The document discusses key Indian banking laws and regulations. It outlines the Banking Regulation Act of 1949 and the Reserve Bank of India Act of 1934, which establish the regulatory framework for banking in India. The Banking Regulation Act defines banking activities and sets requirements around licensing, management, and restrictions. The Reserve Bank of India Act establishes RBI as the central bank of India, giving it authority over monetary policy, banking supervision, and other central banking functions.

1. Banki ng l aw

2. Banki ng Law
 Legislations
 Banking Regulations Act 1949
 Reserve Bank Of India Act 1934

3. Banki ng Law
 Banking Regulations Act 1949
Section 5(b)defines banking as accepting for the
purpose of lending or investing of deposits of money
from the public repayable on demand, and
withdrawal by cheque, draft or order
Permitted business of Banking
Borrowing, lending or advance of money, dealing in
bills of exchange, hundis promissory notes …..
 Acting as agents for government or local authority or
any other person or persons
Contracting for public and private loans and
negotiating and issuing the same
Continued…………….

4. Banki ng Law
 Dealing with issues of shares, loans , debentures etc
for any company
 Carrying on and transacting every kind of guarantee
and indemnity business
 Undertaking and executing trusts
 Undertaking the administration of estates as executor
trustee or otherwise
 Selling, improving, managing, developing,
exchanging, leasing, mortgaging or dealing with any
or all maters of the property or compampany
 Any other form of business as specified by the
government in the Official Gazette

5. Banki ng Law
 Business prohibited for Banks
 No banking company shall directly or indirectly
deal in the buying or selling or bartering of goods
except in connection with the realization of
security given to or held by it.

6. Banki ng Law
 Licensing of Banking Companies
 Section 22 specifies that RBI will issue license to a
banking company after inspecting the books of the
banking company and satisfaction of the following
conditions
 That the company is in a position to pay its present or future
depositors in full as teir claims accrue
 That he proposed management will not be prejudicial to the
public interest or to the interest of its depositors
 That the company has adequate capital structure and earning
prospects
continued …………………

7. Banki ng Law
 The RBI can cancel the license of the bank if it
finds
If the company ceases to carry on banking business
in India
Fails to comply any of the conditions imposed on it
under subsection(1), 3,3(A)
Section 23 deals with opening of branches

8. Banki ng Law
 Restrictions on loans and advances
 Section 20 (notwithstanding anything to the contrary
in section 77 of the companies act 1956 ) no company
shall
 Grant loans and expenses on the security of its own shares
 Enter into any commitment for granting any loan or advance
to or on behalf of
 Any of its directors
 Any firm in which any director is interested as partner, guarantor or
employee
 Any individual in respect of whom any of the directors is partner or
guarantor

9. Banki ng Law
 Management of Banking Companies
 Section 10 prohibits employment of managing agents
Section 10(a) specifies that 51% of directors in any board of
directors of banking companies shall satisfy the following
conditions:
 Shall have special knowledge of one of the following
 Accountancy
 Agriculture or rural economy
 Co-operation
 Economics
 Finance
 Law
 Small-scale industry
 Any other matter the knowledge and experience of which in the opinion
of the RBI be useful to the banking company

10. Banki ng Law
Shall not have substantial interest in, or be
connected with, whether as employee, manager or
managing agent :
Any company not registered under section 25
Any firm which carries on any trade, commerce or
industry which in either case is not a small-scale
industrial concern
Be proprietors of any trading, commercial or industrial
concern, not being a small-scale industrial concern

11. Banki ng Law
 If the above criteria is not met RBI may
 Instruct to reconstruct the composition of the
board
 Remove a director and appoint a person of its
choice
It will be deemed that such an individual be elected
by the banking company

12. Banki ng Law
 Subsection 2(a) states that a director
 Cannot hold office for more than eight years
 Once removed from his office cannot be reappointed
for next 14 years
 Section 16 any person who is already director of a
banking company is barred from directorship in any
other banking company Directors appointed by the RBI
are exempt from this rule

13. Banki ng Law
 Reserve Bank Of India Act 1934
 Central bank of India
 Established April1,1935 under Reseve Bank of
India Act 1934
 Was nationalized in 1948
 Performs the function of
Central Banking
Supervisory control of banks
Promotional banking

14. Banki ng Law
 Central Banking Function
 Issue of Currency
 Issues and regulates banknotes of all denominations through a
separate issues department
 Required to maintain gold and foreign exchange reserves in the form
of minimum reserve systems
 Banker to Government
 Banker to the central and state governments transacts business by
 Maintaining cash balance
 Receiving and making payments
 Managing public debt
 Providing advances to the government for 90 days
 Advising government on floating of loans and legislation affecting banking
continued ………………

15. Banki ng Law
 Bankers and lenders of last resort
 Scheduled banks can borrow from RBI on basis of
eligible securities
 Obtain financial accommodation by rediscounting
their bills of exchange
 Supervision of banks : the RBI has statutory power to
regulate the credit generated by banks
 Section 21 RBI can control the advances against commodities
under Selective Credit Control Mechanism it can stipulate the
 The purpose
 Margin
 Rate of interest
continued ……….

16. Banki ng Law
 The volume of credit is normally controlled through the
regulatory instruments of bank rate, open market
operations and variable cash reserve requirements.
Control over bank rate is liberalized. However it remains a
bench mark in the fluctuating interest rate regime. Bank
rate is the rate of interest at which the RBI rediscounts
bills of exchange
RBI can impound bank reserves to maintain the
liquidity of assets in the form of statutory liquidity
ratio, the following assets are taken into account
Cash in hand (India)
Balance in current account with India
Investment in government securities

17. Thank you !