Banking Regulation Act, 1949 (2024)

An Overview: Banking Regulation Act, 1949

The Banking Regulation Act, 1949 or rbi Act 1949 is a regulation in India that manages all banking firms in India. Passed as the Banking Companies Act 1949, it came into power from Sixteen March 1949 and changed to Banking Regulation Act 1949 from first March 1966. It has been in Jammu and Kashmir since 1956. At first, the law was material just to banking organisations. In 1965 it was developed to make it suitable to helpful banks and to present different changes. The Banking Regulation Act, 2020 came up after it was altered to bring the cooperative banks under the management of the Reserve Bank of India. The Act gives a system under which business banking in India is directed and controlled. The Act supplements the Companies Act, 1956.

The Act gives the Reserve Bank of India (RBI) the ability to permit banks, have regulation over shareholding and casting ballot rights of investors; oversee the arrangement of the sheets and the board; manage the activities of banks; set down guidelines for reviews; control ban, consolidations and liquidation; issue mandates in light of a legitimate concern for public great and on banking strategy, and force punishments. In 1965, the Act was revised to incorporate cooperative banks under its domain by adding Section 56. Cooperative banks, which work just in one state, are shaped and run by the state government. Yet, RBI controls the permitting and directs the business operations. The Banking Act was an enhancement to the past acts connected with banking.

The Banking Regulation (Amendment) Bill, 2020 was presented in Lok Sabha by the Minister of Finance, Ms Nirmala Sitharaman, on March 3, 2020. The Bill tries to alter the Banking Regulation Act, 1949, concerning cooperative banks. The Act directs the working of banks and gives ideas from different angles, for example, authorising the board, and activities of banks. The Act doesn’t matter to specific cooperative organisations.

Highlights of Banking Regulation Act 1949

The primary highlights of the banking regulation act are ar the following:

Prohibition of Trading (Section 8): According to Section 8 of the Banking Regulation Act, a bank can’t straightforwardly or in a roundabout way manage trading or bargaining of products. Anyway,it might bargain the transactions connected with bills of trade for reduction or exchange.

Non-banking asset (Section 9): A bank can’t hold any non-movable property, but obtained except its utilisation, for any period passing a long time from the date of securing thereof. The organisation is allowed, inside a time of seven years, to arrange or exchange any such property for working with its removal.

Management (Section 10): This standard expresses that each bank will have one of its directors as Chairman on its Board of Directors. It additionally expresses that at least 51% of the complete number of individuals from the Board of Directors of a bank will comprise people who have extraordinary information or practical involvement with bookkeeping, farming, banking, financial aspects, money, regulation and others.

Minimum capital (Section 11): Section 11 (2) of the Banking Regulation Act, 1949, states that no bank will initiate or carry on business in India, except if it has least settled up capital and money held endorsed by the RBI.

Payment of commission (Section 13): According to Section 13, a bank isn’t allowed to pay straightforwardly or in a roundabout way via commission, business, rebate or compensation on issues of its portions more than 2.5% of the PSR.

Payment of dividend (Section 15): According to Section 15, no bank will deliver any dividend on its portions until all its capital costs (counting primer costs, association costs, share selling commission, business, a measure of misfortunes caused and different things of use not addressed by tangible resources) have been discounted.

Importance of Banking Regulation Act 1949

• The Banking Regulation Act provides the capacity to RBI to permit banks and the regulation of the shareholding awards capacity to RBI to direct the arrangement of the boards and the executives’ individuals from banks
• It additionally sets down bearings for reviews to be overseen by RBI, and control consolidating and liquidation
• RBI issues directives on banking strategy in light of a legitimate concern for public interest and can force punishments whenever required
• Co-operative Banks were formed under this act in the year of 1965

Conclusion

The Banking Regulation Act 1949 is a regulation in India, that states all banking firms will be controlled under this act. There is an aggregate of fifty-five-five Sections under the banking regulation act, the law was simply material to banks, yet after 1965, it was revised to make it appropriate to agreeable banks ore to present different changes. The act gives a structure that directs and oversees business banks in India. This act enables the RBI to practice control and direct banks under management. The act came into power on March sixteenth 1949. It connects with different perspectives opposite banking in India. The principal objective of the banking regulation act is to guarantee sound banking through regulations covering the launch of branches and the support of liquid resources.