Banking Regulation Act, 1949

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  • The Banking Regulation Act, 1949 came into force on March 16, 1949. It contained various aspects related to Banking Companies in India.
  • This is regulatory act
  • Its purpose is to:
    • Provide safety in the interest of depositors
    • Prevent misuse of powers by managers of banks
  • Act does not supersede but supplement to Companies Act, 1956
  • Initially named Banking Companies Act, 1949 but from March 1, 1966, the name of the Act was changed to Banking Regulation Act, 1949.

Parts and Sections of the Act

  • Part I - Preliminary
    • Section 2 to 5A
    • Section 5B: Defines 'Banking'
    • Section 5C: Defines 'Banking Company' as 'a company which transacts the business of banking in India
    • Section 6: Forms of business in which banking Companies may engage
    • Section 7: Use of words "bank", "banker", "banking" or "banking company"
    • Section 10BB: Power of Reserve Bank to appoint chairman of a banking company
    • Section 11: Requirement as to minimum paid up capital and reserves
    • Section 18: Cash Reserve
    • Section 21: Power of Reserve Bank to control advances by banking companies. Rate of interest
    • Section 21A: Rate of interest charged by banking companies cannot be subject to scrutiny of courts.
    • Section 22: Licensing of banking companies
    • Section 23: Restrictions on opening new and transfer of existing branches etc.
    • Section 27: Monthly returns to Reserve Bank
    • Section 28: Reserve Bank's power to make public certain information in the interest of the public
    • Sections 29, 30, 31: Audit
  • Section 35: Authority to inspect every banking company and its branches
  • Section 35A: Power of RBI to issue directions which every banking company in India has to follow
  • Section 36AA: RBIs power to remove managerial power from persons of office..
  • Section 36AB: RBIs power to appoint additional directors
  • Section 37: Suspension of business
  • Section 47A: RBIs power to impose penalty
  • Section 58A of Companies Act, 1956 empowers companies to accept deposits from the public
  • ...

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