Professional Documents
Culture Documents
Banking Company means any company which transacts the business of banking in India
Secured loan or advance means a loan or advance made on the security of asset the
market value of which is not at any time less than the amount of such loan or advance,
and ‘unsecured loan or advance’ means a loan or advance not secured.
Section Describes the forms of business in which a banking company may engage in addition to
6 the Banking Business.
Section Use of Word Banking: Banking company carrying on banking business in India to use at
7 least one word, bank, banker, banking, or banking company in its name.
Section Prohibition of trading: restricts/prohibits business like trading for goods etc.
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Section Holding of Immovable Property (other than for own Use):
9 No Banking company shall hold any immovable property howsoever acquired except as is
acquired for its own use for a period exceeding 7 years from the date of acquisition. RBI
can further grant extension for a period not exceeding 5 years.
Section
11 Requirement as to minimum paid up Capital and Reserves required for a Scheduled
Bank (bank included in 2nd Schedule of RBI Act 1934).
Domestic Banks – Min. – Rs. 5 lac (Rs.10 lac for business in Mumbai or
Kolkata)
Foreign Banks - Min. - Rs.15 lac (Rs.20 lac for business in Mumbai or
Kolkata) (It is calculated as Value of All Assets minus Outside Liabilities)
If place of business is one state – Rs. 1.00 lac for principal place business
PLUS 10000/- for additional place in same district or 20000/- for additional
place elsewhere (Maximum Rs. 500000/-).
Apart from this, Foreign banks are required to deposit at least 20% of profits for each year
with RBI in respect of business transacted through branches in India. (Presently – 25%)
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Section Regulation of paid up capital, subscribed capital and authorized capital and voting
12 rights
Subscribed capital should not be less than ½ of its authorized capital
Paid up capital should not be less than ½ of its subscribed capital
(i.e. ratio of authorized capital, subscribed and paid up capital should be minimum 4:2:1)
No person shall have voting rights in excess of 10% of total voting rights of all the
shareholders.
Section Every banking company to create reserve fund and 20% of its profits should be
17 transferred to this fund before any dividend is declared. (RBI has directed the banks to
transfer not less than 25% of net profits to Reserve Funds). The appropriation of any sum
from the reserve fund or share premium account is to be reported to Reserve Bank, within
21 days from date of appropriation.
Section Cash Reserve: Non scheduled banks to maintain 3% of the demand and time liabilities by
18 way of cash reserves with itself or by way of balance in a Current Account with RBI.
Section Permits bank to form subsidiary company for certain purposes (vide section 6)
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Section No banking company shall hold shares in any company, whether as pledgee, mortgagee
19(2) or absolute owners of an amount exceeding 30% of its own paid up share capital +
reserves or 30% of the paid up share capital of that company whichever is less.
Section Statutory Liquidity Ratio--Every bank has to maintain liquid assets in form of cash, gold
24 & unencumbered approved securities at the close of any business which is minimum of
certain percentage (Presently 23%), of its total demand and time liabilities in INDIA as on
last Friday of the second preceding fortnight. There is no floor limit of SLR and it as per
RBI discretion, as against 25% earlier. However, maximum limit is 40%.
Section Return of unclaimed deposits (10 years and above) within 30 days of close of each
26 calendar year
Section Every bank to prepare its Balance Sheet as on last working day of March every year on
29 Form `A’ and profit and loss a/c on Form `B’ of the 3rd schedule of the Act.
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Section Balance Sheet should be got audited from qualified auditors
30(I)
Section To publish Balance Sheet and Auditors report within 6 months from the end of period to
31 which they refer.
Section Every bank has to submit 3 copies of Balance sheet to RBI within a period of 3 months,
32 which can be extended up to another period of 3 months (Maximum 6 monthts.
Section RBI can terminate any Chairman or Employee of the bank where it considers desirable to
36 do so.
Constitution of Banks
All Public Sector Banks are Body Corporate formed under Special Statue
Other banks are registered under Company Act, 1956
Cooperative Societies and State Co-operative Banks are registered and
controlled by State Govt. under State Cooperative Society Act of each State.
Registrar of Cooperative Societies has powers to register or wind up. However,
these banks are under dual control of State Govt. and RBI (Regulator).
Other Cooperative Banks are established under Multi State Cooperative Society
Act, 2002. Registrar appointed by Central Govt. is the authority to register and
wind up. Control Authority is NABARD and State Govt.
Cooperative Banks operating in Rural areas are controlled by State Govt. and
NABARD.
Cooperative banks in Urban areas are controlled by State Govt. and RBI.
Assets in India
Every Banking Co. has to maintain assets in India up to the amount not less
than 75% of DTL as on close of business day on last Friday every quarter.
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