Banking Regulation Act, 1949

Quiz
In which was Banking regulation Act passed in
Parliament?
March 1948
February 1949
March1934
when did Banking regulation Act came into force?
february 1948
March 1949
April1934
 Quiz
When was RBI established?
1st April 1935
1st April 1934
1st March 1934
Governor of RBI?
Osborne smith
C.D.Deshmukh
Raghuram Rajan
Urjit Patel
 Quiz
1st Governor of RBI?
Osborne smith
C.D.Deshmukh
Raghuram Rajan

Who is the first indian governor of RBI?

Identify the Logos
 Origin of the Act
No separate legislation till 1949.
Banks were under the control of Indian companies act.
Due to
Mushrooming growth in banks with inadequate capital
Dishonest management
Speculative investment
Appointment of incompetent directors for long periods
Poor liquidity of funds

Initiated the need of a separate banking act

 Origin of the Act
A bill was introduced in March 1948.
Passed in the parliament in February 1949.
Came to force in March1949.
Act was originally known as banking
companies act 1949
Now known as Banking Regulations Act 1949.
 Provisions of the Act
Definition of banking
Business of banking company and prohibited business
Capital requirements
Management
Maintenance of liquid assets
Licensing of banks
Opening of new branches
Provisions regarding loans and advances
Inspections of banks
Powers of reserve bank of India
Returns to be submitted
Acquisition of business
Winding up of banking companies
Amalgamation of banking companies
Miscellaneous penalties
Application of the act to cooperative banks
 Definition of Banking
Defined in section (b) of the act.
accepting, for the purpose of lending or
investment of deposits, of money of public,
repayable on demand or otherwise, and
withdrawal by cheque, draft, order or
otherwise.
Section 5(c) defines a Banking Company, as
any company which transacts business of
banking in India.
 Kinds of Business
Stated in section 6 of the act.
Main functions (usual banking activities)
Subsidiary functions
Main functions
Borrowing, raising or taking up money
Lending money with or without security
Granting and issuing letter of credit of various
kinds, travellers cheque
Collection and transmission of money and
securities.
 Subsidiary functions and services
Managing, selling and realising any property
which may come into its possession in
satisfaction of any of its claim.
Pensions, insurance.
Acquisition and construction.
Venture capital
 Capital requirements

A minimum paid up capital of Rs.100 crore for

setting up a new company.
Raised to Rs. 300 crore within 3 years of
commencement.
 Management
Section 10(A) provides that atleast 51% of the
board of directors of the banking company must
consist of persons who have special knowledge in
Economics,
Banking
Agricultural and rural economy
Law
They should not be proprietors of any trading,
commercial or industrial concern.
Chairman should be a professional banker. His
appointment must be subject to approval from
RBI.