CIVIL

Banking Laws in India

Law Library – 

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An indigenous banking system was being carried out by the businessmen called Sharoffs, Seths, Sahukars, Mahajans, Chettis, etc.The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan. Thereafter, three presidency banks namely the Bank of Bengal (this bank was originally started in the year 1806 as Bank of Calcutta and then in the year 1809 became the Bank of Bengal) , the Bank of Bombay and the Bank of Madras, were set up. From 1st January 1949, the Reserve Bank began functioning as a State-owned and State-controlled Central Bank.. To streamline the functioning of commercial banks, the Government of India enacted the Banking Companies Act,1949 which was later changed as the Banking Regulation Act 1949. RBI acts as a regulator of banks, banker to the Government and banker’s bank. In the year 1969 , 14 major commercial banks in the private sector were nationalized on 19th July,1969.


Basic frame work and regulation

RBI Act 1935

Banking Regulation Act 1949

Prevention of Money Laundering Act, 2002   


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Reserve Bank Of India Act 1934[Click for Commentary]

Key Ideas

Whereas it is expedient to constitute a Reserve Bank for India to regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in [India] and generally to operate the currency and credit system of the country to its advantage.

A bank to be called the Reserve Bank of India shall be constituted for the purposes of taking over the management of the currency from the [Central Government] and of carrying on the business of banking in accordance with the provisions of this Act.
(2) The Bank shall be a body corporate by the name of the Reserve Bank of India, having perpetual succession and a common seal, and shall by the said name sue and be sued

Management: The Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest.
(2) Subject to any such directions, the general superintendence and direction of the affairs and business of the Bank shall be entrusted to a Central Board of Directors which may exercise all powers and do all acts and things which may be exercised or done by the Bank.If in the opinion of the [Central Government] the Bank fails to carry out any of the obligations imposed on it by or under this Act the Central Government] may, by notification in the Gazette of India, declare the Central Board to be superseded, and thereafter the general superintendence and direction of the affairs of the Bank shall be entrusted to such agency as the 4[Central Government] may determine, and such agency may exercise the powers and do all acts and things which may be exercised or done by the Central Board under this Act

Main Functions

Monetary Authority:

  • Formulates, implements and monitors the monetary policy.
  • Objective: maintaining price stability while keeping in mind the objective of growth.

Regulator and supervisor of the financial system:

  • Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.
  • Objective: maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange

  • Manages the Foreign Exchange Management Act, 1999.
  • Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:

  • Issues and exchanges or destroys currency and coins not fit for circulation.
  • Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role

  • Performs a wide range of promotional functions to support national objectives.

Related Functions

  • Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
  • Banker to banks: maintains banking accounts of all scheduled banks.

Reserve Bank owns following organizations

Deposit Insurance and Credit Guarantee Corporation of India(DICGC),

Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL),

National Housing Bank(NHB)


Reserve Bank Of India 

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Acts  exclusively administered by Reserve Bank of India

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II. Other relevant Acts banking regulation 

  • Negotiable Instruments Act, 1881
  • Bankers’ Books Evidence Act, 1891
  • State Bank of India Act, 1955
  •  Companies Act, 2013
  • Securities Contract (Regulation) Act, 1956
  • State Bank of India Subsidiary Banks) Act, 1959
  • Deposit Insurance and Credit Guarantee Corporation Act, 1961
  • Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
  • Regional Rural Banks Act, 1976
  • Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980
  • National Bank for Agriculture and Rural Development Act, 1981
  • National Housing Bank Act, 1987
  • Recovery of Debts Due to Banks and Financial Institutions Act, 1993
  • Competition Act, 2002
  • Indian Coinage Act, 2011: Governs currency and coins
  • Banking Secrecy Act
  • The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003
  • The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993

 

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More Banking laws

Actuaries Act 2006
The African Development bank Act, 1983
The Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004
The Export-Import Bank of India Act, 1981
The Industrial Disputes (Banking and Insurance Companies) Act, 1949
The State Bank of Sikkim (Acquisition of Shares) and Miscellaneous Provisions Act, 1982
The State Bank of Saurashtra (Repeal) and The State Bank of India (Subsidiary Banks) Amendment Act, 2009
The State Bank of India Act, 1955
State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007
State Bank of India (Amendment) Act, 2010
State Bank of India (Amendment) Act, 2007
The Small Industries Development Bank of India Act, 1989
The State Bank of Hyderabad Act, 1956
The Unit Trust of India Act 1963
Reserve Bank of India Act, 1934
Reserve Bank of India (Amendment) Act, 2006
The Regional Rural Banks Act, 1976
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Useful Links pertain to Banking

Banking Research and Study Sites
Centre for Advanced Financial Research and Learning
College of Agricultural Banking
India Observatory
Indira Gandhi Institute of Development Research
Institute for Development and Research in Banking Technology
Joint India-IMF Training Program
National Centre for Finance Education (NCFE)
National Institute of Bank Management
Banks and Banking
Banking Codes and Standards Board of India
Deposit Insurance and Credit Guarantee Corporation
Indian Banks’ Association
Websites of Banks in India
Multi Lateral Institutions
Asian Clearing Union(ACU)
Bank for International Settlements, Basle
International Monetary Fund
SAARCFINANCE
South East Asian Central Banks (SEACEN)
World Bank
Other Regulators
Insurance Regulatory and Development Authority
Ministry of Finance
National Bank for Agriculture and Rural Development
National Housing Bank
Other Central Banks
Securities and Exchange Board of India
Others
सचेत
Bhartiya Reserve Bank Note Mudran Private Limited
Clearing Corporation of India Ltd.
Fixed Income Money Market and Derivatives Association of India
Foreign Exchange Dealers Association of India
National Payments Corporation of India (NPCI)
Security Printing and Minting Corporation of India Limited

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The constituents of the Indian Banking System can be broadly listed as under:
(a) Commercial Banks:
(i) Public Sector Banks
(ii) Private Sector Banks
(iii) Foreign Banks
(b) Cooperative Banks:
(i) Short term agricultural institutions
(ii) Long term agricultural credit institutions
(iii) Non-agricultural credit institutions
(c) Development Banks:
(i) National Bank for Agriculture and Rural Development (NABARD)
(ii) Small Industries Development Bank of India (SIDBI)
(iii) EXIM Bank
(iv) National Housing Bank

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