Transcript Document

WHAT IS A BANK?
• Section 5(b) of BR Act defines a banking as
acceptance of deposits for the purpose of lending
or investment
• The deposits may be repayable on demand or
otherwise and withdrawable by cheque draft or
order or otherwise.
• Section 49A of BR Act, no person other than bank
is authorised to accept deposits withdrawable by
cheque.PACS & Govt are exceptions.
CONDITIONS FOR INCLUSION OF BANKS
IN SECOND SCHEDULE OF RBI ACT, 1934
[Section 42 (6) (a)]
• PAID-UP CAPITAL & RESERVES  RS.5
LAKHS
AFFAIRS NOT CONDUCTED IN A MANNER
DETRIMENTAL TO INTERESTS OF THE
BANK’S DEPOSITORS
MUST BE ONE OF THE FOLLOWING :
– A COMPANY AS DEFINED IN COMPANIES ACT, 1956
– STATE CO-OEPRATIVE BANK OR PRIMARY COOPERATIVE BANK OR AN INSTITUTION NOTIFIED
BY THE CENTRAL GOVT. IN THIS BEHALF
– CORPORATION OR A COMPANY INCORPORATED
BY OR UNDER ANY LAW IN FORCE IN ANY PLACE
OUTSIDE INDIA.
BUSINESS PERMITTED
• Borrowing, lending
• Drawing, making, accepting, buying , selling,
collecting,promissory notes, bills , debentures,
drafts, bill of lading, R/R ,T/R, scrips and other
instruments whether transferable or negotiable or
not
• Providing SDL, SC, sale and purchase of forex,
Issuing BG,LC and many other acctivities
PROHIBITED BUSINESS
• Section 8 of BR Act, 1949 prohibits Bank from
buying or selling goods directly or indirectly
• Section 9 of BR Act prohibits a bank from holding
an immovable property, howsoever acquired for a
period exceeding 07 years from its acquisition
except required for own use. The period may be
extended by another 05 years by RBI.
DIFFERENT BANKS
• SBI set up under SBI Act, 1955
• SBI Associate Banks under SB (subsidiary)
Act,1959
• RRBs under RRB Act, 1976
• PSBs under Banking Companies Act, 1970 and
1980 under Section 03 (Acquisition and Transfer
of Undertakings)
• Cooperative banks under The Banking Laws (
Application to cooperative societies ) act, 1965
RBI ACT,1934
• To regulate the issue of bank notes
• For keeping reserves for securing monetary
stability in India
• To operate the currency and credit system of
the country to its advantage
• Section 42 for CRR maintenance by the
ASCB
RBI ACT,1934
• Sec31: Restriction on drawing a DD
payable to bearer on demand
• Sec42: CRR at discretion of RBI 22/06/06
• Sec49: Announcement of bank rates, The
standard rate at which RBI is prepared to
buy or rediscount bill of exchange or
commercial papers eligible for purchase.
• Sec58(b): Penalty for drawing a DD
payable on demand
MAJOR POWERS OF RBI
• Power to license
• Power to appoint or remove banking board
personnel
• Power to give directions
• Power to inspect and supervise banks
• Power to collect and furnish credit information
• Power to impose penalties
• Power to regulate business of the bank
BANKING REGULATION ACT,
1949
License required from RBI under section 22
of the BR Act. The license is issued subject
to the conditions:- Adequate capital,
Character of proposed management, affairs
of the company, capability of company to
meet claims of depositors, potential in the
area of operations proposed and the interest
of public is served by the bank.
BANKING REGULATION
ACT,1949
• Section 17:-Minimum 20 % of profit to be
transferred to reserve fund before declaring
dividend by a banking company.
• Sec.19:- Restriction on holding shares of
any company for amount not exceeding 30
% of its own Paid up Capital+Reserves or
30 % of the company’s paid up capital,
whichever is less.
BR ACT1949(contd)
• Sec20: No loan against its own shares
• Sec23: RBI’s prior permission before
opening any new branch
• Sec24: SLR to be maintained by the banks
• Sec26: Return on unclaimed deposits for
more than 10 years within 30 days from the
end of a calendar year
• Sec45ZA to 45ZF:Nomination facility
CONTINUED
• Branch licensing under section 23
• Section 11 details the required minimum paid up
capital and reserves of the bank
• Section 12 says that the subscribed capital shall
not be less than 50 % of AC. Paid up capital shall
not be less than 50% of its subscribed capital
• A banking company can have only equity or
ordinary share. Preference shares issued before
01/07/1944 are exempted
CONTINUED
• Section 15, no dividend is payable until all e
capitalized expenses are completely written off.
• Section 19 (2) says the holding of shares in any
company by way of mortgage, pledge or absolute
owner shall not be exceeding 30 % of the Paid up
capital of the company or 30 % of the paid up
capital + Reserves of bank
BOARD OF DIRECTORS
• 51 % should have special knowledge
• No substantial interest in any company
• Period of office not more than 08 years
continuously
• There can be a full time or part time chairman or
MD
• The whole time Chairman or MD shall hold the
office for a period not exceeding 05 years.
CONTINUED
• Chairman may be director of a subsidiary of a
bank or of a company registered under section 25
of Companies Act
• The RBI can remove a chairman or MD and may
appoint another suitable person, but after giving
notice to the company and CM/MD. If the bank
does not comply the order RBI may remove him.
Such CM or MD will be for the residual period
only. The company or person may appeal to the
CG within 30 days.
CONTINUED
• In case of death/resignation/incapacitation of a CM/MD of
a bank, temporary arrangements can be made for
maximum 04 months with the approval of RBI
• If RBI appoints a CM/MD under section 10BB of BR Act,
who is not a director of the banking company, he will be
deemed as director and may be appointed as CM/MD for a
period not more than 03 years.
• Exemption under section 10C of BR Act to CM/MD for
holding qualification shares and also under section 10A of
the act (RBI Appointee ).
CONTINUED
• APPOINTMENT OF ADDITIONAL
DIRECTORS UNDER SECTION 36AB
OF BR ACT
• NO QUALIFICATION SHARES
REQUIRED
• APPOINTMENT FOR 03 YEARS AND
MAY BE EXTENDED TO ANOTHER 03
YEARS BY RBI.
B R ACT,1949
• RBI regulates advances of Banks under section 21
of the act
• RBI regulates rate of interest and other terms and
conditions of acceptance of deposits and loans and
advances under section 35 A of BR Act
• 45ZA of the Act is for nomination of one person in
deposit account.45ZC & 45ZE for safe custody
and safe deposit lockers respectively.
• Under SCC, RBI sets margin, credit ceiling and
rate of interest on specified commodities.
BR ACT CONTINUED
• Section 20, no advance against own shares.
• No advance to or on behalf of any director.
• Section 21 A provides that a transaction between a
bank and its debtor cannot be reopened in any
court for it being excessive.
• Ombudsman is appointed by RBI under section
35A of the BR Act.
• Section 17(1) of BR Act says a sum not less than
20 % of profit should be transferred to the reserve
fund.
continued
• Appropriation from reserve fund to be reported to RBI
within 21 days
• Foreign Banks to keep 20 % of profit as deposit with RBI
each year
• Section 42 of RBI Act for CRR
• A scheduled Bank is one included in second schedule of
RBI
• Section 42 (6) of RBI Act empowers RBI to include a bank
in the schedule 2 if it has a Paid up Capital not less than
Rs.5.00 lac, a company under section 3 of companies act,
an institution notified by CG, a corporation or a company
incorporated outside India under the foreign laws, state
cooperative bank.
continued
• Section 24 of BR Act for SLR maintenance
• Section 29 of BR Act to prepare balance sheet and
profit & loss account on expiry of 12 months
• B/S to be signed by the principal officer and
minimum three directors .
• 03 copies of balance sheet and P & L account to be
submitted to RBI within 03 months from the date
of closing of books.03 copies are to be sent to
company registrar also along with Auditor’s
Report.
continued
• Return on liquid assets under section 24(3)
within 20 days from end of the month to
RBI
• Monthly return on assets and liabilities as at
the close of business on last Friday of
previous month to be submitted before end
of month to RBI as per section 27 of BR
Act
BR ACT,1949
• A quarterly return on assets in India to be
submitted to RBI within 01month of the end of the
last quarter as per section 25(1)
• Return on unclaimed deposits within 30 days of
the close of calendar year under section 26
• Every banking company not being a scheduled
bank has to furnish a return relating to cash
reserve before 20th of every month under section
18(1) of BR Act
STATE BANK OF INDIA
• Shares with Central Government
• No shareholder can exercise voting rights
above 10 % even if their holding is more
• Subsidiary Banks have to act as an agent of
State Bank under section 36 of SBI SB Act
• Subsidiary Bank have to close their books
and returns submitted to SBI, RBI & CG
within 03 months from the date of closing
SBI ACT,1955
• Sec34: SBI will not acquire any immovable
property except for the purpose of providing
buildings or other accommodation
• Sec45: No provision of law relating to the
winding up of companies shall apply to SBI
• Regulation3- Shares of SBI are movable
properties
SBI ACT,1955 (Contd)
• Reg 61: Defines indebtness, loan or
advance, relatives, specified securities
• Reg65: Employee not to grant loan or
advance to himself
• Reg66: Employee not to grant loan to
his/her relatives
• Reg80: The seal of SBI
Regional Rural Banks
• Section 03 of RRB Act empowers CG to set up an
RRB with 35% issued capital with sponsoring
bank, 15% with SG and 50% with CG.
• Chairman is appointed by Sponsoring Bank and
management of the bank is with Board of
Directors.
• Two or more RRBs can be amalgamated by CG
• Transaction of business as per section 5 (b) of BR
Act.
NATIONALISED BANK
• Set up under Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 and Act, 1980.
• No shareholder other than CG can exercise voting rights
in excess of 1% of the total voting rights of all the
shareholders
• Can work as an agent of RBI, if asked
• Affairs conducted by Board of Directors
• Not more than 06 directors nominated by CG
• All the PSBs are scheduled banks under section 42 of RBI
Act
COOPERATIVE BANK
• Registered either under the state laws or under the
Multi-State Cooperative Societies Act.
• The BR Act is applicable to cooperative banks
• Paid up share capital and reserves are not less than
Rs.1.00 lac
• Cooperative society require a license from RBI
under section 22 of BR Act to carry on banking
business.