indian banking system a global
standard. All the initiatives are affected through amendments of relevant acts
pertaining to banking industry that may be banking regulations act, sbi act,
sbi subsidiary act or banking company act, through which greater functional
autonomy is provided to the banks and road maps are prepared to make the
industry a global standard.