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" .. 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.

2 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 .. 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 .. 32 16. Prohibition of common directors .. 33 17. Reserve fund .. 33 (1) ii BANKING REGULATION ACT, 1949 18.

3 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. 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.

4 56 33. Display of audited balance-sheet by companies 34. incorporated outside India .. 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 .. 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.

5 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. 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.

6 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 .. 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.

7 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. Documents of BANKING company to be evidence .. 97 iv BANKING REGULATION ACT, 1949 45-G. Public examination of directors and auditors .. 97 45-H. Special provisions for assessing damages against delinquent directors, etc .. 98 45-I. Duty of directors and officers of BANKING company to assist in the realization of property .. 99 45-J. Special provisions for punishing offences in relation to BANKING companies being wound up .. 99 45-K. Repealed.. 100 45-L. Public examination of directors and auditors, etc. in respect of a BANKING company under schemes of arrangement .. 100 45-M. Special Provisions for BANKING companies working under schemes of arrangements at the commencement of the Amendments Act.

8 101 45-N. Appeals .. 101 45-0. Special period of limitation .. 101 45-P. Reserve Bank to tender advice in winding-up proceedings .. 102 45-Q. Power to inspect .. 102 45-R. power to call for returns and information .. 102 45-S. Chief Presidency Magistrate and District Magistrate to assist official liquidator in taking charge of property of BANKING company being wound up .. 103 45-T. Enforcement of orders and decisions of High Court .. 103 45-U. Power of High Court to make rules .. 104 45-V. References to directors, etc. shall be construed as including references to past directors, etc .. 104 45-W. Part II not to apply to BANKING companies being wound up .. 104 45-X. Validation of certain proceedings .. 104 PART III-B Provisions Relating to Certain Operations of BANKING Companies 45-Y. Power of Central Government to make rules for the preservation of records.

9 105 45-Z. Return of paid instruments to customers .. 105 45-ZA. Nomination for payment of depositor's money .. 105 45-ZB. Notice of claims of other persons regarding deposits not receivable .. 106 45-ZC. Nomination for return of articles kept in safe custody with BANKING company .. 107 45-ZD. Notice of claims of other persons regarding articles not receivable .. 109 45-ZE. Release of contents of safety lockers .. 109 45-ZF. Notice of claims of other persons regarding safety lockers not receivable .. 110 CONTENTS v PART IV Miscellaneous 46. Penalties .. 110 46-A. Chairman, directors, etc., to be public servants, for the purpose of Chapter IX of the Indian penal Code .. 112 47. Cognizance of offences .. 112 47-A. Power of Reserve Bank to impose penalty .. 113 48. Application of fines .. 114 49. Special provisions for private BANKING companies.

10 114 49-A. Restriction on acceptance of deposits withdrawable by cheque .. 114 49-B. Change of name by a BANKING company .. 114 49-C. Alteration of memorandum of a BANKING company .. 114 50. Certain claims for compensation barred .. 114 51. Application of certain provisions to the State bank of India and other notified banks .. 114 52. Power of Central Government to make rules .. 115 53. Powers to exempt in certain cases .. 117 54. Protection of action taken under the Act .. 118 55. Amendment of Act 2 of 1934 .. 118 55-A. Power to remove difficulties .. 118 PART V Application of the Act to Co-operative Banks 56. Act to apply to co-operative societies subject to modifications .. 118 Schedule I .. 139 Schedule II [repealed] .. 141 Schedule III .. 141 Schedule IV .. 150 Schedule V .. 151 THE BANKING REGULATION ACT., 1949 (X of 1949)1 [10th March, 1949] AN ACT TO CONSOLIDATE AND AMEND THE LAW RELATING TO BANKING 2[* * *]; Whereas it is expedient to consolidate and amend the law relating to BANKING 2[* * *]; It is hereby enacted as follows: PART I PRELIMINARY 1.