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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


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