Banking Laws-and Regulations

Monetary Aggregates

M-0= M-1= M-2=

Reserve Money- currency in circulation + banks deposits wih RBI+other deposits with RBI Currency with the public+ demand deposits with Banks+Other deposits with RBI M1+Term deposits with Banks+CDs (upto one year maturity) excluding FCNR deposits.

Monetary Aggregates
M2 + term deposits with banks maturity of over 1 year + call borrowings by banks from financial corporations M0 is called Reserve Money M1 is called narrow money M2 and M3 are called Broad money other deposits with RBI include current deposits of foreign central banks, financial instns etc.

M3= with

Liquidity Aggregates
L1= M3 + all deposits with Post Office Savings bank excluding NSCs L2= L1 + term deposits with term lending instiutions and refinance instns. + term bowoorings by FIs and CDs issuede by FIs L3 =L2 + public deposits of Non-banking finance companies.

Advances to Priority Sector-40% of net credit. (agriculture, SSI,SRTO, Small Business, Selfemployed, Educational Loans, Housing Loans upto Rs. 20 lacs.) Finance to Agriculture- 18% of net credit Of which Indirect finance not over 25% (4.5% of total credit) Investment in RIDF/NABARD/REC for shortfall Finance to weaker section-10%

The Govt-priorities

Small & Marginal farmers,TC/AL-5 acres or < Artisan, village and cottage industry Rs.50000 SC/ST, DRI, SHG/NGO(micro -credit) Export Credit- 12% of Bank credit(not under PS)

The Govt-priorities
Investment in Plant & Machinery in Microenterprises Small enterprises Medium enterprises For Services Mfg./processing Not over Rs. 25 lacs over Rs. 25 to Rs. 500 lacs over Rs. 500 lacs to 1000 lacs Not over Rs. 10 lacs over Rs. 10 lacs to Rs. 200 lacs over Rs. 200 lacs to Rs. 500 lacs

Small Scale Sector-contribution

About 4.37 million units Generating 7% of GDP

Turnover of Rs. 14019 bl.

Jobs for- 22.17 ml. Accounts for Rs. 1000 bl. In exports.

The Govt-priorities

DRI Scheme 1%

of Net Bank Credit 40% of total DRI loans for SC/ST 2/3rd

of DRI loans in rural/ semi-urban centres. Centrally sponsored schemesJawahar Rojgar Yojana NREP

The RBI- requirements

Cash Reserve Ratio(CRR)4.00 of NDTL Statutory Liquidity Ratio(SLR)- 23% of NDTL Bank Rate8.25% Liquidity Adjustment Facility

Repo RateReverse Repo rate-

7.25 % 6.25 %

Prime Lending Rate(PLR) 12-14( ???) Base Rate 9.25-10% Call Rate and MIBORdaily quote-6%?

Commercial Banks & Legislations

Banking Regulations Act,1949S.5 (b)- Banking defined S.24- SLR- 25% to 40% S.21-RBI can give directions on margin, rate of interest , purpose of lending. S.22-Banking licence from RBI S.23- RBI permission for shifting of Branch S.27-28-Monthly st. of assets & liabilities to RBI S.29-32-Annual accounts.

Commercial Banks & Legislations

RBI ACT, 1934:S.42- Min. Paid up capital of Rs. 5 lacs to include in the IInd schedule. S.;17-Accommodation from RBI against approved collaterals. S.18- RBI can lend against any other form of securities S.42- CRR- 3% to 20%(freed) S.45 C/D-RBI empowered to collect credit information and exchange with Banks/FIs S.49- Bank Rate fixation.

Commercial banks & legislations

S.35- RBI Inspection S.35 A-Direction to SCBs under public interest. S.36 AA/BB- removal of CEO/directions by RBI S.36-RBI can prohibit any transaction/changes in management S.37/39- winding up of Banking companymove high court- appoint liquidator. S.44 A- RBI sanction before approving amalgamation S.45- Scheme of reconstruction & grant of moratorium- RBI apply to Central Govt.

Commercial Banks & Legislations

OTHER LEGISLATIONS IMPACTING BANKS

Banking Companies(acquisition & Transfer)Act, 1970 Bankers Book Evidence Act, 1891 Banking Laws amendment Act, 1983 and Banking Companies Nomination Rules, 198- S. 45 ZA to 45 ZF. Transfer of Property Act,1882-S.58(a) to S.58(f) Companies Act- S.125 & S.126- charge/ date of registration Partnership Act,1932( max. 10 partners in a banking company) Limited Liability Partnership Act

Commercial Banks & Legislations

Negotiable Instruments Act,1881 S.13-

Prom. Note, B/Exchange or cheque S.4- Promissory Note S.5- Bills of exchange-(cheque-draft) S.6- Cheques. S.8- and S.9-Holder and Holder in due course. S.10-Payment in due course. S.16- Endorsements S. 85/ 89- Paying bank S.89- material alteration S.131- collecting bank S.138/141 dishonor of cheques.

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