THE BANKING REGULATION ACT, 1949

1 THE BANKING REGULATION ACT, 1949 CONTENTS Introduction .. i PART I Preliminary Section Pages 1. Short title, extent and commencement .. 1 2. Application of other laws not barred .. 1 3. Act to apply co-operative societies in certain cases .. 2 4. Power to suspend operation of Act .. 4 5. Interpretation .. 4 5A. Act to override memorandum, articles, etc .. 9 PART II Business of BANKING Companies 6. Forms of business, in which BANKING companies may, engage .. 9 7. Use of words "bank", "banker", " BANKING " or " BANKING company".

2 14 8. Prohibition of trading .. 15 9. Disposal of non- BANKING assets .. 16 10. Prohibition of employment of managing agents and restrictions on certain forms of employment .. 16 10-A. Board of Directors to include persons with professional or other experiences .. 21 10-B. BANKING Company to be managed by whole-time Chairman .. 24 10-BB. Power of Reserve Bank to appoint Chairman of a BANKING company .. 26 10-C. Chairman and certain directors not to be required o hold qualification shares.

3 27 10-D. Provisions of Secs. 10-A and 10-B to override all other laws, contracts, etc.. 27 11. Requirement as to minimum paid-up capital and reserves .. 27 12. REGULATION of paid-up capital, subscribed capital and authorised capital and voting rights of share holders .. 30 12-A. Election of new directors- .. 32 13. Restriction on commission, brokerage, discount, etc. on sale of shares .. 32 14. Prohibition of charge on unpaid capital .. 32 14-A. Prohibition of floating charge on assets .. 32 15. Restrictions as to payment of dividend.

4 32 16. Prohibition of common directors .. 33 17. Reserve fund .. 33 (1) ii BANKING REGULATION ACT, 1949 18. Cash reserve .. 34 19. Restriction on nature of subsidiary companies .. 35 20. Restriction on loans and advances .. 36 20-A. Restriction on power to remit debts .. 38 21. Power of Reserve Bank to control advances by BANKING companies .. 38 21-A. Rates of interest charged by BANKING companies not to be subject to scrutiny by courts .. 40 22. Licensing of BANKING companies .. 44 23. Restrictions on opening of new, and transfer of 24.

5 Existing places of business .. 47 24. Maintenance of a percentage of assets .. 48 25. Assets in India .. 51 26. Return of unclaimed deposits .. 52 27. Monthly returns and power to call for other 28. returns and information .. 52 28. Power to publish information .. 53 29. Accounts and balance-sheet .. 53 30. Audit .. 54 31. Submission of returns .. 55 32. Copies of balance-sheet and accounts to be sent to Registrar .. 56 33. Display of audited balance-sheet by companies 34. incorporated outside India.

6 56 34. Accounting provisions of this Act not retrospective .. 56 34-A. Production of documents of confidential nature .. 56 35. Inspection .. 57 35-A. Power of the Reserve Bank to give directions .. 59 35-B. Amendments of provisions relating to appointments of managing directors, etc., to be subject to previous approval of the Reserve 60 36. Further powers and functions of Reserve Bank .. 61 36-A. Certain provisions of the Act not to apply to certain BANKING companies .. 63 PART II-A CONTROL OVER MANAGEMENT 36-AA. Power of Reserve Bank to remove managerial and other persons from office.

7 64 36-AB. Power of Reserve Bank to appoint additional directors .. 65 36-AC. Part-II-A to override other laws .. 66 PART II-B Prohibition of certain activities in relation to BANKING companies. 36-AD. Punishment for certain activities in relation to BANKING compensation in certain cases .. 66 CONTENTS iii PART II-C Acquisition of the Undertakings of BANKING Companies 36-AE Power of Central Government to acquire undertakings of BANKING companies in certain cases .. 67 36-AF.

8 Power of the Central Government to make scheme .. 69 36-AG. Compensation to lie given to shareholders of the acquired bank .. 70 36-AH. Constitution of the Tribunal .. 71 36-AI. Tribunal to have powers of a civil court .. 71 36-AJ. Procedure of the Tribunals .. 71 PART III Suspension of Business and Winding up of BANKING Companies 36-B. High Court defined .. 72 37. Suspension of business .. 72 38. Winding up by High Court .. 73 38-A. Court liquidator .. 75 39. Reserve Bank to be official liquidator.

9 75 39-A. Application of Companies Act to liquidators .. 76 40. Stay of Proceedings .. 76 41. Preliminary report by official liquidator .. 76 41-A. Notice to preferential claimants and secured and unsecured creditors .. 76 42. Power to dispense with meetings of creditors, etc.. 77 43. Booked depositor's credits to be deemed proved .. 77 43-A. Preferential payments to depositors .. 78 44. Powers of 1-sigh Court in voluntary winding up .. 79 44-A. Procedure for amalgamation of BANKING companies .. 80 44-B. Restriction on compromise arrangement between BANKING company and creditors.

10 81 45. Power of Reserve Bank to apply to Central Government for suspension of business by a BANKING company and to prepare scheme of reconstitution or amalgamation .. 82 PART-III-A Special Provisions for Speedy Disposal of Winding-up Proceedings 45-A. Part III-A to override other laws .. 91 45-B. Power of High Court to Decide all claims in respect of BANKING companies .. 92 45-C. Transfer of pending proceedings .. 93 45-D. Settlement of list of debtors .. 94 45-E. Special provisions to make calls on contributories .. 97 45-F.