bkg reg Act

7/29/2019 bkg reg Act

1/27

Banking Regulation Act,1949


2/27

Objectives of BR Act

Regulation of business of banking cos

Control over management of bankingbusiness

Suspension and winding up of bankingbusiness


3/27

Banking

Banking means accepting of deposit ofmoney from public repayable on demand or

otherwise and withdrawal by cheque, draft orotherwise

Deposit to be used for lending or investment

sec

. 5(b)


4/27

Business of banking

Primary business-acceptance of deposits

Borrowing of money

Lending secured or unsecured

Investments in all kinds of securities

Dealing with bills of exchange, p- notes

Dealing in forex, bullion, stocks, bonds

Letters of credit


5/27

Business of banking

Safe deposit vaults

Public/ private issue of Govt, corporatesecurities

Guarantees and indemnities

All other business conducive /incidental toabove

Any other business notified by Central Govt.


6/27

Bank, Banker, Banking,

Banking Co

Above names can be used only by bankingcompany

Banking co has to use one of above

No individual or association can use thesenames

Any association of Banks can use

s.7


7/27

Minimum Capital

Foreign Bank Rs. 20 lacs

Indian Bank Rs. 10 lacs

Subscribed capital = authorised capital

Paid up capital = subscribed capital

(s. 11,12)


8/27

Voting Rights of shareholder

No limit on shareholding of a person

Max 10 % of total voting rights PSBs - 1%

s.12(2)


9/27

Reserve Fund

Min 20 % profit each year to be transferred toReserve Fund

CG ( on recommendations of RBI) can waive

this condition, on adequacy of paid up capital+reserves

s.17


10/27

Bank subsidiaries

Can be formed only for business permissiblefor banking cos

For business exclusively outside India (with

RBI approval) For any other purpose prior approval of

CG/RBI reqd.

s.19


11/27

Restriction on Loans / advances

To Directors

On security of own shares

Any firm in which Director is partner or

employee

Any co in which Director is director oremployee

s.20


12/27

RBI power to control Advances

RBI has power to formulate policy on Bankingadvances

When expedient in interest of public,

depositors It may relate to purpose ,margins, amount,

rate of interest

Banks bound to follows.21


13/27

Power to give directions to Banks

In public interest

In the interest of depositors

In the interest of banking policy

Secure proper management of Bank

Banks bound to comply with directions

sec. 35 A


14/27

Rate of interest

No judicial scrutiny on ground of beingexcessive

Interest rates on advances deregulated

s.21A


15/27

SLR

RBI prescribes from time to time

Max. 40% of DTL (present 24%)

To be maintained in approved securities

Monthly return to be submitted to RBI SLR is in addition to CRR (6%)

Shortfall penal interest at 3 % above BankRate

Consecutive default- 5% s. 24


16/27

SLR approved assets

Cash

Surplus cash under CRR

Gold

Approved securities (unencumbered)

T- Bills, G-sec, State Dev Loans


17/27

CRRRBI Act

Each Bank to maintain cash balance with RBIat prescribed percentage of DTL in India(present- 6%)- as average daily balance

No interest paid on CRR balance

s.42(1)


18/27

CRR

If shortfall, penal interest at 3% over Bankrate ( 5% from next fortnight)

Liabilities excluded- capital, reserves, loans

from RBI, PSBs, PFIs, SBI group, Banks, FIs


19/27

Assets in India

Min 75 % of DTL to be India

As on last Friday of each quarter

Monthly return of Assets and Liabilities to be

submitted to RBI

s.25


20/27

Balance Sheet

B/S and P/L as per Third Schedule

Audit by qualified auditor

RBI approval reqd. for Auditor

To be signed by three Directors To be published

Copy to ROC

RBI can direct special audit of any transaction(s.29)


21/27

Inspection by RBI

RBI can conduct inspection of any Bank

CG may also direct RBI to conduct inspectionof any Bank ( include. Foreign Bank)

On examination of report, if found detrimentalto interests of public/ depositors, CG canorder Bank to stop accepting fresh deposit orwinding up

s.35


22/27

CG power to acquire Bank

On RBI Report that Bank failed to comply withinstruction u/s 21, 35A, or not working in interest ofpublic, depositors

CG may make scheme of amalgamation, acquisition,

winding up RB also has power to apply to CG to suspend

business of Bank and prepare scheme ofreconstitution

s.36AE


23/27

Management

50 % Directors to be experts

Min 2 from agriculture/ rural

economy/cooperation / SSI

Appointment /Reappointment/Termination ofChairman/MD/WTD/CEO need prior approvalof RBI


24/27

Management

RBI can make changes in Managementincluding removal

RBI has also power to appoint additional

directors RBI has power to order Bank to call General

Meeting to elect fresh directors

Common directors not allowed in two banks


25/27

Chairman

Chairman to be full time Director

If not, full time MD to be appointed withapproval of RBI

Both to work under supervision and control ofBoard

Max tenure- 5 yrs (re-election allowed)

No qualification shares requiredS


26/27

Licensing of Banks

RBI license mandatory to start bank

Prior approval also required for new branchesincluding overseas branches

Foreign banks allowed on equality basis

s.22,23


27/27

Applicability to PSBs

PSBs governed by Special Laws

Most provisions applicable to PSBs also

Exceptions capital, common directors,

audit, licensing, control over mangmt.,winding up

PSBs are Scheduled Banks subject to

CRR,SLRs.51

Documents

bkg reg Act