Bank Promotion Exams

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RBI Act, 1934

  1. This Act may be called the Reserve Bank of India Act, 1934.
  2. It extends to the whole of India
  3. This section shall come into force at once, and the remaining provisions of this Act shall come into force on such date or dates as the [Central Government] may, by notification in the Gazette of India, appoint.

Some important Sections of RBI Act, 1934

Sec 2(e) Scheduled Bank- A schedule bank means a bank whose name is included in the 2nd schedule of RBI Act 1934. For inclusion, a bank should satisfy conditions laid down in sec 42(6). The essential condition of capital is that such banks have paid capital and reserves of not less than Rs.5 lac & further that RBI is satisfied that the affairs will be conducted by the bank in a manner that will not jeopardize the interest of the depositors.

Banks which are not included in the 2nd schedule of RBI are called Non schedule Bank.

Sec 17- Types of Business

Defines various types of business which RBI may transact which include acceptance of deposit without interest from Central/State Govt, any other person or institution, sale/purchase of foreign exchange, securities, rediscounting of bills/PN, grant loans etc.

Sec 21- Right to transact Govt. Business

RBI has the right to transact Govt. business in India i.e. remittance, exchange, keeping deposit free of interest etc.

Sec 22- Bank Notes
RBI has the sole right to issue bank notes.

Sec 23- Issue Department

Bank notes will be issued by issue deptt. against security consisting of gold coins, bullion, foreign securities & other approved securities.

Sec 24- Denomination of Notes

RBI issues all currency notes of denomination 2, 5, 10, 20, 50, 100, 500, 1000, 5000, 10000. It has power to discontinue or non issue of currency note of any denomination. The notes of 2 & 5 are already been discontinued. 

Sec-28- Rules of Refunding value

RBI can frame rules for refunding value of mutilated , soiled or imperfect notes as a matter of grace.

Sec 42(1)- Define Cash Reserve Ratio

Every bank is required to maintain with RBI an average daily balance equal to a percentage of the net demand & time liabilities as stipulated by RBI from time to time. This is known as CRR. There is no minimum or maximum limit for CRR. Further RBI does not pay interest on balance held for CRR purpose. Currently CRR is 7.75%.

Collecting & Furnishing of Credit Information

  1. RBI is empowered to collect information related to borrower & suit filed accounts.
  1. Borrowers enjoying secured credit limit of Rs.10 lac & above & unsecured limit of Rs.5 lac & above- as on last Friday of April.
  1. Doubtful, lost & suit filled a/c of o/s balance of Rs.100 lac & above- half yearly, March & September.
  1. Basic Statistical Return: BSR-1 for borrower a/c of above Rs.2 lac & BSR-2 containing information about deposit with break up into current, saving & time deposits.

Sec 45-H-T Provision relating to NBFC

No NBFC shall commence business or carry on business without obtaining a certificate of registration & having net owned fund of Rs.25 lac

Sec 49-Declaration of Bank rate

RBI shall declare bank rate from time to time which is the rate at which it buys or rediscount bills of exchange or other commercial paper eligible for purchase under this act.