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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


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