In Banking exams, It important to have a basic understanding of Financial terms and acts. This article helps you develop a basic understanding of Banking Regulations Act.
Banking Regulations Act 1949
Under this act, RBI regulates the banks in India along with the RBI act 1934.
It was enacted on 16 March 1949. Earlier it did not cover cooperative banks but in 1966 it was extended to cooperative banks under section 56
Banking Regulations Act 1949 covers
- Scheduled banks
- Small finance banks
- Payment banks
- Local area banks
- Cooperative banks
Banking Regulations Act 1949 does not cover
- A primary agricultural credit society.
- A co-operative society whose primary object and principal business is providing of long-term finance for agricultural development.
- Land development bank
Objectives of Banking Regulations Act 1949
- To safeguard the interest of depositors;
- To develop banking institutions on sound lines
- To attune the monetary and credit system to the larger interests and priorities of the nation.
What is Banking?
“Banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order, or otherwise.
Prohibition on trading
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, or engage in any trade, or buy, sell or barter goods for others otherwise than in connection with bills of exchange received for collection or negotiation or with such of its business;
Important note: SLR provisions come under the banking regulation act and CRR provisions come under the RBI act.
Important provisions of the Act
Section 5(1)b: Banking Definition
Section 8: Prohibition on trading
Section 16: Prohibition of common directors
Section 17: Reserve Fund
Section 18: Cash reserve
Section 35A: Power of the Reserve Bank to give directions
Section 35AA: Power of Central Government to authorize Reserve Bank for issuing directions to banking companies to initiate the insolvency resolution process
Section 35AB: Power of Reserve Bank to issue directions in respect of stressed assets
Section 36AA Power of Reserve Bank to remove managerial and other persons from
Section 36AB Power of Reserve Bank to appoint additional directors
Section 36AE Power of Central Government to acquire undertakings of banking
companies in certain cases
Section 36AF Power of the Central Government to make scheme
Section 45ZE Release of contents of safety lockers
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