Performance bond and performance guarantee

Supreme Court in United Commercial Bank case, (1981) 3 SCR 300 . There A.P. Sen, J. speaking for the Court, said (pages 323 and 324):

The rule is well established that a bank issuing or confirming a letter of credit is not concerned with the underlying contract between the buyer and seller. Duties of a bank under a letter of credit are created by the document itself, but in any case it has the power and is subject to the limitations which are given or imposed by it, in the absence of the appropriate provisions in the letter of credit.

It is somewhat unfortunate that the High Court should have granted a temporary injunction, as it has been done in this case, to restrain the appellant from making a recall of the amount of ` 85,84,456 from the Bank of India in terms of the letter of guarantee or indemnity executed by it. The courts usually refrain from granting injunction to restrain the performance of the contractual obligations arising out of a letter of credit or a bank guarantee between one bank and another. If such temporary injunctions were to be granted in a transaction between a banker and a banker, restraining a bank from recalling the amount due when payment is made under reserve to another bank or in terms of the letter of guarantee or credit executed by it, the whole banking system in the country would fail.

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Letter of credit

In Tarapore & Co. Madras v. V/o Tractors Export, Moscow and Anr., (1969) 2 SCR 920 supreme Court observed that irrevocable letter of credit had a definite implication. It was independent of and unqualified by the contract of sale or other underlying transactions. It was a mechanism of great importance in international trade and any interference with that mechanism was bound to have serious repercussions on the international trade of this country. The Court reiterated that the autonomy of an irrevocable letter of credit was entitled to protection and except in very exceptional circumstances courts should not interfere with that autonomy.

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PAYMENT SERVICES ACT 2019 – SINGAPORE

PAYMENT SERVICES ACT 2019
(No. 2 of 2019)

I assent.

HALIMAH YACOB,
President.

11 February 2019.

Date of Commencement: 28 January 2020 Parts 1 to 8, sections 109, 110, 112, 115 to 120, Part 10, the First and Second Schedules

An Act to provide for the licensing and regulation of payment service providers, the oversight of payment systems, and connected matters, to repeal the Money‑changing and Remittance Businesses Act (Chapter 187 of the 2008 Revised Edition) and the Payment Systems (Oversight) Act (Chapter 222A of the 2007 Revised Edition), and to make consequential and related amendments to certain other Acts.

Be it enacted by the President with the advice and consent of the Parliament of Singapore, as follows:

PART 1
PRELIMINARY
Short title and commencement
1. This Act is the Payment Services Act 2019 and comes into operation on a date that the Minister appoints by notification in the Gazette.

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Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector

Licensing of Small Finance Banks in the Private Sector

Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector

I. Introduction

The Reserve Bank had issued the Guidelines for Licensing of “Small Finance Banks” in the Private Sector on November 27, 2014. The process of licensing culminated in granting in-principle approval to ten applicants and they have since established the banks. It was notified in these Guidelines that after gaining experience in dealing with these banks, the Reserve Bank will consider ‘on tap’ licensing of these banks. After a review of the performance of the existing small finance banks and to encourage competition, it was announced in the Second Bi-monthly Monetary Policy Statement, 2019-20 dated June 06, 2019 that the Reserve Bank would put out draft guidelines for ‘on tap’ licensing of such banks. Accordingly, the draft guidelines were published on the RBI website on September 13, 2019 inviting comments from the stakeholders and members of the public. The final Guidelines, taking into consideration the responses received, are given below.

II. Guidelines

1. Registration, licensing and regulations

The small finance bank shall be registered as a public limited company under the Companies Act, 2013. It will be licensed under Section 22 of the Banking Regulation Act, 1949 and governed by the provisions of the Banking Regulation Act, 1949; Reserve Bank of India Act, 1934; Foreign Exchange Management Act, 1999; Payment and Settlement Systems Act, 2007; Credit Information Companies (Regulation) Act, 2005; Deposit Insurance and Credit Guarantee Corporation Act, 1961; other relevant Statutes and the Directives, Prudential Regulations and other Guidelines/ Instructions issued by Reserve Bank of India (RBI) and other regulators from time to time. The small finance banks will be given scheduled bank status once they commence their operations.

2. Objectives

The objectives of setting up of small finance banks will be for furthering financial inclusion by (i) provision of savings vehicles primarily to unserved and underserved sections of the population, and (ii) supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities, through high technology-low cost operations.

3. Eligible promoters

(a) Eligibility Criteria:

Resident individuals/professionals (Indian citizens), singly or jointly, each having at least 10 years of experience in banking and finance at a senior level; and Companies and Societies in the private sector, that are owned and controlled by residents (as defined in FEMA Regulations, as amended from time to time), and having successful track record of running their businesses for at least a period of five years, will be eligible as promoters to set up small finance banks. Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) in the private sector, that are controlled by residents (as defined in FEMA Regulations, as amended from time to time), and having successful track record of running their businesses for at least a period of five years, can also opt for conversion into small finance banks after complying with all legal and regulatory requirements of various authorities and if they conform to these guidelines. Further, existing Payments Banks (PBs) which are controlled by residents and have completed five years of operations are also eligible for conversion into small finance banks after complying with all legal and regulatory requirements of various authorities and if they conform to these guidelines. However, joint ventures by different promoter groups for the purpose of setting up small finance banks would not be permitted. As local focus and the ability to serve smaller customers will be the key criteria in licensing such banks, this may be a more appropriate vehicle for local players or players who are focused on lending to unserved / underserved sections of the society. Accordingly, proposals from Government owned / public sector entities and large industrial house / business groups, including from NBFCs and PBs promoted by them, autonomous boards / bodies set up under enactment of a state legislature, state financial corporations, subsidiaries of development financial institutions, will not be entertained. For the purpose of these guidelines, a group with assets of ₹ 5,000 crore or more with the non-financial business of the group accounting for 40 per cent or more in terms of total assets / gross income, will be treated as a large industrial house / business groups. (In taking a view on whether the companies, either as promoters or investors, belong to a large industrial house or to a company connected to a large industrial house, the decision of the RBI will be final). Further, proposals from Alternative Investment Funds (AIFs) will also not be entertained.

Primary (Urban) Co-operative Banks (UCBs), which are desirous of voluntarily transiting into small finance bank, may refer to Scheme on voluntary transition of Urban Co-operative Bank into a Small Finance Bank (Circular reference no. DCBR.CO.LS.PCB. Cir.No.5/07.01.000/2018-19 dated September 27, 2018). UCBs applying for transiting to small finance bank or obtaining in-principle approval for such transition (under the above referred scheme), will be required to ensure compliance with these ‘on tap’ licensing guidelines from the date of commencement of business as small finance bank except the guideline on minimum capital. The minimum net worth of such small finance banks shall be ₹ 100 crore from the date of commencement of business. However they will have to increase their minimum net worth to ₹ 200 crore within five years from the date of commencement of business.

(b) ‘Fit and Proper’ criteria

Promoters / Promoter Groups1 should be ‘fit and proper’ in order to be eligible to promote small finance banks. RBI would assess the ‘fit and proper’ status of the applicants on the basis of their past record of sound credentials and integrity; financial soundness and successful track record of professional experience or of running their businesses, etc. for at least a period of five years.

(c) Corporate Structure:

The promoters / promoter group may choose to set up the small finance bank either as a standalone entity or under a holding company, which shall act as the promoting entity of the bank. However, if there is an intermediate company between the small finance bank and its promoting entity, it should be a Non-Operative Financial Holding Company (NOFHC). If the promoters desire to set up the small finance bank under a holding company structure, without an NOFHC, the holding company / the promoting entity shall be registered as an NBFC – CIC with the Reserve Bank. In case the small finance bank is set up under an NOFHC, the NOFHC would be required to conform to all requirements relating to NOFHC stipulated under paragraph 2 (C) II of the Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector dated August 1, 2016. The general principle for reorganisation of the activities in the group is that all activities permitted to a bank under Section 6 (a) to (o) of Banking Regulation Act, 1949 shall be carried out from the bank. However, if the Promoters desire to continue existing specialized activities from a separate entity proposed to be held under the NOFHC, prior approval from RBI would be required and it should be ensured that similar activities are not conducted through the bank. Further, the activities not permitted to the bank would also not be permitted to the group i.e. entities under the NOFHC would not be permitted to engage in activities that the bank is not permitted to engage in. However, small finance banks will not be allowed to set up any subsidiaries.

4. Scope of activities

The small finance bank, in furtherance of the objectives for which it is set up, shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

It can also undertake other non-risk sharing simple financial services activities, not requiring any commitment of own fund, such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI and after complying with the requirements of the sectoral regulator for such products. After three years from the date of commencement of operations of the bank, requirement for prior approval from the Reserve Bank will no longer apply and the bank will be governed by the extant norms as applicable to scheduled commercial banks.

The small finance bank can also become a Category II Authorised Dealer in foreign exchange business for its clients’ requirements.

Small finance banks will have general permission to open banking outlets from the date of commencement of business as per RBI circular on “Rationalisation of Branch Authorisation Policy- Revision of Guidelines” dated May 18, 2017, as amended from time to time subject to the condition that the requirement of opening at least 25 per cent of its banking outlets in unbanked rural centers (population upto 9,999 as per the latest census). Where the small finance bank has been formed by conversion of an existing NBFC – MFI, the transition of existing branches to banking outlets will be governed by the provisions of paragraph 7 of the RBI circular on “Rationalisation of Branch Authorisation Policy- Revision of Guidelines” dated May 18, 2017, as amended from time to time.

There will not be any restriction in the area of operations of small finance banks; however, preference will be given to those applicants who, in the initial phase, set up the bank in a cluster of under-banked States / districts, such as in the North-East, East and Central regions of the country. These applicants will not have any hindrance to expand to other regions in due course. It is expected that the small finance bank should primarily be responsive to local needs. After the initial stabilization period of five years, and after a review, RBI may liberalize the scope of activities of the small finance banks.

The other financial and non-financial services activities of the promoters, if any, should be kept distinctly ring-fenced and not comingled with the banking business.

The small finance bank will be required to use the words “Small Finance Bank” in its name in order to differentiate it from other banks.

5. Capital requirement

The minimum paid-up voting equity capital for small finance banks shall be ₹ 200 crore, except for such small finance banks which are:

a. transited from UCBs for which the capital requirement will be as prescribed in paragraph 3 (a) above.

b. converted from NBFC/MFI/LAB/PB for which the capital requirement will be as prescribed in paragraph 10 below.

In view of the inherent risk of a small finance bank, it shall be required to maintain a minimum capital adequacy ratio of 15 per cent of its risk weighted assets (RWA) on a continuous basis, subject to any higher percentage as may be prescribed by RBI from time to time. Tier I capital should be at least 7.5 per cent of RWAs. Tier II capital should be limited to a maximum of 100 per cent of total Tier I capital. Basel II norms will be generally applicable to the small finance banks, unless stipulated otherwise.

6. Promoters’ contribution

The promoters shall hold a minimum of 40 per cent of the paid-up voting equity capital of the bank at all times during the first five years from the date of commencement of business of the bank. If the initial shareholding by promoters in the bank is in excess of 40 per cent of paid-up voting equity capital, it should be brought down to 40 per cent within a period of five years. Whether a promoter ceases to be a promoter or could exit from the bank, after completing the lock-in period of five years, would depend on the RBI’s regulatory and supervisory comfort / discomfort and SEBI regulations in this regard. Further, the promoters’ stake should be brought down to a maximum of 30 per cent of the paid-up voting equity capital of the bank within a period of 10 years, and to a maximum of 15 per cent within 15 years from the date of commencement of business of the bank.

Further, in the case of such small finance banks which are transited from UCBs the promoters shall hold a minimum of 26 per cent of paid-up voting equity capital at all times during the first five years from commencement of business of the bank. Promoters’ holding may be brought down to 15 per cent over a period of 15 years from the date of reaching net worth of ₹ 200 crore by such UCBs.

Proposals having diversified shareholding, subject to the initial minimum shareholding of promoters, and a time frame for listing of the bank will be preferred. However, listing will be mandatory within three years after the small finance bank reaches the net worth of ₹ 500 crore for the first time. Small finance banks having net worth of below ₹ 500 crore could also get their shares listed voluntarily, subject to fulfillment of the requirements of the capital markets regulator. Any proposed material change2 in the shareholding pattern in the promoter entity at the time of application and during the period between the application and grant of license should be brought to the prior notice of RBI. Thereafter, such a change would require prior approval of RBI.

7. Foreign shareholding

The foreign shareholding in the small finance bank would be as per the extant Foreign Direct Investment (FDI) policy for private sector banks, subject to paragraph 6 above.

8. Voting rights and transfer / acquisition of shares

As per Section 12 (2) of the Banking Regulation Act, 1949, read with RBI notification dated July 21, 2016, published in the Gazette of India dated September 17, 2016, any shareholder’s voting rights in private sector banks are currently capped at 26 per cent of the total voting rights of all the shareholders of the banking company. Further, as per Section 12 (B) of the Act ibid, any acquisition of 5 per cent or more of paid-up share capital in a private sector bank or voting rights therein will require prior approval of RBI. These provisions will apply to the small finance banks also. However, shareholding limits of promoters / promoter group will be guided by paragraph 6 of these guidelines.

9. Prudential norms

The newly set up small finance banks should ensure that they put in place a robust risk management framework. The small finance bank will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). No forbearance would be provided for complying with the statutory provisions.

In view of the objectives for which small finance banks are set up, the bank will be required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by RBI. While 40 per cent of its ANBC should be allocated to different sub-sectors under PSL as per the extant PSL prescriptions, the bank can allocate the balance 35 per cent to any one or more sub-sectors under the PSL where it has competitive advantage. The first audited balance sheet as on March 31st, post commencement of operations of the small finance bank, would form the basis for the first PSL target for the bank (for the subsequent financial year). During the ‘intervening period’ i.e. the period between date of commencement of business and the date of first audited balance sheet (i.e. March 31st), the small finance banks are not allowed to sell Priority Sector Lending Certificates.

The maximum loan size and investment limit exposure to a single and group obligor would be restricted to 10 per cent and 15 per cent of its capital funds, respectively. Further, in order to ensure that the bank extends loans primarily to small borrowers, at least 50 per cent of its loan portfolio should constitute loans and advances of up to ₹ 25 lakh on an ongoing basis. For assessing compliance with this requirement, the entire loan portfolio of the bank, as on the date of commencement of operations, would be considered and not just the fresh loans disbursed after the commencement of operations. Further, the criteria of upper limit of ₹ 25 lakh shall be borrower wise.

After the initial stabilization period of five years, and after a review, RBI may relax the above exposure limits.

In addition to the restrictions placed on banks’ loans and advances to its directors and the companies in which its directors are interested under Section 20 of the Banking Regulation Act, 1949, the small finance bank is precluded from having any exposure to its promoters, major shareholders (who have shareholding of 10 per cent or more of paid-up voting equity shares in the bank), the relatives [as defined in Section 2 (77) of the Companies Act, 2013 and Rules made there under] of the promoters as also the entities in which they have significant influence or control (as defined under Accounting Standards Ind AS 28 and Ind AS 110).

10. Additional conditions for NBFCs/MFIs/LABs/PBs converting into a bank

An existing NBFC/MFI/LAB/PB, if it meets the conditions under these guidelines, could apply to convert itself into a small finance bank, after complying with all legal and approval requirements from various authorities. In such a case, the entity shall have a minimum net worth of ₹ 200 crore or it shall infuse additional paid-up voting equity capital to achieve net worth of ₹ 200 crore within eighteen months from the date of in-principle approval or as on the date of commencement of operations, whichever is earlier. It may be noted that on conversion into a small finance bank, the NBFC / MFI / PB will cease to exist and all its business which a bank can undertake should fold into the bank and the activities which a bank cannot statutorily undertake be divested / disposed of. Further, the branches of the NBFC / MFI / PB should either be converted into bank branches within a period of three years from the date of commencement of operations or be merged / closed. The small finance bank and the NBFC / MFI cannot co-exist.

Banks are precluded from creating floating charge on their assets. For such NBFCs / MFIs, which succeed in obtaining licenses to convert into small finance banks, if they have created floating charges on their assets for secured borrowings which stand in their balance sheets on the day of conversion into a small finance bank, RBI will permit grandfathering of such borrowings till their maturity. An additional risk weight of 25 per cent will be imposed on the assets on which charge / lien has been created by the converting entity, in favour of the existing lenders / debenture holders, until such time these liabilities are extinguished in order to protect the interest of the depositors.

If the existing NBFCs/MFIs/LABs have diluted the promoters’ shareholding to below 40 per cent, but above 26 per cent, due to regulatory requirements or otherwise, RBI may not insist on the promoters’ minimum initial contribution as indicated in paragraph 6 of the guidelines. In such cases, the promoters’ have to ensure that their holding does not fall below 26% of paid-up voting equity capital during the first five years from commencement of business of the bank, even if fresh equity is infused.

11. Business plan

The applicants for small finance bank licenses will be required to furnish their business plans along with project reports with their applications. The business plan will have to address how the bank proposes to achieve the objectives behind setting up of small finance banks and in the case of an NBFC / MFI applicant, how the existing business of NBFC / MFI will fold into the bank or divested / disposed of. The business plan submitted by the applicant should be realistic and viable. In case of deviation from the stated business plan after issue of license, RBI may consider restricting the bank’s expansion, effecting change in management and imposing other penal / regulatory measures as may be necessary.

12. Corporate governance

  1. The Board of the small finance bank should have a majority of independent Directors3.
  2. The bank should comply with the corporate governance guidelines including ‘fit and proper’ criteria for Directors as issued by RBI from time to time.

13. Other conditions

  1. A promoter will not be granted licenses for both universal bank and small finance bank even if the proposal is to set them up under the NOFHC structure.
  2. If a promoter of a payments bank desires to set up a small finance bank, both the banks should be under NOFHC structure.
  3. Individuals (including relatives) and entities other than the promoters will not be permitted to have shareholding in excess of 10 per cent of the paid-up voting equity capital of the bank. In case of existing NBFCs/MFIs/LABs converting into small finance bank, where there is shareholding in excess of 10 per cent of the paid-up voting equity capital by entities other than the promoters (including private equity funds), RBI may consider providing time up to 3 years from the date of the ‘in principle’ approval for the shareholding to be brought down to a maximum of 10 per cent.
  4. The small finance bank cannot be a Business Correspondent (BC) for another bank. However, it can have its own BC network.
  5. The operations of the bank should be technology driven from the beginning, conforming to generally accepted standards and norms; while new approaches (such as for data storage, security and real time data updation) are encouraged, a detailed technology plan for the same should be furnished to RBI.
  6. The bank should have a high powered Customer Grievances Cell to handle customer complaints. The small finance banks will come under the purview of RBI’s Banking Ombudsman Scheme, 2006, as amended from time to time.
  7. The compliance of terms and conditions laid down by RBI is an essential condition of grant of license. Any non-compliance will attract penal measures or regulatory actions including cancellation of license of the bank.

14. Transition path

The small finance bank may choose to continue as a differentiated bank. If it aspires to transit into a universal bank, such transition will not be automatic, but would be subject to it applying to RBI for such conversion and fulfilling minimum paid-up voting equity capital / net worth requirement as applicable to universal banks; its satisfactory track record of performance as a small finance bank for a minimum period of five years and the outcome of RBI’s due diligence exercise. On transition into a universal bank, it will be subjected to all the norms including NOFHC structure as applicable under the Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector dated August 1, 2016.

15. Procedure for application

In terms of Rule 11 of the Banking Regulation (Companies) Rules, 1949, applications shall be submitted in the prescribed form (Form III). In addition, the applicants should furnish the business plan as per paragraph 11 and other requisite information as per the Annex II. Applications for setting up of small finance banks in the private sector, along with other details as mentioned above, contained in an envelope superscripted “Application for Small Finance Bank” should be addressed to:

The Chief General Manager,
Department of Regulation,
Reserve Bank of India,
Central Office, 13th Floor,
Central Office Building,
Shahid Bhagat Singh Road,
Mumbai – 400001

The licensing window will be open on-tap. As such, applications in the prescribed form along with requisite information could be submitted to RBI at any point of time, as desired by the applicant.

16. Procedure for RBI decisions

  1. At the first stage, the applications will be screened by RBI to assess the eligibility of the applicants, vis-à-vis the criteria laid down in these guidelines. RBI may apply additional criteria to determine the suitability of applications, in addition to the ‘fit and proper’ criteria prescribed at paragraph 3 above. Thereafter, the applications will be referred to a Standing External Advisory Committee (SEAC) to be set up by RBI.
  2. The SEAC will comprise of eminent persons with experience in banking, financial sector and other relevant areas. The tenure of the SEAC will be for three years.
  3. The SEAC will set up its own procedures for screening the applications. The SEAC will meet periodically, as and when required. The Committee will reserve the right to call for more information as well as have discussions with any applicant/s and seek clarification on any issue as may be required by it. The Committee will submit its recommendations to RBI for consideration.
  4. The Internal Screening Committee (ISC), consisting of the Governor and the Deputy Governors will examine all the applications. The ISC will also deliberate on the rationale of the recommendations made by the SEAC and then submit its recommendations to the Committee of the Central Board (CCB) of RBI for the final decision to issue ‘in-principle approval’.
  5. The validity of the ‘in-principle approval’ issued by RBI will be 18 months from the date of granting ‘in-principle approval’ and would thereafter lapse automatically. Therefore, the -applicant will have to obtain the license within a period of 18 months of granting the ‘in-principle approval’.
  6. After issue of the ‘in-principle approval’ for setting up of a small finance bank, if any adverse features are noticed regarding the Promoters or the companies / entities with which the Promoters are associated and the group in which they have interest, the RBI may impose additional conditions and if warranted, may withdraw the ‘in-principle approval’.
  7. The names of applicants that are found suitable for grant of in-principle approval will also be placed on the RBI website.
  8. An applicant who has not been found suitable for issue of license will be advised of the Reserve Bank’s decision. Such applicants will not be eligible to make an application for a banking license for a period of three years from the date of that decision.
  9. Applicants aggrieved by the decision of the Committee of the Central Board can prefer an appeal against the decision to the Central Board of Directors, within one month from the date of receipt of communication from RBI relating to the application not being considered as at paragraph 16 (h) above.

Annex I

Definitions

I. Promoter

Promoter means, the person who together with his relatives [as defined in Section 2 (77) of the Companies Act, 2013 and Rules made there under], by virtue of his ownership of voting equity shares, is in effective control of the bank / NOFHC, and includes, wherever applicable, all entities which form part of the Promoter Group.

II. Promoting entity

Promoting entity means the entity that promotes the bank.

III. Promoter Group

“Promoter Group” includes:

(i) the promoter;

(ii) relatives of the promoter [as defined in Section 2 (77) of the Companies Act, 2013 and Rules made there under]; and

(iii) in case promoter is a body corporate:

(A) a subsidiary or holding company of such body corporate;

(B) any body corporate in which the promoter holds ten per cent or more of the equity share capital or which holds ten per cent or more of the equity share capital of the promoter;

(C) any body corporate in which a group of individuals or companies or combinations thereof which hold twenty per cent or more of the equity share capital in that body corporate also holds twenty per cent or more of the equity share capital of the promoter;

(D) Joint venture/Associate (as defined in terms of InD AS 28) with the promoter;

(E) Related party (as defined in terms of InD AS 24) of the promoter; and

(iv) in case the promoter is an individual:

(A) any body corporate in which ten per cent or more of the equity share capital is held by the promoter or a relative of the promoter or a firm or Hindu Undivided Family in which the promoter or any one or more of his immediate relative is a member;

(B) any body corporate in which a body corporate as provided in (A) above holds ten per cent or more, of the equity share capital;

(C) any Hindu Undivided Family or firm in which the aggregate shareholding of the promoter and his immediate relatives is equal to or more than ten per cent of the total; and

(v) all persons who are declared as promoters in the Articles of Association of the bank/ group companies.

(vi) all persons whose shareholding is aggregated for the purpose of disclosing in the prospectus4 under the heading “shareholding of the promoter group”;

(vii) Entities sharing a common brand name with entities discussed in A, B, C, D, E, where the promoter is a body corporate and A, B, C where the promoter is an individual;

Provided that a financial institution, scheduled commercial bank, foreign institutional investor or mutual fund shall not be deemed to be promoter group merely by virtue of the act that ten per cent or more of the equity share capital of the promoter is held by such institution unless such investment is strategic in nature.


Annex II

Additional Information to be furnished by promoters along with relevant supporting documents

I. Existing Structure

1. Information on the individual promoter :

  1. Self-declaration by the individual promoters as per Appendix I.
  2. Detailed profiles on the background and experience of the individual promoters, his/their expertise, track record of business.

2. Information on the individuals and entities in the promoter group :

  1. Names and details of other entities in the promoter group as per Appendix II (if not covered in Appendix I).
  2. Shareholding pattern of all the entities in the promoter group.
  3. A pictorial organogram indicating the corporate structure of all the entities in the group indicating the shareholding and total assets of the entities.
  4. Annual reports of the past five years of all the group entities.

3. Information on the entity converting/promoting the bank :

  1. Declaration by the promoting / converting entity as per Appendix III.
  2. Shareholding pattern of the promoting / converting entity.
  3. Memorandum and Articles of Association and financial statements of the promoter entity for the past five years (including a tabulation of important financial indicators for the said years), board composition and representation of the Directors over a period of ten years, income tax returns for last three years, C.A certificate indicating source of funds for promoting / converting entity.

II. Proposed Structure

  1. The applicants should furnish detailed information about the persons/entities, who would subscribe to 5 per cent or more of the paid-up voting equity capital (shareholding pattern) of the proposed bank, including foreign equity participation, in the proposed bank and the sources of capital of the proposed investors.
  2. The proposed promoter shareholding and plan for dilution of promoter shareholding in compliance with the guidelines.
  3. Proposed management of the bank, if finalised.

III. Project Report

A project report covering business potential and viability of the proposed bank, the proposed area of operation, the business plan5, any other financial services proposed to be offered, plan for compliance with prudential norms on CRR/SLR6, composition of loan portfolio, priority sector, etc. as per the guidelines, and any other information that is considered relevant. The project report should give as much concrete details as feasible, based on adequate ground level information and avoid unrealistic or unduly ambitious projections. The business plan should address how the bank proposes to achieve financial inclusion7 and in the case of an NBFC / MFI applicant, how the existing business of NBFC / MFI will fold into the bank or divested / disposed of.

IV. Any other information

The promoters may furnish any other relevant information and documents supporting the applications. Further, the RBI may call for any other additional information, as may be required, in due course.


1 The definitions of ‘promoter’ and ‘promoter group’ are provided in Annex I.

2 Material Change means any change of 10% or above of shareholding.

3 Independent Directors: As defined in Companies Act, 2013

4 As per SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2018

5 Business plan should, inter alia, include (but not limited to), the underlying assumptions, the existing infrastructure/ network/ branches, and the proposed product lines, target clientele, target locations, usage of technology, risk management, plans relating to human resources, branch network, alternative points of presence, opening of branches in unbanked rural areas, priority sector compliance, financial projections for five years, etc.

6 In case of NBFC applicants, information on existing CRR / SLR requirement, projected CRR / SLR requirement and plan for compliance with statutory norms on CRR / SLR may be given.

7 Financial Inclusion Plan should include (but not limited to), details of joint venture or partnership for offering financial inclusion products, promoting financial literacy, achieving the objective of small finance banks, etc.

 

Banning of Unregulated Deposit Schemes Act, 2019

Unregulated Deposit Scheme means a Scheme or an arrangement under which deposits are accepted or solicited by any deposit taker by way of business and which is not a Regulated Deposit Scheme, as specified under column (3) of the First Schedule.


 

(Act No. 21 of 2019)

Dated: 31.7.2019

The following Act of Parliament received the assent of the President on the 31st July, 2019, and is hereby published for general information: –

An Act to provide for a comprehensive mechanism to ban the unregulated deposit schemes, other than deposits taken in the ordinary course of business, and to protect the interest of depositors and for matters connected therewith or incidental thereto.

Be it enacted by Parliament in the Seventieth Year of the Republic of India as follows: –

CHAPTER I

Preliminary

1. Short title, extent and commencement. – (1) This Act may be called the Banning of Unregulated Deposit Schemes Act, 2019.
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall be deemed to have come into force on the 21st day of February, 2019.

2. Definitions. – In this Act, unless the context otherwise requires, –

(1) “appropriate Government” means in respect of matters relating to, –

(i) the Union territory without legislature, the Central Government;

(ii) the Union territory of Puducherry, the Government of that Union territory;

(iii) the Union territory of Delhi, the Government of that Union territory; and

(iv) the State, the State Government;

(2) “company” shall have the same meaning as assigned to it in clause (20) of section 2 of the Companies Act, 2013;

(3) “Competent Authority” means an Authority appointed by the appropriate Government under section 7;

(4) “deposit” means an amount of money received by way of an advance or loan or in any other form, by any deposit taker with a promise to return whether after a specified period or otherwise, either in cash or in kind or in the form of a specified service, with or without any benefit in the form of interest, bonus, profit or in any other form, but does not include –

(a) amounts received as loan from a scheduled bank or a co-operative bank or any other banking company as defined in section 5 of the Banking Regulation Act, 1949;

(b) amounts received as loan or financial assistance from the Public Financial Institutions notified by the Central Government in consultation with the Reserve Bank of India or any non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 and is registered with the Reserve Bank of India or any Regional Financial Institutions or insurance companies;

(c) amounts received from the appropriate Government, or any amount received from any other source whose repayment is guaranteed by the appropriate Government, or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature;

(d) amounts received from foreign Governments, foreign or international banks, multilateral financial institutions, foreign Government owned development financial institutions, foreign export credit collaborators, foreign bodies corporate, foreign citizens, foreign authorities or person resident outside India subject to the provisions of the Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder;

(e) amounts received by way of contributions towards the capital by partners of any partnership firm or a limited liability partnership;

(f) amounts received by an individual by way of loan from his relatives or amounts received by any firm by way of loan from the relatives of any of its partners;

(g) amounts received as credit by a buyer from a seller on the sale of any property (whether movable or immovable);

(h) amounts received by an asset re-construction company which is registered with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(i) any deposit made under section 34 or an amount accepted by a political party under section 29B of the Representation of the People Act, 1951;

(j) any periodic payment made by the members of the self-help groups operating within such ceilings as may be prescribed by the State Government or Union territory Government;

(k) any other amount collected for such purpose and within such ceilings as may be prescribed by the State Government;

(l) an amount received in the course of, or for the purpose of, business and bearing a genuine connection to such business including –

(i) payment, advance or part payment for the supply or hire of goods or provision of services and is repayable in the event the goods or services are not in fact sold, hired or otherwise provided;

(ii) advance received in connection with consideration of an immovable property under an agreement or arrangement subject to the condition that such advance is adjusted against such immovable property as specified in terms of the agreement or arrangement;

(iii) security or dealership deposited for the performance of the contract for supply of goods or provision of services; or

(iv) an advance under the long-term projects for supply of capital goods except those specified in item (ii):

Provided that if the amounts received under items (i) to (iv) become refundable, such amounts shall be deemed to be deposits on the expiry of fifteen days from the date on which they become due for refund:

Provided further that where the said amounts become refundable, due to the deposit taker not obtaining necessary permission or approval under the law for the time being in force, wherever required, to deal in the goods or properties or services for which money is taken, such amounts shall be deemed to be deposits.

Explanation. – For the purposes of this clause, –

(i) in respect of a company, the expression “deposit” shall have the same meaning as assigned to it under the Companies Act, 2013;

(ii) in respect of a non-banking financial company registered under the Reserve Bank of India Act, 1934, the expression “deposit” shall have the same meaning as assigned to it in clause (bb) of section 45-I of the said Act;

(iii) the expressions “partner” and “firm” shall have the meanings respectively assigned to them under the Indian Partnership Act, 1932;

(iv) the expression “partner” in respect of a limited liability partnership shall have the same meaning as assigned to it in clause (q) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008;

(v) the expression “relative” shall have the same meaning as assigned to it in the Companies Act, 2013;

(5) “depositor” means any person who makes a deposit under this Act;

(6) “deposit taker” means –

(i) any individual or group of individuals;

(ii) a proprietorship concern;

(iii) a partnership firm (whether registered or not);

(iv) a limited liability partnership registered under the Limited Liability Partnership Act, 2008;

(v) a company;

(vi) an association of persons;

(vii) a trust (being a private trust governed under the provisions of the Indian Trusts Act, 1882 or a public trust, whether registered or not);

(viii) a co-operative society or a multi-State co-operative society; or

(ix) any other arrangement of whatsoever nature, receiving or soliciting deposits, but does not include –

(i) a Corporation incorporated under an Act of Parliament or a State Legislature;

(ii) a banking company, a corresponding new bank, the State Bank of India, a subsidiary bank, a regional rural bank, a co-operative bank or a multi-State co-operative bank as defined in the Banking Regulation Act,1949;

(7) “Designated Court” means a Designated Court constituted by the appropriate Government under section 8;

(8) “insurer” shall have the same meaning as assigned to it in clause (9) of section 2 of the Insurance Act, 1938;

(9) “notification” means a notification published in the Official Gazette and the expression “notify” shall be construed accordingly;

(10) “person” includes –

(i) an individual;

(ii) a Hindu Undivided Family;

(iii) a company;

(iv) a trust;

(v) a partnership firm;

(vi) a limited liability partnership;

(vii) an association of persons;

(viii) a co-operative society registered under any law for the time being in force relating to co-operative societies; or

(ix) every artificial juridical person, not falling within any of the preceding sub-clauses;

(11) “prescribed” means prescribed by the rules made by the Central Government or, as the case may be, the State Government under this Act;

(12) “property” means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible, and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located;

(13) “public financial institution” shall have the same meaning as assigned to it in clause (72) of section 2 of the Companies Act, 2013;

(14) “Regulated Deposit Scheme” means the Schemes specified under column (3) of the First Schedule;

(15) “Regulator” means the Regulator specified in column (2) of the First Schedule;

(16) “Schedule” means the Schedule appended to this Act;

(17) “Unregulated Deposit Scheme” means a Scheme or an arrangement under which deposits are accepted or solicited by any deposit taker by way of business and which is not a Regulated Deposit Scheme, as specified under column (3) of the First Schedule.

CHAPTER II

Banning of Unregulated Deposit Schemes

3. Banning of Unregulated Deposit Schemes. – On and from the date of commencement of this Act, –

(a) the Unregulated Deposit Schemes shall be banned; and

(b) no deposit taker shall, directly or indirectly, promote, operate, issue any advertisement soliciting participation or enrolment in or accept deposits in pursuance of an Unregulated Deposit Scheme.

4. Fraudulent default in Regulated Deposit Schemes. – No deposit taker, while accepting deposits pursuant to a Regulated Deposit Scheme, shall commit any fraudulent default in the repayment or return of deposit on maturity or in rendering any specified service promised against such deposit.

5. Wrongful inducement in relation to Unregulated Deposit Schemes. – No person by whatever name called shall knowingly make any statement, promise or forecast which is false, deceptive or misleading in material facts or deliberately conceal any material facts, to induce another person to invest in, or become a member or participant of any Unregulated Deposit Scheme.

6. Certain scheme to be Unregulated Deposit Scheme. – A prize chit or a money circulation scheme banned under the provisions of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978 shall be deemed to be an Unregulated Deposit Scheme under this Act.

CHAPTER III

Authorities

7. Competent Authority. – (1) The appropriate Government shall, by notification, appoint one or more officers not below the rank of Secretary to that Government, as the Competent Authority for the purposes of this Act.
(2) The appropriate Government may, by notification, appoint such other officer or officers as it thinks fit, to assist the Competent Authority in discharging its functions under this Act.
(3) Where the Competent Authority or officers appointed under sub-section (2), for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of such information and particulars as may be prescribed, that any deposit taker is soliciting deposits in contravention of section 3, he may, by an order in writing, provisionally attach the deposits held by the deposit taker and the money or other property acquired either in the name of the deposit taker or in the name of any other person on behalf of the deposit taker from the date of the order, in such manner as may be prescribed.
(4) The Competent Authority shall, for the purposes of sub-section (3), have the same powers as vested in a civil court under the Code of Civil Procedure, 1908 while conducting investigation or inquiry in respect of the following matters, namely: –
(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officer of a reporting entity and examining him on oath;

(c) compelling the production of records;

(d) receiving evidence on affidavits;

(e) issuing commissions for examination of witnesses and documents; and

(f) any other matter which may be prescribed.

(5) The Competent Authority shall have power to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under this section.
(6) All the persons so summoned shall be bound to attend in person or through authorised agents, as such officer may direct, and shall be bound to state the truth upon any subject respecting which they are examined or make statements, and produce such documents as may be required.
(7) Every proceeding under sub-sections (4) and (5) shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code.
(8) Subject to any rules made in this behalf by the Central Government, any officer referred to in sub-section (2) may impound and retain in his custody for such period, as he thinks fit, any records produced before him in any proceedings under this Act:
Provided that the officer or officers referred to in sub-section (2) shall not –
(a) impound any records without recording his reasons for so doing; or

(b) retain in his custody any such records for a period exceeding three months, without obtaining the previous approval of the Competent Authority.

8. Designated Court. – (1) The appropriate Government shall, with the concurrence of the Chief Justice of the concerned High Court, by notification, constitute one or more Courts known as the Designated Courts for such area or areas or such case or cases as may be specified in such notification, which shall be presided over by a Judge not below the rank of a District and Sessions Judge or Additional District and Sessions Judge.
(2) No Court other than the Designated Court shall have jurisdiction in respect of any matter to which the provisions of this Act apply.
(3) When trying an offence under this Act, the Designated Court may also try an offence, other than an offence under this Act, with which the accused may, under the Code of Criminal Procedure, 1973, be charged at the same trial.

CHAPTER IV

Information On Deposit Takers

9. Central database. – (1) The Central Government may designate an authority, whether existing or to be constituted, which shall create, maintain and operate an online database for information on deposit takers operating in India.
(2) The authority designated under sub-section (1) may require any Regulator or the Competent Authority to share such information on deposit takers, as may be prescribed.

10. Information of business by deposit taker. – (1) Every deposit taker which commences or carries on its business as such on or after the commencement of this Act shall intimate the authority referred to in sub-section (1) of section 9 about its business in such form and manner and within such time, as may be prescribed.
(2) The Competent Authority may, if it has reason to believe that the deposits are being solicited or accepted pursuant to an Unregulated Deposit Scheme, direct any deposit taker to furnish such statements, information or particulars, as it considers necessary, relating to or connected with the deposits received by such deposit taker.

Explanation. – For the removal of doubts, it is hereby clarified that –
(a) the requirement of intimation under sub-section (1) is applicable to deposit takers accepting or soliciting deposits as defined in clause (4) of section 2; and

(b) the requirement of intimation under sub-section (1) applies to a company, if the company accepts the deposits under Chapter V of the Companies Act, 2013.

11. Information to be shared. – (1) The Competent Authority shall share all information received under section 29 with the Central Bureau of Investigation and with the authority which may be designated by the Central Government under section 9.
(2) The appropriate Government, any Regulator, income-tax authorities or any other investigation agency, having any information or documents in respect of the offence investigated under this Act by the police or the Central Bureau of Investigation, shall share all such information or documents with the police or the Central Bureau of Investigation.
(3) Where the principal officer of any banking company, a corresponding new bank, the State Bank of India, a subsidiary bank, a regional rural bank, a co-operative bank or a multi-State co-operative bank has reason to believe that any client is a deposit taker and is acting in contravention to the provisions of this Act, he shall forthwith inform the same to the Competent Authority.

CHAPTER V

Restitution To Depositors

12. Priority of depositors’ claim. – Save as otherwise provided in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or the Insolvency and Bankruptcy Code, 2016, any amount due to depositors from a deposit taker shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the appropriate Government or the local authority.

13. Precedence of attachment. – (1) Save as otherwise provided in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or the Insolvency and Bankruptcy Code, 2016, an order of provisional attachment passed by the Competent Authority, shall have precedence and priority, to the extent of the claims of the depositors, over any other attachment by any authority competent to attach property for repayment of any debts, revenues, taxes, cesses and other rates payable to the appropriate Government or the local authority.
(2) Where an order of provisional attachment has been passed by the Competent Authority –
(a) such attachment shall continue until an order is passed under sub-section (3) or sub-section (5) of section 15 by the Designated Court;

(b) all the attached money or property of the deposit taker and the persons mentioned therein shall vest in the Competent Authority and shall remain so vested till further order of the Designated Court.

(3) The Competent Authority shall open an account in a scheduled bank for the purpose of crediting and dealing with the money realised under this Act, which shall not be utilised except under the instructions of the Designated Court.
(4) The Competent Authority shall not dispose of or alienate the property or money attached, except in accordance with the order of the Designated Court under sub-section (3) or sub-section (5) of section 15.
(5) Notwithstanding anything contained in sub-section (4), the Competent Authority may, if it thinks it expedient, order the immediate sale of perishable items or assets, and the proceeds of the sale shall be utilised in the same manner as provided for other property.

14. Application for confirmation of attachment and sale of property. – (1) The Competent Authority shall, within a period of thirty days, which may extend up to sixty days, for reasons to be recorded in writing, from the date of the order of provisional attachment, file an application with such particulars as may be prescribed, before the Designated Court for making the provisional attachment absolute, and for permission to sell the property so attached by public auction or, if necessary, by private sale.
(2) In case where the money or property has been attached on the permission granted by a Designated Court in another State or Union territory, the application for confirmation of such attachment shall be filed in that Court.

15. Confirmation of attachment by Designated Court. – (1) Upon receipt of an application under section 14, the Designated Court shall issue notice to –

(a) the deposit taker; and

(b) any person whose property is attached under section 14, to show cause, within a period of thirty days from the date of issue of notice, as to why the order of attachment should not be made absolute and the properties so attached be sold.

(2) The Designated Court shall also issue notice to all other persons represented to it as having or being likely to claim any interest or title in the property, to appear on the same date as persons referred to in sub-section (1) to raise objections, if they so desire, to the attachment of the property.
(3) The Designated Court shall, after adopting such procedure as may be prescribed, pass an order –
(a) making the provisional order of attachment absolute; or

(b) varying it by releasing a portion of the property from attachment; or

(c) cancelling the provisional order of attachment, and in case of an order under clause (a) or clause (b), direct the Competent Authority to sell the property so attached by public auction or, if necessary, by private sale and realise the sale proceeds.

(4) The Designated Court shall not, in varying or cancelling the provisional order of attachment, release any property from attachment, unless it is satisfied that –
(a) the deposit taker or the person referred to in sub-section (1) has interest in such property; and

(b) there shall remain an amount or property sufficient for repayment to the depositors of such deposit taker.

(5) The Designated Court shall pass such order or issue such direction as may be necessary for the equitable distribution among the depositors of the money attached or realised out of the sale.
(6) The Designated Court shall endeavour to complete the proceedings under this section within a period of one hundred and eighty days from the date of receipt of the application referred to in sub-section (1).

16. Attachment of property of mala fide transferees. – (1) Where the Designated Court is satisfied that there is a reasonable cause for believing that the deposit taker has transferred any property otherwise than in good faith and not for commensurate consideration, it may, by notice, require any transferee of such property, whether or not he received the property directly from the said deposit taker, to appear on a date to be specified in the notice and show cause why so much of the transferee’s property as is equivalent to the proper value of the property transferred should not be attached.
(2) Where the said transferee does not appear and show cause on the specified date or where the Designated Court is satisfied that the transfer of the property to the said transferee was not a bona fide transfer and not for commensurate consideration, it shall order the attachment of so much of the said transferee’s property as in its opinion is equivalent to the proper value of the property transferred.

17. Payment in lieu of attachment. – (1) Any deposit taker or a person referred to in sub-section (1) of section 15, or transferee referred to in section 16 whose property is about to be attached or has been provisionally attached under this Act, may, at any time before the confirmation of attachment, apply to the Designated Court for permission to deposit the fair value of the property in lieu of attachment.
(2) While allowing the deposit taker or person or transferee referred to in sub-section (1) to make the deposit under sub-section (1), the Designated Court may order such deposit taker or person or transferee to pay any sum towards costs as may be applicable.

18. Powers of Designated Court. – (1) The Designated Court shall exercise the following powers, namely: –
(a) power to approve the statement of dues of the deposit taker due from various debtors;

(b) power to assess the value of the assets of the deposit taker and finalise the list of the depositors and their respective dues;

(c) power to direct the Competent Authority to take possession of any assets belonging to or in the control of the deposit taker and to sell, transfer or realise the attached assets, either by public auction or by private sale as it deems fit depending upon the nature of assets and credit the sale proceeds thereof to its bank account;

(d) power to approve the necessary expenditure to be incurred by the Competent Authority for taking possession and realisation of the assets of the deposit taker;

(e) power to pass an order for full payment to the depositors by the Competent Authority or an order for proportionate payment to the depositors in the event, the money so realised is not sufficient to meet the entire deposit liability;

(f) power to direct any person, who has made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention; and

(g) power to pass any other order which the Designated Court deems fit for realisation of assets of the deposit taker and for repayment of the same to the depositors of such deposit taker or on any other matter or issue incidental thereto.

(2) On the application of any person interested in any property attached and vested in the Competent Authority under this Act and after giving such Competent Authority an opportunity of being heard, make such order as the Designated Court considers just and reasonable for –
(a) providing from such of the property attached and vested in the Competent Authority as the applicant claims an interest in, such sums as may be reasonably necessary for the maintenance of the applicant and of his family, and for expenses connected with the defence of the applicant where criminal proceedings have been initiated against him in the Designated Court under this Act; or

(b) safeguarding, so far as may be practicable, the interest of any business affected by the attachment.

Explanation. – For the purposes of this section, the expression “deposit taker” includes the directors, promoters, managers or members of said establishment or any other person whose property or assets have been attached under this Act.

19. Appeal to High Court. – Any person including the Competent Authority, if aggrieved by any final order of the Designated Court under this Chapter, may appeal to the High Court, within a period of sixty days from the date of such order:

Provided that the High Court may entertain the appeal after the expiry of the said period of sixty days, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal in time.

Explanation. – The expression “High Court” means the High Court of a State or Union territory where the Designated Court is situated.

20. Power of Supreme Court to transfer cases. – (1) Whenever it is made to appear to the Supreme Court that there is a default in any deposit scheme or deposit schemes of the nature referred to in section 30, the Supreme Court may, by an order, direct that any particular case be transferred from one Designated Court to another Designated Court.
(2) The Supreme Court may act under this section only on an application filed by the Competent Authority or any interested party, and every such application shall be supported by an affidavit.
(3) Where an application for the exercise of the powers conferred by this section is dismissed, the Supreme Court may, if it is of opinion that the application was frivolous or vexatious, order the applicant to pay by way of compensation to any person who has opposed the application such sum not exceeding fifty thousand rupees as it may consider appropriate in the circumstances of the case.

CHAPTER VI

Offences and Punishments

21. Punishment for contravention of section 3. – (1) Any deposit taker who solicits deposits in contravention of section 3 shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to five years and with fine which shall not be less than two lakh rupees but which may extend to ten lakh rupees.
(2) Any deposit taker who accepts deposits in contravention of section 3 shall be punishable with imprisonment for a term which shall not be less than two years but which may extend to seven years and with fine which shall not be less than three lakh rupees but which may extend to ten lakh rupees.
(3) Any deposit taker who accepts deposits in contravention of section 3 and fraudulently defaults in repayment of such deposits or in rendering any specified service, shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to ten years and with fine which shall not be less than five lakh rupees but which may extend to twice the amount of aggregate funds collected from the subscribers, members or participants in the Unregulated Deposit Scheme.

Explanation. – For the purposes of this Act, –
(i) the expression “fraudulently” shall have the same meaning as assigned to it in section 25 of the Indian Penal Code;

(ii) where the terms of the Deposit Scheme are entirely impracticable or unviable, the terms shall be relevant facts showing an intention to defraud.

22. Punishment for contravention of section 4. – Any deposit taker who contravenes the provisions of section 4 shall be punishable with imprisonment for a term which may extend to seven years, or with fine which shall not be less than five lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of the fraudulent default referred to in said section, whichever is higher, or with both.

23. Punishment for contravention of section 5. – Any person who contravenes the provisions of section 5 shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to five years and with fine which may extend to ten lakh rupees.

24. Punishment for repeat offenders. – Whoever having been previously convicted of an offence punishable under this Chapter, except the offence under section 26, is subsequently convicted of an offence shall be punishable with imprisonment for a term which shall not be less than five years but which may extend to ten years and with fine which shall not be less than ten lakh rupees but which may extend to fifty crore rupees.

25. Offences by deposit takers other than individuals. – (1) Where an offence under this Act has been committed by a deposit taker other than an individual, every person who, at the time the offence was committed, was in charge of, and was responsible to, the deposit taker for the conduct of its business, as well as the deposit taker, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
(2) Nothing contained in sub-section (1) shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
(3) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a deposit taker other than an individual, and it is proved that the offence –
(a) has been committed with the consent or connivance of; or

(b) is attributable to any neglect on the part of any director, manager, secretary, promoter, partner, employee or other officer of the deposit taker,

such person shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

26. Punishment for contravention of section 10. – Whoever fails to give the intimation required under sub-section (1) of section 10 or fails to furnish any such statements, information or particulars as required under sub-section (2) of that section, shall be punishable with fine which may extend to five lakh rupees.

27. Cognizance of offences. – Notwithstanding anything contained in section 4, no Designated Court shall take cognizance of an offence punishable under that section except upon a complaint made by the Regulator:
Provided that the provisions of section 4 and this section shall not apply in relation to a deposit taker which is a company.

CHAPTER VII

Investigation, Search and Seizure

28. Offences to be cognizable and non-bailable. – Notwithstanding anything contained in the Code of Criminal Procedure, 1973 every offence punishable under this Act, except the offence under section 22 and section 26, shall be cognizable and non-bailable.

29. Competent Authority to be informed of offences. – The police officer shall, on recording information about the commission of an offence under this Act, inform the same to the Competent Authority.

30. Investigation of offences by Central Bureau of Investigation. – (1) On receipt of information under section 29 or otherwise, if the Competent Authority has reason to believe that the offence relates to a deposit scheme or deposit schemes in which –
(a) the depositors, deposit takers or properties involved are located in more than one State or Union territory in India or outside India; and

(b) the total value of the amount involved is of such magnitude as to significantly affect the public interest, the Competent Authority shall refer the matter to the Central Government for investigation by the Central Bureau of Investigation.

(2) The reference made by the Competent Authority under sub-section (1) shall be deemed to be with the consent of the State Government under section 6 of the Delhi Special Police Establishment Act, 1946.
(3) On the receipt of the reference under sub-section (1), the Central Government may transfer the investigation of the offence to the Central Bureau of Investigation under section 5 of the Delhi Special Police Establishment Act, 1946.

31. Power to enter, search and seize without warrant. – (1) Whenever any police officer, not below the rank of an officer in-charge of a police station, has reason to believe that anything necessary for the purpose of an investigation into any offence under this Act may be found in any place within the limits of the police station of which he is in-charge, or to which he is attached, such officer may, with the written authorisation of an officer not below the rank of Superintendent of Police, and after recording in writing so far as possible, the thing for which the search is to be made and subject to the rules made in this behalf, authorise any officer subordinate to him, –
(a) to enter and search any building, conveyance or place, between sunrise and sunset, which he has reason to suspect is being used for purposes connected with the promotion or conduct of any deposit taking scheme or arrangement in contravention of the provisions of this Act;

(b) in case of resistance, to break open any door and remove any obstacle to such entry, if necessary by force, with such assistance as he considers necessary, for exercising the powers conferred by clause (a);

(c) to seize any record or property found as a result of the search in the said building, conveyance or place, which are intended to be used, or reasonably suspected to have been used, in connection with any such deposit taking scheme or arrangement in contravention of the provisions of this Act; and

(d) to detain and search, and if he thinks proper, take into custody and produce before any Designated Court any such person whom he has reason to believe to have committed any offence punishable under this Act:

Provided that if such officer has reason to believe that the said written authorisation cannot be obtained without affording opportunity for the concealment of evidence or facility for the escape of an offender, he may, without the said written authorisation, enter and search such building, conveyance or place, at any time between sunset and sunrise after recording the grounds in writing.
(2) Where it is not practicable to seize the record or property, the officer authorised under sub-section (1), may make an order in writing to freeze such property, account, deposits or valuable securities maintained by any deposit taker about which a complaint has been made or credible information has been received or a reasonable suspicion exists of their having been connected with the promotion or conduct of any deposit taking scheme or arrangement in contravention of the provisions of this Act and it shall be binding on the concerned bank or financial or market establishment to comply with the said order:
Provided that no bank or financial or market establishment shall freeze such account, deposit or valuable securities, for a period beyond thirty days unless the same is authorised by the order of the Designated Court:
Provided further that, if at any time, it becomes practicable to seize the frozen property, the officer authorised under sub-section (1) may seize such property.

Explanation. – For the purposes of this section, the expressions, –
(i) “freezing of account” shall mean that no transaction, whether deposit or withdrawal shall be allowed in the said account; and

(ii) “freezing of property” shall mean that no transfer, conversion, disposition or movement of property shall be allowed.

(3) Where an officer takes down any information in writing or records grounds for his belief or makes an order in writing under sub-section (1) or sub-section (2), he shall, within a time of seventy-two hours send a copy thereof to the Designated Court in a sealed envelope and the owner or occupier of the building, conveyance or place shall, on application, be furnished, free of cost, with a copy of the same by the Designated Court.
(4) All searches, seizures and arrests under this section shall be made in accordance with the provisions of the Code of Criminal Procedure, 1973.

32. Application of Code of Criminal Procedure, 1973 to proceedings before Designated Court. – (1) The Designated Court may take cognizance of offences under this Act without the accused being committed to it for trial.
(2) Save as otherwise provided in section 31, the provisions of the Code of Criminal Procedure, 1973 shall apply –
(a) to all arrests, searches and seizures made under this Act;

(b) to the proceedings under this Act and for the purposes of the said provisions, the Designated Court shall be deemed to be a Court of Session and the persons conducting the prosecution before the Designated Court, shall be deemed to be Public Prosecutors.

CHAPTER VIII

Miscellaneous

33. Publication of advertisement of Unregulated Deposit Scheme. – Where any newspaper or other publication of any nature, contains any statement, information or advertisement promoting, soliciting deposits for, or inducing any person to become a member of any Unregulated Deposit Scheme, the appropriate Government may direct such newspaper or publication to publish a full and fair retraction, free of cost, in the same manner and in the same position in such newspaper or publication as may be prescribed.

34. Act to have overriding effect. – Save as otherwise expressly provided in this Act, the provisions of this Act shall have effect notwithstanding anything contained in any other law for the time being in force, including any law made by any State or Union territory.

35. Application of other laws not barred. – The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.

36. Protection of action taken in good faith. – No suit, prosecution or other legal proceedings shall lie against the appropriate Government or the Competent Authority or any officer of the appropriate Government for anything which is in good faith done or intended to be done under this Act or the rules made thereunder.

37. Power of Central Government to make rules. – (1) The Central Government may, by notification, make rules for carrying out the provisions of this Act.
(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: –
(a) the information and other particulars to be taken into consideration before issuing an order, and the manner of attachment, under sub-section (3) of section 7;

(b) the information to be shared under sub-section (2) of section 9;

(c) the form and manner in which and the time within which the intimation shall be given under sub-section (1) of section 10;

(d) the particulars contained in the application to be filed by the Competent Authority before the Designated Court under sub-section (1) of section 14;

(e) the procedure to be adopted by the Designated Court before issuing an order under sub-section (3) of section 15;

(f) rules under sub-section (1) of section 31;

(g) the manner of publication of advertisement under section 33; and

(h) any other matter which is required to be, or may be, prescribed.

38. Power of State Government, etc., to make rules. – (1) The State Government or Union territory Government, as the case may be, in consultation with the Central Government, by notification, make rules for carrying out the provisions of this Act.
(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: –
(a) ceiling for self-help groups under clause (j) of sub-section (4) of section 2;

(b) purpose and ceiling under clause (k) of sub-section (4) of section 2;

(c) the manner of provisional attachment of property by the Competent Authority under sub-section (3) of section 7;

(d) other matters under clause (f) of sub-section (4) of section 7;

(e) the rules relating to impounding and custody of records under sub-section (8) of section 7; and

(f) any other matter which is required to be, or may be, prescribed.

39. Laying of rules. – (1) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session, or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule, or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.
(2) Every rule made by a State Government or the Union territory Government, as the case may be, shall be laid, as soon as may be after it is made, before each House of the State Legislature or the Union territory Legislature, as the case may be, where it consists of two Houses, or where such Legislature consists of one House, before that House.

40. Power to amend First Schedule. – (1) The Central Government may, having regard to the objects of this Act, and if it considers necessary or expedient so to do, by notification, add to, or as the case may be, omit from the First Schedule, any scheme or arrangement, and on such addition, or omission, such scheme or arrangement shall become, or cease to be, a Regulated Deposit Scheme, as the case may be.
(2) A copy of every notification issued under this section shall, as soon as may be after it has been issued, be laid before each House of Parliament.
41. Act not to apply certain deposits. – The provisions of this Act shall not apply to deposits taken in the ordinary course of business.
42. Amendment to certain enactments. – The enactments specified in the Second Schedule shall be amended in the manner specified therein.
43. Power to remove difficulties. – (1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act, as may appear to it to be necessary for removing the difficulty:
Provided that no such order shall be made under this section after the expiry of three years from the commencement of this Act.
(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.

44. Repeal and saving. – (1) The Banning of Unregulated Deposit Schemes Ordinance, 2019, is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance, shall be deemed to have been done or taken under this Act.

The First Schedule

[See section 2 (15)]

Regulated Deposit Schemes

(1) The Regulator and Regulated Deposit Scheme refers to the regulators and schemes and arrangements listed in the following Table, namely: –

Table

Sl. No.

Regulator

Regulated Deposit Scheme

(1)

(2)

(3)

1.

The Securities and Exchange Board of India

(i) Any scheme or an arrangement [as defined under section 11AA of the Securities and Exchange Board of India Act, 1992 (15 of 1992)] launched, sponsored or carried out by a Collective Investment Management Company registered with the Securities and Exchange Board of India under the Securities and Exchange Board of India (Collective Investment Scheme) Regulations, 1999.

(ii) Any scheme or an arrangement registered with the Securities and Exchange Board of India under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.

(iii) Any scheme or an arrangement, pursuant to which funds are managed by a portfolio manager, registered under the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993.

(iv) Any scheme or an arrangement regulated under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 or providing for employee benefits as permitted under the Companies Act, 2013 (18 of 2013).

(v) Any other scheme or an arrangement registered under the Securities and Exchange Board of India Act, 1992 (15 of 1992), or the regulations made thereunder.

(vi) Any amount received as contributions in the nature of subscriptions to a mutual fund registered with Securities and Exchange Board of India under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

2.

The Reserve Bank of India

(i) Any scheme under which deposits are accepted by Non-Banking Financial Companies as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934) and registered with the Reserve Bank of India; or any other scheme or an arrangement registered under the Reserve Bank of India Act, 1934.

(ii) Any scheme or an arrangement under which funds are accepted by individuals or entities engaged as Business Correspondents and Facilitators by banks subject to the guidelines and circulars issued by the Reserve Bank of India from time to time.

(iii) Any scheme or an arrangement under which funds are received by a system provider operating as an authorised payment system under the Payment and Settlement Systems Act, 2007 (51 of 2007).

(iv) Any other scheme or an arrangement regulated under the Reserve Bank of India Act, 1934 (2 of 1934), or the guidelines or circulars of the Reserve Bank of India.

3.

The Insurance Regulatory and Development Authority of India

A contract of insurance pursuant to a certificate of registration obtained in accordance with the Insurance Act, 1938 (4 of 1938).

4.

The State Government or Union territory Government

(i) Any scheme or an arrangement made or offered by a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912) or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State or Union territory.

(ii) Any scheme or an arrangement commenced or conducted as a chit business with the previous sanction of the State Government in accordance with the provisions of the Chit Funds Act, 1982 (40 of 1982).

(iii) Any scheme or an arrangement regulated by any enactment relating to money lending which is for the time being in force in any State or Union territory.

(iv) Any scheme or an arrangement by a prize chit or money circulation scheme under section 11 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (43 of 1978).

5.

The National Housing Bank

Any scheme or an arrangement for acceptance of deposits registered under the National Housing Bank Act, 1987 (53 of 1987).

6.

The Pension Fund Regulatory and Development Authority

Any scheme or an arrangement under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013).

7.

The Employees’ Provident Fund Organisation

Any scheme, Pension Scheme or Insurance Scheme framed under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952).

8.

The Central Registrar, Multi-State Co-operative Societies

Any scheme or an arrangement for acceptance of deposits from voting members by a Multi-State Co-operative Society registered under the Multi-State Co-operative Societies Act, 2002 (39 of 2002).

9.

The Ministry of Corporate Affairs, Government of India

(i) Deposits accepted or permitted under the provisions of Chapter V of the Companies Act, 2013 (18 of 2013).

(ii) Any scheme or an arrangement under which deposits are accepted by a company declared as a Nidhi or a Mutual Benefit Society under section 406 of the Companies Act, 2013 (18 of 2013).

(2) The following shall also be treated as Regulated Deposit Schemes under this Act, namely: –

(a) deposits accepted under any scheme or an arrangement registered with any regulatory body in India constituted or established under a statute; and

(b) any other scheme as may be notified by the Central Government under this Act.

The Second Schedule

(See section 42)

Amendments To Certain Enactments

Part I

Amendment To The Reserve Bank of India Act, 1934

In the Reserve Bank of India Act, 1934, in section 45-I, in clause (bb), after Explanation II, the following Explanation shall be inserted, namely: –

“Explanation III. – The amounts accepted by a co-operative society from the members or shareholders, by whatever name called, but excluding the amounts received as share capital, shall be deemed to be deposits for the purposes of this clause, if such members or shareholders are nominal or associate members, by whatever name called, who do not have full voting rights in the meetings of such co-operative society.”.

Part II

Amendments To The Securities and Exchange Board of India Act, 1992

In the Securities and Exchange Board of India Act, 1992, –

(i) in section 11, in sub-section (4), for clause (e), the following clause shall be substituted, namely: –

“(e) attach, for a period not exceeding ninety days, bank accounts or other property of any intermediary or any person associated with the securities market in any manner involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder:

Provided that the Board shall, within ninety days of the said attachment, obtain confirmation of the said attachment from the Special Court, established under section 26A, having jurisdiction and on such confirmation, such attachment shall continue during the pendency of the aforesaid proceedings and on conclusion of the said proceedings, the provisions of section 28A shall apply:Provided further that only property, bank account or accounts or any transaction entered therein, so far as it relates to the proceeds actually involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder shall be allowed to be attached.”;

(ii) in section 28A, after Explanation 3, the following Explanation shall be inserted, namely: –

“Explanation 4. – The interest referred to in section 220 of the Income-tax Act, 1961 shall commence from the date the amount became payable by the person.”.

Part III

Amendment To The Multi-State Co-Operative Societies Act, 2002

In the Multi-State Co-operative Societies Act, 2002, in section 67, in sub-section (1), –

(a) after the words “receive deposits”, the words “from its voting members” shall be inserted;

(b) the following Explanation shall be inserted, namely: –

“Explanation. – For the removal of doubts, it is hereby clarified that a multi-State co-operative society shall not be entitled to receive deposits from persons other than voting members.”.

Banking Laws

Government of India issued RBI directions u/s 7 of the RBI Act for the first time

The Reserve bank of India is neither autonomous nor independent and directors are simple government servant by their appointment.

The government has invoked never-before-used powers under the RBI Act allowing it to issue directions to the central bank governor on matters of public interest. Section 7 of the RBI Act empowers the government to consult and give instructions to the governor to act on certain issues that the government considers serious and in public interest. This Section had never been used in independent India till now. The government and RBI have been at loggerheads over a few issues for some time now. While the government believed that easing of lending rules for the 11banks under the prompt corrective action (PCA) framework could help reduce pressure on micro, small and medium enterprises (MSMEs), the regulator stood its ground arguing that such a move would put the clock back and undo clean-up efforts. Continue Reading

Banking Laws Index

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Banking  Laws & Regulations

Currency & Coins

Central Banking & Reserve Bank of India-National And Scheduled Banks-Private Banks-Foreign Banks-Commercial Banks-Co-Operative Banking-Development Banks-Export Import Banks-Housing Banks-Non-Banking Financial Institutions-Chit Funds-Bank Loan and Securitisation- Banking Ombudsman Lok Adalats, Lender’s Liability-Bank Guarantee-Financial Analysis of Banks- International Banking Management-Electronic Banking and IT in Banks-Risk Management in Banks-Investment Banking-Money Supply & Price-Gold Control-Deposit banking or money warehousing-National Bank Notes-Bank Audit & Accounting-Foreign Exchange & Forex-Treasury Operation-Bankruptcy and Insolvency-Banking Disputes & Ombudsman-Training in Banking ,Finance & management -Cyber Security,Cyber Incident Response and Investigations- Bank Fraud-Corporate Credit Appraisal

Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

ACT NO. 5 OF 1970

[31st March, 1970.]

An Act to provide for the acquisition and transfer of the undertakings of certain banking companies, having regard to their size, resources, coverage and organisation, in order to control the heights of the economy and to meet progressively, and serve better, the needs of development of the economy in conformity with national policy and objectives and for matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Twenty-first Year of the Republic of India as follows:—

CHAPTER I
PRELIMINARY
1. Short title and commencement.—(1) This Act may be called the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970.
(2) The provisions of this Act (except section 21, which shall come into force on the appointed day)
shall be deemed to have come into force on the 19th day of July, 1969.
2. Definitions.—In this Act, unless the context otherwise requires,—
(a) “appointed day” means the 14th day of February, 1970, being the day on which the Banking
Companies (Acquisition and Transfer of Undertakings) Ordinance, 1970 (Ord. 3 of 1970), was
promulgated;
(b) “banking company” does not include a foreign company within the meaning of section 591 of
the Companies Act, 1956 (1 of 1956);
(c) “commencement of this Act” means the 19th day of July, 1969;
(d) “corresponding new bank”, in relation to an existing bank, means the body corporate specified
against such bank in column 2 of the First Schedule;
(e) “Custodian” means the person who becomes, or is appointed, a Custodian under section 7;
(f) “existing bank” means a banking company specified in column 1 of the First Schedule, being a
company the deposits of which, as shown in the return as on the last Friday of June, 1969, furnished
to the Reserve Bank under section 27 of the Banking Regulation Act, 1949 (10 of 1949), were not
less than rupees fifty crores;
[(fa) “prescribed” means prescribed by regulations made under this Act;]
(g) “Schedule” means a Schedule to this Act;
(h) words and expressions used herein and not defined but defined in the Banking Regulation Act, 1949 (10 of 1949), have the meanings respectively assigned to them in that Act;
(i) words and expressions used herein and not defined either in this Act or in the Banking Regulation Act, 1949 (10 of 1949) but defined in the Companies Act, 1956 (1 of 1956) shall have the meanings respectively assigned to them in the Companies Act, 1956.]


CHAPTER II
[TRANSFER OF THE UNDERTAKINGS OF EXISTING BANKS AND SHARE CAPITALS OF THE
CORRESPONDING NEW BANKS]
3. Establishment of corresponding new banks and business thereof.—(1) On the commencement of this Act, there shall be constituted such corresponding new banks as are specified in the First Schedule.
(2) The paid-up capital of every corresponding new bank constituted under sub-section (1) shall, until
any provision is made in this behalf in any scheme made under section 9, be equal to the paid-up capital
of the existing bank in relation to which it is the corresponding new bank.
[(2A) Subject to the provisions of this Act, the authorised capital of every corresponding new bank
shall be three thousand crores of rupees divided into three hundred crores of fully paid-up shares of ten
rupees each:
Provided that the corresponding new bank may reduce the nominal or face value of the shares, and
divide the authorised capital into such denomination as it may decide with the prior approval of the
Reserve Bank:
Provided further that the Central Government may in consultation with the Reserve Bank and by
notification in the Official Gazette increase or reduce the authorised capital as it deems fit so however that the shares in all cases shall be fully paid-up shares.]
(2B) Notwithstanding anything contained in sub-section (2), the paid up capital of every
corresponding new bank constituted under sub-section (1) may from time to time be increased by—
(a) such amounts as the Board of Directors of the corresponding new bank may, after consultation
with the Reserve Bank and with the previous sanction of the Central Government, transfer from the
reserve fund established by such bank to such paid-up capital;
(b) such amounts as the Central Government may, after consultation with the Reserve Bank,
contribute to such paid up capital;
[(c) such amounts as the Board of Directors of the corresponding new bank may, after consultation with the Reserve Bank and with the previous sanction of the Central Government, raise whether by public issue [or rights issue or by issue of bonus shares] or preferential allotment or private placement, of equity shares or preference shares in accordance with the procedure as may be prescribed, so, however, that the Central Government shall, at all times hold not less than fifty-one per cent. of the paid-up capital consisting of equity shares of each corresponding new bank:
Provided that the issue of preference shares shall be in accordance with the guidelines framed by
the Reserve Bank specifying the class of preference shares, the extent of issue of each class of such
preference shares (whether perpetual or irredeemable or redeemable) and the terms and conditions
subject to which, each class of preference shares may be issued.]
[(2BB) Notwithstanding anything contained in sub-section (2) the paid-up capital of a corresponding
new bank constituted under sub-section (1) may, from time to time and before any paid-up capital
is [raised by public issue or rights issue or by issue of bonus shares] or preferential allotment or private
placement] under clause (c) of sub-section (2B), be reduced by—
(a) the Central Government, after consultation with the Reserve Bank, by cancelling any paid-up capital which is lost, or is unrepresented by available assets;

(b) the Board of Directors, after consultation with the Reserve Bank and with the previous
sanction of the Central Government, by paying off any paid-up capital which is in excess of the wants
of the corresponding new bank:
Provided that in a case where such capital is lost, or is unrepresented by available assets because of amalgamation of another corresponding new bank or a corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980)
with the corresponding new bank, such reduction may be done, either prospectively or retrospectively, but not from a date earlier than the date of such amalgamation.
(2BBA)(a) A corresponding new bank may, from time to time and after any paid-up capital has been [raised by public issue [or rights issue or by issue of bonus shares] or preferential allotment or private placement] under clause (c) of sub-section (2B), by resolution passed at an annual general meeting of the shareholders entitled to vote, voting in person, or, where proxies are allowed, by proxy, and the votes cast in favour of the resolution are not less than three times the number of the votes, if any, cast
against the resolution by the shareholders so entitled and voting, reduce its paid-up capital in any way.
(b) Without prejudice to the generality of the foregoing power, the paid-up capital may be reduced
by—
(i) extinguishing or reducing the liability on any of its shares in respect of share capital not
paid-up;
(ii) either with or without extinguishing or reducing liability on any of its paid-up shares,
cancelling any paid-up capital which is lost, or is unrepresented by available assets; or
(iii) either with or without extinguishing or reducing liability on any of its paid-up shares, paying
off any paid-up share capital which is in excess of the wants of the corresponding new bank.
(2BBB) Notwithstanding anything contained in sub-section (2BB) or sub-section (2BBA), the
paid-up capital of a corresponding new bank shall not be reduced at any time so as to render it below
twenty-five per cent. of the paid-up capital of that bank as on the date of commencement of the Banking
Companies (Acquisition and Transfer of Undertakings) Amendment Act, 1995 (8 of 1985).]
(2C) The entire paid-up capital of a corresponding new bank, except the paid-up capital 1
[raised from public by public issue [or rights issue or by issue of bonus shares] or preferential allotment or private placement] under clause (c) of sub-section (2B), shall stand vested in, and allotted to, the Central Government.
(2D) The shares of every corresponding new bank not held by the Central Government shall be freely
transferable:
Provided that no individual or company resident outside India or any company incorporated under
any law not in force in India or any branch of such company, whether resident outside India or not, shall
at any time hold or acquire by transfer or otherwise shares of the corresponding new bank so that such
investment in aggregate exceed the percentage, not being more than twenty per cent. of the paid-up
capital, as may be specified by the Central Government by notification in the Official Gazette.
Explanation.—For the purposes of this clause, “company” means any body corporate and includes a
firm or other association of individuals.
(2E) No shareholder of the corresponding new bank, other than the Central Government, shall be
entitled to exercise voting rights in respect of any shares held by him in excess of [ten per cent.] of the total voting rights of all the shareholders of the corresponding new bank.
[Provided that the shareholder holding any preference share capital in the corresponding new bank
shall, in respect of such capital, have a right to vote only on resolutions placed before such
corresponding new bank which directly affects the rights attached to his preference shares:
Provided further that [no preference shareholder, other than the Central Government, shall be entitled
to exercise voting rights in respect of preference shares held by him in excess of ten per cent.] of the total voting rights of all the shareholders holding preference share capital only.]
(2F) Every corresponding new bank shall keep at its head office a register, in one or more books, of
the shareholders (in this Act referred to as the register) and shall enter therein the following particulars:—
(i) the names, addresses and occupations, if any, of the shareholders and a statement of the shares
held by each shareholder, distinguishing each share by its denoting number;
(ii) the date on which each person is so entered as a shareholder;
(iii) the date on which any person ceases to be a shareholder; and
(iv) such other particulars as may be prescribed:
[Provided that nothing in this sub-section shall apply to the shares held with a depository.]
(2G) Notwithstanding anything contained in sub-section (2F), it shall be lawful for every
corresponding new bank to keep the register in computer floppies or diskettes subject to such safeguards as may be prescribed.
(3) Notwithstanding anything contained in the Indian Evidence Act, 1872 (1 of 1872) a copy of, or
extract from, the register, certified to be a true copy under the hand of an officer of the corresponding new bank authorised in this behalf by it, shall, in all legal proceedings, be admissible in evidence.]
(4) Every corresponding new bank shall be a body corporate with perpetual succession and a common
seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, and to
contract, and may sue and be sued in its name.
(5) Every corresponding new bank shall carry on and transact the business of banking as defined in
clause (b) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) and may engage in 4
[one or more of the other forms of business] specified in sub-section (1) of section 6 of that Act.
(6) Every corresponding new bank shall establish a reserve fund to which shall be transferred the
share premiums and the balance, if any, standing to the credit of the reserve fund of the existing bank in
relation to which it is the corresponding new bank, and such further sums, if any, as may be transferred in accordance with the provisions of section 17 of the Banking Regulation Act, 1949 (10 of 1949).
[(7) (i) The corresponding new bank shall, if so required by the Reserve Bank, act as agent of the
Reserve Bank at all places in India where it has a branch, for—
(a) paying, receiving, collecting and remitting money, bullion and securities on behalf of any
Government in India; and
(b) undertaking and transacting any other business which the Reserve Bank may from time to
time entrust to it.
(ii) The terms and conditions on which any such agency business shall be carried on by the
corresponding new bank on behalf of the Reserve Bank shall be such as may be agreed upon.
(iii) If no agreement can be reached on any matter referred to in clause (ii), or if a dispute arises
between the corresponding new bank and the Reserve Bank as to the interpretation of any agreement

between them, the matter shall be referred to the Central Government and the decision of the Central
Government thereon shall be final.
(iv) The corresponding new bank may transact any business or perform any functions entrusted to it
under clause (i), by itself or through any agent approved by the Reserve Bank.]
[3A.Trust not to be entered on the register.—Notwithstanding anything contained in
sub-section (2F) of section 3, no notice of any trust, express, implied or constructive, shall be entered on
the register, or be receivable, by the corresponding new bank:]
[Provided that nothing in this section shall apply to a depository in respect of shares held by it as a
registered owner on behalf of the beneficial owners.]
[3B. Register of beneficial owners.—The register of beneficial owners maintained by a depository
under section 11 of the Depositories Act, 1996 (22 of 1996), shall be deemed to be a register of
shareholders for the purpose of this Act.
Explanation.—For the purposes of section 3, section 3A and this section, the expressions “beneficial
owner”, “depository” and “registered owner” shall have the meanings respectively assigned to them in
clauses (a), (e) and (j) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996).]
4. Undertaking of existing banks to vest in corresponding new banks.—On the commencement of
this Act, the undertaking of every existing bank shall be transferred to, and shall vest in, the
corresponding new bank.
5. General effect of vesting.—(1) The undertaking of each existing bank shall be deemed to include
all assets, rights, powers, authorities and privileges and all property, movable and immovable, cash
balances, reserve funds, investments and all other rights and interests in, or arising out of, such property
as were immediately before the commencement of this Act in the ownership, possession, power or control
of the existing bank in relation to the undertaking, whether within or without India, and all books of
account, registers, records and all other documents of whatever nature relating thereto and shall also be
deemed to include all borrowings, liabilities and obligations of whatever kind then subsisting of the
existing bank in relation to the undertaking.
(2) If, according to the laws of any country outside India, the provisions of this Act by themselves are
not effective to transfer or vest any asset or liability situated in that country which forms part of the
undertaking of an existing bank to, or in, the corresponding new bank, the affairs of the existing bank in
relation to such asset or liability shall, on and from the commencement of this Act, stand entrusted to the
chief executive officer for the time being of the corresponding new bank and the chief executive officer
may exercise all powers and do all such acts and things as may be exercised or done by the existing bank
for the purpose of effectively transferring such assets and discharging such liabilities.
(3) The chief executive officer of the corresponding new bank shall, in exercise of the powers
conferred on him by sub-section (2), take all such steps as may be required by the laws of any such
country outside India for the purpose of effecting such transfer or vesting, and may either himself or
through any person authorised by him in this behalf realise any asset and discharge any liability of the
existing bank.
(4) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powers
of attorney, grants of legal representation and other instruments of whatever nature subsisting or having effect immediately before the commencement of this Act and to which the existing bank is a party or which are in favour of the existing bank shall be of as full force and effect against or in favour of the corresponding new bank, and may be enforced or acted upon as fully and effectually as if in the place of the existing bank the corresponding new bank had been a party thereto or as if they had been issued in favour of the corresponding new bank.

(5) If, on the appointed day, any suit, appeal or other proceeding of whatever nature in relation to any
business of the undertaking which has been transferred under section 4, is pending by or against the
existing bank, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the undertaking of the existing bank or of anything contained in this Act but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the corresponding new bank.
(6) Nothing in this Act shall be construed as applying to the assets, rights, powers, authorities and privileges and property, movable and immovable, cash balances and investments in any country outside
India (and other rights and interests in, or arising out of, such property) and borrowings, liabilities and
obligations of whatever kind subsisting at the commencement of this Act, of any existing bank operating
in that country if, under the laws in force in that country, it is not permissible for a banking company,
owned or controlled by Government, to carry on the business of banking there.


CHAPTER III
PAYMENT OF COMPENSATION

6. Payment of compensation.—(1) Every existing bank shall be given by the Central Government
such compensation in respect of the transfer, under section 4, to the corresponding new bank of the
undertaking of the existing bank as is specified against each such bank in the Second Schedule.
(2) The amount of compensation referred to in sub-section (1) shall be given to every existing bank,
at its option,—
(a) in case (to be paid by cheque drawn on the Reserve Bank) in three equal annual instalments,
the amount of each instalment carrying interest at the rate of four per cent. per annum from the
commencement of this Act, or
(b) in saleable or otherwise transferable promissory notes or stock certificates of the Central Government issued and repayable at par, and maturing at the end of—
(i) ten years from the commencement of this Act and carrying interest from such commencement at the rate of four and a half per cent. per annum, or
(ii) thirty years from the commencement of this Act and carrying interest from such
commencement at the rate of five and a half per cent. per annum, or
(c) partly in cash (to be paid by cheque drawn on the Reserve Bank) and partly in such number of
securities specified in sub-clause (i) or sub-clause (ii), or both, of clause (b), as may be required by the existing bank, or
(d) partly in such number of securities specified in sub-clause (i) of clause (b) and partly in such number of securities specified in sub-clause (ii) of that clause, as may be required by the existing bank.
(3) The first of the three equal annual instalments referred to in clause (a) of sub-section (2) shall be
paid, and the securities referred to in clause (b) of that sub-section shall be issued, within sixty days from
the date of receipt by the Central Government of the option referred to in that sub-section, or where no
such option has been exercised, from the latest date before which such option ought to have been
exercised.
(4) The option referred to in sub-section (2) shall be exercised by every existing bank before the
expiry of a period of three months from the appointed day (or within such further time, not exceeding
three months, as the Central Government may, on the application of the existing bank, allow) and the
option so exercised shall be final and shall not be altered or rescinded after it has been exercised.
(5) Any existing bank which omits or fails to exercise the option referred to in sub-section (2), within
the time specified in sub-section (4), shall be deemed to have opted for payment in securities specified in sub-clause (i) of clause (b) of sub-section (2).
(6) Notwithstanding anything contained in this section, any existing bank may, before the expiry of
three months from the appointed day (or within such further time, not exceeding three months, as the
Central Government may, on the application of the existing bank, allow) make an application in writing to the Central Government for an interim payment of an amount equal to seventy-five per cent. of the
amount of the paid-up capital of such bank, as on the commencement of this Act, indicating therein
whether the payment is desired in cash or in securities specified in sub-section (2), or in both.
(7) The Central Government shall, within sixty days from the receipt of the application referred to in
sub-section (6), make the interim payment to the existing bank in accordance with the option indicated in such application.
(8) The interim payment made to an existing bank under sub-section (7) shall be set off against the
total amount of compensation payable to such existing bank under this Act and the balance of the
compensation remaining outstanding after such payment shall be given to the existing bank in accordance
with the option exercised, or deemed to have been exercised, under sub-section (4) or sub-section (5), as the case may be:
Provided that where any part of the interim payment is obtained by an existing bank in cash, the
payment so obtained shall be set off, in the first instance, against the first instalment of the cash payment
referred in sub-section (2), and in case the payment so obtained exceeds the amount of the first
instalment, the excess amount shall be adjusted against the second instalment and the balance of such
excess amount, if any, against the third instalment of the cash payment.
(9) Any payment purported to have been made to an existing bank under sub-section (3) of section 15
of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969 (22 of 1969), shall be
deducted by the Central Government from the amount of the interim payment made to such existing bank under sub-section (7), or where no such interim payment has been made, from the total amount of the compensation due to such existing bank, and the amount so deducted shall be paid by the Central Government to the corresponding new bank.



CHAPTER IV
MANAGEMENT OF CORRESPONDING NEW BANKS

7. Head office and management.—(1) The head office of each corresponding new bank shall be at
such place as the Central Government may, by notification in the Official Gazette, specify in this behalf,
and, until any such place is so specified, shall be at such place at which the head office of the existing
bank, in relation to which it is the corresponding new bank, is on the commencement of this Act, located.
(2) The general superintendence, direction and management of the affairs and business of a
corresponding new bank shall vest in a Board of Directors which shall be entitled to exercise all such
powers and do all such acts and things as the corresponding new bank is authorised to exercise and do.
(3) (a) As soon as may be after the appointed day, the Central Government shall, in consultation with
the Reserve Bank, constitute the first Board of Directors of a corresponding new bank, consisting of not
more than seven persons, to be appointed by the Central Government, and every director so appointed
shall hold office until the Board of Directors of such corresponding new bank is constituted in accordance with the scheme made under section 9:
Provided that the Central Government may, if it is of opinion that it is necessary in the interests of the
corresponding new bank so to do, remove a person from the membership of the first Board of Directors
and appoint any other person in his place.
(b) Every member of the first Board of Directors (not being an officer of the Central Government or
of the Reserve Bank) shall receive such remuneration as is equal to the remuneration which a member of the Board of Directors of the existing bank was entitled to receive immediately before the commencement of this Act.
(4) Until the first Board of Directors is appointed by the Central Government under sub-section (3),
the general superintendence, direction and management of the affairs and business of a corresponding
new bank shall vest in a Custodian, who shall be the chief executive officer of that bank and may exercise
all powers and do all acts and things as may be exercised or done by that bank.
(5) The Chairman of an existing bank holding office as such immediately before the commencement
of this Act, shall be the Custodian of the corresponding new bank and shall receive the same emoluments
as he was receiving immediately before such commencement:
Provided that the Central Government may, if the Chairman of an existing bank declines to become,
or to continue to function as, a Custodian of the corresponding new bank, or, if it is of opinion that it is
necessary in the interests of the corresponding new bank so to do, appoint any other person as the
Custodian of a corresponding new bank and the Custodian so appointed shall receive such emoluments as the Central Government may specify in this behalf.
(6) The Custodian shall hold office during the pleasure of the Central Government.
8. Corresponding new banks to be guided by the directions of the Central Government.—Every
corresponding new bank shall, in the discharge of its functions, be guided by such directions in regard to
matters of policy involving public interest as the Central Government may, after consultation with the
Governor of the Reserve Bank, give.
9. Power of Central Government to make scheme.—(1) The Central Government may, after
consultation with the Reserve Bank, make a scheme for carrying out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, the said scheme may
provide for all or any of the following matters, namely:—
(a) the capital structure of the corresponding new bank 1
***.
(b) the constitution of the Board of Directors, by whatever name called, of the corresponding new
bank and all such matters in connection therewith or incidental thereto as the Central Government
may consider to be necessary or expedient;
(c) the reconstitution of any corresponding new bank into two or more corporations, the
amalgamation of any corresponding new bank with any other corresponding new bank or with
another banking institution, the transfer of the whole or any part of the undertaking of a
[corresponding new bank to any other corresponding new bank or banking institution] or the transfer
of the whole or any part of the undertaking of any other banking institution to a corresponding new
bank;
[(ca) the manner in which the excess number of directors shall retire under second proviso to
clause (i) of sub-section (3);]
(d) such incidental, consequential and supplemental matters as may be necessary to carry out the
provisions of this Act.
[(3) Every Board of Directors of a corresponding new bank constituted under any scheme made
under sub-section (1), shall include—
(a)
[not more than four whole-time directors] to be appointed by the Central Government after
consultation with the Reserve Bank;
(b) one Director who is an official of the Central Government to be nominated by the
Central Government:
Provided that no such Director shall be a Director of any other corresponding new bank.
Explanation.—For the purposes of this clause, the expression “corresponding new bank” shall include
a corresponding new bank within the meaning of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1980 (40 of 1980);

[(c) one director, possessing necessary expertise and experience in matters relating to regulation
or supervision of commercial banks, to be nominated by the Central Government on the
recommendation of the Reserve Bank;]
Explanation.—For the purpose of this clause, “an officer of the Reserve Bank” includes an
officer of the Reserve Bank who is deputed by that bank under section 54AA of the Reserve Bank of
India Act, 1934 (2 of 1934) to any institution referred to therein;
* * * * *
(e) one Director, from among such of the employees of the corresponding new bank who are
workmen under clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947), to be
nominated by the Central Government in such manner as may be specified in a scheme made under
this section;
(f) one Director, from among the employees of the corresponding new bank who are not workmen
under clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947), to be nominated by the
Central Government after consultation with the Reserve Bank;
(g) one Director who has been a Chartered Accountant for not less than fifteen years to be
nominated by the Central Government after consultation with the Reserve Bank;
(h) subject to the provisions of clause (i), not more than six directors to be nominated by the
Central Government;
[(i) where the capital issued under clause (c) of sub-section (2B) of section 3 is—
(I) not more than sixteen per cent. of the total paid-up capital, one director;
(II) more than sixteen per cent. but not more than thirty-two per cent. of the total paid-up
capital, two directors;
(III) more than thirty-two per cent. of the total paid-up capital, three directors,
to be elected by the shareholders, other than the Central Government, from amongst themselves:
Provided that on the assumption of charge after election of any such director under this clause,
equal number of directors nominated under clause (h) shall retire in such manner as may be specified
in the scheme:
Provided further that in case the number of directors elected, on or before the commencement of
the Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws
(Amendment) Act, 2006 (45 of 2006), in a corresponding new bank exceed the number of directors
specified in sub-clause (I) or sub-clause (II) or sub-clause (III), as the case may be, such excess
number of directors elected before such commencement shall retire in such manner as may be
specified in the scheme and such directors shall not be entitled to claim any compensation for the
premature retirement of their term of office.]
(3A) The directors to be nominated under clause (h) or to be elected under clause (i) of
sub-section (3) shall—
(A) have special knowledge or practical experience in respect of one or more of the following
Matters, namely:—
(i) agricultural and rural economy,
(ii) banking,
(iii) co-operation,
(iv) economics,
(v) finance,
(vi) law,
(vii) small scale industry,
(viii) any other matter the special knowledge of, and practical experience in, which would, in
the opinion of the Reserve Bank, be useful to the corresponding new bank;
(B) represent the interests of depositors; or
(C) represent the interest of farmers, workers and artisans.
[(3AA) Without prejudice to the provisions of sub-section (3A) and notwithstanding anything to the
contrary contained in this Act or in any other law for the time being in force, no person shall be eligible to be elected as director under clause (i) of sub-section (3) unless he is a person having fit and proper status based upon track record, integrity and such other criteria as the Reserve Bank may notify from time to time in this regard.
(3AB) The Reserve Bank may also specify in the notification issued under sub-section (3AA), the
authority to determine the fit and proper status, the manner of such determination, the procedure to be
followed for such determination and such other matters as may be considered necessary or incidental
thereto;]
(3B) Where the Reserve Bank is of the opinion that any director of a corresponding new Bank elected
under clause (i) of sub-section (3) does not fulfil the requirements of 2
[sub-sections (3A) and (3AA)] it may, after giving to such director and the bank a reasonable opportunity of being heard, by order, remove such director and on such removal, the Board of Directors shall co-opt any other person fulfilling the requirements of [sub-sections (3A) and (3AA)] as a director in place of the person so removed till a director is duly elected by the shareholders of the corresponding new bank in the next annual general meeting and the person so co-opted shall be deemed to have been duly elected by the shareholders of the corresponding new bank as a director.]
(4) The Central Government may, after consultation with the Reserve Bank, make a scheme to
amend or vary any scheme made under sub-section (1).
[(5) On and from the date of coming into operation of a scheme made under this section with respect
to any of the matters referred to in clause (c) of sub-section (2) or any matters incidental, consequential
and supplemental thereto,—
(a) the scheme shall be binding on the corresponding new bank or corporations or banking
institutions, and also on the members, if any, the depositors, and other creditors and employees of
each of them and on any other persons having any right or liability in relation to any of them
including the trustees or other persons, managing or in any other manner connected with, any
provident fund or other fund maintained by any of them;
(b) the properties and assets of the corresponding new bank, or as the case may be, of the banking
institution shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vested
in, and the liabilities of the corresponding new bank, or, as the case may be, of the banking institution
shall, by virtue of, and to the extent provided in the scheme, stand transferred to, and become the
liabilities of, the corporation or corporations brought into existence by reconstitution of the banking
institution or the corresponding new bank, as the case may be.
[Explanation I].—In this section, “banking institution” means a banking company and includes
the State Bank of India or a subsidiary bank].

[Explanation II.—For the purposes of this section, the expression “corresponding new bank”
shall include a corresponding new bank within the meaning of the Banking Companies (Acquisition
and Transfer of Undertakings) Act, 1980 (40 of 1980)].
[(6)] Every scheme made by the Central Government under this Act shall be laid, as soon as may be
after it is made, before each House of Parliament while it is in session for a total period of thirty days
[which may be comprised in one session or in two or more successive sessions, and if, before the expiry
of the session immediately following the session or the successive sessions aforesaid], both Houses agree in making any modification in the scheme or both Houses agree that the scheme should not be made, the scheme shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that scheme.
[9A. Power of Reserve Bank to appoint additional director.—(1) If the Reserve Bank is of the
opinion that in the interest of banking policy or in the public interest or in the interests of the
corresponding new bank or its depositors, it is necessary so to do, it may, from time to time, by order in
writing appoint, with effect from such date as may be specified in the order, one or more persons to hold
office as additional directors of the corresponding new bank.
(2) Any person appointed as an additional director in pursuance of this section—
(a) shall hold office during the pleasure of the Reserve Bank and subject thereto for a period not
exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank
may specify;
(b) shall not incur any obligation or liability by reason only of his being a director or for anything
done or omitted to be done in good faith in the execution of the duties of his office or in relation
thereto; and
(c) shall not be required to hold qualification shares in the corresponding new bank.
(3) For the purpose of reckoning any proportion of the total number of directors of the corresponding
new bank, any additional director appointed under this section shall not be taken into account.]

Devider
CHAPTER V
MISCELLANEOUS
10. Closure of accounts and disposal of profits.—(1) Every corresponding new bank shall cause its books to be closed and balanced on the 31st day of December 5
[or such other date in each year as the Central Government may by notification in the Official Gazette, specify] and shall appoint, with the
previous approval of the Reserve Bank, and auditors for the audit of its accounts:
[Provided that with a view to facilitating the transition from one period of accounting to another
period of accounting under this sub-section, the Central Government may, by order published in the
Official Gazette, make such provisions as it considers necessary or expedient for the closing and
balancing of, or for other matters relating to the books in respect of the concerned years.]
(2) Every auditor of a corresponding new bank shall be a person who is qualified to act as an auditor
of a company under section 226 of the Companies Act, 1956 (1 of 1956), and shall receive such remuneration as the Reserve Bank may fix in consultation with the Central Government.
(3) Every auditor shall be supplied with a copy of the annual balance-sheet and profit and loss
account and a list of all books kept by the corresponding new bank, and it shall be the duty of the auditor to examine the balance-sheet and profit and loss account with the accounts and vouchers relating thereto, and in the performance of his duties, the auditor—
(a) shall have, at all reasonable times, access to the books, accounts and other documents of the
corresponding new bank,
(b) may, at the expense of the corresponding new bank, employ accountants or other persons to
assist him in investigating such accounts, and
(c) may, in relation to such accounts, examine the Custodian or any officer or employee of the
corresponding new bank.
(4) Every auditor of a corresponding new bank shall make a report to the Central Government upon
the annual balance-sheet and accounts and in every such report shall state—
(a) whether, in his opinion, the balance-sheet is a full and fair balance-sheet containing all the
necessary particulars and is properly drawn up so as to exhibit a true and fair view of the affairs of the
corresponding new bank, and in case he had called for any explanation or information, whether it has
been given and whether it is satisfactory;
(b) whether or not the transactions of the corresponding new bank, which have come to his notice,
have been within the powers of that bank;
(c) whether or not the returns received from the offices and branches of the corresponding new
bank have been found adequate for the purpose of his audit;
(d) whether the profit and loss account shows a true balance of profit or loss for the period
covered by such account; and
(e) any other matter which he considers should be brought to the notice of the Central
Government.
[Explanation I.—For the purposes of this Act—
(a) the balance-sheet shall not be treated as not disclosing a true and fair view of the affairs of
the corresponding new bank, and
(b) the profit and loss account shall not be treated as not showing a true balance of profit or
loss for the period covered by such account,
merely by reason of the fact that the balance-sheet or, as the case may be, the profit and loss account
does not disclose any matters which are by the provisions of the Banking Regulation Act, 1949
(10 of 1949), read with the relevant provisions of this Act or any other Act, not required to be
disclosed.
Explanation II.—For the purposes of this Act the accounts of the corresponding new bank shall
not be deemed as having not been properly drawn up on the ground merely that they do not disclose
certain matters if—
(i) those matters are such as the corresponding new bank is, by virtue of any provision
contained in the Banking Regulation Act, 1949 (10 of 1949), read with the relevant provisions of
this Act, or any other Act, not required to disclose; and
(ii) the provisions referred to in clause (i) are specified in the balance-sheet and profit and
loss account of the corresponding new bank or in the auditor’s report.]
(5) The report of the auditor shall be verified, signed and transmitted to the Central Government.
(6) The auditor shall also forward a copy of the audit report to the corresponding new bank and to the
Reserve Bank.
(7) After making provision for bad and doubtful debts, depreciation in assets, contributions to staff
and superannuation funds and all other matters for which provision is necessary under any law, or which are usually provided for by banking companies, a corresponding new bank 1
[may, out of its net profits,
declare a dividend and retain the surplus, if any].
[(7A) Every corresponding new bank shall furnish to the Central Government 3
[and to the Reserve
Bank] the annual balance-sheet, the profit and loss account, and the auditor’s report and a report by its
Board of directors on the working and activities of the bank during the period covered by the accounts.]
(8) The Central Government shall cause every auditor’s report and report on the working and
activities of each corresponding new bank to be laid [as soon as may be after they are received before
each House of Parliament
[(9) Without prejudice to the foregoing provisions, the Central Government may, at any time,
appoint such number of auditors as it thinks fit to examine and report on the accounts of a corresponding new bank and the auditors so appointed shall have all the rights, privileges and authority in relation to the audit of the accounts of the corresponding new bank which an auditor appointed by the corresponding new bank has under this section.]
[10A. Annual general meeting.—(1) A general meeting (in this Act referred to as an annual general
meeting) of every corresponding new bank which has issued capital under clause (c) of
sub-section (2B) of section 3 shall be held at the place of the head office of the bank in each year at such
time as shall from time to time be specified by the Board of Directors:
Provided that such annual general meeting shall be held before the expiry of six weeks from the date
on which the balance sheet, together with the profit and loss account and auditor’s report is under
sub-section (7A) of section 10, forwarded to the Central Government or to the Reserve Bank whichever
date is earlier.
(2) The shareholders present at an annual general meeting [shall be entitled to discuss, approve and
adopt] the balance-sheet and the profit and loss account of the corresponding new bank made up to the
previous 31st day of March, the report of the Board of Directors on the working and activities of the
corresponding new bank for the period covered by the accounts and the auditor’s report on the
balance-sheet and accounts.]
[(3) Nothing contained in this section shall apply during the period for which the Board of Directors
of a corresponding new bank had been superseded under sub-section (1) of section 18A:
Provided that the Administrator may, if he considers it appropriate in the interest of the corresponding
new bank whose Board of Directors had been superseded, call annual general meeting in accordance with the provisions of this section.]
[10B. Transfer of unpaid or unclaimed dividend to Unpaid Dividend Account.—(1) Where, after
after the commencement of the Banking Companies (Acquisition and Transfer of Undertakings) and
Financial Institutions Laws (Amendment) Act, 2006 (45 of 2006), a dividend has been declared by a
corresponding new bank but has not been paid or claimed within thirty days from the date of declaration, to, or by, any shareholder entitled to the payment of the dividend, the corresponding new bank shall, within seven days from the date of the expiry of such period of thirty days, transfer the total amount of dividend which remains unpaid or unclaimed within the said period of thirty days, to a special account to be called “Unpaid Dividend Account of … (the name of the corresponding new bank).
Explanation.—In this sub-section, the expression “dividend which remains unpaid” means any
dividend the warrant in respect thereof has not been encashed or which has otherwise not been paid or
claimed.

(2) Where the whole or any part of any dividend, declared by a corresponding new bank before the
commencement of the Banking Companies (Acquisition and Transfer of Undertakings) and Financial
Institutions Laws (Amendment) Act, 2006 (45 of 2006), remains unpaid at such commencement, the
corresponding new bank shall, within a period of six months from such commencement, transfer such
unpaid amount to the account referred to in sub-section (1).
(3) Any money transferred to the Unpaid Dividend Account of a corresponding new bank in
pursuance of this section which remains unpaid or unclaimed for a period of seven years from the date of such transfer, shall be transferred by the corresponding new bank to the Investor Education and Protection Fund established under sub-section (1) of section 205C of the Companies Act, 1956 (1 of 1956).
(4) The money transferred under sub-section (3) to the Investor Education and Protection Fund shall
be utilised for the purposes and in the manner specified in section 205C of the Companies Act, 1956
(1 of 1956).]
11. Corresponding new bank deemed to be an Indian company.—For the purposes of the
Income-tax Act, 1961 (43 of 1961), every corresponding new bank shall be deemed to be an Indian
company and a company in which the public are substantially interested.
12. Removal of Chairman from office.—(1) Every person holding office, immediately before the
commencement of this Act, as Chairman of an existing bank shall, if he becomes Custodian of the
corresponding new bank, be deemed, on such commencement, to have vacated office as such Chairman.
(2) Save as otherwise provided in sub-section (1), every officer or other employee of an existing bank
shall become, on the commencement of this Act, an officer or other employee, as the case may be, of the corresponding new bank and shall hold his office or service in that bank on the same terms and conditions and with the same rights to pension, gratuity and other matters as would have been admissible to him if the undertaking of the existing bank had not been transferred to and vested in the corresponding new bank and continue to do so unless and until his employment in the corresponding new bank is terminated or
until his remuneration, terms or conditions are duly altered by the corresponding new bank.
(3) For the persons who immediately before the commencement of this Act were the trustees for any
pension, provident, gratuity or other like fund constituted for the officers or other employees of an
existing bank, there shall be substituted as trustees such persons as the Central Government may, by
general or special order, specify.
(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947), or in any
other law for the time being in force, the transfer of the services of any officer or other employee from an existing bank to a corresponding new bank shall not entitle such officer or other employee to any
compensation under this Act or any other law for the time being in force and no such claim shall be
entertained by any court, tribunal or other authority.
[12A. Bonus.—(1) No officer or other employee [other than an employee within the meaning of
clause (13) of section 2 of the Payment of Bonus Act, 1965 (21 of 1965)] of a corresponding new bank
shall be entitled to be paid any bonus.
(2) No employee of a corresponding new bank, being an employee within the meaning of clause (13)
of section 2 of the Payment of Bonus Act, 1965 (21 of 1965), shall be entitled to be paid any bonus except in accordance with the provisions of that Act.
(3) The provisions of this section shall have effect notwithstanding any judgment, decree or order of
any court, tribunal or other authority and notwithstanding anything contained in any other provision of
this Act or in the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being in force
or any practice, usage or custom or any contract, agreement, settlement, award or other instrument.]
13. Obligations as to fidelity and secrecy.—(1) Every corresponding new bank shall observe, except
as otherwise required by law, the practices and usages customary among bankers, and, in particular, it
shall not divulge any information relating to or to the affairs of its constituents except in circumstances in which it is, in accordance with law or practices and usages customary among bankers, necessary or
appropriate for the corresponding new bank to divulge such information.

(2) Every director, member of a local board or a committee, or auditor, adviser, officer or other
employee of a corresponding new bank shall, before entering upon his duties, make a declaration of
fidelity and secrecy in the form set out in the Third Schedule.
(3) Every Custodian of a corresponding new bank shall, as soon as possible, make a declaration of
fidelity and secrecy in the form set out in the Third Schedule.
[(4) Nothing contained in this section shall apply to the credit information disclosed under the Credit
Information Companies (Regulation) Act, 2005 (30 of 2005).]
14. Custodian to be public servant.—Every Custodian of a corresponding new bank shall be
deemed to be a public servant for the purposes of Chapter IX of the Indian Penal Code (45 of 1860).
15. Certain defects not to invalidate acts or proceedings.—(1) All acts done by the Custodian,
acting in good faith, shall, notwithstanding any defect in his appointment or in the procedure, be valid.
(2) No act or proceeding of any Board of Directors or a local board or committee of a corresponding
new bank shall be invalid merely on the ground of the existence of any vacancy in, or defect in the
constitution of, such board or committee, as the case may be.
(3) All acts done by a person acting in good faith as a director or member of a local board or
committee of a corresponding new bank shall be valid, notwithstanding that it may afterwards be
discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in any law for the time being in force:
Provided that nothing in this section shall be deemed to give validity to any act by a director or member of a local board or committee of a corresponding new bank after his appointment has been shown to the corresponding new bank to be invalid or to have terminated.
16. Indemnity.—(1) Every Custodian of a corresponding new bank and every officer of the Central
Government or of the Reserve Bank and every officer or other employee of a corresponding new bank,
shall be indemnified by such bank against all losses and expenses incurred by him in or in relation to the
discharge of his duties except such as have been caused by his own wilful act or default.
(2) A director or member of a local board or committee of a corresponding new bank shall not be
responsible for any loss or expense caused to such bank by the insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf of the corresponding new bank, or by the insolvency or wrongful act of any customer or debtor, or by anything done in or in relation to the
execution of the duties of his office, unless such loss, expense, insufficiency or deficiency was due to any
wilful act or default on the part of such director or member.
[16A. Arrangement with corresponding new bank on appointment of directors to prevail.—(1)
Where any arrangement entered into by a corresponding new bank with a company provides for the
appointment by the corresponding new bank of one or more directors of such company, such provision
and any appointment of directors made in pursuance thereof shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law for the time being in force or in the memorandum, articles of association or any other instrument relating to the Company, and any provision regarding share qualification, age limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any director appointed by the corresponding new bank in pursuance of the arrangement as aforesaid.
(2) Any director appointed as aforesaid shall—
(a) hold office during the pleasure of the corresponding new bank and may be removed or
substituted by any person by order in writing of the corresponding new bank;

(b) not incur any obligation or liability by reason only of his being a director or for anything done
or omitted to be done in good faith in the discharge of his duties as a director or anything in relation
thereto;
(c) not be liable to retirement by rotation and shall not be taken into account for computing the
number of directors liable to such retirement.]
17. References to existing banks on and from the commencement of this Act.—Any reference to
any existing bank in any law, other than this Act, or in any contract or other instrument shall, in so far as
it relates to the undertaking which has been transferred by section 4, be construed as a reference to the
corresponding new bank.
18. Dissolution.—No provision of law relating to winding up of corporations shall apply to a
corresponding new bank and no corresponding new bank shall be placed in liquidation save by order of
the Central Government and in such manner as it may direct.
18A. Supersession of Board in certain cases.—(1) Where the Central Government, on the
recommendation of the Reserve Bank, is satisfied that in the public interest or for preventing the affairs of any corresponding new bank being conducted in a manner detrimental to the interest of the depositors or the corresponding new bank or for securing the proper management of any corresponding new bank, it is necessary so to do, the Central Government may, for reasons to be recorded in writing, by order, supersede the Board of Directors of such corresponding new bank for a period not exceeding six months as may be specified in the order:
Provided that the period of supersession of the Board of Directors may be extended from time to time,
so, however, that the total period shall not exceed twelve months.
(2) The Central Government may, on supersession of the Board of Directors of the corresponding
new bank under sub-section (1), appoint, in consultation with the Reserve Bank, for such period as it may determine, an Administrator (not being an officer of the Central Government or a State Government) who has experience in law, finance, banking, economics or accountancy.
(3) The Central Government may issue such directions to the Administrator as it may deem
appropriate and the Administrator shall be bound to follow such directions.
(4) Upon making the order of supersession of the Board of Directors of the corresponding new bank,
notwithstanding anything contained in this Act,—
(a) the chairman, managing directors and other directors shall, as from the date of supersession,
vacate their offices as such;
(b) all the powers, functions and duties which may, by or under the provisions of this Act or any
other law for the time being in force, be exercised and discharged by or on behalf of the Board of
Directors of such corresponding new bank, or by a resolution passed in general meeting of such
corresponding new bank, shall, until the Board of Directors of such corresponding new bank is
reconstituted, be exercised and discharged by the Administrator appointed by the Central Government
under sub-section (2):
Provided that the power exercised by the Administrator shall be valid notwithstanding that such
power is exercisable by a resolution passed in the general meeting of the corresponding new bank.
(5) The Central Government may constitute, in consultation with the Reserve Bank, a committee of
three or more persons who have experience in law, finance, banking, economics or accountancy to assist the Administrator in the discharge of his duties.
(6) The committee shall meet at such times and places and observe such rules of procedure as may be
specified by the Central Government.
(7) The salary and allowances payable to the Administrator and the members of the committee
constituted under sub-section (5) by the Central Government shall be such as may be specified by the
Central Government and be payable by the concerned corresponding new bank.
(8) On and before the expiration of two months before expiry of the period of supersession of the
Board of Directors as specified in the order issued under sub-section (1), the Administrator of the
corresponding new bank, shall call the general meeting of the corresponding new bank to elect new
directors and reconstitute its Board of Directors.
(9) Notwithstanding anything contained in any other law or in any contract, the memorandum or
articles of association, no person shall be entitled to claim any compensation for the loss or termination of his office.
(10) The Administrator appointed under sub-section (2) shall vacate office immediately after the
Board of Directors of the corresponding new bank has been reconstituted.]
19. Power to make regulations.—(1) The Board of Directors of a corresponding new bank may,
after consultation with the Reserve Bank and with the previous sanction of the Central Government, 1
[by notification in the Official Gazette,] make regulations, not inconsistent with the provisions of this Act or
any scheme made thereunder, to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, the regulations may
provide for all or any of the following matters, namely:—
(a) the powers, functions and duties of local boards and restrictions, conditions or limitations, if
any, subject to which they may be exercised or performed, the formation and constitution of local
committees and committees of local board (including the number of members of any such
committee), the powers, functions and duties of such committees, the holding of meetings of local
committees and committees, of local boards and the conduct of business thereat;
(b) the manner in which the business of the local boards shall be transacted and the procedure in
connection therewith;
[(ba) the nature of shares of the corresponding new bank, the manner in which and the
conditions subject to which shares may be held and transferred and generally all matters relating to
the rights and duties of shareholders;
(bb) the maintenance of register, and the particulars to be entered in the register in addition to
those specified in sub-section (2F) of section 3, the safeguards to be observed in the maintenance of
register on computer floppies or diskettes, inspection and closure of the register and all other matters
connected therewith:
(bc) the manner in which general meetings shall be convened, the procedure to be followed
thereat and the manner in which voting rights may be exercised;
(bd) the holding of meetings of shareholders and the business to be transacted thereat;
(be) the manner in which notices may be served on behalf of the corresponding new bank upon
shareholders or other persons;
(bf) the manner in which the directors nominated under clause (h) of sub-section (3) of section 9
shall retire;]
(c) the delegation of powers and functions of the board of directors of a corresponding new bank
to the general manager, director, officer or other employee of that bank;
(d) the conditions or limitations subject to which the corresponding new bank may appoint
advisers, officers or other employees and fix their remuneration and other terms and conditions of
service;
(e) the duties and conduct of advisers, officers or other employees of the corresponding new
bank;
(f) the establishment and maintenance of superannuation, pension, provident or other funds for
the benefit of officers or other employees of the corresponding new bank or of the dependants of such
officers or other employees and the granting of superannuation allowances, annuities and pensions
payable out of such funds;
(g) the conduct and defence of legal proceedings by or against the corresponding new bank and
the manner of signing pleadings;
(h) the provision of a seal for the corresponding new bank and the manner and effect of its use;
(i) the form and manner in which contracts binding on the corresponding new bank may be
executed;
(j) the conditions and the requirements subject to which loans or advances may be made or bills
may be discounted or purchased by the corresponding new bank;
(k) the persons or authorities who shall administer any pension, provident or other fund
constituted for the benefit of officers or other employees of the corresponding new bank or their
dependants;
(l) the preparation and submission of statements of programmes of activities and financial
statements of the corresponding new bank and the period for which and the time within which such
statements and estimates are to be prepared and submitted; and
(m) generally for the efficient conduct of the affairs of the corresponding new bank.
(3) Until any regulation is made under sub-section (1), the articles of association of the existing bank
and every regulation, rule, bye-law or order made by the existing bank shall, if in force at the
commencement of this Act, be deemed to be the regulations made under sub-section (1) and shall have
effect accordingly and any reference therein to any authority of the existing bank shall be deemed to be a reference to the corresponding authority of the corresponding new bank and until any such corresponding authority is constituted under this Act, shall be deemed to refer to the Custodian.
[(4) Every regulation shall, as soon as may be after it is made under this Act by the Board of
directors, of a corresponding new bank, be forwarded to the Central Government and that Government
shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.
20. Amendment of certain enactments.—(1) In the Banking Regulation Act, 1949 (10 of 1949),—
(a) in section 34A, in sub-section (3), for the words “and any subsidiary bank”, the words, figures
and brackets “a corresponding new bank constituted under section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and any subsidiary bank” shall be
substituted;
(b) in section 36AD, in sub-section (3), for the words “and any subsidiary bank”, the words, figures and brackets “a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), and any subsidiary bank” shall be substituted;
(c) in section 51, for the words “or any other banking institution notified by the Central Government in this behalf”, the words, figures and brackets “or any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or any other banking institution notified by the Central Government in this behalf” shall be substituted;
(d) in the Fifth Schedule, in Part I of paragraph 1, in clause (e), the Explanations shall be deemed
never to have been inserted.
(2) In the Industrial Disputes Act, 1947 (14 of 1947), in section 2, in clause (bb), for the words “and
any subsidiary bank”, the words, figures and brackets “a corresponding new bank constituted under
section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970),
and any subsidiary bank” shall be substituted.
(3) In the Banking Companies (Legal Practitioners, Clients, Accounts) Act, 1949 (46 of 1949), in
section 2, in clause (a), for the words “and any subsidiary bank”, the words, figures and brackets “a
corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), and any subsidiary bank” shall be substituted.
(4) In the Deposit Insurance Corporation Act, 1961 (47 of 1961),—
(a) in section 2,—
(i) after clause (e), the following clause shall be inserted, namely:—
(ee) “corresponding new bank” means a corresponding new bank constituted under
section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
(5 of 1970);
(ii) in clause (g),—
(a) for the words “or a banking company”, the words “a corresponding new bank or a
banking company”, and
(b) for the words “with a banking company”, the words “with a corresponding new bank
or with a banking company”,
shall be substituted;
(iii) in clause (i), after the words “banking company”, the words “or a corresponding new
bank” shall be inserted;
(b) section 13 shall be re-numbered as sub-section (1) thereof and after sub-section (1) as so
re-numbered, the following sub-section shall be inserted, namely:—
“(2) The provisions of clauses (a), (b), (c), (d) and (h) of sub-section (1) shall apply to a
corresponding new bank as they apply to a banking company.”
(5) In the State Agricultural Credit Corporations Act, 1968 (60 of 1968),—
(a) in section 2, after clause (i), the following clause shall be inserted, namely:—
(ii) “corresponding new bank” means a corresponding new bank constituted under section 3
of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970)’;
(b) after the words “subsidiary banks” or “subsidiary bank”, as the case may be, occurring in
clause (d) of sub-section (3) of section 5, in clause (b) of section 9 and in the proviso to section 18, the words “corresponding new banks” or “corresponding new bank”, as the case may be, shall be  inserted.


21. Repeal and savings.—(1) The Banking Companies (Acquisition and Transfer of Undertakings)
Ordinance, 1970 (Ord. 3 of 1970), is hereby repealed.
(2) Notwithstanding such repeal and notwithstanding any judgment, decree or order of any court or
tribunal,—
(a) any action taken, or purported to have been taken, or anything done, or purported to have been
done, between the 19th day of July, 1969, and the 10th day of February, 1970, by any corresponding
new bank purported to have been constituted under the Banking Companies (Acquisition and Transfer
of Undertakings) Ordinance, 1969 (8 of 1969), or the Banking Companies (Acquisition and Transfer
of Undertakings) Act, 1969 (22 of 1969), or by any person purporting to act on behalf of such bank
and any right, obligation or liability acquired or incurred, between the said dates, by or on behalf of
such corresponding new bank shall be deemed to have been taken, done, acquired or incurred under
the provisions of this Act by or on behalf of the corresponding new bank constituted thereunder;
(b) any action taken, or purported to have been taken, or anything done, or purported to have been
done, between the 10th day of February, 1970, and the appointed day, by an existing bank or by any
person acting on behalf of such bank, and any right, obligation or liability acquired or incurred,
between the said dates, by or on behalf of such existing bank shall be deemed to have been taken,
done, acquired or incurred under the provisions of this Act by or on behalf of the corresponding new
bank constituted thereunder;
(c) anything done or any action taken, including any order made, notification issued or directions
given under the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1970
(3 of 1970), shall be deemed to have been done, taken, made, issued or given, as the case may be, under the corresponding provisions of this Act.
(3) Any suit, appeal or other proceeding of whatever nature instituted on or after the 19th day of July, 1969, by or against a corresponding new bank purported to have been constituted by the Banking
Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969 (8 of 1969), or the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1969 (22 of 1969), shall not abate, be
discontinued, or be, in any way, prejudicially affected by reason of the expiry of the said Ordinance or the invalidation of the said Act, as the case may be, but such suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the corresponding new bank as if such suit, appeal or other proceeding had been instituted by or against the corresponding new bank constituted under this Act.


THE FIRST SCHEDULE
(See sections 2, 3 and 4)
Existing bank Corresponding new bank
Column 1                                                                                                Column 2
The Central Bank of India Limited                                  Central Bank of India.
The Bank of India Limited                                                Bank of India.
The Punjab National Bank Limited                               Punjab National Bank
The Bank of Baroda Limited                                          Bank of Baorda.
The United Commercial Bank Limited                           [UCO Bank.]
Canara Bank Limited                                                        Canara Bank.
United Bank of India Limited                                        United Bank of India.
Dena Bank Limited                                                            Dena Bank.
Syndicate Bank Limited                                                   Syndicate Bank.
The Union Bank of India Limited                                       Union Bank of India
Allahabad Bank Limited                                                  Allahabad Bank
The Indian Bank Limited                                                    Indian Bank.
The Bank of Maharashtra Limited                                 Bank of Maharashtra.
The Indian Overseas Bank Limited                          Indian Overseas Bank.


THE SECOND SCHEDULE
(See section 6)
Name of existing bank               Amount of compensation
(in lakhs of rupees)
The Central Bank of India Limited         .. 1750
The Bank of India Limited                      .. 1470
The Punjab National Bank Limited         .. 1020
The Bank of Baroda Limited .                            . 840
The United Commercial Bank Limited .. 830
Canara Bank Limited .. 360
United Bank of India Limited .. 420
Dena Bank Limited .. 360
Syndicate Bank Limited .. 360
The Union Bank of India Limited                       .. 310
Allahabad Bank Limited .. 310
The Indian Bank Limited .. 230
The Bank of Maharashtra Limited                                .. 230
The Indian Overseas Bank Limited                   .. 250


THE THIRD SCHEDULE
[See sub-sections (2) and (3) of section 13]
DECLARATION OF FIDELITY AND SECRECY
I,———-, do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as Custodian, Director, member of Local Board, member of Local Committee, auditor, adviser, officer or other employee (as the case may be) of the and which properly relate to the office or position in the said*
held by me.
I further declare that I will not communicate or allow to be communicated to any person not legally entitled thereto any information relating to the affairs of the or to the affairs of any person having any dealing with the ;nor will I allow any such person to inspect or have access to any books or documents belonging to or in possession of the and relating to the business of the or to the business of any person having any dealing with the  Name of corresponding new bank to be filled in.


 

Banking Laws in India

Acts  exclusively administered by Reserve Bank of India

II. Other relevant Acts banking regulation 

  • Negotiable Instruments Act, 1881
  • Bankers’ Books Evidence Act, 1891
  • State Bank of India Act, 1955
  • Companies Act, 1956/ 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