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Banking Regulation Act, 1949 – Part-IV – Section 36AA to 45Q

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 fourth article in the series.

Part 2A - Control over Management

Section 36AA – Power of Reserve Bank to remove managerial and other persons from office 

  • RBI may remove from office any chairman / director / chief executive officer / other officer / employee of the banking company.
  • Any person against whom an order of removal has been made under section 36AA(1), may appeal to the Central Government within 30 days from the date of communication to him of the order. The decision of the Central Government on such appeal and order made by RBI where appeal is not made, shall be final.
  • Where an order under section 36AA(1) has been made, RBI may appoint a suitable person in place of the chairman / director / chief executive officer / other officer / employee who has been removed from his office under section 36AA(1).

Section 36AB - Power of Reserve Bank to appoint additional Directors 

RBI may appoint one / more persons to hold office as additional directors of the banking company.

Part 2AB - Supersession of Board of Directors of Banking Company

Section 36ACA – Supersession of Board of Directors in certain cases 

  • In consultation with the Central Government, RBI may supersede the Board of directors of a banking company for up to 6 months.
  • The period of supersession of the Board of directors may be extended from time to time, however, the total period shall not exceed 12 months.
  • On supersession of the Board of directors of the banking company, RBI may, in consultation with the Central Government, appoint an Administrator (not being an officer of the Central Government / State Government) who has experience in law / finance / banking / economics / accountancy.
  • In consultation with the Central Government, RBI may constitute a committee of 3 or more persons who have experience in law / finance / banking / economics / accountancy to assist the Administrator in the discharge of his duties.
  • On and before the expiration of 2 months before the expiry of the period of supersession of the Board of directors, the Administrator of the banking company shall reconstitute its Board of directors.
  • The Administrator shall vacate office immediately after the Board of directors of the banking company has been reconstituted.

Part 2B - Prohibition of Certain Activities in Relation to Banking Companies

Section 36AD – Punishments for certain activities in relation to banking companies 

  • A person shall not – 
    • Obstruct any person from lawfully entering / leaving any office / place of business of a banking company or from carrying on any business there.
    • Hold, within the office / place of business of any banking company, any demonstration which is violent or which prevents the transaction of normal business by the banking company. 
    • Act in any manner to undermine the confidence of the depositors in the banking company.
  • Whoever contravenes any provision of section 36AD(1) without any reasonable excuse shall be punishable with imprisonment up to 6 months or fine up to Rs.1000 or both.
  • For the purposes of this section "Banking Company" includes RBI, Exim Bank, Reconstruction Bank, National Housing Bank, National Bank, Small Industries Bank, National Bank for Financing Infrastructure and Development or the other development financial institution, SBI, corresponding new bank, regional rural bank and a subsidiary bank.

Part 3 - Suspension of Business and Winding up of Banking Companies

Section 39 – Reserve Bank to be official liquidator

Where in any proceeding for the winding up by the High Court of a banking company, an application is made by RBI, RBI / SBI / any other bank notified by the Central Government / any individual, as stated in such application shall be appointed as the official liquidator of the banking company in such proceeding, and the liquidator, if any, functioning in such proceeding shall vacate office.

Section 44A – Procedure for amalgamation of banking companies

Section 45 – Power of RBI to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstruction of amalgamation

Part 3A - Special Provisions for Speedy Disposal of Winding up Proceedings

Section 45P – Reserve Bank to tender advice in winding up proceeding 

Where in any proceeding for the winding up of a banking company in which any person other than RBI has been appointed as the official liquidator and the High Court has directed the official liquidator to obtain the advice of RBI on any matter, it shall be lawful for RBI to examine the record of any such proceeding and tender advice on matter.

Section 45Q – Power to Inspect 

  • On being directed so to do by the Central Government / High Court, RBI shall inspect a banking company which is being wound up and its books and accounts.
  • On such inspection, RBI shall submit its report to the Central Government and High Court.


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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