Skip to main content

Reserve Bank of India Act, 1934 – Part-IX – Section 46 to 58A

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 ninth article in the series. 

Chapter IV – General Provisions

Section 46 – Contribution by Central Government to the Reserve Fund

The Central Government shall transfer to RBI rupee securities of Rs.5 crore to be allocated by RBI to the Reserve Fund.

Section 46A – Contribution to National Rural Credit (Long Term Operations) Fund and National Rural Credit (Stabilisation) Fund 

RBI shall contribute every year to the National Rural Credit (Long Term Operations) Fund and the National Rural Credit (Stablisation) Fund established and maintained by the National Bank under sections 42 and 43, respectively, of the National Bank for Agriculture and Rural Development Act, 1981.

Section 46C – National Industrial Credit (Long Term Operations) Fund

RBI shall establish and maintain National Industrial Credit (Long Term Operations) Fund with an initial sum of Rs.10 crore and may contribute to the Fund every year.

The amount in the Fund shall be applied by RBI only to the following objects –

  • Making of loans and advances to the Exim Bank / Reconstruction Bank / Small Industries Bank.
  • Purchasing bonds and debentures issued by the Exim Bank / Reconstruction Bank / Small Industries Bank / National Bank for Financing Infrastructure and Development / other development financial institution.

Section 46D – National Housing Credit (Long Term Operations) Fund

RBI shall establish and maintain National Housing Credit (Long Term Operations) Fund and may contribute to the Fund every year.

The amount in the Fund shall be applied by RBI only to the following objects –

  • Making of loans and advances to the National Housing Bank.
  • Purchasing bonds and debentures issued by the National Housing Bank.

Section 47- Allocation of surplus profits

After making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and other provisions, the balance profits shall be paid to the Central Government.

Section 48 – Exemption of Bank from income-tax and super-tax

RBI shall not be liable to pay income-tax or super-tax on any of its income / profits / gains.

Section 49 – Publication of bank rate

RBI shall make public the standard rate at which it is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under this Act.

Section 50 – Auditors

  • Not less than 2 auditors shall be appointed, and their remuneration fixed, by the Central Government.
  • The auditors shall hold office for up to one year and shall be eligible for re-appointment.

Section 51 – Appointment of special auditors by Government

The Central Government may appoint the Comptroller and Auditor-General to examine and report on the accounts of RBI.

Section 52 – Powers and duties of auditors

  • Every auditor shall be supplied with a copy of the annual balance-sheet, and it shall be his duty to examine the same, together with the accounts and vouchers, relating thereto.
  • The auditors shall make a report to the Central Government on the annual balance-sheet and accounts.

Section 53 – Returns

  • 53(1) – RBI shall prepare and transmit to the Central Government a weekly account of the Issue Department and the Banking Department. 
  • 53(2) – Within 2 months from the date on which the annual accounts of RBI are closed, RBI shall transmit to the Central Government a copy of the annual accounts signed by the Governor, the Deputy Governors and the Chief Accounting Officer of RBI, and certified by the auditors, together with a report by the Central Board on the working of RBI throughout the year.

Section 54 – Rural Credit and Development

RBI may maintain expert staff to study various aspects of rural credit and development and it may –

  • Tender expert guidance and assistance to the National Bank.
  • Conduct special studies in areas necessary for promoting integrated rural development.

Section 54A – Delegation of powers

The Governor may delegate his powers and functions to a Deputy Governor.

Section 54AA – Power of Bank to depute its employees to other institutions

  • RBI may depute any member of its staff to any institution which is wholly or substantially owned by RBI.
  • Where a person has been deputed to an institution, he shall not be entitled to claim any salary, emoluments and other terms and conditions of service which he would not have been entitled to claim if he had not been so deputed.
  • Bank shall not depute any member of its staff to any institution on any salary, emoluments or other terms and conditions which are less favourable to him than those to which he is entitled immediately before such deputation.
  • An institution shall be deemed to be substantially owned by RBI, if RBI holds at least 40% of the capital of the institution.

Section 57 – Liquidation of the Bank

The Companies Act, 1956 shall not apply to RBI, and RBI shall be placed in liquidation only by order of the Central Government.

Section 57A – Powers of Bank not to apply to International Financial Services Centre

The powers exercisable by RBI under this Act –

  • Shall not extend to an International Financial Services Centre set up under Section 18(1) of the Special Economic Zones Act, 2005.
  • Shall be exercisable by the International Financial Services Centres Authority established under Section 4(1) of the International Financial Services Centres Authority Act, 2019, in so far as regulation of financial products, financial services and financial institutions that are permitted in the International Financial Services Centres are concerned.

Section 58 – Power of the Central Board to make regulations

  • With the previous sanction of the Central Government, the Central Board may make regulations for giving effect to the provisions of this Act. 
  • As soon as any regulation is made by the Central Board, it shall be forwarded to the Central Government who shall lay it before each House of Parliament. Both the Houses of Parliament shall decide whether the regulation shall be made / modified / rejected.
  • Copies of all regulations made under this section shall be available to the public on payment.

Section 58A - Protection of action taken in good faith

No suit / prosecution / other legal proceeding shall lie against the Central Government / RBI / any other person for anything done in good faith, or for any damage caused by anything done in good faith.


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

Highlights of RBI Annual Report 2025-26 – Chapter 6 (Part I)

Reserve Bank of India (RBI) has published its annual report for the financial year 2025-26. In a series of articles, we will go through the highlights of the report. This is the third article in the series.  Chapter 6 – Regulation, Supervision and Financial Stability (Part I) Opening of and operation in deposit accounts of minors by banks – Minors of any age can open and operate savings and term deposit accounts through his / her natural or legal guardian or with mother as guardian.  Minors above the age of 10 years may open and operate savings and term deposit accounts independently, if they so desire. Digital lending guidelines – Regulated Entities (REs) were mandated to ensure that lending service providers (LSPs) display all loan offers to borrowers when multiple lenders are involved.  A public directory of Digital Lending Apps (DLAs) was introduced to help borrowers verify their link with REs. Non-Banking Financial Companies (NBFCs) were allowed to consider Default...
Post a Comment
Read more

Trade Receivables Discounting System (TReDS)

Reserve Bank of India (RBI) has issued the directions on Trade Receivables Discounting System (TReDS). What is TReDS? TReDS is a technology platform on a digital or electronic network for facilitating factoring of trade receivables through multiple financiers. What is a Factoring Unit? Factoring unit refers to trade receivable in the form of invoice / bill uploaded either by the seller (in the case of factoring) or by the buyer (in case of reverse factoring), as the case may be. Who are the participants in TReDS? Seller – Micro, Small and Medium Enterprise (MSME) Buyer – any person liable to the seller, whether under a contract or otherwise, against an invoice or bill of exchange, to pay any trade receivable Financier – all entities / institutions permitted to undertake factoring business under the Factoring Regulation Act, 2011 Insurance companies  Credit Guarantee Fund Trust notified by the Government of India Who can operate TReDS platforms? An entity shall seek authorisation fr...
Post a Comment
Read more

Transfer of Surplus by the RBI to the Government

The surplus payable by the Reserve Bank of India (RBI) to the Central Government for the financial year 2025-26 amounted to ₹2,86,588.46 crore.  Why does the RBI transfer the surplus amount to the Central Government? As per section 47 of the RBI Act, 1934, after making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and other provisions, the balance of the profits of the RBI is required to be paid to the Central Government. Also, the Central Government holds 100% of the share capital of the RBI. How much risk provision is required to be maintained by the RBI? The RBI developed the Economic Capital Framework (ECF) during 2014-15 and 2015-16 for determining the appropriate level of risk provisions to be made under the provisions of section 47 of the RBI Act, 1934.  In November 2018, the RBI, in consultation with the Government, constituted an Expert Committee to review the ECF of the RBI (Chairman: Dr. Bimal Jalan, fo...
Post a Comment
Read more

Swap Facility for FCNR (B) Deposits, ECBs and OFCBs (updated as on June 23, 2026)

Reserve Bank of India (RBI) has introduced US Dollar-Rupee swap facility for Foreign Currency Non-Resident (Bank) [FCNR (B)] deposits, External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs). Swap facility for FCNR (B) deposits Swap facility for ECBs and OFCBs The swap facility has been introduced for fresh FCNR (B) deposits, including deposits that are renewed upon maturity, for a minimum tenor of 3 years and a maximum tenor of 5 years. The swap facility has been introduced for – ECBs of average maturity of 3 years and above, drawn on after June 8, 2026 till December 31, 2026 by – (a) Public Sector Undertakings (PSUs) whose majority ownership is held by the central and / or state government (other than banks), or (b) PSUs which are incorporated, established or registered under a Central or State Act and controlled by the central / state government. The facility will also be available for the undrawn portion of any exist...
Post a Comment
Read more

Payment of Agency Commission to Agency Banks (ABs) and Disbursement of Government Pension by ABs

Reserve Bank of India (RBI) has issued guidelines on the conduct of Government business by Agency Banks (ABs), payment of agency commission to ABs and disbursement of Government pension by ABs. Who are ABs? ABs mean all Public Sector Banks (PSBs), scheduled Private Sector Banks (PVBs), scheduled Payments Banks (PBs), and scheduled Small Finance Banks (SFBs) appointed by the RBI under Section 45 of the RBI Act, 1934, by mutual agreement, to carry out Government banking business of the Central Government (CG) / State Governments (SGs). What is agency commission? Agency commission means the remuneration paid by the RBI to an AB in consideration of it acting as an agent of the RBI in the conduct of general banking business of the CG and the SGs at the places and in the manner specified in the agreement between the RBI and the bank, with the exception of the functions relating to the management of the public debt. What are the guidelines on appointment of ABs? Any eligible bank which intend...
Post a Comment
Read more