STUDY OF LAWS RELATING TO BANKING AND FINANCE IN INDIA

1. STUDY OF LAWS RELATING TO BANKING
AND FINANCE IN INDIA
PRESENTED BY:
UMASHANKAR UTAGE

2. INTRODUCTION OF THE TOPIC
Law is a system of rules, usually enforced through a set of
institutions. Law is basically the enactment or statute enacted by the
legislature. The principles and regulations formed to implement this
enactment in banking and finance are called Banking and Finance Laws.
The banking and financial industries are heavily regulated by both
state and federal law. These laws impose reporting requirements for banks
and other financial institutions, govern securities and other transactions,
and regulate taxes. In addition to affecting banks, banking and finance law
often plays a large role in mergers and acquisitions of corporations, stock
purchases and investments by both individuals and companies, and tax
audits of bank accounts.
The laws relating to Banking and Finance in India are administered
by the Finance Ministry’s Department of Financial Services. The mandate
of the Department of Financial Services covers the functioning of Banks,
Financial Institutions, Insurance Companies and the National Pension
System.
Thus through this presentation we will come to know about various
laws and acts framed by the Government of India relating to Banking and
Finance.

3. OBJECTIVES OF THE STUDY
The main objectives of this presentation are
as follows:
 To study about Laws relating to Banking and Finance
in India.
 To study about the rules and regulations relating to
the Banking and Finance Laws.
 To study in detail about some laws relating to
banking and finance.

4. IMPORTANCE OF THE STUDY
Banking and finance laws impose reporting requirements for
banks and other financial institutions, govern securities and other
transactions, and regulate taxes. In addition to affecting banks,
banking and finance law often plays a large role in mergers and
acquisitions of corporations, stock purchases and investments by
both individuals and companies, and tax audits of bank accounts.
Many people find they need legal help with banking and
finance law when forming a new business. There are many laws,
contracts, and regulations that may dictate how new business spend
and account for investment funds. That's why many small businesses
and startups find they need to hire a lawyer from the beginning to
ensure compliance with all legal rules.
This is the reason why study of Banking and Finance Laws is so
important.

5. RESEARCH METHODOLOGY
Following is the List of Acts/Laws Being Administered by Department
of Financial Services in India:
1. Negotiable Instrument Act, 1881
2. The Bankers' Books Evidence Act, 1891
3. The Reserve Bank of India Act, 1934
4. The Industrial Finance Corporation of India Act, 1948
5. The Banking Companies (Legal Practitioner Clients' Accounts) Act, 1949
6. The Industrial Disputes (Banking and Insurance Companies) Act, 1949
7. The Banking Regulation(Companies) Rules, 1949
8. The Banking Regulation Act, 1949
9. The State Financial Corporations Act, 1951
10. The Reserve Bank of India (Amendment and Misc. Provisions) Act,
1953
11. The Industrial Disputes (Banking Companies) Decision Act, 1955

6. 12. The State Bank of India Act, 1955
13. The State Bank of India (Subsidiary Banks) Act, 1959
14. The Subsidiary Banks General Regulation,1959
15. The Deposit Insurance and Credit Guarantee Corporation Act, 1961
16. The Banking Companies (Acquisition and Transfer of Undertakings) Act,
1970
17. The Regional Rural Banks Act, 1976
18. The Banking Companies (Acquisition and Transfer of Undertakings) Act,
1980
19. The Export-Import Bank of India Act, 1981
20. The National Bank for Agriculture and Rural Development Act, 1981
21. Chit Fund Act 1982
22. Shipping Development Fund Committee (Abolition) Act, 1985
23. Sick Industrial Companies (Special Provisions) Act, 1985

7. 24. The National Housing Bank Act, 1987
25. SIDBI Act, 1989
26. The Special Court (trial of Offences relating to Transactions in
Securities) Act, 1992
27. The Industrial Finance Corporation (Transfer of Undertakings
and Repeal) Act, 1993
28. Industrial Reconstruction Bank (Transfer of Undertaking &
Appeal) Act, 1997
29. The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
30. Industrial Development Bank (Transfer of Undertaking &
Repeal) Act, 2003
31. Credit Information Companies (Rules & Regulation) Act, 2005

8. The following Rules and Regulations are also used Department of
Financial Services:
1.SIDBI General Regulations, 1990
2. Corrigendum to GSR 564 (E) dated 20.8.93
3. Banking Regulation (Companies) Rules 1949
4. The Nationalised Banks (Management and Misc. Provisions)
Scheme,1970
5. NABARD General Regulations, 1982
6. Banking Companies (Period of Preservation of Records) Rules, 1985
7. Banking Companies (Regulation)Rules ,1985
8. NABARD Bonds Regulations 1988
9. Notification dated 29.9.2004 regarding Stressed Assets Stabilization
Fund in FI
10. The Banking Ombudsman Scheme, 2006
11. Factoring Act Rules, 2011

9. 12. Debts Recovery Tribunal (Procedure) Rules, 1993
13. Debts Recovery Tribunals (Procedure) Amendment
Rules, 1994
14. Debts Recovery Tribunal (Procedure) Amendment
Rules, 1997
15. Debts Recovery Tribunal (Procedure for the appointment
of Presiding Officer of the Tribunal) Rules, 1998
16. Debts Recovery Appellate Tribunal (Procedure for the
appointment of Chairperson of the Appellate Tribunal)
amendment Rules, 2005
17. Debts Recovery Appellate Tribunals (Salaries,
Allowances and other terms and conditions of service of
the Chairperson) Rules, 1993
18. Debts Recovery Tribunals (Salaries, Allowances and
other terms and conditions of service of the Presiding
Officer) Rules, 1993

10. THE NEGOTIABLE INSTRUMENTS ACT, 1881
The object of this law are as follows:
 To legalize the system by which instruments
contemplated by it could pass from hand to hand
by negotiation like any other goods
 To present an orderly and authoritative statement
of leading rules of law relating to the negotiable
instruments
 To confer certain privileges to the mercantile
instruments contemplated under it and provide
special procedure in case the obligation under the
instrument was not discharged

11. RESERVE BANK OF INDIA ACT, 1934
 The Act defines manner in which the RBI can conduct business.
The RBI can accept deposits from the central and state
governments without interest. It can purchase and discount bills
of exchange from commercial banks. It can purchase foreign
exchange from banks and sell it to them. It can provide loans to
banks and state financial corporations. It can provide advances to
the central government and state governments. It can buy or
sell government securities. It can deal in derivative, repo and
reverse repo.
 It also deals with emergency loans to banks. The RBI must
conduct the banking affairs for the central government and
manage public debt.
 In India only the RBI or the central government can issue and
accept promissory notes that are payable on demand.
However, cheque, that are payable on demand, can be issued by
anyone.

12. THE BANKING REGULATION ACT, 1949
 The Banking Regulation Act, 1949 is a legislation in India that regulates all
banking firms in India. Initially, the law was applicable only to banking companies.
But, 1965 it was amended to make it applicable to cooperative banks and to
introduce other changes.
 The Act provides a framework using which commercial banking in India is
supervised and regulated. The Act supplements the Companies Act
1956. Primary Agricultural Credit Society and cooperative land mortgage banks
are excluded from the Act.
 The Act gives the Reserve Bank of India (RBI) to power to license banks, have
regulation over shareholding and voting rights of shareholders; supervise the
appointment of the boards and management; regulate the operations of banks;
lay down instructions for audits; control moratorium, mergers and liquidation;
issue directives in the interests of public good and on banking policy, and impose
penalties.
 In 1965, the Act was amended to include cooperative banks under its purview by
adding the Section 56. Cooperative banks, which operate only in one state, are
formed and run by the state government. But, RBI controls the licensing and
regulates the business operations. The Banking Act was a supplement to the
previous acts related to banking.

13. DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION
ACT, 1961
 Deposit Insurance and Credit Guarantee Corporation ( DICGC) is a
subsidiary of Reserve Bank of India. It was established on 15 July 1978
under Deposit Insurance and Credit Guarantee Corporation Act, 1961 for
the purpose of providing insurance of deposits and guaranteeing of credit
facilities. DICGC insures all bank deposits, such as saving, fixed, current,
recurring deposits for up to the limit of Rs. 100,000 of each deposits in a
bank.
 The functions of the DICGC (deposit insurance and credit guarantee
corporation)are governed by the provisions of 'The Deposit Insurance and
Credit Guarantee Corporation Act, 1961' (DICGC Act) and 'The Deposit
Insurance and Credit Guarantee Corporation General Regulations, 1961'
framed by the Reserve Bank of India in exercise of the powers conferred by
sub-section (3) of Section 50 of the said Act.
 The preamble of the Deposit Insurance and Credit Guarantee Corporation
Act, 1961 states that it is an Act to provide for the establishment of a
Corporation for the purpose of insurance of deposits and guaranteeing of
credit facilities and for other matters connected therewith or incidental

14. SICK INDUSTRIAL COMPANIES ACT (SICA), 1985
 The Sick Industrial Companies Act (SICA) was a key piece of legislation
dealing with the issue of rampant industrial sickness in India. The Sick
Industrial Companies (Special Provisions) Act (SICA) of 1985 was
enacted in India to determine the extent of sickness in industrial units,
expedite the revival of potentially viable companies and close unviable
units to release investment locked up in them for productive use
elsewhere. SICA defined a sick industrial unit as one that had existed for
at least five years and had incurred accumulated losses equal to or
exceeding its entire net worth at the end of any financial year.
 The basic rationale of enacting SICA was to determine sickness in the
industrial units. It also aimed at expediting the revival of potentially
viable units so as to make the investments in such units profitable. At the
same time, to ensure the closure of unviable units so as to release the
investments locked up in such units for productive use elsewhere.

15. BANKING OMBUDSMAN SCHEME
Banking Ombudsman is a quasi judicial
authority functioning under India’s Banking
Ombudsman Scheme 2006, and the authority was
created pursuant to a decision made by the
Government of India to enable resolution of
complaints of customers of banks relating to certain
services rendered by the banks. The Banking
Ombudsman Scheme was first introduced in India in
1995, and was revised in 2002. The current scheme
became operative from 1 January 2006, and replaced
and superseded the banking Ombudsman Scheme
2002. From 2002 until 2006, around 36,000
complaints have been dealt by the
Banking Ombudsman.

16. CONCLUSION:
 Through this study we can conclude that, study
about Banking and Finance Laws in India is very
important. It plays a large role in mergers and
acquisitions of corporations, stock purchases and
investments by both individuals and companies, and
tax audits of bank accounts. It is also very important
for any newly formed company to study these laws in
detail.
 Thus it enables us to study about the importance
of Banking and Finance Laws, all the acts/laws that
are administered by the Department of Financial
services and also helps us study some of the
important laws in detail.

17. WEBLIOGRAPHY:
I have referred the following websites:
www.financialservices.gov.in
www.icsi.in
https://en.wikipedia.org/wiki/Banking_in_India

18. THANK YOU