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THE BANKING REGULATION ACT, 1949 - CONT'D
Some important Sections of Banking Regulation Act, 1949
Sec 5(b) Banking
Banking means acceptance of deposit for the purpose of lending or investment, the deposit of money from the public, repayable on demand or otherwise & withdrawal by cheque, draft, order or otherwise.
Sec 5(c) Banking Company
It means any co. which transacts the business of banking in India.
Sec 6 Forms of Banking Business
In addition to the banking business, a banking co may deals in bills of exchange, hundis, PN, issue LC/BG, buying or selling of foreign exchange, safe custody, safe deposit locker, acting as an agent for any Govt. or local authority, undertaking the administration of estate of executor, trustee, leasing, mortgaging etc. or any other form of business which Central Govt. may notify.
Sec 7 Use of words Bank/Banking/Banking Co.
A banking co carrying on banking business in India must use the word Bank, Banking, Banker, or Banking Co in its name & no other organisation can use these names.
Sec 11 Paid up Capital & Reserve requirement
For Domestic banks-minimum paid up capital & reserve Rs.5 lac.
Foreign bank- Min Rs.15 lac & Min Rs.20 lac if bank has place of business in Mumbai &/or Kolkata
Capital Structure
The ratio of authorise, subscribed and paid up capital must be minimum 4:2:1
Sec 19(2) Holding shares of any Co
No banking co shall hold shares in any co. whether as pledgee, mortgagee, or absolute owner of an amount exceeding 30% of paid up capital of that co. or 30% of its own paid up capital + reserves whichever is less.
Sec 20 Restriction on advance against its own shares
No banking co shall grant loans/advance on the security of its own shares
Sec 21 Power to control advance
RBI can restrict the banks from lending against certain notified commodities, maintenance of a min margin, ceiling limit of advance or charging of min rate of interest.
Sec 21(a) No scrutiny of rate of interest.
A transaction between the banking co and its debtors can not be reopened by any court on the basis of excessive charging of rate of interest.
Sec 24 Maintenance of SLR
A banking co is required to maintain at the close of business on any day a certain percentage of its total demand & time liabilities in India in form of cash, gold & unencumbered approved securities. This is SLR. SLR is to be maintained with reference to total demand & time liabilities as on the last Friday of 2nd preceding fortnight. SLR can be max 40%.
Sec 45(y) Preservation of Bank records
Guidelines for returning the paid instruments to instrument to customer by keeping a true copy.
Sec 45(za) Nomination
For nomination in Deposit a/c
Sec 45(zc) Nomination
For nomination in Safe Custody a/c
Sec 45(ze) Nomination
For nomination in Locker a/c
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