Skip to main content

Banking Regulation Act, 1949 – Part-III – Section 26 to 36

The Banking Regulation Act, 1949 (BR Act, 1949) governs the working of banks in India. In a series of articles, we will briefly go through some of the important provisions of the BR Act, 1949. This is the third article in the series.

Section 26 – Return of unclaimed deposits 

  • Every banking company shall submit to RBI, within 30 days after the close of each calendar year, a return of all accounts in India which have not been operated upon for 10 years.
  • In the case of money deposited for a fixed period, the term of 10 years shall be reckoned from the date of the expiry of such fixed period.
  • Every regional rural bank shall also furnish a copy of the return to the National Bank.

Section 26A – Establishment of Depositor Education and Awareness Fund 

  • RBI shall establish a Fund to be called the "Depositor Education and Awareness Fund".
  • There shall be credited to the Fund the amount to the credit of any account in India with a banking company which has not been operated upon for 10 years or any deposit / amount remaining unclaimed for more than 10 years, within 3 months from the expiry of the said period of 10 years.
  • This section shall not prevent a depositor / claimant to claim his deposit / unclaimed amount or operate his account after the expiry of the said period of 10 years.
  • The banking company shall be liable to repay such deposit / amount at such rate of interest as may be specified by RBI.
  • Where the banking company has paid outstanding amount or allowed operation of such account / deposit, such banking company may apply for refund of such amount.
  • The Fund shall be utilised for promotion of depositors' interests and for such other purposes which may be necessary for the promotion of depositors' interests as specified by RBI.

Section 29 - Accounts and balance-sheet

At the expiration of each calendar year or at the expiration of a period of 12 months ending with such date as the Central Government may specify, every banking company incorporated in India (in respect of all business transacted by it) and every banking company incorporated outside India (in respect of all business transacted through its branches in India), shall prepare a balance-sheet and profit and loss account as on the last working day of that year / period, in the Forms set out in the Third Schedule of the Act.

Section 31 – Submission of returns 

  • 3 copies of the accounts and balance-sheet referred to in section 29 together with the auditor's report shall be furnished as returns to RBI within 3 months from the end of the period to which they refer.
  • RBI may extend the said period of 3 months by a further period up to 3 months.
  • Regional rural bank shall furnish such returns also to the National Bank.

Section 35 - Inspection 

  • RBI at any time may, and on being directed so to do by the Central Government shall, inspect any banking company and its books and accounts. RBI shall supply to the banking company a copy of its report on such inspection.
  • RBI may also undertake scrutiny of the affairs of any banking company and its books and accounts. A copy of the report of the scrutiny shall be furnished to the banking company if the banking company makes a request for the same or if any adverse action is contemplated against the banking company on the basis of the scrutiny.
  • The powers exercisable by RBI under this section may be exercised by the National Bank in relation to the regional rural banks.

Section 35A – Power of RBI to give directions 

Where RBI is satisfied that (a) in the public interest, or (b) in the interest of banking policy, or (c) to prevent the affairs of any banking company being conducted in manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company, or (d) to secure the proper management of any banking company, it is necessary to issue directions to banking companies, it may issue such directions as it deems fit and the banking companies shall be bound to comply with such directions.

Section 35AA – Power of Central Government to authorise Reserve Bank for issuing directions to banking companies to initiate insolvency resolution process

The Central Government may authorise RBI to issue directions to any banking company to initiate insolvency resolution process in respect of a default under the provisions of the Insolvency and Bankruptcy Code, 2016.

Section 35AB – Power of Reserve Bank to issue directions in respect of stressed assets

RBI may issue directions to any banking company for resolution of stressed assets.

Section 35B - Amendments of provisions relating to appointments of Managing Directors, etc., to be subject to previous approval of RBI 

  • In the case of a banking company, amendment of any provision relating to the maximum permissible number of directors or the appointment / re-appointment / termination / remuneration of a chairman / managing director / any other director (whole-time or otherwise) / manager / chief executive officer, shall not have effect unless approved by RBI.
  • Appointment / re-appointment / termination of a chairman / managing director / whole-time director / manager / chief executive officer shall not have effect unless made with the previous approval of RBI.

Section 36 – Further powers and functions of Reserve Banks 

RBI shall make an annual report to the Central Government on the trend and progress of banking in the country.


References

Reserve Bank of India. (2021, April 19). 'The Banking Regulation Act, 1949'. Retrieved from https://rbi.org.in/Scripts/OccasionalPublications.aspx?head=Banking%20Regulation%20Act


Follow at - Telegram   Instagram   LinkedIn   X   Facebook

Labels:

Comments

Post a Comment

Popular Posts

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

Kisan Credit Card (KCC) Scheme

Reserve Bank of India (RBI) has issued directions on Kisan Credit Card (KCC) Scheme. To whom are the directions applicable? The directions are applicable to the following entities – Commercial Banks (excluding overseas branches of Indian banks) Small Finance Banks (SFBs) Regional Rural Banks (RRBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) Central Co-operative Banks (CCBs) To which loans shall the directions be applicable? The directions shall be applicable to loans sanctioned under the KCC Scheme with effect from January 01, 2027.  What are the crop seasons? Crop season means the period up to harvesting and marketing of the crops raised. Short duration crops shall mean crops with anticipated period from sowing to marketing up to 12 months. Long duration crops mean crops which are not short duration crops. The crop season for long duration crops i.e., anticipated period from sowing to marketing is more than 12 months and up to 18 months. For the purpose of the KCC...
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

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

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