CAIIB | Paper 4 | BRBL | Module A | Unit 1 | Legal Framework of Regulation of Banks | New Syllabus скачать в хорошем качестве

CAIIB | Paper 4 | BRBL | Module A | Unit 1 | Legal Framework of Regulation of Banks | New Syllabus

Business Of Banking • Banking in India is mainly governed by the Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934. • Banking is defined in Section 5(b) of the Banking Regulation Act, 1949 as follows – “Banking means the accepting for the purpose of lending or investing, of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.” • Under Section 49A of the Banking Regulation Act, no person other than a banking company, Reserve Bank of India, the State Bank of India or any other banking institution, firm or other person notified by the Central Government in this behalf is authorised to accept deposits withdrawable by cheque. • Acceptance of deposits by non-banking financial companies is regulated by the Reserve Bank under the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. • In India, it is necessary to have a licence from the Reserve Bank under Section 22 of the Banking Regulation Act for commencing or carrying on the business of banking. • Every banking company has to use the word “bank” as part of its name (vide, Section 7 of the Act) and no company other than a banking company can use the words “bank”, “banker”, “banking” as part of its name. Constitution Of Banks Banks in India fall under one of the following categories: • Body corporate constituted under a special statute • Company registered under the Companies Act, 1956 (Companies Act 2013) or a foreign company • Co-operative society registered under a Central or State enactment. Public Sector Banks (other than SBI) • These Public Sector Banks are constituted under the Banking Companies (Acquisition) and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. State Bank of India (SBI) • The State Bank of India was constituted under the State Bank of India Act, 1955 while the seven associate/subsidiary banks were constituted under the State Bank (Subsidiary Banks) Act, 1959. Regional Rural Banks (RRBs) • The RRBs were constituted under the Regional Rural Banks Act, 1976. These banks are governed by the statutes creating them as also some of the provisions of the Banking Regulation Act and the Reserve Bank of India Act. Private Sector Banks/Foreign Banks • Most Private Sector Banks (including Micro and Small Finance Banks) are Companies’ constituted under Section 3 of the Companies Act, 1956 or incorporated under the Companies Act, 2013. Foreign Banks are basically foreign companies constituted as per statutes abroad and treated as such under section 2(42) of the Companies Act, 2013. Co-operative Banks • A co-operative bank conducts ordinary banking business but is established on a co-operative basis. If a co-operative bank is operating in more than one state, the Central Act i.e. Multi State Cooperative Societies Act applies. In other cases, the respective State Co-operative Societies Act would apply. Reserve Bank Of India, 1934 The Reserve Bank of India Act, 1934 was enacted to constitute the Reserve Bank of India and came into force from 6th March 1934. The general superintendence and direction of the affairs and business of the bank have been vested with the Central Board of Directors which consists of –  A governor and not more than four deputy governors appointed by the central government.  Four directors nominated by the central government, one from each of the local boards.  Ten directors nominated by the central government  Two government officials nominated by the central government. • The RBI Act defines a Scheduled Bank as under: A Scheduled Bank is one which has been included in the Second Schedule of the Reserve Bank of India, 1934 which in turn includes only those banks which satisfy the criteria mentioned on section 42 (6) (a) of this statute. • The RBI may act as lender of the last resort as per provisions under Section 17 and 18 of the RBI Act. It offers funds to banks or other financial institutions that are experiencing financial difficulty or are considered highly risky or near bankruptcy due to adverse impact of liquidity or other risks. The government came up with a proposal, for introduction of laws and regulations, to give the regulator (RBI) more control over NBFCs Consequently, Chapter VI of the Finance (No. 2) Act 2019 which took effect from 9th August 2019 provides for amendments inter alia to the RBI Act 1934 with respect to Non-Banking Finance Companies (NBFCs).  Limit of net owned funds has been enhanced to Rs. 100 crores from the existing limit of Rs. 2 crores.  Under newly inserted sections 45-ID and 45-IE, the RBI has been provided with two ways to control the management of a regulated NBFC i.e. by either replacing directors or by superseding its board.  The new section 45MAA introduced, gives the RBI the power to remove or debar an auditor room exercising duties as an auditor for an RBI regulate