2. PERMITTED BUSINESS(SEC.6)---- MAIN FUNCTIONS
1.Borrowing ,raising,lending
2.Lending
3.Granting and issuing letters of credit
4.Buying,selling and dealing in bullion species
5.Holding,issuing on commission ,underwriting
6.Purchase and selling of bonds
7.Safe deposit vaults
8.Transmission of money
9.Dealing in BOE,PN
3. SUBSIDIARY FUNCTIONS
• Acting as agents for individuals, governments etc
• Carrying on Agency Business
• Contracting, public and private loans
• Acting as trustees
• Participating and managing issue
• Carrying out indemnity and guarantee business
• Any other business notified by central government
4. BUSINESS PROHIBITED(SEC.8)
1. Trading Activity directly or indirectly
Exception in(Trading)
• Realisation of securities
• In connection with BOE or while acting as trustees
• 2. Buying immovable property except for Bank use
5. RESTRICTION ON SUBSIDIARY COMPANY(SEC.19)
• Formation of Subsidiary Company for the purpose of trading
• Holding of shares in other companies beyond limit
• Holding shares in company where director is interested party
A subsidiary can be formed for the purpose of: Executing Trusts,
Administration of Estates, Safe Deposit Vaults or setting branch outside
India with RBI permision
6. MANAGEMENT (SEC.10 (A))
• Board of directors: At least 51% Directors having special
knowledge in areas like accounts, law etc
• Chairman: Professional banker , appointed with approval
by RBI
7. MAINTENANCE OF LIQUID ASSET
• Sec.25: At least 25% of total demand and time liabilities(SLR)
• May extend up to 40% if prescribed by RBI
• Following liabilities are excluded:
1. Paid up capital and reserves
2. Advance taken from RBI,SBI,NABARD or bank notified by Central
government.
• Apart from SLR Bank also need to maintain CRR as prescribed by
RBI from time to time.
8. LICENSING OF BANKING COMPANIES(SEC.22)
• License can be granted on the fulfilment of following conditions:
1. In a position to pay present and future liabilities
2. Affairs are not detrimental
3. General character of management is not prejudicial to interest of
depositors
4. Adequate capital structure
5. Public interest will be served
6. Grant of licence will not be prejudicial to Banking system.
9. LICENSING OF BANKING COMPANIES(FOREIGN COMPANY)
• In public interest
• Law of the registered country does not discriminate with
banking company registered in India
• Complies with all provisions applicable to such banks
10. OPENING OF NEW BRANCHES(SEC.23)
Conditions for grant of license for new branch,
• Financial conditions and History
• General character of management
• Adequacy of Capital structure
• Public interest
11. INSPECTION OF BANKS(SEC.35)
• RBI has been given power to inspect
• Every Director/Officer is bound to produce all books of accounts which is
demanded
• RBI has right to examine any Director or officer under oath
• After the inspection is over copy is sent to concerned Bank and to government
• If Central govt is of the opinion report is detrimental it may ask to make
representation
• If representation is not reasonable it may:
1.Prohibit bank from accepting deposits
2. u/s 38 direct for winding up
12. RESTRICTION ON ADVANCES (SEC 20)
• Cannot grant loans on security of its own shares
• Cannot grant loan on behalf of:
1. Any of its directors
2.Any firm in which director is interested
3. Any company or subsidiary company in which director, manager, employee is
having substantial interest
4.Any individual in respect of whom any of its director is partner or guarantor
13. Regulation and control by RBI
• Licensing Requirements
• Corporate Governance in banks
• Statutory Pre-emptions
• Interest rates
• Prudential norms
• Disclosure Norms
• Anti Money laundering norms
• Protection of small depositors
• Para - Banking Activities
• Annual Onsite Inspection
• OSMOS
