Skip to main content

Reserve Bank of India Act, 1934 – Part-V – Section 45B to 45JA

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the fifth article in the series. 

Chapter IIIA - Collection and Furnishing of Credit Information

Section 45B – Power of Bank to collect credit information

RBI may collect credit information from banking companies and furnish it to any banking company in accordance with section 45D.

Section 45C – Power to call for returns containing credit information

RBI may direct any banking company to submit statements relating to credit information.

Section 45D – Procedure for furnishing credit information to banking companies

  • A banking company may apply to RBI to provide credit information.
  • RBI shall furnish the requested credit information without disclosing the names of the banking companies which have submitted the information.
  • RBI may levy fees of up to Rs.25 for furnishing credit information.

Section 45E – Disclosure of information prohibited

  • Information submitted by a banking company to RBI under Section 45C or furnished by RBI to any banking company under Section 45D, shall be confidential and shall not be published / disclosed.
  • The court / tribunal / other authority shall not compel RBI / any banking company to produce / disclose such information.

Section 45F – Certain claims for compensation barred

No person shall have any right to any compensation for any loss incurred due to operation of Chapter IIIA.

Chapter IIIB – Provisions Relating To Non-Banking Institutions Receiving Deposits and Financial Institutions

Section 45H – Chapter IIIB not to apply in certain cases

Chapter IIIB shall not apply to State Bank / banking company / new bank / Regional Rural Bank / co-operative bank / primary agricultural credit society / primary credit society.

Section 45-IA – Requirement of registration and net owned fund

  • Non-banking financial company (NBFC) shall commence / carry on the business of non-banking financial institution (NBFI) only after –
    • obtaining a certificate of registration.
    • having net owned fund of Rs.25 lakh or such other amount, not exceeding Rs.100 crore.
  • RBI may notify different amounts of net owned fund for different categories of NBFCs.
  • RBI may cancel a certificate of registration granted to an NBFC.
  • A company aggrieved by the order of rejection of application for registration / cancellation of registration certificate may appeal to the Central Government within 30 days of the order.
  • Where an appeal is made to the Central Government, the decision of the Central Government shall be final. Where no appeal is made, the decision of RBI shall be final.

Section 45-IB – Maintenance of percentage of assets

  • Every NBFC shall invest and continue to invest in India in unencumbered approved securities –
    • an amount, not less than 5% or not exceeding 25%, as RBI my specify
    • of the deposits outstanding at the close of business on the last working day of the second preceding quarter
  • RBI may specify different percentages of investment for different classes of NBFCs.
  • If the amount invested by an NBFC at the close of business on any day falls below the rate specified, the NBFC shall pay to RBI penal interest @ (3% p.a. + Bank Rate) on the shortfall amount.
  • Where the shortfall continuous in the subsequent quarters, penal interest shall be payable @ (5% p.a. + Bank Rate) on the shortfall amount for each subsequent quarter.
  • The penal interest shall be paid within 14 days from the date the notice is served on the NBFC.
  • If the NBFC fails to pay the penal interest within the prescribed time, the penalty may be levied by the order of the Court. When order is issued by the Court, it shall issue a certificate specifying the sum payable by the NBFC. If satisfied that the defaulting NBFC had sufficient cause for its failure, RBI may waive the penal interest.

Section 45-IC – Reserve fund

  • Every NBFC shall create a reserve fund and transfer therein at least 20% of its net profit every year before any dividend is declared.
  • No appropriation of any sum from the reserve fund shall be made by the NBFC except for the purpose specified by RBI and every such appropriation shall be reported to RBI within 21 days of withdrawal. RBI may extend the period of 21 days or condone any delay in making such report.
  • On the recommendation of RBI, the Central Government may exempt an NBFC from the provisions of Section 45-IC. Such order shall be made only if the reserve fund together with the share premium account is not less than the paid-up capital of the NBFC.

45-ID – Power of Bank to remove directors from office

  • RBI may remove from office a director of NBFC (other than Government owned NBFC).
  • Such director shall not, directly / indirectly, take part in the management of any NBFC for up to 5 years.
  • RBI may appoint a suitable person in place of the director, so removed from his office.
  • The new director shall –
    • hold office for up to 3 years or such further periods up to 3 years at a time.
    • not incur any obligation / liability as director for anything done / omitted to be done in good faith in the execution of the duties of his office.
  • On the removal of a director from office, such director shall not be entitled to claim any compensation for the loss / termination from office.

45-IE – Supersession of Board of directors of NBFC (other than Government Company)

  • RBI may supersede the Board of Directors of NBFC (other than Government Company) for up to 5 years.
  • On supersession of the Board of Directors of NBFC, RBI may appoint a suitable person as the Administrator.
  • RBI may issue directions to the Administrator and the Administrator shall be bound to follow such directions.
  • On making the order of supersession of the Board of Directors of an NBFC –
    • the chairman, managing director and other directors shall vacate their offices.
    • until the Board of Directors of NBFC is reconstituted, all the powers, functions and duties of the Board, shall be exercised and discharged by the Administrator.
  • RBI may constitute a committee consisting of 3 or more members who have experience in law / finance / banking / administration / accountancy to assist the Administrator in discharge of his duties. 
  • The salary and allowances payable to the Administrator and the members of the committee constituted by RBI, shall be specified by RBI and paid by the concerned NBFC.
  • On / before the expiration of the period of supersession of the Board of Directors, the Administrator shall facilitate reconstitution of the Board of Directors of the NBFC.
  • A person shall not be entitled to any compensation for the loss / termination of his office.
  • Administrator shall vacate office immediately after the Board of Directors of the NBFC is reconstituted.

Section 45J – Bank to regulate or prohibit issue of prospectus or advertisement soliciting deposits of money

RBI may by general / special order –

  • Regulate / prohibit the issue of any prospectus / advertisement by any NBFC, soliciting deposits of money from the public.
  • Specify the conditions subject to which such prospectus / advertisement may be issued.

Section 45JA – Power of Bank to determine policy and issue directions

RBI may determine the policy and give directions to NBFCs relating to income recognition, accounting standards, prudential norms, purpose of advance (fund / non-fund based), maximum amount of advance / investment in shares and securities, etc.


References

Reserve Bank of India. (2022, August 29). 'The Reserve Bank of India Act, 1934'. Retrieved from https://rbi.org.in/Scripts/OccasionalPublications.aspx?head=Reserve%20Bank%20of%20India%20Act


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Credit Cards and Debit Cards

Reserve Bank of India (RBI) has issued directions on issuance of credit cards and debit cards. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Non-Banking Financial Companies (NBFCs) for all layers – NBFC-Investment and Credit Companies (NBFC-ICC) NBFC-Factor  NBFC-Micro Finance Institutions (NBFC-MFI)  Housing Finance Company (HFC)  What is a credit card? Credit Card is a physical / virtual payment instrument issued with a pre-approved revolving credit limit that can be used to purchase goods and services or draw cash advances. What is a debit card? Debit Card is a physical / virtual payment instrument linked to a Savings Bank / Current Account which can be used to withdraw cash, make online payments, do Point of Sale (PoS) terminal / Quick Response (QR) code transactions, fund transfer, e...
Post a Comment
Read more

Credit Derivatives

Reserve Bank of India (RBI) has issued directions on credit derivatives. What is Credit Derivative? Credit derivative means a derivative contract whose value is derived from the credit risk of an underlying debt instrument or an index of underlying debt instruments. What is Credit Default Swap (CDS) and Total Return Swap (TRS)? Credit Default Swap (CDS) means a credit derivative contract in which one counterparty (protection seller) commits to pay to the other counterparty (protection buyer) in the case of a credit event with respect to a reference entity and in return, the protection buyer makes periodic payments (premium) to the protection seller until the maturity of the contract or the credit event, whichever is earlier. Total Return Swap (TRS) means a credit derivative contract under which one counterparty (total return payer) commits to transfer the entire economic performance of a reference asset to the other counterparty (total return receiver), and, in return, receives a pre-d...
Post a Comment
Read more

Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)

Reserve Bank of India (RBI) has issued the directions on maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) by banks. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Payments Banks (PBs) Local Area Banks (LABs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) District Central Co-operative Banks (DCCBs) What is CRR? Every bank shall maintain in India by way of cash reserve, a sum equivalent to such percent of its Net Demand and Time Liabilities (NDTL) in India, as the RBI in terms of Section 42(1) of the RBI Act, 1934 (for scheduled banks) and Section 18(1) of the Banking Regulation Act (BR Act), 1949 (for non-scheduled banks) [including provisions of Section 18(1) of the BR Act as applicable to co-operative banks], may specify. What is incremental CRR? In terms of Secti...
Post a Comment
Read more

Special Rupee Vostro Accounts (SRVAs)

Reserve Bank of India (RBI) has consolidated the guidelines governing Special Rupee Vostro Accounts (SRVAs). Who can open and maintain Special Rupee Vostro Accounts (SRVAs)? Authorised Dealer (AD) banks in India may open Special Rupee Vostro Accounts (SRVAs) of its branch outside India or a bank resident outside India. Which transactions can be settled through SRVA? The settlement of cross-border trade transactions through SRVA is an additional arrangement for invoicing, payment and settlement of exports and imports in Indian Rupee (INR).  All permissible capital and current account transactions under Foreign Exchange Management Act (FEMA) may be settled through the SRVA.  AD banks maintaining SRVA are permitted to open additional current account for exporter / importer, exclusively for settlement of export / import transactions. What can be the source and use of funds in SRVA? SRVA may be funded by way of inward remittances or transfer from other repatriable INR accounts in t...
Post a Comment
Read more

Deposits between a person resident in India and a person resident outside India

Reserve Bank of India (RBI) has updated the regulations on deposits between a person resident in India and a person resident outside India. What are the restrictions on deposits between a person resident in India and a person resident outside India? No person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India. However, the following deposits are exempted – Deposits held in rupee accounts maintained by foreign diplomatic missions and diplomatic personnel and their family members in India with an authorised dealer. Deposits held by diplomatic missions and diplomatic personnel in special rupee accounts namely Diplomatic Bond Stores Account to facilitate purchases of bonded stocks from firms and companies who have been granted special facilities by customs authorities for import of stores into bond. The funds in the account may be repatriated outside India without the approval of the RBI. Deposits held in accounts maintained in foreig...
Post a Comment
Read more