Banking Regulation Act, 1949
1. The law relating to banking came into force on 16.03.1949 under the name of the Banking Companies Act 1949.
2. W.e.f. 01.03.1966 its name was changed to Banking Regulation Act, 1949.
3. Originally the Act was not applicable to the State of J&K. In 1956 it was made applicable to J&K also.
4. The Banking Regulation Act, 1949 does not apply to primary agricultural credit societies, co-operative land mortgage banks and non-agricultural primary credit societies with paid up capital and reserves of less than Rs.Hakh.
5. As per Section 5, Approved Securities means (i) Securities in which a trustee may invest money under clause (a), clause (b), Clause (bb). clause (c) or Clause (d) of Section 20 of the Indian Trust Act, 1882. and (ii) Such of the securities authorised by the Central Govt. under clause (b) of Section 20 of the Indian Trust Act, 1882, as may be prescribed.
6. As per Section 5, Banking’ means the accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise, and withdraw-able by cheque, draft order or otherwise.’Demand Liabilities’ means liabilities which must be met on demand and ‘time liabilities’ means liabilities which are not demand liabilities.
7. Section 6 lays down the forms of business in addition to the business of banking in which a bank may engage.
8. Section 7 prohibits use of words ‘bank’ ‘banker’ or banking company by a company oiher than a banking company.
9. Section 8 prohibits trading activities for a bank except iti connection with realisation of security given to or held by it.
10. As per Section 9 a banking company cannot hold any immovable property, howsoever acquired except such as is required for its own use, for a period exceeding 7 years from the acquisition thereof. The aforesaid period of 7 years can be extended by RBI by a period not exceeding 5 years where it is satisfied that such extension would be in the interest of depositors of the banking company.
11. As per Section 13, payment of commission, brokerage, discount or remuneration in respect of any shares by a banking company shall not be more tfian 2.5% of the paid up value of said shares.
12. As per Section 17 a banking company is required to transfer to Reserve Fund 20% of the profits before declaring dividend. As per current guidelines of RBI a scheduled bank is required to transfer 25% of the profit before providing for bonus and declaring dividend.
13.As per Section 19(2) no banking company can hold shares in another company whether as pledgee, mortgagee or absolute owner of an amount exceeding 30% of the paid up share capital of that company or 30% of its own paid up share capital and reserves, whichever is less. (RBI has reduced it to 10%).
14. As per Section 21 A, Rate of Interest charged by banks are not subject to scrutiny of courts.
15. As per Section 24, banks are required to maintain Statutory Liquidity Ratio as prescribed by RBI. Maximum SLR will be 40% of NDTL. As per amendment to Banking Regulation Act, the condition of minimum SLR of 25% of NDTL has been removed. Thus, RBI has liberty to fix minimum SLR.
16. As per Section 26, banking companies are required to submit a return of all deposit accounts which have not been operated for the last 10 years. The return is submitted as on 31st December and within one month
17. Section 45 Y relates to power granted to Central Govt. to make rules for preservation of records.
18. Section 45Z relates to return of paid instruments to customers after keeping a true copy of all relevant parts of such instruments.
19. Section 45ZA to 45 ZF relate to nomination in deposits, safe custody and locker accounts.