Category Archive Banking Laws

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Reserve Bank of India (Amendment) Act, 2006

RESERVE BANK OF INDIA (AMENDMENT) ACT, 2006 1

[No. 26 OF 2006]

[June 12, 2006]

An Act further to amend the Reserve Bank of India Act, 1934

Be it enacted by Parliament in the Fifty-seventh Year of the Republic of India as follows:-

Prefatory Note-Statement of Objects and Reasons. – Financial sector reforms are marking steady progress in India. The Indian financial markets now have more products, participants and better liquidity than before. For more operational flexibility, the Reserve Bank of India needs to have enabling powers to use a larger variety of financial instruments than hitherto.

2. The volatility in the influx of foreign exchange and the market conditions in a fast changing economy can be expected to continue in future as the financial sector makes more and more progress. To cope with any unforeseen eventualities in future, such as excess or lack of liquidity in the banking system and for effective conduct of monetary policy, there is a need to enable Reserve Bank of India to determine the Cash Reserve Ratio (CRR) for scheduled banks without any floor or ceiling. Globally, many Central Banking authorities have such powers. Further, in the context of the conduct of monetary policy becoming more market-based through progressive use of indirect instruments, the Reserve Bank of India needs more flexibility to set Cash Reserve Ratio, which is one of the two statutory pre-emptions in respect of the resources of banks.

3. Over-the-counter derivatives play a crucial role in reallocating and mitigating the risks of corporates, banks and other financial institutions. The ambiguity regarding their legal validity has inhibited the growth and stability of the market for such derivatives. It has become essential to provide for clear legal validity of such contracts.

4. At present, under Section 29-A of the Securities Contracts (Regulation) Act, 1956, the Central Government has delegated to the Reserve Bank of India, by a notification, the powers exercisable by it under Section 16 of that Act, for regulating the transactions in money market and other instruments. Therefore, more effective regulation of the markets for interest rate contracts, including Government securities and money- market instruments as also derivatives, it is necessary to confer specific powers on the Reserve Bank of India, under the Reserve Bank of India Act, 1934, to lay down policy and to issue directions to agencies operating in these contracts, securities and derivatives.

5. It is, therefore, considered necessary to suitably amend the Reserve Bank of India Act, 1934. The salient features of the Bill which seeks to amend the RBI Act are as follows:-

(a) define the expressions, ‘derivative’, ‘repo’ and ‘reverse repo’ in Section 17 for the purposes of the business of the Bank and differently in new Chapter III-D for the purposes of regulatory powers of the Bank;

(b) empower the Reserve Bank of India to deal in derivatives, to lend or borrow securities and to undertake repo or reverse repo;

(c) remove the lower floor and upper ceiling of Cash Reserve Ratio (CRR) and to provide flexibility to RBI to specify CRR;

(d) remove ambiguity regarding the legal validity of derivatives;

(e) empower RBI to lay down policy and issue directions to any agency dealing in various kinds of contracts in respect of Government securities, money-market instruments, derivatives, etc., and to inspect such agencies.

6. The Bill seeks to achieve the above objects.

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1. Received the assent of the President on June 12, 2006 and published in the Gazette of India, Extra., Part II, Section 1

1. Short title and commencement.

(1) This Act may be called the Reserve Bank of India (Amendment) Act, 2006.

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint; and different dates may be appointed by different provisions of this Act.

2. Amendment of Section 17.

In Section 17 of the Reserve Bank of India Act, 1934 3f 1934) (hereinafter referred to as the principal Act),-

(i) after clause (6), the following shall be inserted, namely:

‘(6-A) dealing in derivatives, and, with the approval of the Central Board, in any other financial instrument.

Explanation.-For the purposes of this clause, “derivative” means an instrument, to be settled at a future date, whose value is derived from change in one or a combination of more than one of the following underlying, namely:-

(a) interest rate,

(b) price of securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government,

(c) price of foreign securities,

(d) foreign exchange rate, index of rates of prices,

(e) credit rating or credit index,

(g) price of gold or silver coins, or gold or silver bullion, or

(h) any other variable of similar nature;

(ii) after clause (12-A), the following shall be inserted, namely:-

‘(12-AA) lending or borrowing of securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities;

(12-AB) dealing in repo or reverse repo:

Provided that lending or borrowing of funds by way of repo or reverse repo shall not be subject to any limitation contained in this section.

Explanation.- For the purposes of this clause,-

(a) “repo” means an instrument for borrowing funds by selling securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed;

(b) “reverse repo” means an instrument for lending funds by purchasing securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the funds lent;’.

3. Amendment of Section 42.

In Section 42 of the principal Act, –

(i) in sub-section (1),-

(a) for the words, brackets and figure “three per cent of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section (2)”, the words, brackets and figure “such per cent of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section (2), as the Bank may from time to time, having regard to the needs of securing the monetary stability in the country, notify in the Gazette of India” shall be substituted;

(b) the proviso shall be omitted;

(ii) sub-sections (1-AA) and (1-B) shall be omitted.

4. Insertion of new Chapter III-D.

After Chapter III-C of the principal Act, the following Chapter shall be inserted, namely:-

‘Chapter III-D

REGULATION OF TRANSACTIONS IN DERIVATIVES, MONEY MARKET INSTRUMENTS, SECURITIES, ETC.

45-U. Definitions.- For the purpose of this Chapter,-

(a) “derivative” means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or credit index, price of securities (also called “underlying”), or a combination of more than one of them and includes interest rate swaps, forward rate arrangements, foreign currency swaps, foreign currency-rupee swaps, foreign currency options, foreign currency-rupee options or such other instruments as may be specified by the Bank from time to time;

(b) “money market instruments” include call or notice money, term money, repo, reverse repo, certificate of deposit, commercial usance bill, commercial paper and such other debt instrument of original or initial maturity up to one year as the Bank may specify from time to time;

(c) “repo” means an agreement for borrowing funds by selling securities with an agreement to repurchase the securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed;

(d) “reverse repo” means an instrument for lending funds by purchasing securities with an agreement to resell the securities on a mutually agreed future date at an agreed price which includes interest for the funds lent;

(e) “securities” means securities of the Central Government or a State Government or such securities of a local authority as may be specified in this behalf by the Central Government and, for the purposes of repo” or “reverse repo”, includes corporate bonds and debentures.

45-V. Transactions in derivatives.

(1) Notwithstanding anything contained in the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or any other law for the time being in force, transactions in such derivatives, as may be specified by the Bank from time to time, shall be valid, if at least one of the parties to the transactions is the Bank, a scheduled bank, or such other agency falling under the regulatory purview of the Bank under the Act, the Banking Regulation Act, 1949 (10 of 1949), the Foreign Exchange Management Act, 1999 (42 of 1999), or any other Act or instrument having the force of law, as may be specified by the Bank from time to time.

(2) Transactions in such derivatives, as had been specified by the Bank from time to time, shall be deemed always to have been valid, as if the provisions of subsection (1) were in force at all material times.

45-W. Power to regulate transactions in derivatives, money market instruments, etc

45-X. Duty to comply with directions and furnish information.-It shall be the duty of every director or member or other body for the time being vested with the management of the affairs of the agencies referred to in Section 45-W to comply with the directions given by the Bank and to submit the information or statement or particulars called for under that section.’.

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The Recovery of Debts Due To Banks and Financial Institutions Act, 1993

Section 1. Short title, extent, commencement and application

(51 of 1993) 1

[27th August 1993]

An Act to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto.

Be it enacted by Parliament in Forty-fourth Year of the Republic of India as follows:

——————–

1. Assented to by the President on 27th August, 1993, published in the Gazette of India, Extraordinary, Pt. II, Sec. I dated 27th August, 1993.

(1) This Act may be called the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

(2) It extends to the whole of India except the State of Jammu and Kashmir.

(3) It shall be deemed to have come into force on the 24th day of June, 1993.

(4) The provisions of this Act shall not apply where the amount of debt due to any bank or financial institution or to a consortium of banks or financial institutions is less than ten lakh rupees or such other amount, being not less than one lakh rupees, as the Central Government may, by notification, specify.

Section 2. Definitions

In this Act, unless the context otherwise requires, –

(a) “Appellate Tribunal” means an Appellate Tribunal established under sub-section (1) of Sec. S;

(b) “Application” means an application made to a Tribunal under Sec.19;

(c) “Appointed day”, in relation to a Tribunal or an Appellate Tribunal, means the a -ate on which such Tribunal is established under sub-section (1) of Sec. 3 or, as the case may be, sub-section (1) of Sec. 8;

(d) “Bank” means-

(i) A banking company;

(ii) A corresponding new bank;

(iii) State Bank of India;

(iv) A subsidiary bank; or

(v) A Regional Rural Bank;

(e) “Banking company” shall have the meaning assigned to it in Cl. (c) of Sec. 5 of the Banking Regulation Act, 1949 (10 of 1949);

1[(ea) “Chairperson” means a Chairperson of an Appellate Tribunal appointed under section 9;]

(f) “Corresponding new bank” shall have the meaning assigned to it in Cl. (da) of Sec. 57of the Banking Regulation Act, 1949 (10 of 1949);

(g) 2[“Debt” means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any Civil Court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application;]

(h) “Financial institution” means-

(i) A public financial institution within the meaning of Sec. 4-A of the Companies Act, 1956 (1 of 1956);

3[“(i-a) the securitisation company or reconstruction company which has obtained a certificate of registration under sub-section (4) of Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002)];”.

(ii) Such other institution as the Central Government may, having regard to its business activity and the area of its operation in India, by notification, specify;

(i) “Notification” means a notification published in the Official Gazette;

(j) “Prescribed” means prescribed by rules made under this Act;

1[(ja) “Presiding Officer” means the Presiding Officer of the Debts Recovery Tribunal appointed under sub-section (1) of section 4;]

(k) “Recovery Officer” means a Recovery Officer appointed by them Central Government for each Tribunal under sub- section (1) of Sec. 7;

(1) “Regional Rural Bank” means a Regional Rural Bank established under Sec. 3 of the Regional Rural Banks Act, 1976 (21 of 1976);

(m) “State Bank of India” means the State Bank of India constituted under Sec. 3 of the State Bank of India Act, 1955, (23 of 1955);

(n) “Subsidiary bank” shall have the meaning assigned to it in Cl. (k) of Sec. 2 of the State Bank of India (Subsidiary Banks) Act, 1959, (38 of 1959);

(o) “Tribunal” means the Tribunal established under sub-section (1) of Sec. 3.

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1. Inserted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

2. Substituted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

3. Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 3. Establishment of Tribunal

(1) The Central Government shall, by notification, establish one or more Tribunals, to be known as the Debts Recovery Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act.

(2) The Central Government shall also specify, in the notification referred to in sub-section (1), the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it.

Section 4. Composition of Tribunal

(1) A Tribunal shall consist of one person only (hereinafter referred to as the Presiding Officer) to be appointed, by notification, by the Central Government.

(2) Notwithstanding anything contained in sub-section (1), the Central Government may authorise the Presiding Officer of one Tribunal to discharge also the functions of the Presiding Officer of another Tribunal.

Section 5. Qualifications for appointment as Presiding Officer

A person shall not be qualified for appointment as the Presiding Officer of a Tribunal unless he is, or has been, or is qualified to be, a District Judge.

Section 6. Term of office

The Presiding Officer of a Tribunal shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of 1[sixty-two years], whichever is earlier.

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1. Subs. for ‘sixty years” by Act No. 28 of 1995, Sec. 2.

Section 7. Staff of Tribunal

(1) The Central Government shall provide the Tribunal 1[with one or more Recovery Officers] and such other officers and employees as that Government may think fit.

(2) 1[The Recovery Officers] and other officers and employees of a Tribunal shall discharge their functions under the general superintendence of the Presiding Officer.

(3) The salaries and allowances and other conditions of service of the 1[Recovery Officers] and other officers and employees of a Tribunal shall be such as may be prescribed.

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1. Substituted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000.

Section 8. Establishment of Appellate Tribunal

(1) The Central Government shall, by notification, establish one or more Appellate Tribunals, to be known as the Debts Recovery Appellate Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act.

(2) The Central Government shall also specify in the notification referred to in sub-section (1) the Tribunals in relation to which the Appellate Tribunal may exercise jurisdiction.

1[(3) Notwithstanding anything contained in sub-sections (1) and (2), the Central Government may authorise the Chairperson of one Appellate tribunal to discharge also the functions of the Chairperson of other Appellate Tribunal.]

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1. Inserted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 9. Composition of Appellate Tribunal

An Appellate Tribunal shall consist of one person only (hereinafter referred to as the Presiding Officer of the Appellate Tribunal) to be appointed, by notification, by the Central Government.

Section 10. Qualifications for appointment as Presiding Officer of the Appellate Tribunal

A person shall not be qualified for appointment as the Presiding Officer of an Appellate Tribunal unless he-

(a) Is, or has been, or is qualified to be, a judge of a High Court; or

(b) Has been a member of the Indian Legal Service and has held a post in Grade I of that Service for at least three years; or

(c) Has held office as the Presiding Officer of a Tribunal for at least three years.

Section 11. Term of office

The Presiding Officer of an Appellate Tribunal shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of 1[Sixty five years], whichever is earlier.

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1. Subs. for ‘sixty-two years’ by ibid.

Section 12. Staff of the Appellate Tribunal

The provisions of Sec. 7 (except those relating to Recovery Officer) shall, so far as may be, apply to an Appellate Tribunal` as they to a Tribunal and accordingly references in that section to “ Tribunal” shall be construed as references to “ Appellate Tribunal” and references to “Recovery Officer” shall be deemed to have been omitted.

 Section 13. Salary and allowances and other terms and conditions of service of Presiding Officers

The salary and allowances payable to and the other terms and conditions of service (including pension, gratuity and other retirement benefits) of the presiding Officer of a Tribunal or and Appellate Tribunal shall be such as m may be prescribed:

Provided that neither the salary and allowances nor the other terms and conditions of service of 1[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal shall be varied to his] disadvantage after appointment.

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1. Substituted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 14. Filling up of vacancies

If, for any reason other than temporary absence, any vacancy occurs in the office of the Presiding Officer of a Tribunal or an appellate Tribunal, then the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Tribunal or the Appellate Tribunal from the stage at which the vacancy is filled.

Section 15. Resignation and removal

(1) The Presiding Officer of a Tribunal or an Appellate Tribunal may, by notice in writing under his hand addressed to the Central Government, resign his office:

Provided that 1[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold Office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term 6f office, whichever is the earliest.

(2) The Presiding Officer of a Tribunal or an Appellate Tribunal shall not be removed from his office except by an order made by the Central Government on the ground of proved misbehaviour or incapacity after inquiry, –

(a) In the case of the Presiding Officer of a Tribunal, made by a Judge of a High Court;

(b) In the case of the Presiding Officer of an Appellate Tribunal, made by a judge of the Supreme Court,

In which 1[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] concerned has been informed of the charges against him and given a reasonable opportunity of being heard in respect of these charges.

(3) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of 1[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal.]

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1. Substituted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 16. Orders constituting Tribunal or an Appellate Tribunal to be final and not to invalidate its proceedings

No order of the Central Government appointing any ‘ person as the Presiding Officer of a Tribunal or an Appellate Tribunal shall be called in question in any manner, and no act or proceeding before a Tribunal or an e Appellate Tribunal shall be called in question in any manner on the ground merely of any defect in the constitution of a Tribunal or an Appellate Tribunal.

Section 17. Jurisdiction, powers and authority of Tribunals

(1) A Tribunal shall exercise, on and from the appointed clay, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions. .

(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.

Section 17 A. Power of Chairperson of Appellate Tribunal

1[Power of Chairperson of Appellate Tribunal. (1) The Chairperson of an Appellate Tribunal shall exercise general power of superintendence and control over the Tribunal under his jurisdiction including the power of appraising the work and recording the annual confidential reports of Presiding Officer.

(2) The Chairperson of an Appellate tribunal having jurisdiction over the Tribunals may, on the application of any of the parties or on his own motion after notice to the parties, and after hearing them, transfer any case from one Tribunal for disposal to any other Tribunal.]

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1. Inserted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 18. Bar of jurisdiction

On and from the appointed day, no Court or other authority shall have, or been titled to exercise, any jurisdiction, power or authority (except the Supreme Court, and a High Court exercising jurisdiction under Arts. 226 and 227 of the Constitution) in relation to the matters specified in Sec. 17.

Section 19. Application to the Tribunal

1[Application to the Tribunal. (1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction, –

2[Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 for the purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under that Act:

Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under sub-section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application :

Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor].”

(a) The defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) Any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or

(c) The cause of action, wholly or in part, arises.

(2) Where a bank or financial institution, which has to recover its debt from any person has filed an application to the Tribunal under sub-section (1) and against the same person another bank or financial institution also has claim to recover its debt then, the later bank or Financial institution may join the applicant-bank or financial institution at any stage of the proceedings before the final order is passed by making an application to that Tribunal.

(3) Every application under sub-section (1) or sub-section (2) shall be in such form and be accompanied by such documents or other evidence and by such fee for filing the application as may be prescribed:

Provided that the fee may be prescribed having regard to the amount of debt to be recovered:

Provided further that nothing contained in this sub-section relating to fee shall apply to cases transferred to the Tribunal under sub-section (1) of Sec. 31.

(4) On receipt of the application under sub-section (1) or sub-section (2), the Tribunal shall issue summons requiring the defendant to show cause within thirty days of the service of summons as to why the relief prayed for should not be granted.

(5) The defendant shall, at or before the first fearing or within such time as the Tribunal may permit, present a written statement of his defence.

(6) Where the defendant claims to set-off against the applicant’s demand any ascertained sum of money legally recoverable by him for such applicant, the defendant may, at the first hearing of the application, but not afterwards unless permitted by the Tribunal, present a written statement containing the particulars of the debt sought to be set-off.

(7) The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Tribunal to pass a final order in respect of both of the original claim and of the set-off.

(8) A defendant in an application may, in addition to his right of pleading a set-off under sub-section (6), set up, by way of counter-claim against the claim of the applicant, any right or claim in respect of a cause of action accruing to the defendant against the applicant either before or after the filing of the application but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of a claim for damages or not.

(9) A counter-claim under sub-section (8) shall have the same effect as a cross-suit so as to enable the Tribunal to pass a final order on the same application, both on the original claim and on the counter-claim.

(10) The applicant shall be at liberty to file a written statement in answer to the counter-claim of the defendant within such period as may be fixed by the Tribunal.

(11) Where a defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not to be disposed of by way of counter-claim but in an independent action, the applicant may, at any time before issues are settled in relation to the counter-claim, apply to the Tribunal for an order that such counter-claim may be excluded, and the Tribunal may, on the hearing of such application make such order as it thinks fit.

(12) The Tribunal may make an interim order (whether by way of injunction or stay or attachment) against the defendant to debar him from transferring, alienating or otherwise dealing with, or disposing of, any property and assets belonging to him without the prior permission of the Tribunal.

(13)

(A) Where, at any stage of the proceedings, the Tribunal is satisfied, by affidavit or otherwise, that the defendant, with in-tent to obstruct or delay or frustrate the execution of any order for the recovery of debt that may be passed against him,—

(i) is about to dispose of the whole or any part of his property; or

(ii) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Tribunal; or

(iii) is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest,

the Tribunal may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Tribunal, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the certificate for the recovery of debt, or to appear and show cause why he should not furnish security.

(B) Where the defendant fails to show cause why he should not furnish security, or fails to furnish the security required, within the time fixed by the Tribunal, the Tribunal may order the attachment of the whole or such portion of the properties claimed by the applicant as the properties secured in his favour or otherwise owned by the defendant as appears sufficient to satisfy any certificate for the recovery of debt.

(14) The applicant shall, unless the Tribunal otherwise directs, specify the property required to be attached and the estimated value thereof.

(15) The Tribunal may also in the order direct the conditional attachment of the whole or any portion of the property specified under sub-section (14).

(16) If an order of attachment is made without complying with the provisions of sub-section (13) such attachment shall be void.

(17) In the case of disobedience of an order made by the Tribunal under sub-sections (12), (13) and (18) or breach of any of the terms on which the order was made, the Tribunal may order the properties of the person guilty of such disobedience or breach to be attached and may also order such person to be detained in the civil prison for a term ot exceeding three months, unless in the meantime the Tribunal directs his release.

(18) Where it appears to the Tribunal to be just and convenient, the Tribunal may, by order,—

(a) appoint a receiver of any property, whether before or after grant of certificate for recovery of debt;

(b) remove any person from the possession or custody of the property;

(c) commit the same to the possession, custody or management of the receiver;

(d) confer upon the receiver all such powers, as to bringing and defending suits in the courts or filing and defending applications before the Tribunal and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Tribunal thinks fit; and

(e) appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof.

(19) Where a certificate of recovery is is-sued against a company registered under the Companies Act, 1956. The Tribunal may order the sale proceeds of such company to be distributed among its secured creditors in accordance with the provisions of section 529-A of the Companies Act, 1956 and to pay the surplus, if any, to the company.

(20) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due upto the date of realisation or actual payment, on the application as it thinks fit to meet the ends of justice.

(21) The Tribunal shall send a copy of every order passed by it to the applicant and the defendant.

(22) The Presiding Officer shall issue a certificate under his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate.

(23) Where the Tribunal which has issued a certificate of recovery, is satisfied that the property is situated with in the local limits of the jurisdiction of two or more Tribunals, it may send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated:

Provided that in a case where the Tribunal to which the certificate of recovery is sent for execution finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the Tribunal which has Issued it.

(24) The application made to the Tribunal under sub-section (1) or sub-section (2) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the application finally within one hundred and eighty days from the date of receipt of the application.

(25) The Tribunal may make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to se-cure the ends of justice.]

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1. Substituted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

2. Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 20. Appeal to the Appellate Tribunal

(1) Save as provided in sub-section (2), any person aggrieved by an order made, or deemed to have been made, by a Tribunal under this Act, may prefer an appeal to an Appellate Tribunal having jurisdiction in the matter.

(2) No appeal shall lie to the Appellate Tribunal from an order made by a Tribunal with the consent of the parties.

(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made, or deemed to have been made, by the Tribunal is received by him and it shall be in such form and be accompanied by such fee as may be prescribed:

Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.

(4) On receipt of an appeal under sub-section (1), the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.

(5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Tribunal.

(6) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal.

Section 21. Deposit of amount of debt due, on filing appeal

Where an appeal is preferred by any person from whom the amount of debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventy-five per cent. of the amount of debt so due from him as determined by the Tribunal under Sec. 19:

Provided that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.

Section 22. Procedures and powers of the Tribunal and the Appellate Tribunal

(1) The Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall have powers to regulate their own procedure including the places at which they shall have their sittings.

(2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908, (5 of 1908) while trying a suit, in respect of the following matters, namely: –

(a) Summoning and enforcing the attendance of any person and examining him on oath;

(b) Requiring the discovery and production of documents;

(c) Receiving evidence on affidavits;

(d) Issuing commissions for the examination of witnesses or documents;

(e) Reviewing its decisions;

(f) Dismissing an application for default or deciding it ex parte;

(g) Setting aside any order of dismissal of any application for default or any order passed by it ex parte;

(h) Any other matter, which may be prescribed.

(3) Any proceeding before the Tribunal or the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of Secs. 193 and 228, and for the purposes of Sec. 196 of the Indian Penal Code (45 of 1860) and the Tribunal or the Appellate Tribunal shall be deemed to be a Civil Court for all the purposes of Sec. 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974.).

Section 23. Right to legal representation and Presenting Officers

(1) A bank or a financial institution making an application to a Tribunal or an appeal to an Appellate Tribunal may authorise one or more legal practitioners or any of its officers to act as Presenting Officers and every person so authorised by it may present its case before the Tribunal or the Appellate Tribunal.

(2) The defendant may either appear in person or authorise one or more legal practitioners or any of his or its officers to present his or its case before the Tribunal or the Appellate Tribunal.

Section 24. Limitation

The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an application made to a Tribunal.

Section 25. Modes of recovery of debts

The Recovery Officer shall, on receipt of the copy of the certificate under sub-section (7) of Sec. 19, proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely: –

(a) Attachment and sale of the movable or immovable property of the defendant;

(b) Arrest of the defendant and his detention in prison;

(c) Appointing a receiver for the management of the movable or immovable properties of the defendant.

Section 26. Validity of certificate and amendment thereof

(1) It shall not be open to the defendant to dispute before the Recovery Officer the correctness of the amount specified in the certificate, and no objection to the certificate on any other ground shall also be entertained by the Recovery Officer.

(2) Notwithstanding the issue of a certificate to a Recovery Officer, the Presiding Officer shall have power to withdraw the certificate or correct any clerical or arithmetical mistake in the certificate by sending intimation to the Recovery Officer.

(3) The Presiding Officer shall intimate to the Recovery Officer any order withdrawing or cancelling a certificate or any correction made by him under sub-section (2).

Section 27. Stay of proceedings under certificate and amendment or withdrawal thereof

(1) Notwithstanding that a certificate has been issued to the Recovery Officer for the recovery of any amount, the Presiding Officer may grant time for the payment of the amount, and thereupon the Recovery Officer shall stay the proceedings until the expiry of the time so granted.

(2) Where a certificate for the recovery of amount has been issued, the Presiding Officer shall keep the Recovery Officer informed of any amount paid or time granted for payment, subsequent to the issue of such certificate to the Recovery Officer.

(3) Where the order giving rise to a demand of amount for recovery of debt has been modified in a peal, and, as a consequence thereof the demand is reduced, the Presiding Officer shall stay the recovery of such part of the amount of the certificate as pertains to the said reduction for the period for which the appeal remains pending.

(4) Where a certificate for the recovery of debt has been received by the Recovery Officer and subsequently the amount of the outstanding demands is reduced 1[or enhanced] as a result of an appeal, the Presiding Officer shall, when the order which was the subject-matter of such appeal has become final and conclusive, amend the certificate or withdraw it, as the case may be.

——————–

1. Inserted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 28. Other modes of recovery

(1) Where a certificate has been issued to the Recovery Officer under sub-section (7) of Sec. 19, the Recovery Officer may, without prejudice to the modes of recovery specified in Sec. 25, recover the amount of debt by any one or more of the modes provided under this section.

(2) If any amount is due from any person to the defendant, the Recovery Officer may require such person to deduct from the said amount, the amount of debt due from the defendant under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer:

Provided that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a Civil Court under Sec. 60 of the Code of Civil Procedure, 1908 (5 of 1908).

(3)

(i) The Recovery Officer may, at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the defendant or to any person who holds or may subsequently hold money for or on account of the defendant, to pay to the Recovery Officer either forthwith upon the money becoming due or being held or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount of debt due from the defendant or the whole of the money when it is equal to or less than that amount.

(ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the defendant jointly with any other person and for the purposes of this sub-section, the shares of the joint holders in such amount shall be presumed, until the contrary is proved, to be equal.

(iii) A copy of the notice shall be forwarded to the defendant at his last address known to the Recovery Officer and in the case of a joint account to all the joint holders at their last addresses known to the Recovery Officer.

(iv) Save as otherwise provided -in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, bank, financial institution, or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like to be made before the payment is made notwithstanding any rule, practice or requirement to the contrary.

(v) Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice.

(vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or the part thereof is not due to the defendant or that he does not hold any money for or on account of the defendant, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant on the date of the notice, or to the extent of the defendant’s liability for any sum due under this Act, whichever is less.

(vii) The Recovery Officer may, at any time or from time to time, amend or revoke any notice under this sub-section or extend the time for making any payment in pursuance of such notice.

(viii) The Recovery Officer shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section, and the person so paying shall be fully discharged from his liability to the defendant to the extent of the amount so paid.

(ix) Any person discharging any liability to the defendant after the receipt of a notice under this sub-section shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant so discharged or to the extent of the defendant’s liability for any debt due under this Act, whichever is less.

(x) If the person to whom a notice under this sub- section is sent fails to make payment in pursuance thereof to the Recovery Officer, he shall be deemed to be a defendant in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were a debt due from him, in the manner provided in Secs. 25, 26 and 27 and the notice shall have the same effect as an attachment of a debt by the Recovery Officer in exercise of his powers under Sec. 25.

(4) The Recovery Officer may apply to the Court in whose custody there is money belonging to the defendant for payment to him of the entire amount of such money, or if it is more than the amount of debt due, an amount sufficient to discharge the amount of debt so due.

1[(4A) The Recovery Officer may, by order, at any stage of the execution of the certificate of recovery, require any person, and in case of a company, any of its officers against whom or which the certificate of recovery is issued, to declare on affidavit the particulars of his or its assets.]

(5) The Recovery Officer may recover any amount of debt due from the defendant by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Income-tax Act, 1961 (43 of 1961).

——————–

1. Inserted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 29. Application of certain provisions of Income-tax Act

The provisions of the Second and Third Schedules to the Income-tax Act, 1961 (43 of 1961), and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the income-tax:

Provided that any reference under the said provisions and the rules to the assessee” shall be construed as a reference to the defendant under this Act.

Section 30. Appeal against the order of Recovery Officer

1[Appeal against the order of Recovery Officer. (1) Notwithstanding anything contained in section 29, any person aggrieved by an order of the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal.

(2) On receipt of an appeal under sub-section (l), the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such enquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under sections 25 to 28 (both inclusive).]

——————–

1. Substituted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 31. Transfer of pending cases

(1) Every suit or other proceeding pending before any Court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action whereon it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal:

Provided that nothing in this sub-section shall apply to any appeal pending as aforesaid before any Court.

(2) Where any suit or other proceeding stands transferred from any Court to a Tribunal under sub-section (1), —

(a) The Court shall, as soon as may be after such transfer, forward the records of such suit or other proceeding to the Tribunal; and

(b) The Tribunal may, on receipt of such records, proceed to deal with such suit or other proceeding, so far as may be, in the same manner as in the case of an application made under Sec. 19 from the stage which was reached before such transfer or from any earlier stage 1[Omitted] as the Tribunal may deem fit.

——————–

1. Omitted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 31 A. Power of Tribunal to issue certificate of recovery in case of decree or order

1[Power of Tribunal to issue certificate of recovery in case of decree or order. (1) Where a decree or order was passed by any court before the commencement of the Recovery of Debts Due to Banks and Financial Institutions (Amendment) Act, 2000 and has not yet been executed, then, the decree-holder may apply to the Tribunal to pass an order for recovery of the amount.

(2) On receipt of an application under sub-section (1), the Tribunal may issue a certificate for recovery to a Recovery Officer.

(3) On receipt of a certificate under sub-section (2), the Recovery Officer shall proceed to recover the amounts as if it was a certificate in respect of a debt recoverable under this Act.]

——————–

1. Inserted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 32. Chairperson, Presiding Officer and staff of Appellate Tribunal and Tribunal to be public servants

1[Chairperson, Presiding Officer and staff of Appellate Tribunal and Tribunal to be public servants. The Chairperson of an Appellate Tribunal, the Presiding Officer of a Tribunal, the Recovery Officer, and other officers and employees of an Appellate Tribunal and a Tribunal shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code.]

——————–

1. Substituted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 33. Protection of action taken in good faith

No suit, prosecution or other legal proceeding shall lie against the Central Government or against the Presiding Officer of a Tribunal or of an Appellate Tribunal or against the Recovery Officer for anything which is in good faith done or intended to be done in pursuance of this Act or any rule or order made thereunder.

Section 34. Act to have overriding effect

(1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. (2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948) the State Financial Corporations Act, 1951 (63 of 1951) the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984) 1[and the Sick Industrial Companies (Special Provisions) Act, 1985 and the Small Industries Development Bank of India Act, 1989](1 of 1986).

——————–

1. Substituted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 35. Power to remove difficulties

(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act, as appear to it to be necessary or expedient for removing the difficulty:

Provided that no such order shall be made after the expiry of the period of three years from the date of commencement of this Act.

(2) Every order made under this section shall, as soon as may be after it is made, be laid before each House of Parliament.

Section 36. Power to make rules

(1) The Central Government may, by notification make rules to carry out the provisions of this Act.

(2) Without prejudice to the generality of the foregoing powers, such rules may provide for all or any of the following matters, namely: –

(a) The salaries and allowances and other terms and conditions of service of 1[the Chairpersons, the Presiding Officers], Recovery Officers and other officers and employees of the Tribunal and the Appellate Tribunal under Secs. 7,12 and 13;

(b) The procedure for the investigation of misbehaviour or incapacity of 1[the Chairpersons of Appellate Tribunals and the Presiding Officers of the Tribunals] under sub-section (3) of Sec. 15;

(c) The Form in which an application may be made under Sec. 19, the documents and other evidence by which such application shall be accompanied and the fees payable in respect of the filing of such application;

(d) The Form in which an appeal may be filed before the Appellate Tribunal under Sec. 20 and the fees payable in respect of such appeal;

(e) Any other matter which is required to be, or may be, prescribed.

1[(3) Every notification issued under sub-section (4) of section l, section 3 and section 8 and every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or rule or both Houses agree that the notification or rule should not be issued or made, the notification or rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification or rule.]

——————–

1. Substituted by Act 1 of The Recovery of Debts due to Banks and Financial Institutions (Amendment) Act, 2000, dt. 25-03-2000

Section 37. Repeal and saving

(1) The Recovery of Debts Due to Banks and Financial Institutions Ordinance, 1993 (Ord. 25 of 19930, is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance, shall be deemed to have been done or taken under the corresponding provisions of this Act.

Bydeb

The Regional Rural Banks Act, 1976

Section 1. Short title, extent and commencement

No.21 OF 1976

[9th February, 1976.]

An Act to provide for the incorporation, regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto.

BE it enacted by Parliament in the Twenty-seventh Year of the Republic of India as follows:–

(1) This Act may be called the Regional Rural Banks Act, 1976.

(2) It extends to the whole of India.

(3) It shall be deemed to have come into force on the 26th day of September, 1975.

The Regional Rural Banks Act, 1976

Section 2. Definitions

In this Act, unless the context otherwise requires,–

(a) “Board”, in relation to a Regional Rural Bank, means the Board of directors of that Regional Rural Bank;

(b) “Chairman”, in relation to a Regional Rural Bank, means the individual appointed or re-appointed under sub-section (1) of section 11 as the Chairman of that bank;

(c) “Director”, in relation to a Regional Rural Bank, means a member of the Board of that bank;

(d) “Notified area” means the local limits, specified under sub-section (1) of section 3, within which a Regional Rural Bank shall operate;

(e) “Prescribed” means prescribed by rules made under this Act;

(f) “Regional Rural Bank” means a Regional Rural Bank established under sub-section (1) of section 3;

(g) “Sponsor Bank”, in relation to a Regional Rural Bank, means a bank by which such Regional Rural Bank has been sponsored;

(h) “State Government” means,–

(i) In relation to a Regional Rural Bank established in a Union territory, the Central Government;

(ii) In relation to a Regional Rural Bank established in a State, the Government of that State;

(i) words and expressions used herein and not defined but defined in the Reserve Bank of India Act, 1934 (2 of 1934 ), shall have the meanings respectively assigned to them in that Act;

(j) words and expressions used herein and not defined either in this Act or in the Reserve Bank of India Act, 1934 (2 of 1934), but defined in the Banking Regulation Act, 1949 (10 of 1949), shall have the meanings respectively assigned to them in the Banking Regulation Act, 1949.

Section 3. Establishment and incorporation of Regional Rural Banks

(1) The Central Government may, if requested so to do by a Sponsor Bank, by notification in the Official Gazette, establish in a State or Union territory, one or more Regional Rural Banks with such name as may be specified in the notification and may, by the said or subsequent notification, specify the local limits within which each Regional Rural Bank shall operate.

(2) Every Regional Rural Bank shall be a body corporate with perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and to contract and may sue and be sued in its name.

(3) It shall be the duty of the Sponsor Bank to aid and assist the Regional Rural Bank, sponsored by it, by subscribing to the share capital of such Regional Rural Bank, recruitment and training of personnel during the first five years of the functioning of the Regional Rural Bank and providing such managerial and financial assistance as may be mutually agreed upon between the Sponsor Bank and the Regional Rural Bank.

Section 4. Offices and agencies

(1) A Regional Rural Bank shall have its head office at such place in the notified area as the Central Government may, after consultation with the Reserve Bank and the Sponsor Bank, specify by notification in the Official Gazette.

(2) A Regional Rural Bank may, if it is of opinion that it is necessary so to do, establish its branches or agencies at any place in the notified area.

Section 5. Authorised capital

The authorised capital of each Regional Rural Bank shall be one crore of rupees, divided into one lakh of fully paid-up shares of one hundred rupees each:

Provided that the Central Government may, after consultation with the Reserve Bank and the Sponsor Bank, increase or reduce such authorised capital; so, however, that the authorised capital shall not be reduced below twenty-five lakhs of rupees, and the shares shall be, in all cases, fully paid-up shares of one hundred rupees each.

Section 6. Issued capital

(1) The issued capital of each Regional Rural Bank shall be twenty-five lakhs of rupees.

(2) Of the capital issued by a Regional Rural Bank under sub-section (1), fifty per cent shall be subscribed by the Central Government; fifteen per cent by the concerned State Government and thirty-five per cent by the Sponsor Bank.

(3) The Board may, after consultation with the Reserve Bank, the concerned State Government and the Sponsor Bank and with the prior approval of the Central Government, from time to time, increase the issued capital of the Regional Rural Bank; and, where additional capital is issued, such capital shall also be subscribed in the same proportion as is specified in sub-section (2).

Section 7. Shares to be approved securities

Notwithstanding anything contained in the Acts hereinafter mentioned in this section, the shares of a Regional Rural Bank shall be deemed to be included among the securities enumerated in section 20 of the Indian Trusts Act, 1882 (2 of 1882), and shall also be deemed to be approved securities for the purposes of the Banking Regulation Act, 1949(10 of 1949).

Section 8. Management

(1) Subject to the provisions of this Act, the general superintendence, direction and management of the affairs and business of a Regional Rural Bank shall vest in a Board of directors who may exercise all the powers and discharge all the functions which may be exercised or discharged by the Regional Rural Bank.

(2) In discharging its functions, the Board shall Act on business principles and shall have due regard to public interest

Section 9. Board of directors

(1) The Board of directors shall consist of the Chairman appointed under sub-section (1) of section 11, and the following other members, namely:–

(a) Not more than three directors, to be nominated by the Central Government;

(b) Not more than two directors, to be nominated by the concerned State Government; and

(c) Not more than three directors, to be nominated by the Sponsor Bank.

(2) The Central Government may increase the number of members of the Board; so, however, that the number of directors does not exceed fifteen in the aggregate and also prescribe the manner in which the additional number may be filled in.

Section 10. Term of office of director

A director (other than the Chairman) shall hold office for such period not exceeding two years, from the date when he assumes office, as the authority nominating him may specify at the time when the nomination is made, and may, on the expiry of the said period, continue to hold office until his successor has been nominated and shall also be eligible for re-nomination.

Section 11. Chairman

(1) The Central Government shall appoint an individual to be the Chairman of a Regional Rural Bank and specify the period, not exceeding five years, for which such individual shall, subject to the provisions of sub-section (4), hold office as the Chairman.

(2) The individual, appointed as a Chairman under sub-section (1), shall, on the expiry of the period specified under that sub-section, be eligible for re-appointment.

(3) The Chairman shall devote his whole time to the affairs of the Regional Rural Bank and shall have, subject to the superintendence, control and direction of the Board, the management of the whole of the affairs of the Regional Rural Bank.

(4) The Chairman shall hold office during the pleasure of the Central Government.

(5) The Chairman shall receive such salary and allowances and be governed by such terms and conditions of service as may be determined by the Central Government.

(6) If the Chairman is, by infirmity or otherwise, rendered incapable of carrying out his duties or is absent, on leave or otherwise, in circumstances not involving the vacation of office, the Central Government may appoint another individual to act as the Chairman during the absence of the first-mentioned Chairman.

Section 12. Disqualifications

A person shall be disqualified for being appointed or, as the case may be, nominated as, and for being, a director, if he-

(a) Is, or, at any time has been, adjudged insolvent or has suspended payment of his debt or has compounded with his creditors, or

(b) Is of unsound mind and stands so declared by a competent court, or

(c) Is, or has been, convicted of an offence which, in the opinion of the Central Government, involves moral turpitude.

Section 13. Vacation of the seat of directors

(1) If a director-

(a) Becomes subject to any disqualification specified in section 12, or

(b) Is absent without leave of the Board for more than three consecutive meetings thereof.

His seat shall thereupon become vacant.

(2) The Chairman may resign his office by giving notice thereof in writing to the Central Government and a director may resign his office by giving notice thereof to the authority by which he was nominated; and, on such resignation being accepted, the Chairman or the director, as the case may be, shall be deemed to have vacated his office.

Section 14. Meetings of Board

(1) The Board of directors of a Regional Rural Bank shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.

(2) The Chairman of the Regional Rural Bank shall preside over every meeting of the Board, and, in his absence, such director as the Chairman may generally, or in relation to any particular meeting, authorise in this behalf shall preside; and, in the absence of both the Chairman and the director so authorised, the directors present at the meeting shall elect one from among themselves to preside over the meeting.

Explanation.-For the purposes of this sub-section, “absence” from a meeting means non-attendance for any reason whatsoever at the meeting, or any part of the meeting during which any business is transacted.

(3) All questions at a meeting of the Board shall be decided by a majority of the votes of the directors present and voting; and, in case of equality of votes, the person presiding shall have a second or casting vote.

(4) No director shall, as a director, take part in the discussion of, or vote on, any contract, loan, arrangement or proposal entered into or to be entered into, by or on behalf of the Regional Rural Bank, if he is, in any way, whether directly or indirectly, interested in the contract, loan, arrangement or proposal and, where a director is interested in any such matter, he shall, at the earliest possible opportunity, disclose to the Board the nature of his interest in such contract, loan, arrangement or proposal, and where he does so, his presence at the meeting shall not count for the purpose of forming any quorum at the time of any such discussion or vote, and if he does vote, his vote shall be void:

Provided that nothing contained in this sub-section shall apply to such director by reason only of his being-

(i) A shareholder (other than a director) holding not more than two per cent.of the paid-up capital in any public company within the meaning of the Companies Act, 1956 (1 of 1956), or any corporation established by or under any law for the time being in force in India or any co-operative society, with which the Regional Rural Bank has entered into, or proposes to enter into, any contract, loan, arrangement or proposal; or

(ii) A director of the Regional Rural Bank as such.

Section 15. Committees of Board

The Board may constitute such committees, whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons, as it may think fit, for such purposes as it may decide.

Section 16. Fees and allowances of directors and members of committees

(1) Every director and every member of a committee (other than the Chairman) shall be paid such fees and allowances as may be determined by the Central Government:

Provided that no fees shall be paid to any director, or member of a committee, if he is an officer of the Central Government, State Government, the Reserve Bank, Sponsor Bank or any other bank.

(2) The allowances payable to a director or a member of a committee, who is an officer of the Central Government, State Government, Reserve Bank, Sponsor Bank or any other bank, shall be paid by the Government or bank by which such officer is employed; and the allowances and fees payable to any other director or member of a committee shall be payable by the concerned Regional Rural Bank.

Section 17. Staff of Regional Rural Banks

(1) A Regional Rural Bank may appoint such number of officers and other employees as it may consider necessary or desirable for the efficient performance of its functions and may determine the terms and conditions of their appointment and service:

Provided that it shall be lawful for a Sponsor Bank, if requested so to do by a Regional Rural Bank sponsored by it, to send, during the first five years of the functioning of a Regional Rural Bank, such number of officers or other employees on deputation to the Regional Rural Bank as may be necessary or desirable for the efficient performance of its functions:

Provided further that the remuneration of officers and other employees appointed by a Regional Rural Bank shall be such as may be determined by the Central Government, and, in determining such remuneration, the Central Government shall have due regard to the salary structure of the employees of the State Government and the local authorities of comparable level and status in the notified area.

(2) Notwithstanding anything contained in the Industrial Disputes Act, 1947, or any other law for the time being in force, no award, judgment, decree, decision or order of any industrial tribunal, court or other authority, made before the commencement of this Act, shall apply to the terms and conditions in relation to the persons appointed by a Regional Rural Bank.

(3) The officers and other employees of a Regional Rural Bank shall exercise such powers and perform such duties as may be entrusted or delegated to them by the Board.

Section 18. Business which a Regional Rural Bank may transact

(1) Every Regional Rural Bank shall carry on and transact the business of banking as defined in clause (b) of section 5 of the Banking Regulation Act, 1949, and may engage in one or more forms of business specified in sub-section (1) of section 6 of that Act.

(2) Without prejudice to the generality of the provisions of sub-section (1), every Regional Rural Bank may, in particular, undertake the following types of business, namely:–

(a) The granting of loans and advances, particularly to small and marginal farmers and agricultural labourers, whether individually or in groups, and to co-operative societies, including agricultural marketing societies, agricultural processing societies, co-operative farming societies, primary agricultural credit societies or farmers’ service societies, for agricultural purposes or agricultural operations or for other purposes connected therewith;

(b) The granting of loans and advances, particularly to artisans, small entrepreneurs and persons of small means engaged in trade, commerce or industry or other productive activities, within the notified area in relation to the Regional Rural Bank.

Section 19. Closure of accounts

(1) Every Regional Rural Bank shall cause it books to be closed and balanced as on the 31st day of December of each year and shall appoint with the approval of the Central Government auditors for the audit of its accounts.

(2) Every auditor of a Regional Rural Bank shall be a person who is qualified to act as an auditor of a company under section 226 of the Companies Act, 1956 (1 of 1956), and shall receive such remuneration as the Regional Rural Bank may fix with the approval of the Central Government.

(3) Every auditor shall be supplied with a copy of the annual balance-sheet and profit and loss account of the Regional Rural Bank, and a list of all books kept by the Regional Rural Bank, and it shall be the duty of the auditor to examine the balance-sheet and vouchers relating thereto, and, in the performance of his duties, the auditor-

(a) Shall have, at all reasonable times, access to the books, accounts and other documents of the Regional Rural Bank;

(b) May, at the expense of the Regional Rural Bank, employ accountants or other persons to assist him in investigating such accounts; and

(c) May, in relation to such accounts, examine the Chairman or any officer or employee of the Regional Rural Bank.

(4) Every auditor of a Regional Rural Bank shall make a report to that bank upon the annual balance-sheet and accounts and in every such report shall state,–

(a) Whether, in his opinion, the balance-sheet is a full and fair balance-sheet containing all necessary particulars and is properly drawn up so as to exhibit a true and fair view of the affairs of the Regional Rural Bank, and, in case he had called for any explanation or information, whether it has been given and whether it is satisfactory;

(b) Whether or not, the transactions of the Regional Rural Bank, which have come to his notice, have been within the powers of that bank;

(c) Whether or not, the returns received from the offices and branches of the Regional Rural Bank have been found adequate for the purpose of his audit;

(d) Whether the profit and loss account shows a true balance of profit or loss for the period covered by such accounts; and

(e) Any other matter which he considers should be brought to the notice of the Regional Rural Bank.

Section 20. Annual report to be furnished the shareholders

Every Regional Rural Bank shall, within sixty days from the date of closure of its accounting year, send to each of its shareholders a report as to its working and activities during the accounting year immediately preceding together with a copy of its balance-sheet, profit and loss account and the auditor’s report in relation to the accounts of the said accounting year.

Section 21. Disposal of profits

After making provisions for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and all other matters for which provision is, under law, necessary or which are usually provided for by banking companies, a Regional Rural Bank may, out of its net profits, declare a dividend.

Section 22. Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961

For the purpose of the Income-tax Act, 1961(43 of 1961), or any other enactment for the time being in force relating to any tax on income, profits or gains, a Regional Rural Bank shall be deemed to be a co-operative society.

Section 23. Interest-tax not payable

Notwithstanding anything contained in the Interest-tax Act, 1974 (45 of 1974), no Regional Rural Bank shall be liable to pay any tax under that Act.

Section 24. Power of Central Government to give directions

(1) A Regional Rural Bank shall, in the discharge of its functions, be guided by such directions in regard to matters of policy involving public interest as the Central Government may, after consultation with the Reserve Bank, give.

(2) If any question arises as to whether any such direction relates to a matter of policy involving public interest, the decision of the Central Government thereon shall be final.

Section 25. Obligations as to fidelity and secrecy

(1) A Regional Rural Bank shall observe, except as otherwise required by law, the practices and usages customary among bankers and, in particular, it shall not divulge any information relating to, or to the affairs of, its constituents except in circumstances in which it is, in accordance with the law or practice and usage customary among bankers, necessary or appropriate for the Regional Rural Bank to divulge.

(2) Every director, member of a committee or auditor, officer or other employee of a Regional Rural Bank shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the Schedule to this Act.

1[(3) Nothing contained in this section shall apply to the credit information disclosed under the Credit Information Companies (Regulation) Act, 2005.

——————–

1. Ins. by Act No. 30 of 2005 w.e.f. 23-6-2005.

Section 26. Bar to liquidation of Regional Rural Bank

No provision of law relating to the winding up of companies shall apply to a Regional Rural Bank and a Regional Rural Bank shall not be placed in liquidation save by order of the Central Government and in such manner as it may direct

Section 27. Defects in appointment or constitution not to invalidate acts or proceedings

(1) No Act of a Chairman, acting in good faith, shall be invalid merely by reason of any defect in his appointment or in the procedure.

(2) No act or proceeding of any Board of directors or of any committee of a Regional Rural Bank shall be invalid merely on the ground of the existence of any vacancy in, or defect in the constitution of, such Board or committee, as the case may be.

(3) Acts done by a person, acting in good faith, as a director or member of a committee of a Regional Rural Bank shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in any law for the time being in force:

Provided that nothing in this section shall be deemed to give validity to any Act done by a director or a member of any committee of a Regional Rural Bank after his appointment has been shown to the Regional Rural Bank to be invalid or to have terminated.

Section 28. Indemnity of directors, etc

(1) A director or a member of a committee of a Regional Rural Bank shall not be responsible for any loss or expense caused to such bank by insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf of a Regional Rural Bank or by the insolvency or wrongful act of any customer or debtor or anything done in, or in relation to, the execution of the duties of his office, unless such loss, expense, insufficiency or deficiency was due to any wilful act or default on the part of such director or member.

(2) The Chairman of a Regional Rural Bank and every officer of the Central Government or State Government or an officer of the Reserve Bank or the Sponsor Bank and every officer or other employee of a Regional Rural Bank shall be indemnified by such bank against all losses and expenses incurred by him in, or in relation to, the discharge of his duties except such as have been caused by his own wilful act or default.

Section 29. Power to make rules

(1) The Central Government may, after consultation with the Reserve Bank and the Sponsor Bank, by notification in the Official Gazette, make rules for carrying out the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:–

(a) The manner in which the additional number of members of the Board may be filled in, under sub-section (2) of section 9;

(b) The time and place at which the Board of directors of a Regional Rural Bank shall meet and the rules of procedure which shall be observed by the Board in regard to the transaction of business at its meetings, under sub-section (1) of section 14;

(c) Any other matter which is required to be, or may be, prescribed.

(3) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

Section 30. Power to make regulations

The Board of directors of a Regional Rural Bank may, after consultation with the Sponsor Bank and the Regional Rural Bank, and with the previous sanction of the Central Government, make regulations, not inconsistent with the provisions of this Act and the rules made thereunder, to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act.

Section 31. Removal of difficulties

If any difficulty arises in giving effect to the provisions of this Act, the Central Government may make such order, not inconsistent with the provisions of this Act, as may appear to it to be necessary for the purpose of removing the difficulty;

Provided that no such order shall be made after the expiry of a period of five years from the commencement of this Act.

Section 32. Act to Override the provisions of other laws

The provisions of this Act shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force or in any contract, express or implied, or in any instrument having effect by virtue of any law other than this Act, and notwithstanding any custom or usage to the contrary.

Section 33. Amendment of certain enactments

(1) In the Reserve Bank of India Act, 1934,–

(a) In section 2,–

(i) After clause

(civ), the following clause shall be inserted, namely:–

(cv) “Regional Rural Bank” means a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976;’;

(ii) After clause

(e), the following clause shall be inserted, namely:–

‘(ea) “Sponsor Bank” means a Sponsor Bank as defined in the Regional Rural Banks Act, 1976;’;

(iii) The existing clause (ei) shall be re-lettered as clause (eb);

(b) In section 45H, for the words “a co-operative bank”, the words “a Regional Rural Bank or a co-operative bank” shall be substituted;

(c) In section 46A, in sub-section (2), in clause (b),–

(i) After the words “State co-operative banks”, the words “or Regional Rural Banks” shall be inserted;

(ii) Or the proviso, the following proviso, shall be substituted, namely:–

“Provided that such loans and advances are fully guaranteed as to the re-payment of principal and payment of interest,–

(i) In the case of loans and advances to State co-operative banks, by the State Government; and

(ii) In the case of loans and advances to a Regional Rural Bank, by the Sponsor Bank.”;

(d) In section 46B, in sub-section (2),–

(i) After the words “State co-operative banks”, the words “or Regional Rural Banks” shall be inserted;

(ii) After the proviso, the following proviso shall be inserted namely:–

“Provided further that no such loans or advances shall be made-

(a) Except for the purpose of enabling the Regional Rural Banks to pay any dues in respect of bills of exchange and promissory notes purchased or re-discounted by the or loans and advances made to them by the Bank under section 17 and unless, in the opinion of the Bank, the Regional Rural Banks are unable to pay such dues in time owing to drought, famine or other natural calamities, and

(b) Unless such loans and advances are fully guaranteed as to re-payment of the principal and payment of interest by the Sponsor Bank.”.

(2) In the Industrial Disputes Act, 1947 (14 of 1947), in section 2, in clause (a), in sub-clause (i), after the words and figures “Food Corporation Act, 1964, or”, the words and figures “a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976, or” shall be inserted.

(3) In the Banking Regulation Act, 1949 (10 of 1949),–

(a) In section 24, after sub-section (2A), the following sub-section shall be inserted, namely:–

“(2B) The Reserve Bank may, by notification in the Official Gazette, vary the percentage referred to in sub-section (2A) in respect of a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976.”;

(b) In section 34A, in sub-section (3), for the words “and any subsidiary bank”, the words and figures “a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976, and any subsidiary bank” shall be substituted;

(c) In section 36AD, in sub-section (3), for the words “and any subsidiary bank”, the words and figures “a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976, and any subsidiary bank” shall be substituted;

(d) In section 51, for the words “or any other banking institution notified by the Central Government in this behalf”, the words and figures “or a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976, or any other banking institution notified by the Central Government in this behalf” shall be substituted.

(4) In the Banking Companies (Legal Practitioners’ Clients’ Accounts) Act, 1949 (45 of 1949), in section 2, in clause (a), for the words “and any subsidiary bank”, the words and figures “a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976, and any subsidiary bank” shall be substituted.

(5) In the Deposit Insurance Corporation Act, 1961(47 of 1961),–

(a) In section 2,–

(i) In clause (g),–

(a) For the words “a banking company”, the words “a Regional Rural Bank or a banking company” shall be substituted;

(b) For the words “with a banking company”, the words “with a Regional Rural Bank or with a banking company” shall be substituted;

(ii) In clause (i), after the words “banking company”, the words “or a Regional Rural Bank” shall be inserted;

(iii) After clause (m), the following clause shall be inserted, namely:–

‘(ma) “Regional Rural Bank” means a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976;’;

(b) After section 11, the following section shall be inserted, namely:–

“11A. Registration of Regional Rural Banks.

The Corporation shall register every Regional Rural Bank before the expiry of thirty days from the date of its establishment.”;

(c) in section 13, after sub-section (2), the following sub-section shall be inserted, namely:–

“(3) The provisions of clauses (a), (b), (c), (d) and (h) of sub-section (1) shall apply to a Regional Rural Bank as they apply to a banking company.”;

(d) in sub-section (1) of section 14, for the words “banking company”, wherever they occur, the words “banking company, Regional Rural Bank” shall be substituted.

Section 34. Repeal and saving

(1) The Regional Rural Banks Ordinance, 1975, is hereby repealed.

(2) Notwithstanding such repeal anything done or any action taken under the Ordinance so repealed shall be deemed to have been done or taken under the corresponding provisions of this Act.

Schedule

THE SCHEDULE

[See section 25 (2)]

I……………………….., do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as a director, member of committee, officer, employee or auditor (as the case may be) of the Regional Rural Bank and which properly relate to any office or position in the said Bank held by me.

I further declare that I will not communicate or allow to be communicated to any person not legally entitled thereto any information relating to the affairs of the Regional Rural Bank or to the affairs of any person having any dealings with the Regional Rural Bank, nor will I allow any such person to inspect or have access to, any books or documents belonging to, or in the possession of the Regional Rural Bank and relating to the business of the Regional Rural Bank, or to the business of any person having any dealings with the Regional Rural Bank.

Signed before me.

Signature.

Dated

Bydeb

Reserve Bank of India Act, 1934

Preamble

An Act to constitute a Reserve Bank of India

Whereas it is expedient to constitute a Reserve Bank for India to regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency any credit system of the country to its advantage;

And whereas in the present disorganisation of the monetary systems of the world it is not possible to determine what will be suitable as a permanent basis for the Indian monetary system;

But whereas it is expedient to make temporary provision on the basis of the existing monetary system, and to leave the question of the monetary standard best suited to India to be considered when the international monetary position has become sufficiently clear and stable to make it possible to frame permanent measures;

It is hereby enacted as follows: –

Section 1. Short title, extent and commencement

(1) This Act may be called the Reserve Bank of India Act, 1934.

(2) It extends to the whole of India.

(3) This section shall come into force at once, and the remaining provisions of this Act shall came into force on such date or dates as the Central Government may, by notification in the Gazette of India, appoint.

Section 2. Definitions

In this Act, unless there is anything repugnant in the subject or context, –

(a) 1[***]

(ai) 1[***]

(aii) “The Bank” means the Reserve Bank of India constituted by this Act;

(aiii) “Bank for International Settlements”, means the body corporate established with the said name under the law of Switzerland in pursuance of an agreement, dated the 20th January, 1930, signed at the Hague;

(b) “The Central Board” means the Central Board of Directors of the Bank;

(bi) 1[***]

(bii) 1[***]

(biii) 1[***]

(biv) 1[***]

(bv) 1[***]

(bvi) “Deposit Insurance Corporation” means the Deposit Insurance Corporation established under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961);

(bvii) “Development Bank” means the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964);

(bviii) 1[***]

2[(bviiia) “Exim Bank” means the Export-Import Bank of India established under the Export – Import Bank of India Act, 1981 (28 of 1981);]

(bix) “Foreign currency” and “foreign exchange” have the meanings respectively assigned to them in the Foreign Exchange Regulation Act, 1973 (46 of 1973);

(c) “Industrial Finance Corporation” means the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948 (15 of 1948);

(ca) “International Development Association” means the “Association” referred to in the International Development Association (Status, Immunities and Privileges) Act, 1960 (32 of 1960);

(cb) “International Finance Corporation” means the “Corporation” referred to in the International Finance Corporation (Status, Immunities and Privileges) Act, 1958 (42 of 1958);

(cc) “International Monetary Fund” and “International Bank for Reconstruction and Development” means respectively the “International Fund” and the “International Bank”, referred to in the International Monetary Fund and Bank Act, 1945;

1[(ccc) “National Bank” means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);]

3[(cccc) “National Housing Bank” means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987);]

(ci)-(civ) 1[***]

4[(cv) “Reconstruction Bank” means the Industrial Reconstruction Bank of India established under section 3 of the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984);]

(d) “Rupee coin” means rupees which are legal tender in India under the provisions of the Indian Coinage Act, 1906 (3 of 1906);

(e) “Scheduled bank” means a bank included in the Second Scheduled;

5[(e1) “Small Industries Bank” means the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989;]

(ea) “Sponsor Bank” means a Sponsor Bank as defined in the Regional Rural Banks Act, 1976 (21 of 1976);

(eb) “State Bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955);

(f) 1[***]

(f1) “State Financial Corporation” means any State Financial Corporation established under the State Financial Corporations Act, 1951 (63 of 1951);

(g) “Unit Trust” means the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (25 of 1963);

6[(h) “Agricultural operations”, “central co-operative bank”, “co-operative society”, “crops”, “marketing of crops”, “pisciculture”, “regional rural bank” and “State co-operative bank” shall have the meanings respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);

(i) “Co -operative bank”, “co-operative credit society”, “director”, “primary agricultural credit society”, “primary co-operative bank” and “primary credit society” shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949).]

——————–

1. Omitted by Act No. 61 of 1981, w.e.f. 1/5/1982.

2. Inserted by Act No. 28 of 1981, w.e.f. 1/1/1982.

3. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.

4. Inserted by Act No. 62 of 1984, w.e.f. 20/3/1985.

5. Inserted by Act No. 39 of 1989, w.e.f. 7/3/1990.

6. Inserted by Act No. 61 of 1981, w.e.f. 1/5/1982.

Section 3. Establishment and incorporation of Reserve Bank

(1) A bank to be called the Reserve Bank of India shall be constituted for the purposes of taking over the management of the currency from the Central Government and of carrying on the business of banking in accordance with the provisions of this Act.

(2) The Bank shall be a body corporate by the name of the Reserve Bank of India, having perpetual succession and a common seal, and shall by the said name sue and be sued.

Section 4. Capital of the Bank

The capital of the bank shall be five crores of rupees.

Section 5. Section

[Section 5. repealed by Act No. 62 of 1948, w.e.f. 1st January, 1949]

Section 6. Offices, branches and agencies

The Bank shall as soon as may be, establish offices in Bombay, Calcutta, Delhi and Madras and may establish branches or agencies in any other place in India or, with the previous sanction of the Central Government elsewhere.

Section 7. Management

(1) The Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interests.

(2) Subject to any such directions, the general superintendence and direction of the affairs and business of the Bank shall be entrusted to a Central Board of Directors which may exercise all powers and do all acts and things which may be exercised or done by the Bank.

(3) Save as otherwise provided in regulations made by the Central Board, the Governor and in his absence the Deputy Governor nominated by him in his behalf, shall also have powers of general superintendence and direction of the affairs and the business of the Bank, and may exercise all powers and do all acts and things which may be exercised or done by the Bank.

Reserve Bank of India Act, 1934

Section 8. Composition of the Central Board, and term of office of directors

(1) The Central Board shall consist of the following Directors, namely: –

(a) A Governor and not more than four Deputy Governors to be appointed by the Central Government;

(b) Four Directors to be nominated by the Central Government, one from each of the four Local Boards as constituted by section 9;

(c) Ten Directors to be nominated by the Central Government; and

(d) One Government official to be nominated by the Central Government.

(2) The Governor and Deputy Governors shall devote their whole time to the affairs of the Bank, and shall receive such salaries and allowances as may be determined by the Central Board, with the approval of the Central Government:

PROVIDED that the Central Board may, if in its opinion it is necessary in the public interest so to do, permit the Governor or a Deputy Governor to undertake, at the request of the Central Government or any State Government, such part-time honorary work, whether related to the purposes of this Act or not, as is not likely to interfere with his duties as Governor or Deputy Governor, as the case may be:

1[PROVIDED FURTHER that the Central Government may, in consultation with the Bank, appoint a Deputy Governor as the Chairman of the National Bank, on such terms and conditions as that Government may specify.]

(3) A Deputy Governor and the Director nominated under clause (d) of sub-section (1) may attend any meeting of the Central Board and take part in its deliberations but shall not be entitled to vote:

PROVIDED that when the Governor is, for any reason, unable to attend any such meeting, a Deputy Governor authorised by him in this behalf in writing may vote for him at that meeting.

(4) The Governor and a Deputy Governor shall hold office for such term not exceeding five years as the Central Government may fix when appointing them, and shall be eligible for re-appointment.

A Director nominated under clause (c) of sub-section (1) shall hold office for a period of four years and thereafter until his successor shall have been nominated.

A Director nominated under clause (d) of sub-section (1) shall hold office during the pleasure of the Central Government.

(5) No act or proceeding of the Board shall be questioned on the ground merely of the existence of any vacancy in, or any defect in the constitution, of the board.

(6) 2[***]

(7) A retiring director shall be eligible for re-nomination.

——————–

1. Inserted by Act No. 61 of 1981, w.e.f. 1/5/1982.

2. Omitted by Act No. 18 of 1964, w.e.f. 1/7/1964.

Section 9. Local Boards, their constitution and functions

(1) A Local Board shall be constituted for each of the four areas specified in Schedule I and shall consist of five members to be appointed by the Central Government to represent, as far as possible, territorial and economic interests and the interests of co-operative and indigenous banks.

(2) The members of the Local Board shall elect from amongst themselves one person to be the Chairman of the Board.

(3) Every member of a Local Board shall hold office for a term of four years and thereafter until his successor shall have been appointed and shall be eligible for re-appointment.

(4) A Local Board shall advise the Central Board on such matters as may be generally or specifically referred to it and shall perform such duties as the Central Board may delegate to it.

Section 10. Disqualifications of directors and members of Local Boards

(1) No person may be a Director or a member of a Local Board who-

(a) Is a salaried Government official; or

(b) Is, or at any time has been, adjudicated an insolvent, or has suspended payment or has compounded with his creditors; or

(c) Is found lunatic or becomes of unsound mind; or

(d) Is an officer or employee of any bank; or

(e) Is a Director of banking company within the meaning of clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), or of a co-operative bank.

(2) No two persons who are partners of the same mercantile firm, or are Directors of the same private company, or one of whom is the general agent of or holds a power of procuration from the other, or from a mercantile firm of which the other is a partner, may be Directors or members of the same Local Board at the same time.

(3) Nothing in clause (a), clause (d) or clause (e) of sub-section (1) shall apply to the Governor, or to a Deputy Governor or to the Director nominated under clause (d) of sub-section (1) of section 8.

Section 11. Removal from and vacation of office

(1) The Central Government may remove from office the Governor, or a Deputy Governor or any other Director or any member of a Local Board.

(2) A Director nominated under clause (b) or clause (c) of sub-section (1) of section 8 shall cease to hold office if without leave from the Central Board he absents himself from three consecutive meetings of the Board convened under sub-section (1) of section 13.

(3) The Central Government shall remove from office any Director, and the Central Board shall remove from office any member of a Local Board, if such Director or member becomes subject to any of the disqualifications specified in sub-section (1) or sub-section (2) of section 10.

(4) A director or member of Local Board removed or ceasing to hold office under the foregoing sub-sections shall not be eligible for re-appointment either as Director or as member of a Local Board until the expiry of the term for which his appointment was made.

(5) The nomination as Director or member of a Local Board of any person who is a Member of Parliament or the Legislature of any State shall be void, unless within two months of the date of his nomination he ceases to be such member, and if any Director or member of a Local Board is elected or nominated as a member at Parliament or any such Legislature, he shall cease to be a Director or member of the Local Board as from the date of such election or nomination, as the case may be.

(6) A director may resign his office to the Central Government, and a member of a Local Board may resign his office to the Central Board, and on the acceptance of the resignation the office shall become vacant.

Section 12. Casual vacancies and absences

(1) If the Governor or a Deputy Governor by infirmity or otherwise is rendered incapable of executing his duties or is absent on leave or otherwise in circumstances not involving the vacation of his appointment, the Central Government may, after consideration of the recommendations made by the Central Board in this behalf, appoint another person to officiate for him, and such person may, notwithstanding anything contained in clause (d) of sub-section (1) of section 10, be an officer of the Bank.

(2) 1[***]

(3) Where any casual vacancy in the office of any member of a Local Board occurs, the Central Board may nominate thereto any person recommended by the other members of the Local Board.

(4) Where any casual vacancy occurs in the office of a Director other than the vacancies provided for in sub-section (1), the vacancy shall be filled by the Central Government.

(5) A person nominated under this section to fill a casual vacancy shall hold office for the unexpired portion of the term of his predecessor.

——————–

1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.

Section 13. Meetings of the Central Board

(1) Meetings of the Central Board shall be convened by the Governor at least six times in each year and at least once in each quarter.

(2) Any four Directors may require the Governor to convene a meeting of the Central Board at any time and the Governor shall forthwith convene a meeting accordingly.

(3) The Governor or if for any reason, he is unable to attend, the Deputy Governor authorised by the Governor under the proviso to sub-section (3) of Section 8 to vote for him, shall preside at meetings of the Central Board, and, in the event of an equality of voter, shall have a second or casting vote.

Section 14. General meetings

1 [General meetings]

——————–

1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.

Section 15. First constitution of the Central Board

1[First constitution of the Central Board]

——————–

1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.

Section 16. First constitution of Local Boards

1[First constitution of Local Boards]

——————–

1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.

Section 17. Business which the Bank may transact

The Bank shall be authorised to carry on and transact the several kinds of business hereinafter specified, namely:-

(1) The accepting of money on deposit without interest from, and the collection of money for, the Central Government, the State Governments, local authorities, banks and any other persons;

(2)

(a) The purchase, sale and rediscount of bills of exchange and promissory notes, drawn on and payable in India and arising out of bona fide commercial or trade transactions bearing two or more good signatures, one of which shall be that of a scheduled bank or a State co-operative bank or any financial institution, which is predominantly engaged in the acceptance or discounting of bills of exchange and promissory notes and which is approved by the Bank in this behalf and maturing-

(i) In the case of bills of exchange and promissory notes arising out of any such transaction relating to the export of goods from India, within one hundred and eighty days, and

(ii) In any other case, within ninety days,

From the date of such purchase or rediscount exclusive of days of grace;

(b) The purchase, sale and rediscount of bills of exchange and promissory notes, drawn and payable in India and bearing two or more good signatures, one of which shall be that of a scheduled bank or a State co-operative bank or any financial institution, which is predominantly engaged in the acceptance or discounting of bills of exchange and promissory notes and which is approved by the Bank in this behalf and drawn or issued for the purpose of financing agricultural operations or the marketing of crops, and maturing within fifteen months from the date of such purchase or rediscount, exclusive of days of grace;

1[***]

(bb) The purchase, sale and rediscount of bills of exchange and promissory notes drawn and payable in India and bearing two or more good signatures, one of which shall be that of a State co-operative bank or a State financial corporation or any financial institution, which is predominantly engaged in the acceptance or discounting of bills of exchange and promissory notes and which is approved by the Bank in this behalf, and drawn or issued for the purpose of financing the production or marketing activities of cottage and small scale industries approved by the Bank and maturing within twelve months from the date of such purchase or rediscount, exclusive of days of grace, provided that the payment of the principal and interest of such bills of exchange or promissory notes is fully guaranteed by the State Government;

(c) The purchase, sale and rediscount of bills of exchange and promissory notes drawn and payable in India and bearing the signature of a scheduled bank, and issued or drawn for the purpose of holding or trading in securities of the Central Government or a State Government, and maturing within ninety days from the date of such purchase or rediscount, exclusive of days of grace;

(3)

(a) The purchase from and sale to scheduled banks of foreign exchange;

(b) The purchase, sale and rediscount of bills of exchange (including treasury bills) drawn in or on any place in any country outside India which is a member of the International Monetary Fund and maturing: –

(i) In the case of bills of exchange arising out of any bona fide transaction relating to the export of goods from India, within one hundred and eighty days, and

(ii) In any other case, within ninety days,

From the date of such purchase or rediscount:

PROVIDED that no such purchase, sale or rediscount shall be made in India except with a scheduled bank or a State co-operative bank;

1[***]

(3A) The making to any scheduled bank or State co-operative bank, of loans and advances, against promissory notes of such bank, repayable on demand or on the expiry of fixed periods not exceeding one hundred and eighty days:

PROVIDED that the borrowing bank furnishes a declaration in writing, to the effect that-

(i) It holds bills of exchange arising out of any transaction relating to the export of goods from India, of a value not less than the amount of such loans or advances: –

(a) Drawn in India and on any place in any country outside India which is a member of the International Monetary Fund or in any other country notified in this behalf by the Bank in the Gazette of India, and

(b) Maturing not later than one hundred and eighty days from the date of the loan or advance, and it will, so long as any part of such loans and advances remains unpaid, continue to hold such bills of exchange of a value not less than the amount of such loans or advances outstanding for the time being; or

(ii) It has granted a pre-shipment loan or advance to an exporter or any other person in India in order to enable him to export goods from India, the amount of the loan or advance drawn and outstanding at any time being not less than the outstanding amount of the loan or advance obtained by the borrowing bank from the bank;

(3B) The making to any scheduled bank or State co-operative bank of loans and advances repayable on demand or on the expiry of fixed periods not exceeding one hundred and eighty days against promissory notes of such bank:

PROVIDED that the borrowing bank furnishes a declaration in writing to the effect that it has made loans and advances for bona fide commercial or trade transactions or for financing agricultural operations or the marketing of crops or for other agricultural purposes as set out in the declaration and the said declaration includes such other particulars as may be required by the bank;

(4) The making to local authorities, scheduled banks, State co-operative banks and State Financial Corporations of loans and advances, repayable on demand or on the expiry of fixed periods not exceeding ninety days, against the security of-

(a) Stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any Act of Parliament of the United Kingdom or by any law for the time being in force in India;

(b) Gold or silver or documents of title to the same;

(c) Such bills of exchange and promissory notes as are eligible for purchase or rediscount by the bank or as are fully guaranteed as to the repayment of the principal and payment of interest by a State Government;

(d) Promissory notes of any scheduled bank or State co-operative bank, supported by documents of title to goods such documents having been transferred, assigned, or pledged to any such bank as security for a loan or advance made for bona fide commercial or trade transactions, or for the purpose of financing agricultural operations or the marketing of crops:

PROVIDED that loans and advances made against the security of bills of exchange and promissory notes arising out of any transaction relating to the export of goods from India shall be repayable on demand or on the expiry of fixed periods not exceeding one hundred and eighty days;

(4A) The making to any State Financial Corporation, of loans and advances repayable on the expiry of fixed periods not exceeding eighteen months from the date of such loan or advance, against securities of the Central Government or of any State Government, of any maturity, or against bonds and debentures issued by that Corporation and guaranteed by the State Government concerned and maturing within a period not exceeding eighteen months from the date of such loan or advance:

PROVIDED that the previous approval of the State Government shall be obtained for the borrowing by the State Financial Corporation and the amount of loans and advances granted to that Corporation under this clause shall not, at any time, exceed in the aggregate twice the paid-up share capital thereof;

2[(4AA) The making of annual contributions to the National Rural Credit (Long Term Operations) Fund and the National Rural Credit (Stabilisation) Fund established under sections 42 and 43, respectively, of the National Bank for Agriculture and Rural Development Act, 1981;]

(4B) The making to the Industrial Finance Corporation of India of loans and advances-

(a) Repayable on demand or on the expiry of fixed periods not exceeding ninety days from the date of such loan or advance. against securities of the Central Government or of any State Government; or

(b) Repayable on the expiry of fixed periods not exceeding eighteen months from the date of such loan or advance, against securities of the Central Government or of any maturity, or against bonds and debentures issued by the said corporation and guaranteed by the Central Government and maturing within a period not exceeding eighteen months from the date of such loan or advance.

3[***]

(4BB) The making to any financial institution notified by the Central Government in this behalf, of loans and advances: –

(a) Repayable on demand or on the expiry of fixed periods not exceeding ninety days from the date of such loan or advance, against the securities of the Central Government or of any State Government; or

(b) Repayable on the expiry of fixed periods not exceeding eighteen months from the date of such loan or advance, against securities of the Central Government or of any State Government, of any maturity, or against bonds and debentures issued by that financial institution and guaranteed by the Central Government or any State Government, and maturing within a period not exceeding eighteen months from the date of such loan or advance:

PROVIDED that the amount of loans and advances granted to a financial institution under sub-clause (b) shall not, at any time, exceed in the aggregate sixty per cent of the paid-up share capital thereof;

(4BBB) The making to the Unit Trust of loans and advances-

(i) Repayable on demand or on the expiry of a fixed period not exceeding ninety days from the date of such loan or advance against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India;

(ii) Repayable on demand or within a period of eighteen months from the date of such loan or advance against the security of the bonds of the Unit Trust issued with the approval of and guaranteed by the Central Government;

(iii) For the purpose of any scheme other than the first unit scheme under the Unit Trust of India Act, 1963 (52 of 1963) on such terms and conditions and against the security of such other property of the Unit Trust as may be specified in this behalf by the Bank;

(4C) The making to a Warehousing Corporation established under the Agricultural Produce (Development and Warehousing) Corporations Act, 1956 (28 of 1956), of loans and advances: –

(a) Repayable on demand or on the expiry of fixed periods not exceeding ninety days, from the date of such loan or advance, against securities of the Central Government or of any State Government; or

(b) Repayable on the expiry of fixed periods not exceeding eighteen months from the date of such loan or advance, against securities of the Central Government or of any State Government, of any maturity, or against bonds and debentures issued by the Corporation to which the loan or advance is made, and guaranteed by the Central or a State Government, and maturing within a period not exceeding eighteen months from the date of such loan or advance:

PROVIDED that the amount of loans and advances granted under clause (b) shall not at any time exceed, in the aggregate, three crores of rupees in the case of the Central Warehousing Corporation and fifty lakhs of rupees in the case of a State Warehousing Corporation;

(4D) The making to the Deposit Insurance Corporation of loans and advances; and generally assisting the Corporation in such manner and on such terms as may be determined by the Central Board;

4[(4DD) The making to the National Housing Bank of loans and advances and generally assisting the National Housing Bank in such manner and on such terms as may be determined by the Central Board;]

5[(4E) The making to the National Bank of loans and advances repayable on demand or on the expiry of fixed period not exceeding eighteen months from the date of making of the loan or advance, either-

(i) Against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India; or

(ii) On such other terms and conditions as the Bank may specify;

(4F) Contributing to the initial capital of the Unit Trust;

(4G) The making of loans and advances to, and the purchasing of bonds and debentures of, the Development Bank 2[or the Exim Bank] 4[or the Reconstruction Bank] 5[or the Small Industries Bank] out of the National Industrial Credit (Long Term Operations) Fund established under section 46C;

6[(4GG) The making of loans and advances to, and the purchasing of bonds and debentures of, the National Housing Bank out of the National Housing Credit (Long Term Operations) Fund established under section 46D;

(4H) The making to the Development Bank 3[or the Small Industries Bank] of loans and advances-

(a) Repayable on demand or on the expiry of fixed periods not exceeding ninety days, from the date of such loan or advance against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India; or

(b) Against the security of bills of exchange or promissory notes, arising out of bona fide commercial or trade transactions bearing two or more good signatures and maturing within five years from the date of such loan or advance;

(4-I) The making to scheduled banks, the Development Bank, the Exim Bank, 7[the Reconstruction Bank or the Small Industries Bank], the Industrial Finance Corporation and any other financial institution as may, on the recommendation of the Bank, be approved in this behalf by the Central Government of loans and advances repayable on demand or otherwise and against such security and on such other terms and conditions as may be approved in this behalf by the Central Board for the purpose of enabling such banks, or financial institution, as the case may be, to purchase foreign exchange from the Bank for the purpose of financing the import of capital goods or for such other purposes as may be approved by the Central Government;

(4J) The making to the Exim Bank of loans and advances-

(a) Repayable on demand or on the expiry of a fixed period not exceeding ninety days, from the date of such loan or advance against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India; or

(b) Against the security of bills of exchange or promissory notes, arising out of bona fide commercial or trade transactions bearing two or more good signatures and maturing within five years from the date of such loan or advance;

(4K) The making to the Reconstruction Bank of loans and advances-

(a) Repayable on demand or on the expiry of a fixed period not exceeding ninety days, from the date of such loan or advance against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India; or

(b) Against the security of bills of exchange or promissory notes, arising out of bona fide commercial or trade transactions bearing two or more good signatures and maturing within five years from the date of such loan or advance;

(5) The making to the Central Government and State Governments of advances repayable in each case not later than three months from the date of the making of the advance;

(6) The issue of demand drafts, telegraphic transfers and other kinds of remittances made payable at its own offices or agencies, the purchase of telegraphic transfers, and the making, issue and circulation of bank post bills;

11[(6-A) dealing in derivatives, and, with the approval of the Central Board, in any other financial instrument.

Explanation.-For the purposes of this clause, “derivative” means an instrument, to be settled at a future date, whose value is derived from change in one or a combination of more than one of the following underlying, namely:-

(a) interest rate,

(b) price of securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government,

(c) price of foreign securities,

(d) foreign exchange rate, index of rates of prices,

(e) credit rating or credit index,

(g) price of gold or silver coins, or gold or silver bullion, or

(h) any other variable of similar nature;]

(7) 8[***]

(8) The purchase and sale of securities of the Central Government or a State Government of any maturity or of such securities of a local authority as may be specified in this behalf by the Central Government on the recommendation of the Central Board:

PROVIDED that securities fully guaranteed as to principal and interest by any such Government or authority shall be deemed for the purposes of this clause to be securities of such Government or authority;

9[***]

Central Government in this behalf;

(9) The custody of monies, securities and other articles of value, and the collection of the proceeds, whether principal, interest or dividends, of any such securities;

(10) The sale and realisation of all property, whether movable or immovable, which may in any way come into the possession of the Bank in satisfaction, or part satisfaction, of any of its claims;

(11) The acting as agent for the Central Government or any State Government or any local authority or the Industrial Finance Corporation of India or any other body corporate which is established or constituted by or under any other law or the government of any such country outside India or any such person or authority as may be approved in this behalf by the Central Government in the transaction or any of the following kinds of business, namely: –

(a) The purchase and sale of gold or silver or foreign exchange;

(b) The purchase, sale, transfer and custody of bills of exchange, securities or shares in any company;

(c) The collection of the proceeds, whether principal, interest or dividends, of any securities or shares;

(d) The remittance of such proceeds, at the risk of the principal, by bills of exchange payable either in India or elsewhere;

(e) The management of public debt;

(f) The issue and management of bonds and debentures;

(11A) The acting as agent for the Central Government: –

(a) In guaranteeing the due performance by any small scale industrial concern, approved by the Central Government, of its obligations to any bank or other financial institution in respect of loans and advances made, or other credit facilities provided, to it by such bank or other financial institution and the making as such agent of payments in connection with such guarantee, and

(b) In administering any scheme for subsidising the rate of interest or other charges in relation to any loans or advances made, or other credit facilities provided, by banks or other financial institutions for the purpose of financing or facilitating any export from India and the making as such agent of payment on behalf of the Central Government;

(12) The purchase and sale of gold or silver coins and gold and silver bullion and foreign exchange and the opening of a gold account with the principal currency authority of any foreign country or the Bank for International. Settlement or any international or regional bank or financial institution formed by such principal currency authority or authorities or by the government of any foreign country;

(12A) The purchase and sale of securities issued by the government of any country outside India or by any institution or body corporate established outside India and expressed to be payable in a foreign currency or any international or composite currency unit, being in the case of purchase by the Bank securities maturing within a period of ten years from the date of purchase:

PROVIDED that in the case of securities of an institution or body corporate, the repayment of principal and payment of interest in respect of such securities shall be guaranteed by the government of the country concerned;

12[(12-AA) lending or borrowing of securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities;

(12-AB) dealing in repo or reverse repo:

Provided that lending or borrowing of funds by way of repo or reverse repo shall not be subject to any limitation contained in this section.

Explanation.- For the purposes of this clause,-

(a) “repo” means an instrument for borrowing funds by selling securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed;

(b) “reverse repo” means an instrument for lending funds by purchasing securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the funds lent;]

(12B) The making of loans and advances in foreign currencies to scheduled banks, the Development Bank, the Exim Bank,] 6[the Reconstruction Bank or the Small Industries Bank,] the Industrial Finance Corporation, any State Financial Corporation and any other financial institution as may, on the recommendation of the Bank, be approved by the Central Government and on such terms and conditions as may be specified by the Central Board in this behalf, against promissory notes of such bank or financial institution, as the case may be:

PROVIDED that the borrowing bank or financial institution, as the case may be, furnishes a declaration in writing to the effect that-

(a) It has made loans and advances in foreign currencies for financing international trade or for the import of capital goods or for such other purposes as may be approved by the Central Government; and

(b) That the amount of loans or advances so made and outstanding at any time will not be less than the outstanding amount of the loans or advances obtained by it from the Bank;

(13) The opening of an account with an office outside India of any bank, including a bank incorporated in India or the making of an agency agreement with, and the acting as an agent or correspondent of any bank incorporated outside India, or the principal currency authority of any country under the law for the time being in force in that country or any international or regional bank or financial institution formed by such principal currency authorities or foreign governments, and the investing of the funds of the Bank in the shares and securities of any such international or regional bank or financial institution or of any other foreign institution as may be approved by the Central Board in this behalf;

(13A) Participation in any arrangement for the clearing and settlement of any amounts due from, or to any person or authority on account of the external trade of India with any other country or group of countries or of any remittances to, or from, that country or group of countries, including the advancing, or receiving of any amount in any currency in connection therewith, and, for that purpose, becoming, with the approval of the Central Government, a member of any international or regional clearing union of central banks, monetary or other authorities, or being associated with any such clearing arrangements, or becoming a member of any body or association formed by central banks, monetary or other similar authorities, or being associated with the same in any manner;

(14) The borrowing of money for a period not exceeding one month for the purposes of the business of the Bank, and the giving of security for money so borrowed:

PROVIDED that no money shall be borrowed under this clause from any person in India other than a scheduled bank or from any person outside India other than a bank which is the principal currency authority of any country under the law for the time being in force in that country:

PROVIDED FURTHER that the total amount of such borrowings from persons in India shall not at any time exceed the amount of the capital of the Bank;

(15) The making and issue of bank notes subject to the provisions of this Act;

(15A) The exercise of powers and functions and the performance of duties entrusted to the Bank under this Act or under any other law for the time being in force;

(15B) The providing of facilities for training in banking and for the promotion of research, where, in the opinion of the Bank, such provision may facilitate the exercise by the Bank of its powers and functions, or the discharge of its duties;

(16) Generally, the doing of all such matters and things as may be incidental to or consequential upon the exercise of its powers or the discharge of its duties under this Act.

——————–

1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.

2. Substituted by Act No. 81 of 1985, w.e.f. 1/5/1986.

3. Earlier Proviso omitted by Act No. 66 of 1988, w.e.f. 30/12/1988.

4. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.

6. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.

7. Substituted for the words “or the Reconstruction Bank”, by Act No. 39 of 1989, w.e.f. 7/3/1990.

8. Omitted by Act No. 2 of 1948.

9. Second proviso omitted by Act No. 32 of 1951.

10. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.

11. Inserted by Act No. 26 of 2006 w.e.f. 12-6-2006.

12. Inserted by Act No. 26 of 2006 w.e.f. 12-6-2006.

Section 18. Power of direct discounts

When, in the opinion of the Bank, a special occasion has arisen making it necessary or expedient that action should be taken under this section for the purpose of regulating credit in the interests of Indian trade, commerce, industry and agricultural, the Bank may, notwithstanding any limitation contained in section 17: –

(1) Purchase, sell or discount any bill of exchange or promissory note though such bill or promissory note is not eligible for purchase or discount by the Bank under that section; or

(2) 1[***]

(3) Make loans or advances to-

(a) A State Co-operative bank; or

(b) On the recommendation of a State co-operative bank, to a co-operative society registered within the area in which the State co-operative bank operates; or

(c) Any other person,

Repayable on demand or on the expiry of the fixed periods, not exceeding ninety days, on such terms and conditions as the Bank may consider to be sufficient.

——————–

1. Clause (2) omitted Act No. 24 of 1978.

Section 18 A. Validity of loan or advance not to be questioned

Notwithstanding anything to the contrary contained in any other law for the time being in force-

(a) The validity of any loan or advance granted by the Bank in pursuance of the provisions of this Act shall not be called in question merely on the ground of non-compliance with the requirements of such other law as aforesaid or of any resolution, contract, memorandum, and articles of association or other instrument:

PROVIDED that nothing in this clause shall render valid any loan or advance obtained by any company or co-operative society where such company or co-operative society is not empowered by its memorandum to obtain loans or advances;

(b) Where a loan or advance has been granted under clause (3A) or under clause (3B) of section 17 or a loan or advance granted under clause (3) of section 18 by the Bank to any person has been applied by such person, wholly or in part, in making a loan or advance to any borrower, any sum received-

(i) By the borrowing bank on account of bills of exchange in respect of which the declaration under clause (i) of the proviso to clause (3A) of section 17 has been furnished or in repayment or realisation of the outstanding loans and advances referred to in clause (ii) of the said proviso or in the proviso to clause (3B) of the said section, or

(ii) By the borrowing bank or any other person in repayment or realisation of loans and advances granted to a borrower out of funds obtained by it or by him from the Bank under section 18,

Shall be utilised only for the repayment by the borrowing bank or other person, as the case may be, of the amounts due to be repaid by it or by him to the Bank, and shall be held by it or by him in trust for the Bank, until such time as the amounts are so repaid.

Section 19. Business which the bank may not transact

Save as otherwise provided in sections 17,18, 42 and 45, the bank may not-

(1) Engage in trade or otherwise have a direct interest in any commercial, industrial, or other undertaking except such interest as it may in any way acquire in the course of the satisfaction of any of its claims:

PROVIDED that all such interests shall be disposed of at the earliest possible moment;

(2) Purchase the shares of any banking company or of any other company, or grant loans upon the security of any such shares;

(3) Advance money on mortgage of, or otherwise on the security of, immovable property or documents of title relating thereto, or become the owner of immovable property, except so far as is necessary for its own business premises and residences for its officers and servants;

(4) Make loans or advances;

(5) Draw or accept bills payable otherwise than on demand;

(6) Allow interest on deposits or current amounts.

Reserve Bank of India Act, 1934

Section 20. Obligation of the Bank to transact government business

The Bank shall undertake to accept monies for account of the Central Government and to make payments up to the amount standing to the credit of its account, and to carry out its exchange, remittance and other banking operations, including the management of the public debt of the Union.

Section 21. Bank to have the right to transact government business in India

(1) The Central Government shall entrust the Bank, on such conditions as may be agreed upon, with all its money, remittance, exchange and banking transactions in India, and, in particular, shall deposit free of interest all its cash balances with the Bank:

PROVIDED that nothing in this sub-section shall prevent the Central Government from carrying on money transactions at places where the Bank has no branches or agencies, and the Central Government may hold at such places such balances as it may require.

(2) The Central Government shall entrust the Bank, on such conditions as may be agreed upon, with the management of the public debt and with the issue of any new loans.

(3) In the event of any failure to reach agreement on the conditions referred to in this section the Central Government shall decide what the conditions shall be.

(4) Any agreement made under this section shall be laid, as soon as may be after it is made, before Parliament. 1[***]

——————–

1. Clause (5) omitted by Act No. 24 of 1978.

Section 21. Bank to have the right to transact government business in India

(1) The Central Government shall entrust the Bank, on such conditions as may be agreed upon, with all its money, remittance, exchange and banking transactions in India, and, in particular, shall deposit free of interest all its cash balances with the Bank:

PROVIDED that nothing in this sub-section shall prevent the Central Government from carrying on money transactions at places where the Bank has no branches or agencies, and the Central Government may hold at such places such balances as it may require.

(2) The Central Government shall entrust the Bank, on such conditions as may be agreed upon, with the management of the public debt and with the issue of any new loans.

(3) In the event of any failure to reach agreement on the conditions referred to in this section the Central Government shall decide what the conditions shall be.

(4) Any agreement made under this section shall be laid, as soon as may be after it is made, before Parliament. 1[***]

——————–

1. Clause (5) omitted by Act No. 24 of 1978.

Section 21 A. Bank to transact government business of States on agreement

(1) The Bank may by agreement with the government of any state undertake-

(a) All its money, remittance, exchange and banking transactions in India, including in particular, the deposit, free of interest, of all its cash balances with the Bank; and

(b) The management of the public debt of, and the issue of any new loans by, that State.

(2) Any agreement made under this section shall be laid, as soon as may be after it is made, before Parliament.

Section 21 B. Effect of agreements made between the Bank and certain States before the 1st November, 1956

(1) Any agreement made under section 21 or section 21A between the Bank and the government of a State specified in the Explanation below and in force immediately before the lst day of November, 1956, shall, as from that day have effect as if it were an agreement made on that day under section 21A between the Bank and the government of the corresponding State subject to such modifications, if and being of a character not affecting the general operation of the agreement, as may be agreed upon between the Bank and the government of the corresponding State, or in default of such agreement, as may be made therein by order of the Central Government.

Explanation: In this sub-section “corresponding State” means: –

(a) In relation to the agreement between the Bank and the State of Andhra, the State of Andhra Pradesh;

(b) In relation to the agreement between the Bank and any other Part A State as it existed before the 1st day of November, 1956, the State with the same name; and

(c) In relation to the agreement between the Bank and the Part B State of Mysore or Travancore-Cochin as it existed before the 1st day of November, 1956, the State of Mysore or Kerala respectively.

(2) Any agreement made under section 21A between the Bank and the government of the part B State of Hyderabad, Madhya Bharat or Saurashtra shall be deemed to have terminated on the 31st day of October, 1956.

Section 22. Right to issue bank notes

(1) The bank shall have the sole right to issue bank notes in India, and may, for a period which shall be fixed by the Central Government on the recommendation of the Central Board, issue currency notes of the Government of India supplied to it by the Central Government, and the provisions of this Act applicable to bank notes shall, unless a contrary intention appears, apply to all currency notes of the Government of India issued either by the Central Government or by the Bank in like manner as if such currency notes were bank notes, and references in this Act to bank notes shall be construed accordingly.

(2) On and from the date on which this chapter comes into force the Central Government shall not issue any currency notes.

Section 23. Issue department

(1) The issue of bank notes shall be conducted by the Bank in an issue department which shall be separated and kept wholly distinct from the banking department, and the assets of the issue department shall not be subject to any liability other than the liabilities of the issue department as hereinafter defined in section 34.

(2) The issue department shall not issue bank notes to the banking department or to any other person except in exchange for other bank notes or for such coin, bullion or securities as are permitted by this Act to form part of the Reserve.

1[***]

——————–

1. Sub-section (3) omitted by Act No. 24 of 1978.

Reserve Bank of India Act, 1934

Section 24. Denominations of notes

(1) Subject to the provisions of sub-section (2), bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of the Central Board, specify in this behalf.

(2) The Central Government may, on the recommendation of the Central Board, direct the non-issue or the discontinuance of issue of bank notes of such denominational values as it may specify in this behalf.

Section 25. Form of bank notes

The design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board.

Section 26. Legal tender character of notes

(1) Subject to the provisions of sub-section (2), every bank note shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government.

(2) On recommendation of the Central Board the Central Government may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender save at such office or agency of the Bank and to such extent as may be specified in the notification.

Section 26 A. Certain bank notes to cease to be legal tender

Notwithstanding anything contained in section 26, no bank note of the denominational value of five hundred rupees, one thousand rupees or ten thousand rupees issued before the 13th day of January, 1946, shall be legal tender in payment or on account for the amount expressed therein.

Section 27. Re-issue of notes

The Bank shall not re-issue bank notes, which are torn, defaced or excessively spoiled.

Section 28. Recovery of notes lost, stolen, mutilated or imperfect

Notwithstanding anything contained in any enactment or rule of law to the contrary, no person shall of right be entitled to recover from the Central Government or the Bank, the value of any lost, stolen, mutilated or imperfect currency note of the Government of India or bank note:

PROVIDED that the Bank may, with the previous sanction of the Central Government, prescribe the circumstances in and the conditions and limitations subject to which the value of such currency notes or bank notes may be refunded as of grace and the rules made under this proviso shall be laid on the table of Parliament. 1[***]

——————–

1. Omitted by Act No. 24 of 1978.

Section 28 A. Issue of special bank notes and special one rupee notes in certain cases

(1) For the purpose of controlling the circulation of bank notes without India, the Bank may, notwithstanding anything contained in any other provision of this Act, issue bank notes of such design, form and material as may be approved under sub-section (3) (hereinafter in this section referred to as special bank notes) of the denominational values of five rupees, ten rupees and one hundred rupees.

(2) For the purpose of controlling the circulation of Government of India one rupee notes without India, the Central Government may, notwithstanding anything contained in any other provision of this Act or in the Currency Ordinance, 1940 (Ordinance 4 of 1940), issue Government of India notes of the denominational value of one rupee of such design, form and material as may be adopted under sub-section (3) (hereinafter in this section referred to as special one rupee notes).

(3) The design, form and material of the special bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Governor and of the special one rupee notes shall be such as the Central Government may think fit to adopt.

(4) Neither the special bank notes nor the special one rupee notes shall be legal tender in India.

(5) The special one rupee note shall be deemed to be included in the expression “rupee coin” for all the purposes of this Act except section 39, but shall be deemed not to be a currency note for any of the purposes of this Act.

(6) Where a special bank note is on its face expressed to be payable at a specified office or branch of the Bank, obligation imposed by section 39 shall be only on the specified office or branch and, further, shall be subject to such regulations as may be made under this section.

(7) The Bank may, with the previous sanction of the Central Government make regulations to provide for all matters for which provision is necessary or convenient for the purpose of giving effect to the provisions of this section, and, in particular, the manner in which, and the conditions or limitations subject to which-

(i) Bank notes and one rupee notes in circulation in any country outside India may be replaced by special notes issued under this section;

(ii) Any such special notes may be exchanged for any other bank notes or one rupee notes.

Section 29. Bank exempt from stamp duty on bank notes

The Bank shall not be liable to the payment of any stamp duty under the Indian Stamp Act, 1899 (2 of 1899), in respect of bank notes issued by it.

Section 30. Powers of Central Government to supersede Central Board

(1) If in the opinion of the Central Government the Bank fails to carry out any of the obligations imposed on it by or under this Act the Central Government may, by notification in the Gazette of India, declare the Central Board to be superseded, and thereafter the general superintendence and direction of the affairs of the Bank shall be entrusted to such agency at the Central Government may determine, and such agency may exercise the powers and do all acts and things which may be exercised or done by the Central Board under this Act.

(2) When action is taken under this section the Central Government shall cause a full report of the circumstances leading to such action and of the action taken to be laid before Parliament at the earliest possible opportunity and in any case within three months from the issue of the notification superseding the Board.

Section 31. Issue of demand bills and notes

(1) No person in India other than the Bank, or, as expressly authorised by this Act the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any sum or sums of money on the bills, hundis or notes payable to bearer on demand of any such person:

PROVIDED that cheques or drafts, including hundis, payable to bearer on demand or otherwise may be drawn on a person’s account with a banker, shroff or agent.

(2) Notwithstanding anything contained in the Negotiable Instrument Act, 1881 (26 of 1881), no person in India other than the Bank or, as expressly authorised by this Act, the Central Government shall make or issue any promissory note expressed to be payable to the bearer of the instrument.

Section 32. Section

[Section 32 repealed by the Reserve Bank of India (Amendment) Act, 1974]

Section 33. Assets of the issue department

(1) The assets of the issue department shall consist of gold coin, gold bullion, foreign securities, rupee coin and rupee securities to such aggregate amount as is not less than the total of the liabilities of the issue department as hereinafter defined.

(2) The aggregate value of the gold coin, gold bullion and foreign securities held as assets and the aggregate value of the gold coin and gold bullion so held shall not at any time be less than two hundred crores of rupees and one hundred and fifteen crores of rupees, respectively.

1[(3) The remainder of the assets shall be held in rupee coin, Government of India rupee securities of any maturity, promissory notes drawn by the National Bank for any loans or advances under clause (4E) of section 17 and such bills of exchange and promissory notes payable in India as are eligible for purchase by the Bank under sub-clause (a) or sub-clause (b) or sub-clause (bb) of clause (2) of section 17 or under clause (1) of section 18.]

(4) For the purposes of this section, gold coin and gold bullion shall be valued at 2[a price not exceeding the international market price for the time being obtaining,] rupee coin shall be valued at its face value, and securities shall be valued at rates not exceeding the market rates for the time being obtaining.

(5) Of the gold coin and gold bullion held as assets, not less than seventeen-twentieths shall be held in India, and all gold coin and gold bullion held as assets shall be held in the custody of the Bank or its agencies:

PROVIDED that gold belonging to the Bank which is in any other bank or in any mint or treasury or in transit may be reckoned as part of the assets.

(6) For the purposes of this section, the foreign securities which may be held as part of the assets shall be-

(i) Securities of the following kinds payable in the currency of any foreign country which is a member of the International Monetary Fund, namely: –

(a) Balances with the bank which is the principal currency authority of that foreign country and any other balances or securities in foreign

Currency maintained with or issued by the International Monetary Fund, the International Bank for Reconstruction and Development, the International Development Association or the International Finance Corporation or Asian Development Bank or the Bank for International Settlements or any banking or financial institution 3[approved] by the Central Government in this behalf, provided that they are repayable within a period of ten years;

(b) Bills of exchange bearing two or more good signatures and drawn on and payable at any place in that foreign country and having a maturity not exceeding ninety days; and (c) Government securities of that foreign country maturing within ten years;

(ii) Any drawing rights representing a liability of the International Monetary Fund.

——————–

1. Substituted for the figures and words “0.118489 grammes of fine gold per rupee” by Act No. 8 of 1991, w.r.e.f. 15/10/1990.

2. Substituted by Act No. 1 of 1984, w.e.f. 15/2/1984.

3. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.

Section 34. Liabilities of the issue department

(1) The liabilities of the issue department shall be an amount equal to the total of the amount of the currency notes of the Government of India and bank notes for the time being in circulation. 1[***]

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1. Sub-sections (2) & (3) omitted.

Section 35. Section

[Section 35 repealed by Act No. 62 of 1948, w.e.f. 1st. January, 1949]

Section 36. Section

[Section 36 repealed by Act No. 55 of 1963, w.e.f. 1st. February, 1964]

Section 37. Suspension of assets requirements as to foreign securities

Notwithstanding anything contained in the foregoing provisions, the Bank may, with the previous sanction of the Central Government, for periods not exceeding six months in the first instance, which may, with the like sanction, be extended from time to time by periods not exceeding three months at a time, hold as assets foreign securities of less amount in value than that required by sub-section (2) of section 33.

Section 38. Obligations of government and the Bank in respect of rupee coin

The Central Government shall undertake not to put into circulation any rupees, except through the Bank, and Bank shall undertake not to dispose of rupee coin otherwise than for the purposes of circulation.

Section 39. Obligation to supply different forms of currency

(1) The Bank shall issue rupee coin on demand in exchange for bank notes and currency notes of the Government of India, and shall issue currency notes or bank notes on demand in exchange for coin which is legal tender under the Indian Coinage Act, 1906 (3 of 1906).

(2) The Bank shall, in exchange for currency notes or bank notes of two rupees or upwards, supply currency notes or bank notes of lower value or other coins which are legal tender under the Indian Coinage Act, 1906 (3 of 1906), in such quantities as may, in the opinion of the Bank, be required for circulation; and the Central Government shall supply such coins to the Bank on demand. If the Central Government at any time fails to supply such coins, the Bank shall be released from its obligations to supply them to the public.

Section 40. Transactions in foreign exchange

2[Transactions in foreign exchange. The Bank shall sell to or buy from any authorised person who makes a demand in that behalf at its office in Bombay, Calcutta, Delhi or Madras or at such of its branches as the Central Government may, by order, determine, foreign exchange at such rates of exchange and on such conditions as the Central Government may from time to time by general or special order determine, having regard so far as rates of exchange are concerned to its obligations to the International Monetary Fund:

PROVIDED that no person shall be entitled to demand to buy or sell foreign exchange of a value less than two lakhs of rupees.

Explanation: In this section “authorised person” means a person who is entitled by or under the Foreign Exchange Regulation Act, 1[1973 (46 of 1973)] to buy, or as the case may be, sell, the foreign exchange to which his demand relates.]

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1. Substituted by Act No. 1 of 1984, w.e.f. 15/2/1984.

2. Substituted for sections 40 and 41 by Act No. 23 of 1947.

Section 41 A. Section

[Section 41A. Obligation to provide remittance between India and Burma: repealed by Act No. 11 of 1947, w.e.f. 1st. April, 1947]

Section 42. Cash reserves of scheduled banks to be kept with the Bank

(1) Every bank included in Scheduled II shall maintain with the Bank an average daily balance the amount of which shall not be less than 11[such per cent of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section (2), as the Bank may from time to time, having regard to the needs of securing the monetary stability in the country, notify in the Gazette of India]

PROVIDED that the Bank may, by notification in the Gazette of India, increase the said rate to such higher rate as may be specified in the notification so however that the rate shall not be more than 1[twenty per cent] of the total of the demand and time liabilities.

Explanation: For the purposes of this section-

(a) “Average daily balance” shall mean the average of the balances held at the close of business on each day of a 2[fortnight;]

2[(b) “Fortnight” shall mean the period from Saturday to the second following Friday, both days inclusive;]

(c) “Liabilities” shall not include-

(i) The paid-up capital or the reserves or any credit balance in the profit and loss account of the bank;

(ii) The amount of any loan taken from the bank or from the Development Bank 5[or from the Exim Bank] 7[or from the Reconstruction Bank] 6[or from the National Housing Bank] or from the 10[National Bank] 8[or from the Small Industries Bank;]

(iii) In the case of a State co-operative bank, also any loan taken by such bank from a State Government 3[or from the National Co-operative Development Corporation established under the National Co-operative Development Corporation Act, 1962 (26 of 1962)] and any deposit of money with such bank representing the reserve fund or any part thereof maintained with it by any co-operative society within its area of operation;

(iv) In the case of a State co-operative bank, which has granted an advance against any balance maintained with it, such balance to the extent of the amount outstanding in respect of such advance;

3[(v) In the case of a Regional Rural Bank, also any loan taken by such bank from its Sponsor Bank;

(d) The aggregate of the “liabilities” of a scheduled bank, which is not a State co-operative bank, to-

(i) The State Bank;

(ii) A subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);

(iii) A corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970);

3[(iiia) A corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);]

(iv) A banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(v) A co-operative Bank; or

(vi) Any other financial institution notified by the Central Government in this behalf.

Shall be reduced by the aggregate of the liabilities of all such banks and institutions to the scheduled bank;

(e) The aggregate of the “liabilities” of a scheduled bank, which is a State co-operative bank, to-

(i) The State Bank;

(ii) A subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);

(iii) A corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970);

3[(iiia) A corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);

(iv) A banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); or . (v) Any other financial institution notified by the Central Government in this behalf,

Shall be reduced by the aggregate of the liabilities of all such banks and institutions to the State co-operative bank.

(1A) Notwithstanding anything contained in sub-section (1), the bank may, by notification in the Gazette of India, direct that every scheduled bank shall, with effect from such date as may be specified in the notification, maintain with the bank, in addition to the balance prescribed by or under sub-section (1), an additional average daily balance the amount of which shall not be less than the rate specified in the notification, such additional balance being calculated with reference to the excess of the total of the demand and time liabilities of the bank as shows in the return referred to in sub-section (2) over the total of its demand and time liabilities at the close of business on the date specified in the notification as shown by such return so however, that the additional balance shall, in no case, be more than such excess:

3[PROVIDED that the bank may, by a separate notification in the Gazette of India, specify different dates in respect of a bank subsequently, included in the Schedule II.]

4[(1AA) ****]

4[(1B) *****]

3[(1C) The bank may, for the purposes of this section, specify from time to time with reference to any transaction or class of transactions that such transaction or transactions shall be regarded as liability in India of a scheduled bank, and if any question arises as to whether any transaction or class of transactions shall be regarded, for the purposes of this section, as liability in India of a scheduled bank, the decision of the Bank thereon shall be final.]

(2) Every scheduled bank shall send to the bank a return signed by two responsible officers of such bank showing-

(a) The amount of its demand and time liabilities and the amount of its borrowings from banks in India, classifying them into demand and time liabilities,

(b) The total amount of legal tender notes and coins held by it in India,

(c) The balance held by it at the Bank in India,

(d) The balances held by it at other banks in current account and the money at call and short notice in India,

(e) The investments (at book value) in Central and State Government securities including treasury bills and treasury deposit receipts,

(f) The amount of advances in India,

(g) The inland bills purchased and discounted in India and foreign bills purchased and discounted,

2[At the close of business on each alternate Friday, and every such return shall be sent not later than seven days after the date to which it relates:]

PROVIDED that the bank may, by notification in the Gazette of India, delete or modify or add to any of the particulars specified in the foregoing clauses:

PROVIDED FURTHER that where 3[such alternate] Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), for one or more offices of a scheduled bank, the return shall give the preceding working day’s figures in respect of such office or offices, but shall nevertheless be deemed to relate to that Friday:

2[PROVIDED ALSO that where the bank is satisfied that the furnishing of a fortnightly return under his sub-section is impracticable in the case of any scheduled bank by reason of the geographical position of the bank and its branches, the Bank may allow such bank-

(i) To furnish a provisional return for the fortnight within the period aforesaid to be followed by a final return not later than twenty days after the date to which it relates, or

(ii) To furnish in lieu of a fortnightly return a monthly return to be sent not later than twenty days after the end of the month to which it relates giving the details specified in this sub-section in respect of such bank at the close of business for the month.]

3[(2A) Where the last Friday of a month is not an alternate Friday for the purpose of sub-section (2), every scheduled bank shall send to the bank, a special return giving the details specified in sub-section (2) as at the close of business on such last Friday or where such last Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), as at the close of business on the preceding working day and such return shall be sent not later than seven days after the date to which it relates.]

(3) If the average daily balance held at the bank by a scheduled bank during any 2[fortnight] is below the minimum prescribed by or under sub-section (1) or sub-section (1A), such scheduled bank shall be liable to pay to the bank in respect of that 2[fortnight] penal interest at a rate of three per cent above the bank rate on the amount by which such balance with the bank falls short of the prescribed minimum, and if during the next succeeding 2[fortnight] such average daily balance is still below the prescribed minimum, the rates of penal interest shall be increased to a rate of five per cent above the bank rate in respect of that 2[fortnight] and each subsequent 2[fortnight] during which the default continues on the amount by which such balance at the bank falls short of the prescribed minimum.

(3A) Where under the provisions of sub-section (3) penal interest at the increased rate of five per cent above the bank rate has become payable by a scheduled bank, if thereafter the average daily balance held at the Bank during the next succeeding 2[fortnight] is still below the prescribed minimum: –

(a) Every director, manager or secretary of the scheduled bank, who is knowingly and wilfully a party to the default, shall be punishable with fine which may extend to five hundred rupees and with a further fine which may extend to five hundred rupees for each subsequent 2[fortnight] during which the default continues, and

(b) The Bank may prohibit the scheduled bank from receiving after the said 2[fortnight] any fresh deposit,

And, if default is made by the scheduled bank in complying with the prohibition referred to in clause (b), every director and officer of the schedule bank who is knowingly and wilfully a party to such default or who through negligence or otherwise contributes to such default shall in respect of each such default be punishable with fine which may extend to five hundred rupees and with a further fine which may extend to five hundred rupees for each day after the first on which a deposit received in contravention of such prohibition is retained by the scheduled bank.

Explanation: In this sub-section “officer” includes a manager, secretary, branch manager, and branch secretary.

(4) Any scheduled bank failing to comply with the provisions of sub-section (2) shall be liable to pay to the Bank a penalty of one hundred rupees for each day during which the failure continues.

(5)

(a) The penalties imposed by sub-sections (3) and (4) shall be payable within a period of fourteen days from the date on which a notice issued by the Bank demanding the payment of the same is served by the scheduled bank, and in the event of failure of the scheduled bank to pay the same within such period, may be levied by a direction of the principal civil court having jurisdiction in the area where an office of the defaulting bank is situated, such direction to be made only upon an application made in this behalf to the court by the Bank;

(b) When the court makes a direction under clause (a), it shall issue a certificate specifying the sum payable by the scheduled bank and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a suit;

(c) Notwithstanding anything contained in this section, if the Bank is satisfied that the defaulting bank had sufficient cause for its failure to comply with the provisions of sub-sections (1), (1A) or (2), it may not demand the payment of the penal interest of the penalty, as the case may be.

(6) The Bank shall, save as hereinafter provided, by notification in the Gazette of India;

(a) Direct the inclusion in Schedule II of any bank not already so included which carries on the business of banking in India and which-

(i) Has a paid-up capital and reserves of an aggregate value of not less than five lakhs of rupees, and

(ii) Satisfies the Bank that its affairs are not being conducted in a manner detrimental to the interests of its depositors, and

(iii) Is a State co-operative bank or a company as defined in section 3 of the Companies Act, 1956 (1 of 1956), or an institution notified by the Central Government in this behalf or a corporation or a company incorporated by or under any law in force in any place outside India;

(b) Direct the exclusion from that Schedule of any scheduled bank: –

(i) The aggregate value of whose paid-up capital and reserves becomes at any time less than five lakhs of rupees, or

(ii) Which is, in the opinion of the Bank after making an inspection under section 35 of the Banking Regulation Act, 1949 (10 of 1949), conducting its affairs to the detriment of the interests of its depositors, or

(iii) Which goes into liquidation or otherwise ceases to carry on banking business:

PROVIDED that the Bank may, on application of the scheduled bank concerned and subject to such conditions, if any, as it may, impose, defer the making of a direction under sub-clause (i) or sub-clause (ii) of clause (b) for such period as the Bank considers reasonable to give the scheduled bank an opportunity of increasing the aggregate value of its paid-up capital and reserves to not less than five lakhs of rupees or, as the case may be, of removing the defects in the conduct of its affairs;

(c) Alter the description in that Schedule whenever any scheduled bank changes its name.

Explanation: In this sub-section the expression “value” means the real or exchangeable value and not the nominal value which may be shown in the books of the bank concerned; and if any dispute arises in computing the aggregate value of the paid-up capital and reserves of a bank, a determination thereof by the Bank shall be final for the purposes of this sub-section.

9[(6A) In considering whether a State co-operative bank or a regional rural bank should be included in or excluded from Schedule II, it shall be competent for the Bank to act on a certificate from the National Bank on the question whether or not a State co-operative bank or a regional rural bank, as the case may be, satisfies the requirements as to paid-up capital and reserves or whether its affairs are not being conducted in a manner detrimental to the interests of its depositors.]

(7) The Bank may, for such period and subject to such conditions as may be specified, grant to any scheduled bank such exemptions from the provisions of this section as it thinks fit with reference to all or any of its offices or with reference to the whole or any part of its assets and liabilities.

——————–

1. Substituted by Act No. 9 of 1991, for the words “fifteen per cent”.

2. Substituted by Act No. 1 of 1984, w.e.f. 29/3/1985.

3. Inserted by Act No. 1 of 1984, w.e.f. 29/3/1985.

4. Sub-section (1-AA) and (1-B) Omitted by Act No. 26 of 2006 w.e.f. 12-6-2006.

5. Inserted by Act No. 28 of 1981, w.e.f. 1/1/1982.

6. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.

7. Inserted by Act No. 62 of 1984, w.e.f. 20/3/1985.

8. Inserted by Act No. 39 of 1989, w.e.f. 7/3/1990.

9. Inserted by Act No. 61 of 1981, w.e.f. 1/5/1982.

10. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.

11. Subs. by Act No. 26 of 2006 w.e.f. 12-6-2006.

Section 43. Publication of consolidated statement by the bank

The Bank shall cause to be published each 1[fortnight] a consolidated statement showing the aggregate liabilities and assets of all the scheduled banks together, based on the returns and information received under this Act or any other law for the time being in force.

——————–

1. Substituted by Act No. 1 of 1984, w.e.f. 29/3/1985.

Section 43 A. Protection of action taken in good faith

(1) No suit or other legal proceeding shall lie against the bank or any of its officers for anything which is in good faith done or intended to be done in pursuance of section 42 or section 43 or in pursuance of the provision of chapter IIIA.

(2) No suit or other legal proceeding shall lie against the bank or any of its officers for any damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of section 42 or section 43 or in pursuance of the provisions of chapter III-A.

Section 44. Section

[Section 44. Power to require returns from co-operative banks :repealed by the Banking Laws (Application to Co-operative Societies) Act, 1965, w.e.f. 1st. March 1966]

Section 45. Appointment of agents

1[Appointment of agents. (1) Unless otherwise directed by the Central Government with reference to any place, the bank may, having regard to public interest, convenience of banking, banking development and such other factors which in its opinion are relevant in this regard, appoint the National Bank, or the State Bank, or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), as its agent at all places, or at any place in India for such purposes as the Bank may specify.

(2) When any bank is appointed by the bank as its agent under sub-section (1) to receive on behalf of the Bank any payment required to be made into the Bank, or any bill, hundies or other securities required to be delivered into the Bank, under any law or rule, regulations or other instructions having the force of law, the same may be paid or delivered into the bank so appointed as the agent of the bank.]

——————–

1. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.

Section 45 A. Definitions

In this chapter, unless the context otherwise requires: –

(a) “Banking company” means a banking company as defined in section 5 of the Banking Regulation Act, 1949 (10 of 1949), and includes the State Bank of India, any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), any corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), and any other financial institution notified by the Central Government in this behalf;

(b) “Borrower” means any person to whom any credit limit has been sanctioned by any banking company, whether availed of or not, and includes-

(i) In the case of a company or corporation, as subsidiaries;

(ii) In the case of a Hindu undivided family, any member thereof or any firm in which such member is a partner;

(iii) In the case of a firm, any partner thereof or any other firm in which such partner is a partner; and

(iv) In the case of an individual, any firm in which such individual is a partner;

(c) “Credit information” means any information relating to-

(i) The amounts and the nature of loans or advances and other credit facilities granted by a banking company to any borrower or class of borrowers;

(ii) The nature of security taken from any borrower or class of borrowers for credit facilities granted to him or to such class;

(iii) The guarantee furnished by a banking company for any of its customers or any class of its customers;

(iv) The means, antecedents, history of financial transactions and the credit worthiness of any borrower or class of borrowers;

(v) Any other information which the Bank may consider to be relevant for the more orderly regulation of credit or credit policy.

Section 45 B. Power of bank to collect credit information

The bank may-

(a) Collect, in such manner as it may think fit, credit information from banking companies; and

(b) Furnish such information to any banking company in accordance with the provisions of section 45D.

Section 45 C. Power to call for returns containing credit information

(1) For the purpose of enabling the bank to discharge its functions under this chapter, it may at any time direct any banking company to submit to it such statements relating to such credit information and in such form and within such time as may be specified by the Bank from time to time.

(2) A banking company shall, notwithstanding anything to the contrary contained in any law for time being in force or in any instrument regulating the constitution thereof or in any agreement executed by it, relating to the secrecy of its dealings with its constituents, be bound to comply with any direction issued under sub-section (1).

Section 45 D. Procedure for furnishing credit information to banking companies

(1) A banking company may, in connection with any financial arrangement entered into or proposed to be entered into by it, with any person, make an application to the Bank in such form as the Bank may specify requesting it to furnish the applicant with such credit information as may be specified in the application.

(2) On receipt of an application under sub-section (1), the bank shall, as soon as may be, furnish the applicant with such credit information relating to the matters specified in the application, as may be in its possession:

PROVIDED that the information so furnished shall not disclose the names of the banking companies which have submitted such information to the Bank.

(3) The bank may in respect of each application levy such fees, not exceeding twenty-five rupees, as it may deem fit for furnishing credit information.

Section 45 E. Disclosure of information prohibited

(1) Any credit information contained in any statement submitted by a banking company under section 45C or furnished by the bank to any banking company under section 45D, shall be treated as confidential and shall not, except for the purposes of this chapter, be published or otherwise disclosed.

(2) Nothing in this section shall apply to-

(a) The disclosure by any banking company, with the previous permission of the Bank, of any information furnished to the Bank under section 45C;

(b) The publication by the Bank, if it considers necessary in the public interest so to do, of any information collected by it under section 45C, in such consolidated form as it may think fit without disclosing the name of any banking company or its borrowers;

(c) The disclosure or publication by the banking company or by the bank of any credit information to any other banking company or in accordance with the practice and usage customary among bankers or as permitted or required under any other law:

1[(d) the disclosures of any credit information under the Credit Information Companies (Regulation) Act, 2005.]

PROVIDED that any credit information received by a banking company under this clause shall not be published except in accordance with the practice and usage customary among bankers or as permitted or required under any other law.

(3) Notwithstanding anything contained in any law for the time being in force, no court, tribunal or other authority shall compel the Bank or any banking company to produce or to give inspection of any statement submitted by that banking company under section 45C or to disclose any credit information furnished by the Bank to that banking company under section 45D.

——————–

1. Clause (d) Inserted by Act No. 30 of 2005 w.e.f. 23-6-2005.

Section 45 F. Certain claims for compensation barred

No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred by reason of the operation of any of the provisions of this chapter.

Section 45 G. Section

[Section 45G. Penalties: repealed by the Reserve Bank of India (Amendment) Act, 1974]

Section 45 H. Chapter III-B not to apply in certain cases

CHAPTER III-B

The provisions of this chapter shall not apply to the State Bank or banking company as defined in section 5 of the Banking Regulation Act, 1949 (10 of 1949) or 1[a corresponding new bank as defined in clause (da) of section 5 of that Act or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959)] or a Regional Rural Bank or a co-operative bank or a primary agricultural credit society or a primary credit society:

PROVIDED that for the purposes of this chapter, the Tamil Nadu Industrial Investment Corporation Limited shall not be deemed to be a banking company.

——————–

1. Substituted by Act No. 1 of 1984, w.e.f. 15/2/1984.

Section 45 I. Definitions

In this chapter, unless the context otherwise requires-

2[(a) “Business of a non-banking financial institution” means carrying on of the business of a financial institution referred to in clause (c) and includes business of a non-banking financial company referred to in clause (f);]

3[(aa)] “Company” means a company as defined in section 3 of the Companies Act, 1956 (1 of 1956) and includes a foreign company within the meaning of section 591 of that Act;

(b) “Corporation” means a corporation incorporated by an Act of any Legislature;

1[(bb) “Deposit” includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form, but does not include: –

(i) Amounts raised by way of share capital;

(ii) Amounts contributed as capital by partners of a firm;

(iii) Amounts received from a scheduled bank or a co-operative bank or any other banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(iv) Any amount received from: –

(a) The Development Bank,

(b) A State Financial Corporation,

(c) Any financial institution specified in or under section 6A of the Industrial Development Bank of India Act, 1964 (18 of 1964), or

(d) Any other institution that may be specified by the Bank in this behalf;

(v) Amounts received in the ordinary course of business, by way of-

(a) Security deposit,

(b) Dealership deposit,

(c) Earnest money, or

(d) Advance against orders for goods, properties or services;

(vi) Any amount received from an individual or a firm or an association of individuals not being a body corporate, registered under any enactment relating to money lending which is for the time being in force in any State; and

(vii) Any amount received by way of subscriptions in respect of a chit.

Explanation I: “Chit” has the meaning assigned to it in clause (b) of section 2 of the Chit Funds Act, 1982 (40 of 1982).

Explanation II: Any credit given by a seller to a buyer on the sale of any property (whether movable or immovable) shall not be deemed to be deposit for the purposes of this clause;

(c) “Financial institution” means any non-banking institution which carries on as its business or part of its business any of the following activities, namely: –

(i) The financing, whether by way of making loans or advances or otherwise, of any activity other than its own;

(ii) The acquisition of shares, stock, bonds, debentures or securities issued by a government or local authority or other marketable securities of a like nature;

(iii) Letting or delivering of any goods to a hirer under a hire-purchase agreement as defined in clause (c) of section 2 of the Hire-Purchase Act, 1972 (26 of 1972);

(iv) The carrying on of any class of insurance business;

(v) Managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto;

(vi) Collecting, for any purpose or under any scheme or arrangement by whatever name called monies in lump sum or otherwise, by way of subscriptions or by sale of units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing monies in any other way, to persons from whom monies are collected or to any other person,

4[But does not include any institution, which carries on as its principal business: –

(a) Agricultural operations; or

(aa) Industrial activity; or;]

(b) The purchase or sale of any goods (other than securities) or the providing of any services; or

(c) The purchase, construction or sale of immovable property, so, however, that no portion of the income of the institution is derived from the financing of purchases, constructions or sales of immovable property by other persons;

2[Explanation : For the purposes of this clause, “industrial activity” means any activity specified in sub-clauses (i) to (xviii) of clause (c) of section 2 of the Industrial Development Bank of India Act, 1964 (18 of 1964)];

(d) “Firm” means a firm as defined in the Indian Partnership Act, 1932 (9 of 1932);

(e) “Non-banking institution” means a company, corporation or co-operative society.

2[(f) “non-banking financial company” means-

(i) A financial institution which is a company;

(ii) A non banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending Tiny manner;

(iii) Such other non-banking institution or class of such institutions, as the bank may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.]

——————–

1. Substituted by Act No. 1 of 1984, w.e.f. 15/2/1984.

2. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.

3. Earlier clause (a) renumbered to (aa) by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.

4. Substituted by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.

Section 45 IA. Requirement of registration and net owned fund

1[Requirement of registration and net owned fund. (1) Notwithstanding anything contained in this Chapter or in any other law for the time being in force, no non-banking financial company shall commence or carry on the business of a non-banking financial institution without-

(a) Obtaining a certificate of registration issued under this Chapter; and

(b) Having the net owned fund of twenty five lakh rupees or such other amount, not exceeding two hundred lakhs, as the bank may, be notification in the Official Gazette, specify.

(2) Every non-banking financial company shall make an application for registration to the bank in such form as the bank may specify:

PROVIDED that a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 shall make an application for registration to the bank before the expiry of six months from such commencement and notwithstanding anything contained in sub-section (1) may continue to carry on the business of a non-banking financial institution until a certificate of registration is issued to it or rejection of application for registration is communicated to it.

(3) Notwithstanding anything contained in sub-section (1), a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 and having a net owned fund of less than twenty five lakh rupees may, for the purpose of enabling such company to fulfil the requirement of the net owned fund, continue to carry on the business of a non-banking financial institution-

(i) For a period of three years from such commencement; or

(ii) For such further period as the bank may, after recording the reasons in writing for so doing, extend, subject to the condition that such company shall, within three months of fulfilling the requirement of the net owned fund, inform the bank about such fulfilment:

PROVIDED that the period allowed to continue business under this sub-section shall in no case exceed six years in the aggregate.

(4) The bank may, for the purpose of considering the application for registration, require to be satisfied by an inspection of the books of the non-banking financial company or otherwise that the following conditions are fulfilled: –

(a) That the non-banking financial company is or shall be in a position to pay its present or future depositors in full as and when their claims accrue;

(b) That the affairs of the non-banking financial company are not being or are not likely to be conducted in a manner detrimental to the interest of its present or future depositors;

(c) That the general character of the management or the proposed management of the non-banking financial company shall not be prejudicial to the public interest or the interests of its depositors;

(d) That the non-banking financial company has adequate capital structure and earning prospects;

(e) That the public interest shall be served by the grant of certificate of registration to the non-banking financial company to commence or to carry on the business in India;

(f) That the grant of certificate of registration shall not be prejudicial to the operation and consolidation of the financial sector consistent with monetary stability and economic growth considering such other relevant factors which the bank may, by notification in the Official Gazette, specify; and

(g) Any other condition, fulfilment of which in the opinion of the bank, shall be necessary to ensure that the commencement of or carrying on of the business in India by a non-banking financial company shall not be prejudicial to the public interest or in the interest of the depositors.

(5) The bank may, after being satisfied that the conditions specified in sub-section (4) are fulfilled, grant a certificate of registration subject to such conditions which it may consider fit to impose.

(6) The bank may cancel a certificate of registration granted to a non-banking financial company under this section if such company-

(i) Ceases to carry on the business of a non-banking financial institution in India; or

(ii) Has failed to comply with any condition subject to which the certificate of registration had been issued to it; or

(iii) At any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section (4); or

(iv) Fails-

(a) To comply with any direction issued by the bank under the provisions of this Chapter; or

(b) To maintain accounts in accordance with the requirements of any law or any direction or order issued by the bank under the provisions of this Chapter; or

(c) To submit or offer for inspection its books of accounts and other relevant documents when so demanded by an inspecting authority of the bank; or

(v) Has been prohibited from accepting deposit by an order made by the bank under the provisions of this Chapter and such order has been in force for a period of not less than three months:

PROVIDED that before cancelling a certificate of registration on the ground that the non-banking financial company has failed to comply with the provisions of clause (ii) or has failed to fulfil any of the conditions referred to in clause (iii) the bank, unless it is of the opinion that the delay in cancelling the certificate of registration shall be prejudicial to public interest or the interest of the depositors or the non-banking financial company, shall give an opportunity to such company on such terms as the bank may specify for taking necessary steps to comply with such provisions or fulfilment of such condition:

PROVIDED FURTHER that before making any order of cancellation of certificate of registration, such company shall be given a reasonable opportunity of being heard.

(7) A company aggrieved by the order of rejection of application for registration or cancellation of certificate of registration may prefer an appeal, within a period of thirty days from the date on which such order of rejection or cancellation is communicated to it, to the Central Government and the decision of the Central Government where an appeal has been preferred to it, or of the bank where no appeal has been preferred, shall be final:

PROVIDED that before making any order of rejection of appeal, such company shall be given a reasonable opportunity of being heard.

Explanation: For the purposes of this section-

(I) “Net owned fund” means-

(a) The aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the company after deducting therefrom-

(i) Accumulated balance of loss;

(ii) Deferred revenue expenditure; and

(iii) Other intangible assets; and

(b) Further reduced by the amounts representing-

(1) Investments of such company in shares of-

(i) Its subsidiaries;

(ii) Companies in the same group;

(iii) All other non-banking financial companies; and

(2) The book value of debentures, bonds, outstanding loans and advances (including hire-purchase and lease finance) made to, and deposits with-

(i) Subsidiaries of such company; and

(ii) Companies in the same group,

To the extent such amount exceeds ten per cent, of (a) above.

(II) “Subsidiaries” and “companies in the same group” shall have the same meanings assigned to them in the Companies Act, 1956 (1 of 1956).]

——————–

1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.

Section 45 IB. Maintenance of percentage of assets

1Maintenance of percentage of assets. (1) Every non-banking financial company shall invest and continue to invest in India in unencumbered approved securities, valued at a price not exceeding the current market price of such securities, an amount which, at the close of business on any day, shall not be less than five per cent or such higher percentage not exceeding twenty five per cent, as the bank may, from time to time and by notification in the Official Gazette, specify, of the deposits outstanding at the close of business on the last working day of the second preceding quarter:

PROVIDED that the bank may specify different percentages of investment in respect of different classes of non-banking financial companies.

(2) For the purpose of ensuring compliance with the provisions of this section, the bank may require every non-banking financial company to furnish a return to it in such form, in such manner and for such period as may be specified by the bank.

(3) If the amount invested by a non-banking financial company at the close of business on any day falls below the rate specified under sub-section (1), such company shall be liable to pay to the bank, in respect of such shortfall, a penal interest at a rate of three per cent per annum above the bank rate on such amount by which the amount actually invested falls short of the specified percentage, and where the shortfall continues in the subsequent quarters, the rate of penal interest shall be five per cent per annum above the bank rate on such shortfall for each subsequent quarter.

(4)

(a) The penal interest payable under sub-section (3) shall be payable within a period of fourteen days from the date on which a notice issued by the bank demanding payment of the same is served on the non-banking financial company and, in the event of a failure of the non-banking financial company to pay the same within such period, penalty may be levied by a direction of the principal civil court having jurisdiction in the area where an office of the defaulting non-banking financial company is situated and such direction shall be made only upon an application made in this behalf to the court by the bank; and

(b) When the court makes a direction under clause (a), it shall issue a certificate specifying the sum payable by the non-banking financial company and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a suit.

(5) Notwithstanding anything contained in this section, if the bank is satisfied that the defaulting non-banking financial company had sufficient cause for its failure to comply with the provisions of sub-section (1), it may not demand the payment of the penal interest.

Explanation: For the purposes of this section: –

(i) “Approved securities” means securities of any State Government or of the Central Government and such bonds, both the principal whereof and the interest whereon shall have been fully and unconditionally guaranteed by any such government;

(ii) “Unencumbered approved securities” includes the approved securities lodged by the non-banking financial company with another institution for an advance or any other arrangement to the extent to which such securities have not been drawn against or availed of or encumbered in any manner;

(iii) “Quarter” means the period of three months, ending on the last day of March, June, September or December.

——————–

1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.

Section 45 IC. Reserve fund

(1) Every non-banking financial company shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared.

(2) No appropriation of any sum from the reserve fund shall be made by the non-banking financial company except for the purpose as may be specified by the bank from time to time and every such appropriation shall be reported to the bank within twenty-one days from the date of such withdrawal:

PROVIDED that the bank may, in any particular case and for sufficient cause being shown, extend the period of twenty-one days by such further period as it thinks fit or condone any delay in making such report.

(3) Notwithstanding anything contained in sub-section (1), the Central Government may, on the recommendation of the bank and having regard to the adequacy of the paid-up capital and reserves of a non-banking financial company in relation to its deposit liabilities, declare by order in writing that the provisions of sub-section (1) shall not be applicable to the non-banking financial company for such period as may be specified in the order:

PROVIDED that no such order shall be made unless the amount in the reserve fund under sub-section (1) together with the amount in the share premium account is not less than the paid-up capital of the non-banking financial company.]

Section 45 J. Section

Bank to regulate or prohibit issue of prospectus or advertisement soliciting deposits of money.

]

The bank may, if it considers necessary in the public interest so to do, by general or special order-

(a) Regulate or prohibit the issue by any non-banking institution of any prospectus or advertisement soliciting deposits of money from the public; and

(b) Specify the conditions subject to which any such prospectus or advertisement, if not prohibited, may be issued.

Section 45 JA. Power of bank to determine policy and issue directions

1[Power of bank to determine policy and issue directions. (1) If the bank is satisfied that, in the public interest or to regulate the financial system of the country to its advantage or to prevent the affairs of any non-banking financial company being conducted in a manner detrimental to the interest of the depositors or in a manner prejudicial to the interest of the non-banking financial company, it is necessary or expedient so to do, it may determine the policy and give directions to all or any of the non-banking financial companies relating to income recognition, accounting standards, making of proper provision for bad and doubtful debts, capital adequacy based on risk weights for assets and credit conversion factors for off balance-sheet items and also relating to deployment of funds by a non-banking financial company or a class of non-banking financial companies or non-banking financial companies generally, as the case may be, and such non-banking financial companies shall be bound to follow the policy so determined and the directions so issued.

(2) Without prejudice to the generality of the powers vested under sub-section (1), the bank may give directions to non-banking financial companies generally or to a class of non-banking financial companies or to any non-banking financial company in particular as to-

(a) The purpose for which advances or other fund based or non-fund based accommodation may not be made; and . (b) The maximum amount of advances or other financial accommodation or investment in shares and other securities which, having regard to the paid-up capital, reserves and deposits of the non-banking financial company and other relevant considerations, may be made by that non-banking financial company to any person or a company or to a group of companies.]

——————–

1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.

Section 45 K. Power of bank to collect information from non-banking institutions as to deposits and to give directions

(1) The bank may at any time direct that every non-banking institution shall furnish to the bank, in such form, at such intervals and within such time, such statements, information or particulars relating to or connected with deposits received by the non-banking institution, as may be specified by the bank by general or special order.

(2) Without prejudice to the generality of the power vested in the bank under sub-section (1), the statements, information or particulars to be furnished under sub-section (1), may relate to all or any of the following matters, namely, the amount of the deposits, the purposes and periods for which, and the rates of interest and other terms and conditions on which, they are received.

(3) The bank may, if it considers necessary in the public interest so to do, give directions to non-banking institutions either generally or to any non-banking institution or group of non-banking institutions in particular, in respect of any matters relating to or connected with the receipt of deposits, including the rates of interest payable on such deposits, and the periods for which deposits may be received.

(4) If any non-banking institution fails to comply with any direction given by the bank under sub-section (3), the bank may prohibit the acceptance of deposits by that non-banking institution.

(5) 1[***]

(6) Every non-banking institution receiving deposits shall, if so required by the bank and within such time as the bank may specify, cause to be sent at the cost of the non-banking institution a copy of its annual balance-sheet and profit and loss account or other annual accounts to every person from whom the non-banking institution holds, as on the last day of the year to which the accounts relate, deposits higher than such sum as may be specified by the bank.

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1. Omitted by Act No. 51 of 1974.

Section 45 L. Power of bank to call for information from financial institutions and to give directions

(1) If the bank is satisfied for the purpose of enabling it to regulate the credit system of the country to its advantage it is necessary so to do, it may-

(a) Require financial institutions either generally or any group of financial institutions or financial institution in particular, to furnish to the Bank in such form, at such intervals and within such time, such statements, information or particulars relating to the business of such financial institutions or institution, as may be specified by the bank by general or special order;

(b) Give to such institutions either generally or to any such institution in particular, directions relating to the conduct of business by them or by it as financial institutions or institution.

(2) Without prejudice to the generality of the power vested in the bank under clause (a) of sub-section (1), the statements, information or particulars to be furnished by a financial institution may relate to all or any of the following matters, namely, the paid-up capital, reserves or other liabilities, the investments whether in government securities or otherwise, the persons to whom, and the purposes and periods for which, finance is provided and the terms and conditions, including the rate of interest, on which it is provided.

(3) In issuing directions to any financial institution under clause (b) of sub-section (1), the bank shall have due regard to the conditions in which, and the objects for which, the institution has been established, its statutory responsibilities, if any, and the effect the business of such financial institution is likely to have on trends in the money and capital markets.

Section 45 M. Duty of non-banking institutions to furnish statements, etc., required by bank

It shall be the duty of every non-banking institution to furnish the statements, information or particulars called for, and to comply with any direction given to it, under the provisions of this chapter.

Section 45 MA. Powers and duties of auditors

(1) It shall be the duty of an auditor of a non-banking institution to inquire whether or not the non-banking institution has furnished to the bank such statements, information or particulars relating to or connected with deposits received by it, as are required to be furnished under this chapter, and the auditor shall, except where he is satisfied on such inquiry that the non-banking institution has furnished such statements, information or particulars, make a report to the bank giving the aggregate amount of such deposits held by the non-banking institution.

1[(1A) The bank may, on being satisfied that it is necessary so to do, in the public interest or in the interest of the depositors or for the purpose of proper assessment of the books of accounts, issue directions to any non-banking financial company or any class of non-banking financial companies or non-banking financial companies generally or to the auditors of such non-banking financial company or companies relating to balance sheet, profit and loss account, disclosure of liabilities in the books of accounts or any matter relating thereto.]

(2) Where, in the case of 2[a non-banking financial company] the auditor has made, or intends to make, a report to the bank under sub-section (1), he shall include in his report under sub-section (2) of section 227 of the Companies Act, 1956 (1 of 1956), the contents of the report which he has made, or intends to make, to the bank.

1[(3) Where the bank is of the opinion that it is necessary so to do in the public interest or in the interest of the non-banking financial company, or in the interest of depositors of such company it may at any time by order direct that a special audit of the accounts of the non-banking financial company in relation to any such transaction or class of transactions or for such period or periods, as may be specified in the order, shall be conducted and the bank may appoint an auditor or auditors to conduct such special audit and direct the auditor or the auditors to submit the report to it.

(4) The remuneration of the auditors as may be fixed by the bank, having regard to the nature and volume of work involved in the audit and the expenses of or incidental to the audit, shall be borne by the non-banking financial company so audited.]

——————–

1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.

2. Substituted for words “a non-banking institution, being a company” by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.

Section 45 MB. Power of bank to prohibit acceptance of deposit and alienation of assets

1[Power of bank to prohibit acceptance of deposit and alienation of assets. (1) If any non-banking financial company violates the provisions of any section or fails to comply with any direction or order given by the bank under any of the provisions of this Chapter, the bank may prohibit the non-banking financial company from accepting any deposit.

(2) Notwithstanding anything to the contrary contained in any agreement or instrument or any law for the time being in force, the bank, on being satisfied that it is necessary so to do in the public interest or in the interest of the depositors, may direct, the non-banking financial company against which an order prohibiting from accepting deposit has been issued, not to sell, transfer, create charge or mortgage or deal in any manner with its property and assets without prior written permission of the bank for such period not exceeding six months from the date of the order.

——————–

1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.

Section 45 MC. Power of bank to file winding up petition

(1) The bank, on being satisfied that a non-banking financial company-

(a) Is unable to pay its debt; or

(b) Has by virtue of the provisions of section 45-IA become disqualified to carry on the business of a non-banking financial institution; or

(c) Has been prohibited by the bank from receiving deposit by an order and such order has been in force for a period of not less than three months; or

(d) The continuance of the non-banking financial company is detrimental to the public interest or to the interest of depositors of the company,

May file an application for winding up of such non-banking financial company under the Companies Act, 1956 (1 of 1956).

(2) A non-banking financial company shall be deemed to be unable to pay its debt if it has refused or has failed to meet within five working days any lawful demand made at any of its offices or branches and the bank certifies in writing that such company is unable to pay its debt.

(3) A copy of every application made by the bank under sub-section (1) shall be sent to the Registrar of Companies.

(4) All the provisions of the Companies Act, 1956 (1 of 1956) relating to winding up of a company shall apply to a winding up proceeding initiated on the application, made by the bank under this provision.]

Section 45 N. Inspection

(1) The bank may, at any time, cause an inspection to be made by one or more of its officers or employees or other persons (hereinafter in this section referred to as the inspecting authority)-

(i) Of any non-banking institution, including a financial institution, for the purposes of verifying the correctness or completeness of any statement, information or particulars furnished to the bank or for the purpose of obtaining any information or particulars which the non-banking institution has failed to furnished on being called upon to do so; or

(ii) Of any non-banking institution being a financial institution, if the bank considers it necessary or expedient to inspect that institution.

(2) It shall be the duty of every director or member of any committee or other body for the time being vested with the management of the affairs of the non-banking institution or other officer or employee thereof to produce to the inspecting authority all such books, accounts and other documents in his custody or power and to furnish that authority with any statements and information relating to the business of the institution as that authority may require of him, within such time as may be specified by that authority

(3) The inspection authority may examine on oath director or member of any committee or body for the time being vested with the management of the affairs of the non-banking institution or other officer or employee thereof, in relation to its business and may administer an oath accordingly.

Section 45 NA. Deposits not to be solicited by unauthorised persons

No person shall solicit on behalf of any non-banking institution either by publishing or causing to be published any prospectus or advertisement or in any other manner deposits of money from the public unless-

(a) He has been authorised in writing by the said non-banking institution to do so and specifies the name of the institution which has so authorised him, and

(b) The prospectus or advertisement complies with any order made by the bank under section 45J and with any other provision of law for the time being in force, applicable to the publication of such prospectus or advertisement.

Section 45 NB. Disclosure of information

1[Disclosure of information. (1) Any information relating to a non-banking financial company-

(i) Contained in any statement or return submitted by such company under the provisions of this Chapter; or

(ii) Obtained through audit or inspection or otherwise by the bank,

Shall be treated as confidential and shall not, except otherwise provided in this section, be disclosed.

(2) Nothing in this section shall apply to-

(a) The disclosure by any non-banking financial company, with the previous permission of the bank, of any information furnished to the bank under sub-section (1);

(b) The publication by the bank, if it considers necessary in the public interest so to do, of any information collected by it under sub-section (1) in such consolidated form as it may think fit without disclosing the name of any non-banking financial company or its borrowers;

(c) The disclosure or publication by the non-banking financial company or by the bank of any such information to any other non-banking financial company or in accordance with the practice and usage customary amongst such companies or as permitted or required under any other law:

PROVIDED that any such information received by a non-banking financial company under this clause shall not be published except in accordance with the practice and usage customary amongst companies or as permitted or required under any other law.

(3) Notwithstanding anything contained in this Act or in any other law for the time being in force, the bank, if it is satisfied that, in the public interest or in the interest of the depositors or the non-banking financial company or to prevent the affairs of any non-banking financial company being conducted in a manner detrimental to the interest of the depositors, it is expedient so to do, may, either on its own motion or on being requested, furnish or communicate any information relating to the conduct of business by any non-banking financial company to any authority constituted under any law.

(4) Notwithstanding anything contained in any law for the time being in force, no court or Tribunal or other authority shall compel the bank to produce or to give for inspection of any statement or other material obtained by the bank under any provisions of this Chapter.

——————–

1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.

Section 45 NC. Power of bank to exempt

The bank, on being satisfied that it is necessary so to do, may declare by notification in the Official Gazette that any or all of the provisions of this Chapter shall not apply to a non-banking institution or a class of non-banking institutions or a non-banking financial company or to any class or non-banking financial companies either generally or for such period as may be specified, subject to, such condition, limitations or restrictions as it may think fit to impose.]

Section 45 O. Section

[Section 45-O. Penalties: repealed by the Reserve Bank of India (Amendment) Act, 1974]

Section 45 P. Section

[Section 45P. Cognizance of offences: repealed by the Reserve Bank of India (Amendment) Act, 1974]

Section 45 Q. Chapter III B to override other laws

The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

Section 45 QA. Power of Company Law Board to order repayment of deposit

1[Power of Company Law Board to order repayment of deposit. (1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit.

(2) Where a non-banking financial company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board constituted under section 10E of the Companies Act, 1956 (1 of 1956), may, if it is satisfied, either on its own motion or on an application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the non-banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order:

PROVIDED that the Company Law Board may, before making any order under this sub-section, give a reasonable opportunity of being heard to the non-banking financial company and the other persons interested in the matter.

——————–

1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.

Section 45 QB. Nomination by depositors

(1) Where a deposit is held by a non-banking financial institution to the credit of one or more persons, the depositor or, as the case may be, all the depositors together may nominate, in the manner prescribed by rules made by the Central Government under section 45ZA of the Banking Regulation Act, 1949 (10 of 1949), one person to whom in the event of the death of the sole depositor or the death of all the depositors, the amount of deposit may be returned by the non-banking financial institution.

(2) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such deposit, where a nomination made purports to confer on any person the right to receive the amount of deposit from the non-banking financial institution, the nominee shall, on the death of the sole depositor or, as the case may be, on the death of all the depositors, become entitled to all the rights of the sole depositor or, as the case may be, of the depositors, in relation to such deposit to the exclusion of all other persons, unless the nomination is varied or cancelled in the manner prescribed by rules made by the Central Government under section 45ZA of the Banking Regulation Act, 1949 (10 of 1949).

(3) Where the nominee is a minor, it shall be lawful for the depositor making the nomination to appoint, in the manner prescribed by rules made by the Central Government under section 45ZA of the Banking Regulation Act, 1949 (10 of 1949), any person to receive the amount of deposit in the event of his death during the minority of the nominee.

(4) Payment by a non-banking financial institution in accordance with the provisions of this section shall constitute a full discharge to the non-banking financial institution of its liability in respect of the deposit:

PROVIDED that nothing contained in this sub-section shall affect the right or claim which any person may have against the person to whom any payment is made under this section.

(5) No notice of the claim of any person, other than the person or persons in whose name a deposit is held by a non-banking financial institution, shall be receivable by the non-banking institution, nor shall the non-banking financial institution be bound by any such notice even though expressly given to it:

PROVIDED that where any decree, order, certificate or other authority from a court of competent jurisdiction relating to such deposit is produced before a non-banking institution, the non-banking institution shall take due note of such decree, order, certificate or other authority.]

Section 45 R. Interpretation

1[CHAPTER III-C

PROHIBITION OF ACCEPTANCE OF DEPOSITS BY UNINCORPORATED BODIES

——————–

1. Inserted by Act No. 1 of 1984, w.e.f. 15/2/1984.

45R. Interpretation.

The words and expressions used in this Chapter and defined in Chapter IIIB shall have the meanings respectively assigned to them therein.

Section 45 S. Deposits not to be accepted in certain cases

1[Deposits not to be accepted in certain cases. (1) No person, being an individual or a firm or an unincorporated association of individuals shall, accept any deposit-

(i) If his or its business wholly or partly includes any of the activities specified in clause (c) of section 45-I; or

(ii) If his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner:

PROVIDED that nothing contained in this sub-section shall apply to the receipt of money by an individual by way of loan from any of his relatives or to the receipt of money by a firm by way of loan from the relative or relatives of any of the partners.

(2) Where any person referred to in sub-section (1) holds any deposit on the lst day of April, 1997 which is not in accordance with sub-section (1), such deposit shall be repaid by that person immediately after such deposit becomes due for repayment or within three years from the date of such commencement, whichever is earlier:

PROVIDED that if the bank is satisfied on an application made by any person to the bank that such person is unable to pay a part of the deposits for reasons beyond his control or such repayment shall cause extreme hardship to him, it may, by an order in writing, extend such period by a period not exceeding one year subject to such conditions as may be specified in the order.

(3) On and from the lst day of April, 1997, no person referred to in sub-section (1) shall issue or cause to be issued any advertisement in any form for soliciting deposit.

Explanation: For the purposes of this section, a person shall be deemed to be a relative of another if, and only if-

(i) They are members of a Hindu undivided family; or

(ii) They are husband and wife; or

(iii) The one is related to the other in the manner indicated in the List of relatives below:

List of relatives

1. Father, 2. Mother (including step-mother), 3. Son (including step-son), 4. Son’s wife, 5. Daughter (including step-daughter), 6. Father’s father, 7. Father’s mother,8. Mother’s mother,9. Mother’s father,10. Son’s son, 11. Son’s son’s wife, 12. Son’s daughter, 13. Son’s daughter’s husband, 14. Daughter’s husband, 15. Daughter’s son, 16. Daughter’s son’s wife, 17. Daughter’s daughter, 18. Daughter’s daughter’s husband, 19. Brother (including step-brother), 20. Brother’s wife, 21, Sister (including step-sister), 22. Sister’s husband.]

——————–

1. Substituted by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 1/4/1997.

Section 45 T. Power to issue search warrants

(1) Any court having jurisdiction to issue a search warrant under the Code of Criminal Procedure, 1973 (2 of 1974) may, on an application by an officer of the bank or of the State Government authorised in this behalf stating his belief that certain documents relating to acceptance of deposits in contravention of the provisions of section 45S are secreted in any place within the local limits of the jurisdiction of such court, issue a warrant to search for such documents.

(2) A warrant issued under sub-section (1) shall be executed in the same manner and shall have the same effect as a search warrant issued under the Code of Criminal Procedure, 1973.

Section 45 U. Definitions

1[Definitions.

1[CHAPTER III-D

REGULATION OF TRANSACTIONS IN DERIVATIVES, MONEY MARKET INSTRUMENTS, SECURITIES, ETC.

For the purpose of this Chapter,-

(a) “derivative” means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or credit index, price of securities (also called “underlying”), or a combination of more than one of them and includes interest rate swaps, forward rate arrangements, foreign currency swaps, foreign currency-rupee swaps, foreign currency options, foreign currency-rupee options or such other instruments as may be specified by the Bank from time to time;

(b) “money market instruments” include call or notice money, term money, repo, reverse repo, certificate of deposit, commercial usance bill, commercial paper and such other debt instrument of original or initial maturity up to one year as the Bank may specify from time to time;

(c) “repo” means an agreement for borrowing funds by selling securities with an agreement to repurchase the securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed;

(d) “reverse repo” means an instrument for lending funds by purchasing securities with an agreement to resell the securities on a mutually agreed future date at an agreed price which includes interest for the funds lent;

(e) “securities” means securities of the Central Government or a State Government or such securities of a local au thority as may be specified in this behalf by the Central Government and, for the purposes of repo” or “reverse repo”, includes corporate bonds and debentures.]

——————–

1. Ins. by Act No. 26 of 2006 w.e.f. 12-6-2006.

Section 45 V. Transactions in derivatives

1[Transactions in derivatives. (1) Notwithstanding anything contained in the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or any other law for the time being in force, transactions in such derivatives, as may be specified by the Bank from time to time, shall be valid, if at least one of the parties to the transactions is the Bank, a scheduled bank, or such other agency falling under the regulatory purview of the Bank under the Act, the Banking Regulation Act, 1949 (10 of 1949), the Foreign Exchange Management Act, 1999 (42 of 1999), or any other Act or instrument having the force of law, as may be specified by the Bank from time to time.

(2) Transactions in such derivatives, as had been specified by the Bank from time to time, shall be deemed always to have been valid, as if the provisions of subsection (1) were in force at all material times.]

——————–

1. Ins. by Act No. 26 of 2006 w.e.f. 12-6-2006.

Section 45 W. Power to regulate transactions in derivatives, money market instruments, etc

1[Power to regulate transactions in derivatives, money market instruments, etc. (1) The Bank may, in public interest, or to regulate the financial system of the country to its advantage, determine the policy relating to interest rates or interest rate products and give directions in that behalf to all agencies or any of them, dealing in securities, money market instruments, foreign exchange, derivatives, or other instruments of like nature as the Bank may specify from time to time:

Provided that the directions issued under this sub-section shall not relate to the procedure for execution or settlement of the trades in respect of the transactions mentioned therein, on the Stock Exchanges recognised under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).

(2) The Bank may, for the purpose of enabling it to regulate agencies referred to in sub-section (1), call for any information, statement or other particular from them, or cause an inspection of such agencies to be made.]

——————–

1. Ins. by Act No. 26 of 2006 w.e.f. 12-6-2006.

Section 45 X. Duty to comply with directions and furnish information

1[Duty to comply with directions and furnish information. It shall be the duty of every director or member or other body for the time being vested with the management of the affairs of the agencies referred to in Section 45-W to comply with the directions given by the Bank and to submit the information or statement or particulars called for under that section.]

——————–

1. Ins. by Act No. 26 of 2006 w.e.f. 12-6-2006.

Section 46. Contribution by Central Government to the reserve fund

The Central Government shall transfer to the bank rupee securities of the value of five crores of rupees to be allocated by the bank to the reserve fund.

Section 46 A. Contribution to National Rural Credit (Long Term Operations) Fund and National Rural Credit (Stabilisation) Fund

1[Contribution to National Rural Credit (Long Term Operations) Fund and National Rural Credit (Stabilisation) Fund. The bank shall contribute every year such sums of money as it may consider necessary and feasible to do so, to the National Rural Credit (Long Term Operations) Fund and the National Rural Credit (Stabilisation) 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.

——————–

1. Earlier sections 46A and 46B substituted by Act No. 61 of 1981, w.e.f. 12/7/1982.

Section 46 B. Section

[Section 46B: Repealed]

Section 46 C. National Industrial Credit (Long Term Operations) Fund

(1) The bank shall establish and maintain a fund to be known as the national industrial credit (long term operations) fund to which shall be credited-

(a) An initial sum of ten crores of rupees by the bank;

(b) Such further sums of money as the bank may contribute every year:

PROVIDED that the annual contribution during each of the five years commencing with the year ending on the 30th day of June, 1965 shall not be less than five crores of rupees:

PROVIDED FURTHER that the Central Government may, if the circumstances so require, authorise the bank to reduce the said sum of five crores of rupees in any year.

(2) The amount in the said fund shall be applied by the bank only to the following objects, namely: –

(a) The making to the Development Bank of loans and advances for the purpose of the purchase of, or subscription to, stocks, shares, bonds or debentures issued by the Industrial Finance Corporation of India, a State Financial Corporation or any other financial institution which may be notified by the Central Government in this behalf, or for the purposes of any other business of the Development Bank;

(b) The purchasing of bonds and debentures issued by the Development Bank;

1[(c) The making to the Exim Bank or the Reconstruction Bank [or the Small Industries Bank], as the case may be, of loans and advances for the purposes of any business of the Exim Bank or the Reconstruction Bank 2[or the Small Industries Bank],

(d) The purchasing of bonds and debentures issued by the Exim Bank or the Reconstruction Bank [or the Small Industries Bank, as the case may be.

——————–

1. Inserted by Act No. 28 of 1981, w.e.f. 1/1/1982.

2. Inserted by Act No. 39 of 1989, w.e.f. 7/3/1990.

Section 46 D. National Housing Credit (Long Term Operations) Fund

1[National Housing Credit (Long Term Operations) Fund. (1) The Bank shall establish and maintain a Fund to be known as the National Housing Credit (Long Term Operations) Fund to which shall be credited every year such sums of money as it may consider necessary.

(2) The amount in the said fund shall be applied by the Bank only to the following objects, namely: –

(a) The making to the National Housing Bank of loans and advances for the purpose of any business of the National Housing Bank;

(b) The purchasing of bonds and debentures issued by the National Housing Bank.

——————–

1. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.

Section 47. Allocation of surplus profits

After making provisions for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and for all other matters for which provision is to be made by or under this Act or which are usually provided for by bankers, the balance of the profits shall be paid to the Central Government.

Section 48. Exemption of bank from income-tax and super-tax

Notwithstanding anything contained in the Income Tax Act, 1961 (43 of 1961), or any other enactment for the time being in force relating to income-tax or super-tax, the bank shall not be liable to pay income-tax or super-tax on any of income, profits or gains.

Section 49. Publication of bank rate

The bank shall make public from time to time 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

(1) Not less than two auditors shall be appointed, and their remuneration fixed, by the Central Government.

(2) The auditors shall hold office for such term not exceeding one year as the Central Government may fix while appointing them, and shall be eligible for reappointment.

Section 51. Appointment of special auditors by government

Without prejudice to anything contained in section 50, the Central Government may at any time appoint the Comptroller and Auditor-General to examine and report upon the accounts of the bank.

Section 52. Powers and duties of auditors

(1) 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; and every auditor shall have a list delivered to him of all books kept by the bank, and shall at all reasonable times have access to the books, accounts and other documents of the bank, and may, at the expense of the bank, employ accountants or other person to assist him in investigating such accounts and may, in relation to such accounts, examine any director or officer of the bank.

(2) The auditors shall make a report to the Central Government upon the annual balance-sheet and accounts, and in every such report they shall state whether, in their opinion, the balance-sheet is a full and fair balance-sheet containing all necessary particulars and properly drawn up so as to exhibit a true and correct view of the state of the bank’s affairs, and, in case they have called for any explanation or information from the Central Board, whether it has been given and whether it is satisfactory.

Section 53. Returns

(1) The bank shall prepare and transmit to the Central Government a weekly accounts of the Issue Department and of the Banking Department in such form as the Central Government may, by notification in the Gazette of India, prescribe. The Central Government shall cause these accounts to be published in the Gazette of India at such intervals and in such modified form as it may deem fit.

(2) The bank shall also, within two months from the date on which the annual accounts of the bank are closed, transmit to the Central Government a copy of the annual accounts signed by the Governor, the Deputy Governors and the Chief Accounting Officer of the bank and certified by the auditor, together with a report by the Central Board on the working of the bank throughout the year, and the Central Government shall cause such accounts and report to be published in the Gazette of India.

Section 54. Rural credit and development

1[Rural credit and development. The bank may maintain expert staff to study various aspects of rural credit and development and in particular it may: –

(a) Tender expert guidance and assistance to the National Bank;

(b) Conduct special studies in such areas as it may consider necessary to do so for promoting integrated rural development.]

——————–

1. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.

Section 54 A. Delegation of powers

(1) The Governor may, by general or special order, delegate to a Deputy Governor, subject to such conditions and limitations, if any, as may be specified in the order, such of the powers and functions exercisable by him under this Act or under any other law for the time being in force as he may deem necessary for the efficient administration of the functions of the bank.

(2) The fact that a Deputy Governor exercises any power or does any act or thing in pursuance of this Act shall be conclusive proof of his authority to do so.

Section 54 AA. Power of bank to depute its employees to other institutions

(1) The bank may, notwithstanding anything contained in any law, or in any agreement, for the time being in force, depute any member of its staff for such period as it may thinks fit-

(a) To any institution which is wholly or substantially owned by the bank;

(b) To the Development Bank, so, however, that no such deputation shall continue after the expiration of thirty months from the commencement of section 5 of the Public Financial Institutions Laws (Amendment) Act, 1975;

(c) To the Unit Trust, so, however, that no such deputation shall continue after the expiration of thirty months from the date notified by the Central Government under sub-section (1) of section 4A of the Unit Trust of India Act, 1963 (52 of 1963);

And thereupon the person so deputed shall, during the period of his deputation, render such service to the institution to which he is so deputed as that institution may require.

(2) Where a person has been deputed to an institution under sub-section (1), 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.

(3) Nothing contained in this section shall empower the bank to depute any member of its staff to any institution on any salary, emoluments or other terms and conditions which is or are less favourable to him than that or those to which he is entitled immediately before such deputation.

(4) For the purposes of this section, an institution shall be deemed to substantially owned by the bank if in the capital of the institution the bank has not less than forty per cent share.

Explanation: The word “capital” means, in relation to the Unit Trust, the initial capital of that Trust.

Section 55. Section

[Section 55. Reports by the bank: repealed by Act No. 62 of l948, w.e.f. 1st. January, 1949]

Section 56. Section

[Section 56. Power to require declaration as to ownership of registered shares: repealed by Act No. 62 of l948, w.e.f. 1st. January, 1949]

Section 57. Liquidation of the Bank

(1) Nothing in the Companies Act, 1956 (1 of 1956) shall apply to the bank and the bank shall not be placed in liquidation save by order of the Central Government and in such manner as it may direct.

(2) [Omitted]

Section 58. Power of the Central Board to make regulations

(1) The Central Board may, with the previous sanction of the Central Government, 3[by notification in the Official Gazette make regulations consistent with this Act to provide for all matters for which provision is necessary or convenient for the purpose of giving effect to the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing provision, such regulations may provide for all or any of the following matters, namely: –

[Clauses

(a) to (e) omitted]

(f) The manner in which the business of the Central Board shall be transacted, and the procedure to be followed at meetings thereof;

(g) The conduct of business of Local Boards and the delegation to such Boards of powers and functions;

(h) The delegation of powers and functions of the Central Board to Deputy Governors, Directors or officers of the Bank;

(i) The formation of Committees of the Central Board, the delegation of powers and functions of the Central Board to such Committees, and the conduct of business in such Committees;

(j) The constitution and management of staff and superannuation funds for the officers and servants of the bank;

(k) The manner and form in which contracts binding on the bank may be executed;

(l) The provision of an official seal of the bank and the manner and effect of its use;

(m) The manner and form in which the balance-sheet of the Bank shall be drawn up, and in which the accounts shall be maintained;

(n) The remuneration of Directors of the bank;

(o) The relations of the scheduled banks with the Bank and the returns to be submitted by the scheduled banks to the bank;

(p) The regulation of clearing-houses for 1[banks (including post office savings banks);]

2[(pp) The regulation of fund transfer through electronic means between the banks or between the banks and other financial institutions referred to in clause (c) of section 45-I, including the laying down of the conditions subject to which banks and other financial institutions shall participate in such fund transfers, the manner of such fund transfers and the right and obligations of the participants in such fund transfers.]

(q) The circumstances in which, and the conditions and limitations subject to which, the value of any lost, stolen, mutilated or imperfect currency note of the Government of India or bank note may be refunded; and

(r) Generally, for the efficient conduct of the business of the bank.

(3) Any regulation made under this section shall have effect from such earlier or later date as may be specified in the regulation.

(4) Every regulation shall, as soon as may be after it is made by the Central Board, be forwarded to the Central Government and that government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation, or both Houses agree that the regulation should not be made, the regulation shall, thereafter, have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.

(5) Copies of all regulations made under this section shall be available to the public on payment.

——————–

1. Substituted by Act No. 66 of 1988, w.e.f. 30/12/1988.

2. Inserted by the Information Technology Act, 2000, w.e.f. 9th. June, 2000.

3. Inserted by Act No. 66 of 1988, w.e.f. 30/12/1988.

Section 58 A. Protection of action taken in good faith

(1) No suit, prosecution or other legal proceeding shall lie against the Central Government or the bank or any other person in respect of anything which is in good faith done or intended to be done under this Act or in pursuance of any order, regulation or direction made or given thereunder.

(2) No suit or other legal proceeding shall lie against the Central Government or the bank for an damage caused or likely to be caused by anything which is in good faith done or intended to be done under this Act or in pursuance of any order, regulation or direction made or given thereunder.

Section 58 B. Penalties

(1) Whoever in any application, declaration, return, statement, information or particulars made, required or furnished by or under or for the purposes of any provisions of this Act, or any order, regulation or direction made or given thereunder or in any prospectus or advertisement issued for or in connection with the invitation by any person, of deposits of money from the public wilfully makes a statement which is false in any material particular knowing it to be false or wilfully omits to make a material statement shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.

(2) If any person fails to produce any book, account or other document or to furnish any statement, information or particulars which, under this Act or any order, regulation or direction made or given thereunder, it is his duty to produce or furnish or to answer any question put to him in pursuance of the provisions of this Act or of any order, regulation or direction made or given thereunder, he shall be punishable with fine which may extend to two thousand rupees in respect of each offence and if he persists in such failure or refusal, with further fine which may extend to one hundred rupees for every day, after the first during which the offence continues.

(3) If any person contravenes the provisions of section 31, he shall be punishable with fine, which may extend to the amount of the bill of exchange, hundi, promissory note or engagement for payment of money in respect whereof the offence is committed.

(4) If any person discloses any credit information, the disclosure of which is prohibited under section 45E, he shall be punishable with imprisonment for a term, which may extend to six months, or with fine, which may extend to one thousand rupees, or with both.

1[(4A) If any person contravenes the provisions of sub-section (1) of section 45-IA, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to five years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

(4AA) If any auditor fails to comply with any direction given or order made by the bank under section 45MA, he shall be punishable with fine, which may extend to five thousand rupees.

(4AAA) Whoever fails to comply with any order made by the Company Law Board under sub-section (2) of section 45QA, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to a fine of not less than rupees fifty for every day during which such non-compliance continues.]

(5) 2[If any person other than an auditor]-

(a) Receives any deposit in contravention of any direction given or order made under Chapter IIIB; or

3[(aa) Fails to comply with any direction given or order made by the bank under any of the provisions of Chapter III B; or]

(b) Issues any prospectus or advertisement otherwise than in accordance with section 45NA or any order made under section 45J, as the case may be,

He shall be punishable with imprisonment for a term, which may extend to three years and shall also be liable to fine which may extend-

(i) In the case of a contravention falling under clause (a), to twice the amount of the deposit received; and

(ii) In the case of a contravention falling under clause (b), to twice the amount of the deposit called for by the prospectus or advertisement.

3[(5A) If any person contravenes any provision of section 45S, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of deposit received by such person in contravention of that section, or two thousand rupees, whichever is more, or with both:

PROVIDED that in the absence of special and adequate reasons to the contrary to be mentioned in the judgment of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees.

(5B) Notwithstanding anything contained in section 29 of the Code of Criminal Procedure, 1973 (2 of 1974), it shall be lawful for a Metropolitan Magistrate or a Judicial Magistrate of the first class to impose a sentence of fine in excess of the limit specified in that section on any person convicted under sub-section (5A).]

(6) If any other provision of this Act is contravened or if any default is made in complying with any other requirement of this Act or of any order, regulation or direction made or given or condition imposed thereunder, any person guilty of such contravention or default shall be punishable with fine which may extend to two thousand rupees and where a contravention or default is a continuing one, with further fine which may extend to one hundred rupees for every day, after the first, during which the contravention or default continues.

——————–

1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.

2. Substituted for the words “If any person” by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.

3. Inserted by Act No. 1 of 1984, w.e.f. 15/2/1984.

Section 58 C. Offences by companies

(1) Where a person committing a contravention or default referred to in section 58B is a company, every person who, at the time the contravention or default was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention or default and shall be liable to be proceeded against and punished accordingly:

PROVIDED that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention of default was committed without his knowledge or that he had exercised all due diligence to prevent the contravention or default.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the same was committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary, or other officer or employee of the company, such director, manager, secretary, other officer or employee shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Explanation I: Any offence punishable under this Act shall be deemed to have been committed at the place where the registered office or the principal place of business, as the case may be, in India, of the company is situated.

Explanation II: For the purpose of this section: –

(a) “A company” means any body corporate and includes a corporation, a non-banking institution, a firm, a co-operative society or other association of individuals;

(b) “Director”, in relation to a firm, means a partner in the firm.

Section 58 D. Application of section 58B barred

Nothing contained in section 58B shall apply to, or in respect of, any matter dealt with in section 42.

Section 58 E. Cognizance of offences

(1) No court shall take cognizance of any offence punishable under this Act except upon a complaint in writing made by an officer of the Bank, generally or specially authorised in writing in this behalf by the Bank, and no court other than that of a Metropolitan Magistrate or a Judicial Magistrate of the first class or a court superior thereto shall try any such offence:

1[PROVIDED that in respect of any offence punishable under sub-section (5A) of section 58B, a complaint in writing may also be made by an officer of the State Government, generally or specially authorised in writing in this behalf by that government.

(2) Notwithstanding any thing contained in the Code of Criminal Procedure, 1973 (2 of 1974) a Magistrate may, if he sees reason so to do, dispense with the personal attendance of the officer of the Bank filing the complaint, but the Magistrate may in his discretion, at any stage of the proceedings, direct the personal attendance of the complainant.

——————–

1. Inserted by Act No. 1 of 1984, w.e.f. 15/2/1984.

Section 58 F. Application of fine

A court imposing any fine under this Act may direct that the whole or any part thereof shall be applied in, or towards payment of, the costs of the proceedings.

Section 58 G. Power of bank to impose fine

1[Power of bank to impose fine. (1) Notwithstanding anything contained in section 58B, if the contravention or default of the nature referred to in section 58B is committed by a non-banking financial company, the bank may impose on such non-banking financial company-

(a) A penalty not exceeding five thousand rupees; or

(b) Where the contravention or default is under sub-section (4A) or clause (a) or clause (aa) of sub-section (5) of section 58B, a penalty of five lakh rupees or twice the amount involved in such contravention or default, where the amount is quantifiable, whichever is more; and where such contravention or default is a continuing one, further penalty which may extend to twenty-five thousand rupees for every day, after the first, during which the contravention or default continues.

(2) For the purpose of imposing penalty under sub-section (1), the bank shall serve a notice on the non-banking financial company requiring it to show cause why the amount specified in the notice should not be imposed as a penalty and a reasonable opportunity of being heard shall also be given to such non-banking financial company.

(3) Any penalty imposed by the bank under this section shall be payable within a period of thirty days from the date on which notice issued by the bank demanding payment of the sum is served on the non-banking financial company and, in the event of failure of the non-banking financial company to pay the sum within such period, may be levied on a direction made by the principal civil court having jurisdiction in the area where the registered office or the head office of the non-banking financial company is situated :

PROVIDED that no such direction shall be made, except on an application made by an officer of the bank authorised in this behalf, to by the principal civil court.

(4) The court, which makes a direction under sub-section (3), shall issue a certificate specifying the sum payable by the non-banking financial company and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a civil suit.

(5) Non complaint shall be filed against any non-banking financial company in any court of law pertaining to any contravention or default in respect of which the bank under this section has imposed any penalty.

(6) Where any complaint has been filed against a non-banking financial company in a court in respect of contravention or default of the nature referred to in section 58B, no proceedings for imposition of penalty against that non-banking financial company shall be taken under this section.]

——————–

1. Inserted by Act No. 1 of 1984, w.e.f. 15/2/1984.

Section 59-61. Sections

[Sections 59 to 61: repealed by Act No. 20 of 1937]

Schedule 1

SCHEDULE I

[Section 9]

1[1. The Western Area shall consist of the States of Goa, Gujarat, Madhya Pradesh and Maharashtra and the Union Territories of Dadra and Nagar Haveli, and Daman and Diu.

2. The Eastern Area shall consist of the States of Arunachal Pradesh, Assam, Bihar, Manipur, Meghalaya, Mizoram, Nagaland, Orissa, Sikkim, Tripura and West Bengal and the Union Territories of Andaman and Nicobar Islands.]

3. The Northern Area shall consist of the States of Jammu and Kashmir, Punjab, Haryana, Himachal Pradesh, Rajasthan and Uttar Pradesh and the Union territories of Chandigarh and Delhi.

4. The Southern Area shall consist of the States of Andhra Pradesh, Karnataka, Tamil Nadu and Kerala and the Union territories of Pondicherry and Lakshadweep.

——————–

1. Substituted by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.

Schedule 2

SCHEDULE II

SCHEDULED BANKS

[Sections 2(e) and 42]

Abhyudaya Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 19/1/1988)

ABN Amro Bank N.V. (11/10/1991)

Adhiyaman Grama Bank, Dharmapuri (Tamil Nadu) (27/12/1985)

Ajgemene bank Nederland N.V.

Akola Gramin Bank, Akola (Maharashtra) (16/10/1983)

Alaknanda Gramin Bank, Pauri (U.P.) (31/8/1985)

Aligarh Gramin Bank, Aligarh (U.P.) (22/3/1981)

Allahabad Bank

Allahabad Kshetriya Gramin Bank, Allahabad (U.P.) (23/8/1980)

Alwar-Bharatpur Anchalik Gramin Bank, Bharatpur (Rajasthan)

(21/2/1981)

Ambala-Kurukshetra Gramin Bank, Ambala City (Haryana) (18/1/1985)

American Express International Banking Corporation

Andhra Bank, Masulipatam (A.P.)

Andhra Pradesh State Co-operative Bank Ltd., Hyderabad (A.P.) (2/7/1966)

ANZ Grindlays Bank p.l.c. (25/1/1990)

Arab Bangladesh Bank Ltd.

Aravali Kshetriya Gramin Bank, Sawaimadhopur (Rajasthan) (2/10/1981)

Arunachal Pradesh Rural Bank, Pasighat (Arunachal Pradesh) (30/11/1983)

Aurangabad-Jalna Gramin Bank, Aurangabad (Maharashtra) (6/12/1982)

Baitarani Gramya Bank, Baripada (Orissa) (23/6/1980)

Balasore Gramya Bank, Balasore (Orissa) (6/8/1980)

Ballia Kshetriya Gramin Bank, Ballia (U.P.) (25/12/1976)

Banaskantha-Mehsana Gramin Bank, Patan (Gujarat) (29/11/1981)

Bank International Indonesia

Bank of America National Trust and Savings Association (29/5/1964)

Bank of Bahrain and Kuwait B.S.C. (14/7/1986)

Bank of Baroda

Bank of Ceylon

Bank of Cochin Ltd., Ernakulam

Bank of Credit and Commerce International (Overseas) Ltd.

Bank of India

Bank of Karad Ltd., Karad (5/6/1968)

Bank of Madura Ltd., Madurai (T.N.)

Bank of Maharashtra

Bank of Nova Scotia, Toronto (Canada) (31/5/1984)

Bank of Oman Ltd.

Bank of Punjab Ltd. (19/4/1995)

Bank of Rajasthan Ltd., Udaipur (Rajasthan)

Bank of Tamilnad Ltd. (22/11/1979)

Bank of Thanjaur Ltd.

1[The Bank of Tokyo-Mitsubishi UFJ Ltd.]

Banque de I’ Indochine et de Suez (INDOSUEZ) (2/10/1981)

Banque Nationale de Paris (1/7/1966)

Barabanki Gramin Bank, Barabanki (U.P.)

Bardhaman Gramin Bank, Burdwan (W.B.) (25/11/1980)

Bareilly Corporation Bank Ltd., Bareilly (U.P.)

Bareilly Kshetriya Gramin Bank, Bareilly (U.P.) (27/9/1980)

Bassein Catholic Co-operative Bank Ltd., Papdy Vasai (Town) Thane District, Maharashtra (1/11/1990)

Bastar Kshetriya Gramin Bank, Jagdalpur (M.P.) (15/12/1979)

Basti Gramin Bank, Basti (U.P.) (1/8/1980)

Begusarai Kshetriya Gramin Bank, Begusarai (Bihar) (23/3/1985)

Benares State Bank

Bhagalpur-Banka Kshetriya Gramin Bank, Bhagalpur (Bihar) (22/3/1985)

Bhagirath Gramin Bank, Sitapur (U.P.) (19/9/1976)

Bhandara Gramin Bank, Bhandara (Maharashtra)

Bharat Overseas Bank Ltd., Madras

Bhilwara-Ajmer Kshetriya Gramin Bank, Bhilwara (Rajasthan) (24/3/1984)

Bhojpur Rohtas Gramin Bank, Arrah (Bihar) (26/12/1975)

Bidur Gramin Bank, Bijnor (U.P.) (18/1/1983)

Bihar State Co-operative Bank Ltd., Patna (Bihar) (2/7/1966)

Bijapur Grameena Bank, Bijapur (Karnataka) (31/3/1983)

Bikaner Kshetriya Gramin Bank, Bikaner (Rajasthan) (25/3/1985)

Bilaspur-Raipur Kshetriya Gramin Bank, Bilaspur (M.P.) (20/10/1976)

Bolangir Anchalik Gramya Bank, Bolangir (10/4/1976)

Bombay Mercantile Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)

British Bank of the Middle East

Buldhana Gramin Bank, Buldhana (Maharashtra) (17/10/1985)

Bundelkhand Kshetriya Gramin Bank, Tikkamgarh (M.P.)

Bundi-Chittorgarh Kshetriya Gramin Bank, Bundi (Rajasthan) (23/3/1984)

Cachar Gramin Bank, Silchar (Assam) (31/3/1981)

Canara Bank

Catholic Syrian Bank Ltd., Trichur (18/8/1969)

Cauvery Grameena Bank, Mysore (2/10/1976)

Central Bank of India

Centurion Bank Ltd. (27/1/1995)

Chaitanya Grameena Bank, Tenali (Guntur) (A.P.) (25/3/1983)

Chambal Kshetriya Gramin Bank, Morena (M.P.) (11/2/1984)

Champaran Kshetriya Gramin Bank, Motihari (Bihar) (21/3/1976)

Chandrapur Gadchiroli Gramin Bank, Chandrapur (Maharashtra)

(4/2/1983)

Chartered Bank

Chase Manhattan Bank N.A. (7/12/1994)

Chhatrasal Gramin Bank, Orai (U.P.) (30/3/1982)

Chhindwara-Seoni Kshetriya Gramin Bank, Chhindwara (M.P.)

(20/1/1983)

Chikmagalur-Kodaga Grameena Bank, Chikmagalur (Karnataka) (28/4/1984)

Chitradurga Gramin Bank, Chitradurga (Karnataka) (5/8/1981)

Citibank N.A.

City Union Bank Ltd.

Commercial Bank of Korea Ltd.

Corporation Bank Ltd.

Cosmos Co-operative Bank Ltd., Pune (Maharashtra) (1/11/1990)

Credit Agricole Indosuez

Credit Lyonnais (28/12/1989)

Cuttack Gramya Bank, Cuttack (Orissa) (11/10/1976)

Damoh-Panna-Sagar Kshetriya Gramin Bank, Damoh (M.P.) (30/3/1981)

Dena Bank

Deutsche Bank A.G. (15/11/1980) (13/12/1986) (5/4/1988)

Development Bank of Singapore Ltd.

Development Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)

Development Credit Bank Ltd.

Devipatan Kshetriya Gramin Bank, Gonda (U.P.) (17/1/1981)

Dewas Shajapur Kshetriya Gramin Bank, Dewas (M.P.) (30/3/1982)

Dhanalakshmi Bank Ltd., Trichur (Kerala)

Dhenkanal Gramya Bank, Dhenkanal (Orissa) (12/8/1981)

Dresdner Bank AG

Dungarpur-Banswara Kshetriya Gramin Bank, Dungarpur (Rajasthan) (25/3/1984)

Durg-Rajnandgaon Gramin Bank, Rajnandgaon (M.P.) (12/3/1980)

Ellaquai Dehati Bank, Srinagar (J&K) (10/7/1979)

Emirates Commercial Bank Ltd. (6/3/1981)

Etah Gramin Bank, Etah (U.P.) (29/3/1981)

Etawah Kshetriya Gramin Bank, Etawah (U.P.) (18/3/1980)

European Asian Bank

Faizabad Kshetriya Gramin Bank, Faizabad (U.P.) (5/9/1980)

Faridkot Bhatinda Kshetriya Gramin Bank, Bhatinda (Punjab) (22/3/1986)

Farrukhabad Gramin Bank, Farrukhabad (U.P.) (29/3/1976)

Fatehpur Kshetriya Gramin Bank, Fatehpur (U.P.) (6/9/1980)

Federal Bank Ltd., Alwaye (Kerala)

Ganga Yamuna Gramin Bank, Dehradun (U.P.) (29/3/1985)

Gaur Gramin Bank, Malda (W.B.)

Giridih Kshetriya Gramin Bank, Giridih (Bihar) (30/6/1984)

Global Trust Bank Ltd. (11/10/1994)

Goa State Co-operative Bank Ltd. (15/12/1994)

Godavari Grameena Bank, Rajahmundry (A.P.) (11/4/1987)

Golconda Grameen Bank, Hyderabad (A.P.) (15/2/1985)

Gomti Gramin Bank, Jaunpur (U.P.) (30/3/1981)

Gopalganj Kshetriya Gramin Bank, Gopalganj (Bihar) (27/3/1981)

Gorakhpur Kshetriya Gramin Bank, Gorakhpur (U.P.) (30/9/1975)

Grindlays Bank P.L.C.

Gujarat State Co-operative Bank Ltd., Ahmedabad (Gujarat) (2/7/1966)

Gurdaspur Amritsar Kshetriya Gramin Vikas Bank, Gurdaspur (Punjab)

(31/3/1983)

Gurgaon Gramin Bank, Gurgaon (Haryana) (28/3/1976)

Gwalior Datia Kshetriya Gramin Bank, Datia (M.P.) (19/9/1985)

HDFC Bank Ltd. (23/1/1995)

Habib Bank Ltd.

Hadoti Kshetriya Gramin Bank, Kotah (Rajasthan) (14/10/1982)

Hanil Bank

Hardoi-Unnao Gramin Bank, Hardoi (U.P.) (7/6/1977)

Haryana Kshetriya Gramin Bank, Bhiwani (Haryana)

Haryana State Co-operative Apex Bank Ltd., Ambala at Chandigarh

Hazaribagh Kshetriya Gramin Bank, Hazaribagh (Bihar) (19/11/1984)

Himachal Gramin Bank, Mandi (H.P.) (23/12/1976)

Hindon Gramin Bank, Ghaziabad (U.P.) (28/3/1987)

Hindustan Commercial Bank Ltd., Kanpur (UP)

Hissar-Sirsa Kshetriya Gramin Bank, Hissar (Haryana) (2/10/1984)

Hongkong and Shanghai Banking Corporation Ltd. (25/1/1990)

Howrah Grameen Bank, Howrah (W.B.) (12/6/1982)

IDBI Bank Ltd.

Indian Bank

Indian Overseas Bank

Indore-Ujjain Kshetriya Gramin Bank, Ujjain (M.P.) (19/11/1984)

ING Bank N.V.

Jaipur Nagaur Aanchalik Gramin Bank, Jaipur (Rajasthan)

Jammu and Kashmir Bank Ltd., Srinagar (11/8/1971)

Jammu Rural Bank, Jammu (12/3/1976)

Jamnagar Gramin Bank, Jamnagar (Gujarat) (26/12/1978)

Jamuna Gramin Bank, Agra (U.P.) (2/12/1983)

Janata Sahakari Bank Ltd., Pune (Maharashtra) (18/8/1988 w.e.f. 1/9/1988)

Jhabua-Dhar Kshetriya Gramin Bank, Jhabua (M.P.) (20/6/1980)

Junagadh Amreli Gramin Bank, Junagadh (Gujarat)

Ka Bank Nangkyndong Ri Khasi Jaintia (Meghalaya) (29/12/1981)

Kakathiya Grameena Bank, Warangal (A.P.) (28/6/1982)

Kalahandi Anchalika Gramya Bank, Bhawanipatna (Orissa) (26/5/1980)

Kalpatharu Grameena Bank, Tumkur (Karnataka) (31/3/1982)

Kalupur Commercial Co-operative Bank Ltd., Ahmedabad (Gujarat) (18/8/1988 w.e.f. 1/9/1988)

Kamraj Rural Bank, Sopore (J&K) (16/6/1981)

Kanakadurga Grameena Bank, Gudivada (A.P.) (28/3/1986)

Kanpur Kshetriya Gramin Bank, Kanpur (U.P.) (27/2/1980)

Kapurthala Firozpur Kshetriya Gramin Bank, Kapurthala (Punjab) (30/3/1983)

Karbi N.C. Rural Bank, Diphu (Assam) (27/1/1982)

Karnataka Bank Ltd., Mangalore (Karnataka)

Karnataka State Co-operative Apex Bank Ltd., Bangalore (Karnataka) (2/7/1966)

Karur Vysya Bank

Kashi Gramin Bank, Varanasi (U.P.) (28/7/1980)

Kerala State Co-operative Bank Ltd., Trivandrum (2/7/1966)

Khasi Jaintia Rural Bank, Shillong (Meghalaya)

Kisan Gramin Bank, Budaun (U.P.) (19/5/1980)

Kolar Gramin Bank, Kolar (Karnataka) (16/2/1983)

Koraput-Panchabati Gramya Bank, Jeypore (Orissa) (13/11/1976)

Kosi Kshetriya Gramin Bank, Purnea (Bihar) (23/12/1976)

Krishna Grameena Bank, Gulbarga (Karnataka) (1/12/1978)

Krung Thai Bank Public Company Ltd.

Kshetriya Gramin Bank, Hoshangabad (20/1/1976)

Kshetriya Kisan Gramin Bank, Mainpuri (U.P.) (20/5/1980)

Kumbakon City Union Bank Ltd.

Kutch Gramin Bank, Bhuj (Gujarat) (23/12/1978)

Lakhimi Gaonlia Bank, Golaghat (Assam) (29/7/1980)

Lakshmi Commercial Bank Ltd.

Lakshmi Vilas Bank Ltd. Karur

Langpi Dehangi Rural Bank, Dhipu (Assam)

Lord Krishna Bank Ltd., Kodungallur (16/4/1971)

Madhubani Kshetriya Gramin Bank, Madhubani (Bihar) (31/3/1979)

Madhya Pradesh (Rajya Sahakari Bank Maryadit), Jabalpur (M.P.)

Madhya Pradesh State Co-operative Bank Ltd., Madras (2/7/1966)

Madras State Co-operative Bank Ltd., Madras (2/7/1966)

Magadh Gramin Bank, Gaya (Bihar) (10/11/1976)

Mahakaushal Kshetriya Gramin Bank, Narsinghpur (M.P.) (1/4/1984)

Maharashtra Co-operative Bank Ltd., Mumbai

Maharashtra State Co-operative Bank Ltd., Bombay (Incorporating the Vidarbha Co-operative Bank Ltd.) (2/7/1966)

Malaprabha Grameena Bank, Dharwar (13/8/1976)

Mallabhum Gramin Bank, Bankura (9/4/1976)

Malwa Gramin Bank, Sangrur (Punjab) (27/2/1986)

Mandla-Balaghat Kshetriya Gramin Bank, Mandia (M.P.) (14/11/1982)

Manipur Rural Bank, Imphal (Manipur) (28/5/1981)

Manjira Grameena Bank, Sangareddy, Medak, (A.P.) (31/3/1982)

Mapura Urban Co-operative Bank of Goa Ltd., Goa

Marathwada Gramin Bank, Nanded (Maharashtra) (26/8/1976)

Marudhar Kshetriya Gramin Bank, Churu (Rajasthan) (29/3/1979)

Marwar Gramin Bank, Pali (6/9/1976)

Mayurakshi Gramin Bank, Suri (West Bengal) (16/10/1976)

Mercantile Bank Ltd.

Mewar Aanchalik Gramin Bank, Udaipur (Rajasthan) (25/1/1983)

Miraj State Bank Ltd.

Mithila Kshetriya Gramin Bank, Darbhanga (Bihar) (14/3/1980)

Mitsui Taiyo Kobe Bank Ltd.

Mizoram Rural Bank, Aizawl (Mizoram) (27/9/1983)

Monghyr Kshetriya Gramin Bank, Monghyr (Bihar) (12/3/1977)

Murshidabad Gramin Bank, Berhampore (W.B.) (17/11/1984)

Muzaffarnagar Kshetriya Gramin Bank, Muzaffarnagar (U.P.) (27/7/1984)

Mysore State Co-operative Apex Bank Ltd., Bangalore (2/7/1966)

Nadia Gramin Bank, Krishnagar (W.B.) (27/8/1980)

Nagaland Rural Bank, Kohima (Nagaland) (30/3/1983)

Nagarjuna Gramin Bank, Khammam (30/4/1976)

Nalanda Gramin Bank, Biharshariff (Bihar) (31/3/1979)

Nainital Almora Kshetriya Grameen Bank, Nainital (U.P.) (26/3/1983)

Nainital Bank Ltd., Nainital (U.P.)

Nedungadi Bank Ltd., Calicut (Orissa)

Netravati Grameena Bank, Mangalore (Karnataka) (11/10/1984)

New Bank of India

New India Co-operative Bank Ltd., Bombay, Maharashtra (1/9/1990)

Nimar Kshetriya Gramin Bank, Khargone (M.P.) (26/6/1982)

North Malabar Gramin Bank, Cannanore (Kerala) (12/12/1976)

Oman International Bank S.A.O.G. (25/1/1990)

Oriental Bank of Commerce

Orissa State Co-operative Bank Ltd., Cuttack (2/7/1966)

Overseas Chinese Banking Corporation Ltd.

Palamau Kshetriya Gramin Bank, Daltonganj (Bihar) (15/5/1980)

Panchmahal Gramin Bank, Godhra (Gujarat) (30/3/1982)

Pandyan Grameen Bank, Sattur (T.N.) (9/3/1977)

Parvatiya Gramin Bank, Chamba (H.P.) (2/11/1985)

Parur Central Bank Ltd.

Patliputra Gramin Bank, Patna (Bihar) (27/11/1984)

Pinakini Grameena Bank, Nellore (A.P.)

Pithoragarh Kshetriya Gramin Bank, Pithoragarh (U.P.) (27/3/1985)

Pragjyotish Gaonlia Bank, Nalbari (Assam) (6/7/1976)

Pratapgarh Kshetriya Gramin Bank, Pratapgarh (U.P.) (25/8/1980)

Prathama Bank, Moradabad (30/9/1975)

Punjab and Sind Bank, Amritsar

Punjab Co-operative Bank, Amritsar

Punjab National Bank

Punjab State Co-operative Bank Ltd., Chandigarh

Purbanchal Bank Ltd., Gauhati

Puri Gramya Bank, Pipli (Orissa) (25/2/1976)

Rae Bareli Kshetriya Gramin Bank, Rae Bareli (U.P.) (29/3/1976)

Raigarh Kshetriya Gramin Bank, Raigarh (M.P.) (31/1/1981)

Rajasthan State Co-operative Bank Ltd., Jaipur (Rajasthan) (2/7/1966)

Rajgarh Kshetriya Gramin Bank, Rajgarh (M.P.)

Rajgarh Sehore Kshetriya Gramin Bank, Biaora (Rajgarh) (M.P.)

(23/3/1983)

Rajkot Nagrik Sahakari Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)

Ranchi Kshetriya Gramin Bank, Ranchi (Bihar) (21/6/1980)

Rani Lakshmi Bai Kshetriya Gramin Bank, Jhansi (U.P.) (31/3/1982)

Ratlam Mandsaur Kshetriya Gramin Bank, Mandsaur (M.P.)

Ratnagiri Sindudurg Gramin Bank, Ratnagiri (Maharashtra) (19/11/1983)

Ratnakar Bank Ltd., Kolhapur

Rayalaseema Grameena Bank, Cuddapah (6/8/1976)

Rewa-Sidhi Gramin Bank, Rewa (M.P.) (20/12/1976)

Rupee Co-operative Bank Ltd., Pune (Maharashtra) (18/8/1988 w.e.f.

1/9/1988)

Rushikulya Gramya Bank, Berhampur (Orissa) (14/2/1981)

SBI Commercial and International Bank Ltd. (30/11/1993)

Sabarkantha-Gandhinagar Gramin Bank, Himatnagar (Gujarat) (9/8/1984)

Sagar Gramin Bank, Amtala (West Bengal), (24/9/1980)

Sahyadri Gramin Bank, Shimoga (Karnataka) (6/9/1984)

Samastipur Kshetriya Gramin Bank, Samastipur (Bihar) (12/5/1980)

Samyut Kshetriya Gramin Bank, Azamgarh (U.P.) (6/1/1976)

Sangameshwara Grameena Bank, Mahboobnagar (A.P.) (31/3/1982)

Sangli Bank

Sangli Urban Co-operative Bank Ltd., Sangli (18/8/1988 w.e.f. 1/9/1988)

Santhal Pargannas Gramin Bank, Dumka (Bihar) (30/3/1977)

Saran Kshetriya Gramin Bank, Chapra (Bihar) (28/3/1981)

Saraswat Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)

Sarayu Gramin Bank, Lakhimpur-Kheri (U.P.) (9/8/1983)

Sarda Gramin Bank, Satna (M.P.)

Satar Bank of Mysore (Karnataka)

Shahadol Kshetriya Gramin Bank, Shahadol (M.P.)

Shahjahanpur Kshetriya Gramin Bank, Shahjahanpur (U.P.) (24/3/1983)

Shamrao Vithal Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)

Sharda Gramin Bank, Satna (31/3/1979)

Shekhawati Gramin Bank, Sikar (Rajasthan) (7/10/1976)

Shivalik Kshetriya Gramin Bank, Hoshiarpur, (Punjab) (30/3/1983)

Shivpuri-Guna Kshetriya Gramin Bank, Shivpuri (M.P.) (28/3/1981)

Shri Venkateswara Grameena Bank, Chittoor (A.P.) (22/3/1981)

Singhbhum Kshetriya Gramin Bank, Chaibasa (Bihar) (31/3/1979)

Siwan Kshetriya Gramin Bank, Siwan (Bihar) (31/3/1981)

Solapur Gramin Bank, Solapur (Maharashtra) (21/1/1984)

Sonali Bank

South Indian Bank Ltd., Trichur (Kerala)

South Malabar Gramin Bank, Malappuram (Kerala) (11/12/1976)

Sravasthi Gramin Bank, Bahraich (U.P.) (4/3/1980)

Sree Anantha Grameena Bank, Anantapur (A.P.) (1/11/1979)

Sri Saraswati Grameena Bank, Adilabad (A.P.) (30/3/1982)

Sri Sathavahana Grameena Bank, Karimnagar (A.P.) (28/3/1983)

Sri Visakha Grameena Bank, Srikakulam (A.P.) (30/9/1976)

Sriganganagar Kshetriya Gramin Bank, Sriganganagar (Rajasthan)

(31/3/1984)

Srirama Grameena Bank, Nizamabad (A.P.) (21/2/1985)

Standard Chartered Bank

State Bank of Bikaner and Jaipur

State Bank of Hyderabad

State Bank of India

State Bank of Indore

State Bank of Mauritius Ltd. (12/12/1994)

State Bank of Mysore

State Bank of Patiala

State Bank of Saurashtra, Bhavnagar

State Bank of Travancore

Subansiri Gaonlia Bank, North Lakhimpur (Assam) (30/3/1982)

Sultanpur Kshetriya Gramin Bank, Sultanpur (U.P.) (8/2/1977)

Sumitomo Bank Ltd.

Surat Peoples Co-operative Bank Ltd., Surat (Gujarat) (18/8/1988 w.e.f. 1/9/1988)

Surat-Bharuch Gramin Bank, Bharuch (Gujarat) (28/2/1984)

Surendranagar-Bhavnagar Gramin Bank, Surendranagar (Gujarat) (15/12/1983)

Surguja Kshetriya Gramin Bank, Ambikapur (M.P.) (24/10/1979)

Syndicate Bank

Tamil Nadu Mercantile Bank Ltd.

Tamil Nadu State Apex Co-operative Bank Ltd., Madras (25/5/1989)

Thane Gramin Bank, Thane (Maharashtra) (30/3/1986)

Thar Aanchalik Gramin Bank, Jodhpur (Rajasthan) (31/1/1983)

Toronto-Dominion Bank

Traders’ Bank Ltd.

Tripura Gramin Bank, Agartala (21/12/1976)

Tulsi Gramin Bank, Banda (U.P.) (26/3/1981)

Tungabhadra Gramin Bank, Bellary (25/1/1976)

UCO Bank

Union Bank of India

United Bank of India

United Commercial Bank

United Industrial Bank Ltd., Calcutta

United Western Bank Ltd., Bangalore City

Uttar Banga Kshetriya Gramin Bank, Cooch-Behar (W.B.) (7/3/1977)

Uttar Pradesh Co-operative Bank Ltd., Lucknow (2/7/1966)

Vaishali Kshetriya Gramin Bank, Muzaffarpur (Bihar) (10/3/1977)

Vallalar Grama Bank, Cuddalore (Tamil Nadu) (19/6/1986)

Valsad-Dangs Gramin Bank, Bulsar (Gujarat) (23/2/1984)

Varada Grameena Bank, Kumta (Karnataka) (12/10/1984)

Vidisha-Bhopal Kshetriya Gramin Bank, Vidisha (M.P.) (31/3/1986)

Vidur Gramin Bank, Bijnor (U.P.)

Vijaya Bank Ltd., Mangalore (Karnataka)

Vindhyavasini Gramin Bank, Mirzapur (U.P.) (30/3/1983)

Visveshwaraya Grameen Bank, Mandya (Karnataka) (27/3/1985)

Vysya Bank Ltd., Bangalore City

West Bengal Provincial Co-operative Bank Ltd., Calcutta (2/7/1966)

West Bengal State Co-operative Bank Ltd., Calcutta

Yavatmal Gramin Bank, Yavatmal (Maharashtra) (29/1/1985)

——————–

1. Subs. by Noti. No. DBOD No. IBD. 937/23.3.007/2005-06 , dated 26-12-2005 (w.e.f. 1-1-2006.)

Schedule 3

SCHEDULE III

[Repealed by Act No. 23 of 1955, w.e.f. 1/7/1955]

Schedule 4

SCHEDULE IV

[Repealed by Act No. 62 of 1948, w.e.f. 1/1/1949]

Schedule 5

SCHEDULE V

[Repealed by the M.O. 1937]

“CHAPTER III-E

JOINT MECHANISM

45-Y. Joint Mechanism.—

(1) Notwithstanding anything contained in this Act or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or any other law for the time being in force, if any difference of opinion arises as to whether—

(i) any instrument, being derivative referred to in clause (a) or money market instrument referred to in clause (b) or repo referred to in clause (c) or reverse repo referred to in clause (d) or securities referred to in clause (e) of Section 45-U of this Act; or

(ii) any instrument, being policy of life insurance under the Insurance Act, 1938 (4 of 1938) or the rules or regulations made thereunder, or, scrips or any other securities referred to in sub-clauses (i), (ia), (ib), (ic), (id), (ie), (ii), (iia) and (iii) of clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956),

is hybrid or composite instrument, having a component of money market investment or securities market instrument or a component of insurance or any other instrument referred to in clause (i) or clause (ii) and falls within the jurisdiction of the Reserve Bank of India or the Securities and Exchange Board of India established under Section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Insurance Regulatory and Development Authority established under Section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) or the Pension Fund Regulatory and Development Authority constituted by the Resolution of the Government of India Number F.No. 1(6) 2007-PR, dated the 14th November, 2008, such difference of opinion shall be referred to a Joint Committee consisting of the following, namely—

(a) the Union Finance Ministerex officio Chairperson
(b) the Governor, Reserve Bank of Indiaex officio Vice-Chairperson
(c) the Secretary, Department of Economic Affairs in the Ministry of Finance, Government of Indiaex officio Member;
(d) the Secretary, Department of Financial Services in the Ministry of Finance, Government of Indiaex officio Member;
(e) the Chairperson, Insurance Regulatory and Development Authorityex officio Member
(f) the Chairman, Securities and Exchange Board of Indiaex officio Member;
(g) the Chairperson, Pension Fund Regulatory and Development Authorityex officio Member;

(2) The Secretary, Department of Financial Services in the Ministry of Finance, Government of India shall be the convener of the meetings of the Joint Committee referred to in sub-section (1).

(3) In case of any difference of opinion referred to in sub-section (1), any Member of the Joint Committee referred to in clauses (&), (e), if) or (g) of that sub-section may make a reference to the Joint Committee.

(4) The Joint Committee shall follow such procedure as it may consider expedient and give, within a period of three months from the date of reference made under sub¬section (3), its decisions thereon to the Central Government.

(5) The decision of the Joint Committee shall be binding on the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority.”

Bydeb

The Unit Trust of India Act, 1963

Preamble

[ACT NO.52 OF 1963]

[30th December, 1963]

An Act to provide for the establishment of a Corporation with a view to encouraging saving and investment and participation in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal of securities.

BE it enacted by Parliament in the Fourteenth Year of the Republic of India as follows:-

Section 1. Short title, extent and commencement

 [ACT NO.52 OF 1963]

[30th December, 1963]

An Act to provide for the establishment of a Corporation with a view to encouraging saving and investment and participation in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal of securities.

BE it enacted by Parliament in the Fourteenth Year of the Republic of India as follows:-

(1) This act may be called the Unit Trust of India Act, 1963.

(2) It extends to the whole of India.

(3) It shall come into force on such date1 as the Central Government may, by notification in the Official Gazette, appoint.

——————–

1. 1-2-1964; vide Notification No.G.S.R.172, dated 31-1-1964, Gazette of India, Extraordinary, Pt.II.Sec.3(i), p.47.

Section 2. Definitions

In this Act, unless the context otherwise requires,-

(a) “Board” means the Board of trustees constituted under section 10 or section 41;

(b) “Contributing institution” means an institution which is, for the time being, a contributory to the initial capital of the Trust under section 4;

(c) “Contribution certificate” means a certificate issued under section 6;

(d) “Initial capital” means the capital of the Trust referred to in section 4;

(e) “Life Insurance Corporation” means the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956.);

(f) “Prescribed” means prescribed by regulations made under this Act;

(g) “Reserve Bank” means the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934 (2 of 1934.);

(h) “Scheduled bank” means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934.);

(i) “Securities” means shares, debentures, bonds and other stock of any company or other body corporate, whether incorporated in India or outside, and securities issued by any local authority in India, or by the Government of, or a local authority in, any such country outside India as may be approved by the Reserve Bank and includes Government security as defined in section 2 of the Public Debt Act, 1944, (18 of 1944.) but does not include mortgages on immovable property;

(j) “State Bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955.);

(k) “Subsidiary bank” has the same meaning as in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959.);

(l) “Trust” means the Unit Trust of India established under section 3;

(m) “Trustee” means a trustee appointed, nominated or elected under section 10 or section 41;

(n) “Unit” means a unit issued under the unit scheme;

(o) ” Unit capital” means the aggregate of the face value of the units sold under the unit scheme and outstanding for the time being;

(p) “Unit certificate” means a certificate issued to the purchaser of a unit under the unit scheme;

(q) “Unit holder” means a person for the time being recognised by the Trust as the holder of a unit certificate under the unit scheme; (r) “Unit scheme” means a scheme made under section 21.

Section 3. Establishment and incorporation of Unit Trust of India

(1) The Central Government shall, by notification in the Official Gazette, establish a Corporation by the name of the Unit Trust of India which shall be a body corporate having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold or dispose of property and to contract, and may, by the said name, sue or be sued.

 (2) The head office of the Trust shall be at Bombay or at such other place as the Reserve Bank may, by notification in the Official Gazette, specify.

(3) The Trust may establish local offices, branches or agencies at any places in or outside India.

Section 4. Initial capital of Trust

 (1) Subject to the provisions of this Act, the initial capital of the Trust shall be five crores of rupees divided in the form of certificates each of which shall be of such face value as may be prescribed and contributed in the manner hereinafter provided.

 (2) Before such date as the Central Government may, by notification in the Official Gazette, specify in this behalf-

(a) The Reserve Bank shall contribute two and a half crores or rupees;

(b) The Life Insurance Corporation shall contribute seventy-five lakhs of rupees;

(c) The State Bank and the subsidiary banks shall contribute seventy-five lakhs of rupees, the amount which the State Bank and each subsidiary bank shall contribute being determined by the State Bank;

(d) Other institutions, namely, scheduled banks other than those referred to in clause (c) and such classes of financial institutions as may be notified by the Central Government in the Official Gazette in this behalf may contribute one crore of rupees.

(3) If the aggregate of the contributions made by the institutions referred to in clause (d) of sub-section (2) exceeds one crore of rupees, the Board shall refund the excess amount to such institution, so however, that the amount to be refunded to each such institution bears, as far as possible, the same proportion to the contribution made by it as the excess amount bears to the aggregate of the contributions made by such institutions.

(4) If the aggregate of the contributions made by the institutions referred to in clause (d) of sub-section (2) is less than one crore of rupees, the Reserve Bank shall contribute the deficiency within thirty days of the date specified under sub-section (2):

Provided that the Reserve Bank may, thereafter, transfer the whole or any part of its contribution under this sub-section to any institution referred to in clause (d) of sub-section (2).

(5) If at any time the Board is of opinion that the amount of the initial capital is in excess of the requirements of the Trust, it may refund the whole or any part of such capital to the contributing institutions:

Provided that where only a part is so refunded the amount to be refunded to each such institution shall bear, as far as possible, the same proportion to the contribution made by it as such part bears to the initial capital:

Provided further that for the purpose of any refund, the value of the initial capital shall be determined by the Board on such basis as the Central Government may specify in this behalf, regard being had to the real or exchangeable value thereof.

Section 5. Maintenance of register of contributories

The Board shall maintain in such manner as may be prescribed a register containing the names of the contributing institutions, the amount contributed by each such institution and such other particulars as may be prescribed.

Section 6. Issue of contribution certificates

(1) As soon as may be after the contribution has been made by any contributing institution under section 4, the Board shall issue to such contributing institution a contribution certificate or contribution certificates in such form and containing such particulars as may be prescribed.

(2) Where the whole or any part of the contribution has been refunded to any institution under sub-section (5) of section 4, that institution shall, as soon as may be after the refund has been made, forward the contribution certificate or certificates to the Board for cancellation or amendment, as the case may be, and the Board shall cancel or amend the certificate or certificates accordingly.

Section 7. Right of transfer of contribution certificates in certain cases

(1) Any contributing institution referred to in clause (d) of sub-section (2) of section 4 may, in the prescribed manner, transfer a contribution certificate to any other institution referred to in that clause and thereupon such other institution shall be deemed to be a contributing institution for the purposes of this Act.

(2) Save as provided in sub-section (1), a contribution certificate shall not be transferred.

Section 8. Rights and liabilities of holders of contribution certificates

Every holder of a contribution certificate shall have all the rights and be subject to all the liabilities conferred or imposed on a contributing institution by or under this Act.

Section 9. Management

(1) The general superintendence, direction and management of the affairs and business of the Trust shall vest in a Board of trustees which may exercise all powers and do all acts and things which may be exercised or done by the Trust.

(2) The Board shall, in discharging its functions under this Act, act on business principles, regard being had to the interest of the unit holders.

Section 10. Board of trustees

The Board of trustees shall consist of the following, namely.

(a) The Chairman to be appointed by the Reserve Bank;

(b) Four trustees to be nominated by the Reserve bank, of whom not less that three shall be persons have special knowledge of, or experience in, commerce, industry, banking, finance or investment;

(c) One trustee to be nominated by the Life Insurance Corporation;

(d) One trustee to be nominated by the State Bank;

(e) Two trustees to be elected in the prescribed manner by the contributing institutions referred to in clause (d) of sub-section (2) of section 4; and

(f) An executive trustee to be appointed by the Reserve Bank:

Provided that if the appointment of the Chairman is whole-time, it shall not be necessary to appoint an executive trustee:

Provided further that on the first constitution of the Board, the trustees referred to in clause (e) shall be nominated by the Reserve Bank and shall hold office for a period of twelve months from the date of their nomination or until two trustees are elected under the said clause, whichever may be earlier.

Section 11. Term of office of trustees

(1) A trustee nominated under clause (b) of section 10, if he is an officer of the Reserve Bank, or a trustee nominated under clause (c) or clause (d) of that section shall hold office during the pleasure of the authority nominating him.

(2) A trustee nominated under clause (b) of section 10, if he is not an officer of the Reserve bank, or a trustee elected under clause (e) of that section shall hold office for four years and thereafter until his successor is duly nominated or elected.

(3) A casual vacancy in the office of a trustee referred to in sub-section (2) or in the office of a trustee nominated under the second proviso to section 0 shall be filled by election or nomination, as the case may be, and the trustee so elected or nominated shall hold office for the unexpired portion of the term of his predecessor:

Provided that no such vacancy occurring within three months of the date of the expiry of the normal term of office of such trustee need be filled under this Sub-section.

(4) A trustee nominated under the second proviso to section 10 or a trustee nominated in his place under sub-section (3) of this section shall be deemed to be a trustee elected under clause (e) of section 10.

(5) A person who holds, or who has held, office as a trustee shall, subject to the other provisions of this Act, be eligible for re-nomination or re-election, as the case may be.

Section 12. Disqualification for being a trustee

A person shall not be capable of being nominated or elected as a trustee if–

(a) He is, except in the case of the Chairman or the executive trustee, an officer or other employee of the Trust; or

(b) He is, or at any time has been, adjudicated as insolvent or has suspended payment of his debts or has compounded with his creditors; or

(c) He is of unsound mind and stands so declared by a competent court; or

(d) He has been convicted of an offence which, in the opinion of the Reserve Bank, involves moral turpitude.

Section 13. Vacation and resignation of office of trustee

(1) If a trustee-

(a) Becomes subject to any of the disqualifications mentioned in section 12; or

(b) Is absent without leave of the Board from more than three consecutive meetings thereof; or

(c) Being a trustee elected or deemed to be elected under clause (e) of section 10 becomes an officer or other employee of Government or of the Reserve Bank, State Bank, a subsidiary bank or the Trust,

His office shall thereupon become vacant.

(2) A trustee nominated under clause (b) of section 10 who is not an officer of the Reserve Bank or a trustee elected or deemed to be elected under clause (e) of that section may be letter addressed to the Board resign his office and on such resignation being accepted by the Board shall be deemed to have vacated his office.

Section 14. Chairman and executive trustee

(1) The appointment of a Chairman or of an executive trustee may be either whole-time or part-time:

Provided that if the appointment of the Chairman is part-time, the appointment of the executive trustee shall be whole-time.

(2) The Chairman or the executive trustee shall-

(a) Hold office for such term not exceeding five years as the Reserve Bank may specify;

(b) Receive such salary or allowances or both from the Trust and be governed by such terms and conditions of service as the Reserve Bank may determine; and

(c) Perform such functions as the Board may entrust or delegate to him.

Section 15. Casual vacancy in office of Chairman or executive trustee

If the Chairman or the executive trustee is by infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise, in circumstances not involving the vacation of his appointment, the Reserve Bank may nominate another person to act in his place until the date on which the Chairman or the executive trustee, as the case may be, resumes his duties.

Section 16. Fees and allowances of certain trustees

Trustees, other than the Chairman and the executive trustee, shall be paid such fees and allowances for attending the meetings of the Board or of any of its committees and for attending to any other work of the Trust, as may be prescribed:

Provided that no fees shall be payable to a trustee who is an officer of Government of any corporation established by any law for the time being in force.

Section 17. Meetings of Board

(1) The Board shall meet not less than six times a year and at least once every two months and shall observe such rules of procedure in regard to the transaction of business at its meeting as may be prescribed.

(2) The Chairman, or, if for any reason he is unable to attend any meeting of the Board, any other trustee nominated by him in this behalf or, in the even of such nominated trustee also being unable to attend the meeting or no such nomination having been made by the Chairman, any other trustee elected by the trustees present at the meeting from among themselves, shall preside at the meeting.

(3) All questions which come up before any meeting of the Board shall be decided by a majority of votes of the trustees present and voting, and, in the event of equality of votes, the Chairman or, in his absence, the person presiding, shall have a second or casting vote.

Section 18. Executive Committee and other committees

(1) There shall be an Executive Committee which shall consist of–

(a) The Chairman of the Board,

(b) Where an executive trustee has been appointed by the Reserve Bank, such executive trustee, and

(c) Two other trustees nominated in this behalf by the Reserve Bank.

(2) The Chairman of the Board shall be the Chairman of the Executive Committee.

(3) Subject to such general or special directions as the Board may, from time to time, give the Executive Committee shall be competent to deal with any matter within the competence of the Board.

(4) The Board may constitute such other committees whether consisting wholly of trustees or wholly of other persons or partly of trustees and partly of other persons as it thinks fit and for such purpose at it may decide.

(5) The Executive Committee or any other committee constituted under this section shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meeting as may be prescribed.

(6) The members of a committee (other than the trustees) shall be paid such fees and allowances for attending its meetings and for attending to any other work of the Trust, as may be prescribed.

Provided that no fees shall be payable to a member who is an officer of Government or of any corporation established by any law for the time being in force.

Section 19. Business of Trust

(1) The Trust may carry on and transact any of the following kinds of business, namely:–

(a) Selling and purchasing units;

(b) Investing in, acquiring, holding or disposing of, securities and exercising and enforcing all powers and rights incidental thereto;

(c) Keeping money on deposit with scheduled banks or with such other institutions as may be prescribed;

(d) Generally, doing all such matters and things as may be incidental to or consequential upon the discharge of its functions under this Act.

(2) The Trust shall not take on lease, purchase or otherwise acquire except for its own use any immovable property or any interest therein.

Section 20. Borrowing powers

(1) The Trust may borrow from any authority or person, not being Government or the Reserve Bank, against such security and on such terms and conditions as may be agreed upon.

(2) The Trust may borrow money from the Reserve Bank repayable on demand or on the expiry of a fixed period not exceeding ninety days from the date on which the money is so borrowed against stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India.

(3) If the Board is of opinion that a situation has arisen in which it is necessary or expedient for the Trust to borrow money from the Reserve Bank against securities other than those mentioned in sub-section (2), the Trust may borrow money from that bank repayable on demand or within a period not exceeding eighteen months from the date on which the money is so borrowed against its own bonds which the Trust may issue with the approval of the Central Government.

(4) The bonds issued by the Trust under sub-section (3) shall be guaranteed by the Central Government as to the repayment of principal and the payment of interest at such rate as may be fixed by the Central Government at the time the bonds are issued.

Section 21. Unit scheme

(1) For the purpose of providing facilities for participation in the income, profits and gains arising out of the acquisition, holding, management or disposal of securities by the Trust, the Board shall make a unit scheme.

(2) Subject to the provisions of this Act, and the regulations made under section 43, a scheme made under sub-section (1) may provide for–

(a) The issue of units and the face value of each unit, which shall not be less than ten rupees or more than one hundred rupees;

(b) The form and manner in which an application may be made for the purchase of a unit from the Trust;

(c) The manner in which payment may be made for purchasing a unit from the Trust;

(d) The issue of unit certificates and the form and manner in which such certificates may be issued;

(e) The issue of duplicate of any unit certificate in the event of loss or destruction of the original and the fee on the payment of which such duplicate may be issued;

(f) The procedure for determining the value at which the units may be sold or purchased, from time to time, by the Trust;

(g) The recognition of persons as unit holders;

(h) The persons to whom, the time at which and the manner in which any payments in respect of a unit shall be made by the Trust;

(j) The conditions, if any, subject to which a unit holder may transfer the unit;

(k) Any other matter which the Trust may consider to be necessary or proper for the effective implementation of the scheme.

(3) The Board may, from time to time, add to or otherwise amend the scheme made under sub-section(1)

(4) The scheme made under sub-section(1) and every amendment thereof under sub-section(3) shall be notified in the Official Gazette.

Section 22. Allocation of income, interest and other expenses

(1) The total gross income of the Trust in any year shall be allocated to the initial capital and the unit capital in the same proportion as the former bears to the latter at the end of that year.

(2) The interest payable for any year for any borrowings made by the Trust and the total amount of other expenses incurred by the Trust in that year shall be allocated and charged to the initial capital and the unit capital in the same proportion as is referred to in sub-section(1):

Provided that if the amount of expenses other than interest allocated to the unit capital is more than five per cent of the gross income allocated to the unit capital in that year, only an amount equal to such five per cent shall be charged to the unit capital and the rest of the total amount of expenses other than interest shall be charged to the initial capital.

Section 23. Distribution of income

(1) The gross income allocated to the initial capital in any year reduced by the interest and the amount of other expenses charged for that year to the initial capital may be distributed in the prescribed manner among the contributing institutions in proportion to their contributions to the initial capital.

(2) The gross income allocated to the unit capital in any year reduced by the interest and the amount of other expenses charged for that year to the unit capital may, but not less than ninety per cent.of the gross income so reduced shall, be distributed to the unit holders in respect of that year.

Section 24. Distribution of income after refund of initial capital

Notwithstanding anything contained in section 22 or section 23, where the whole of the initial capital has been refunded to the contributing institutions, the gross income in any year reduced by the interest payable for that year for any borrowings made by the Trust and the total amount of other expenses incurred by the Trust in that year may, but not less than ninety per cent of the gross income so reduced shall, be distributed to the unit holders in respect of that year.

Section 25. Definition of year

In this Chapter “year” means the period in respect of which the books and accounts of the Trust are balanced and closed under sub-section(2) of section 26.

Section 26. Preparation of balance-sheet, etc., of Trust

(1) The balance-sheet and accounts of the Trust shall be prepared and maintained in such form and manner as may be prescribed.

(2) The Board shall cause the books and accounts of the Trust to be balanced and closed each year as on such date as may be prescribed

Section 27. Audit

(1) The affairs of the Trust shall be audited by an auditor duly qualified to act as an auditor under sub-section(1) of section 226 of the Companies Act, 1956, (1 of 1956) who shall be appointed by the Trust and shall receive such remuneration as the Trust may fix.

(2) The auditor shall be supplied with a copy of the annual balance-sheet of the Trust and it shall be his duty to examine it together with the accounts and vouchers relating thereto and he shall have a list delivered to him of all books kept by the Trust and shall at all reasonable times have access to the books, accounts, vouchers and other documents of the Trust.

(3) The auditor may, in relation to such accounts, examine any trustee or any officer or other employee of the Trust and shall be entitled to require from the Board or officers or other employees of the Trust such information and explanation as he may think necessary for the performances of his duties.

(4) The auditor shall make a report to the Trust upon the annual balance-sheet and accounts examined by him and in every such report he shall state whether in his opinion the balance-sheet is a full and fair balance-sheet containing all necessary particulars and properly drawn up so as to exhibit a true and fair view of the state of affairs of the Trust and in case he had called for any information or explanation from the Board or any officer or other employee of the Trust, whether it has been given and whether it is satisfactory.

Section 28. Publication of annual accounts and reports

The Trust shall furnish to each of the contributing institutions within four months from the date on which its accounts are balanced and closed in respect of any year a copy of the balance-sheet and accounts together with a copy of the auditor’s report and shall publish the same in the Official Gazette.

Section 29. Furnishing of information to Reserve Bank

The Trust shall furnish, from time to time, to the Reserve Bank such information as the Reserve Bank may require.

Section 30. Power of Reserve Bank to give directions

In the discharge of its functions under this Act, the Trust shall be guided by such directions in matters of policy involving public interest as the Reserve Bank may give to it in writing, and if any question arises whether the direction relates to a matter of policy involving public interest, the decision of the Reserve Bank thereon shall be final.

Section 31. Staff of Trust

(1) The Trust may appoint such number of officers and other employees as it considers necessary or desirable for the efficient performances of its functions and determine the terms and conditions of their appointment and service.

(2) Without prejudice to the provisions of sub-section (1), it shall be lawful for the Trust to utilise, and for the Reserve Bank to make available, the services of such staff of the Reserve Bank on such terms and conditions as may be agreed upon between the Trust and the Reserve Ba

Section 32. Income-tax and other taxes

(1) Notwithstanding anything contained in the income-tax Act, 1961, (43 of 1961) the Super Profits Tax Act, 1963, (14 of 1963) or in any other enactment for the time being in force relating to income-tax, super-tax or super profits tax, or any other tax on income, profits or gains–

(a) The Trust shall not be liable to pay income-tax, super-tax, super profits tax or any other tax in respect of any income, profits or gains derived by it from any source;

(b) Where the income received by a unit holder, being an individual, from the Trust in respect of units does not exceeds one thousand rupees, such income, and where such income exceeds one thousand rupees, a sum of one thousand rupees, shall be excluded in computing the total income of the unit holder for purposes of income-tax and in the case of any such unit holder who would not be liable to super-tax but for the inclusion of such income in his total income, also for purposes of super-tax; and

(c) Where a contributing institution is liable to be assessed to super profits tax under the Super Profits Tax Act, 1963, (14 of 1963) in respect of its own income, profits or gains and receives any sum from the Trust under this Act in respect of its contribution to the initial capital, such sum as reduced by the amount of any income-tax and super-tax payable in respect thereof shall be excluded from the total income of the said institution in computing its chargeable profits for the purposes of super profits tax.

(2) Notwithstanding anything contained in section 193 or section 194 of the Income-tax Act, 1961(43 of 1961)–

 (a) No deduction of income-tax or super-tax shall be made on any interest or dividend payable to the Trust in respect of any securities or shares owned by it or in which it has full beneficial interest; and

(b) No deduction of income-tax shall be made by the Trust from the income distributed by it to a unit holder being an individual.

(3) Subject to the foregoing sub-sections, for the purposes of the Income-tax Act, 1961, (43 of 1961)–

(a) Any distribution of income received by a unit holder from the Trust shall be deemed to be his income by way of dividends; and

(b) The Trust shall be deemed to be a company.

Section 33. Act 18 of 1891 to apply in relation to Trust

The Bankers’ Books Evidence Act, 1891 shall apply in relation to the Trust as if it were a bank as defined in section 2 of the said Act.

Section 34. Declaration of fidelity and secrecy

Every trustees, auditor, officer or other employee of the Trust or any employee of the Reserve Bank whose services are utilised by the Trust under section 31 shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the First Schedule to this Act.

Section 35. Defects in appointments not to invalidate acts, etc

(1) No act or proceeding of the Board or of any committee of the Trust shall be questioned on the ground merely of the existence of any vacancy in, or defect in the constitution of, the Board or committee.

(2) No act done by any person acting in good faith as a trustee shall be deemed to be invalid merely on the ground that he was disqualified to be a trustee or that there was any other defect in his appointment.

Section 36. Indemnity of trustees

(1) Every trustee shall be indemnified by the Trust against all losses and expenses incurred by him in, or in relation to, the discharge of his duties except such as are caused by his own wilful act or default.

(2) A trustee of the Board shall not be responsible for any other trustee, or for any officer or other employee of the Trust, or for any loss or expenses resulting to the Trust, from the insufficiency or deficiency of value of or title to any property or security acquired or taken on behalf of the Trust or the insolvency or wrongful act of any debtor or any person under obligation to the Trust or anything done in good faith in the execution of the duties of his office or in relation thereto.

Section 37. Protection of action taken under this Act

No suit or other legal proceeding shall lie against the Trust or the Reserve Bank or any trustee or any officer employee of the Trust or the Reserve Bank or any other person authorised by the Trust to discharge any functions under this Act for any damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of this Act.

Section 38. Delegation of powers

The Board may, by general or special order, delegate to any officer of the Trust, subject to such conditions and limitations, if any, as may be specified in the order, such of its powers and duties under this Act as it may deem necessary.

Section 39. No trust to be taken notice of and protection from attachment

(1) No notice of a trust, express, implied or constructive, shall be receivable by the Trust.

(2) The amount standing to the credit of a contributing institution shall not be liable to attachment under any decree or order of any court in respect of any debt or liability incurred by the contributing institution.

Section 40. Repayment of contribution in case of winding up of contributing institution

(1) In the event of a contributing institution referred to in clause(d) of sub-section(2) of section 4 being wound up, the Trust shall, on a demand in that behalf made by the authority in charge of the winding up, pay to such authority an amount equivalent to the value of the contribution to the initial capital made by that institution.

(2) The value of the contribution shall be determined by the Board on such basis as the Central Government may specify, regard being had to the real or exchangeable value of such contribution.

Section 41. Power of Central Government to reconstitute Board

(1) Notwithstanding anything contained in section 10 or section 11, where the whole of the initial capital has been refunded to the contributing institutions, the Central Government may, after consultation with the Reserve Bank, by order, provide for the reconstitution of the Board.

(2) An order made under sub-section (1) may provide for all or any of the following matters, namely:–

(a) The number of trustees that will constitute the Board;

(b) The manner in which they shall be chosen:

(c) Their terms of office;

(d) Filling of casual vacancies;

(e) Such incidental, consequential and supplementary matters as may be necessary to give effect to the order including the reconstitution of the executive committee or other committees.

(3) Every order made under this section shall be published in the Official Gazette and a copy thereof shall be laid before each House of Parliament as soon as may be after it is made.

Section 42. Liquidation of trust

(1) The Trust shall not be placed in liquidation save by order of the Central Government and in such manner as it may direct.

(2) In making such order, the Central Government shall, if the initial capital has not been wholly refunded, direct, among other things, that–

(i) The value of the net assets of the Trust after paying off all its liabilities, other than those in respect of the initial capital and the unit capital shall be divided into two parts in the same proportion as the aggregate face value of all the units immediately prior to the date on which the Trust is placed in liquidation bears to the initial capital as on that date; and

(ii) The first part shall be distributed among the contributing institutions in proportion to their respective contributions to the initial capital as on that date and the second part shall be distributed among the unit holders in proportion to the face value of the units held by them as on that date.

Section 43. Regulations

(1) The Board may, with the previous approval of the Reserve Bank, make regulations not inconsistent with this Act to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act.

(2) In particular and without prejudice to the generally of the foregoing power, such regulations may provide for–

(a) The form and manner of maintenance of the register of contributing institutions and the particulars to be contained therein;

(b) The face value of a contribution certificate, its from and the particulars to be contained therein;

(c) The manner of transfer of a contribution certificate;

(d) The rights and liabilities of a contributing institution;

(e) The holding and conduct of election under this Act, including the final decision on doubts or disputes regarding the validity of elections;

(f) The fees and allowances that may be paid to the trustees;

(g) The times and places of the meeting of the Board or of any committee constituted under this Act and the procedure to be followed at such meetings including the quorum necessary for the transaction of business;

(h) The fees and allowances that may be paid to the members of a committee, other than trustees;

(i) The institutions with which money may be kept on deposit;

(j) The manner of distribution of income to the contributing institutions;

(k) The form and manner in which the balance-sheet and the accounts of the Trust shall be prepared and maintained;

(l) The date on which the books of accounts of the Trust shall be balanced and closed each year;

(m) The duties and conduct, salaries and allowances, and other conditions of service of officers and other employees of the Trust;

(n) The establishment and maintenance of provident or other benefit funds for officers and other employees of the Trust; and

(o) Any other matter which is to be, or may be, prescribed.

(3) Any regulation which may be made by the Board under this Act may be made by the Reserve Bank within three months of the establishment of the Trust and any regulation so made may be altered or rescinded by the Board in the exercise of its powers under this Act.

Section 44. Amendment of certain enactments

The enactments specified in the Second Schedule to this Act shall be amended in the manner provided therein.

THE FIRST SCHEDULE

(See section 34)

DECLARATION OF FIDELITY AND SECRECY

I do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as trustee, auditor, officer or other employee (as the case may be) of the Unit Trust of India and which properly relate to the office or position held by me in the said Trust.

I further declare that I will not communicate or allow to be communicated to any person not legally entitled thereto any information relating to the affairs of the Unit Trust of India or to the affairs of any person having any dealing with the said Trust; nor will I allow any such person to inspect or have access to any books or documents belonging to or in possession of the Unit Trust of India and relating to the business of the said Trust or the business of any person having any dealing with the said Trust.

(Signature)

Signed before me:

THE SECOND SCHEDULE

(See section 44)

AMENDMENT OF CERTAIN ENACTMENTS

PART I

AMENDMENTS TO THE RESERVE BANK OF INDIA ACT, 1934

(2 OF 1934)

Amendments

1. Amendment of section 2.

In section 2, after clause(f), insert the following clause, namely:–

‘(g) “Unit Trust” means the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963.’

2. Amendment of section 17.

In section 17,–

(a) After clause(4BB), insert the following clause, namely:–

“(4BBB) The making to the Unit Trust of loans and advances–

(i) Repayable on demand or on the expiry of a fixed period not exceeding ninety days from the date of such loan or advance against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India, or

(ii) Repayable on demand or within a period of eighteen months from the date of such loan or advance against the security of the bonds of the Unit Trust issue with the approval of and guaranteed by the Central Government;”;

(b) After clause (4E), insert the following clause, namely:–

“(4F) Contributing to the initial capital of the Unit Trust.”.

PART II

AMENDMENT TO THE INDUSTRIAL DISPUTES ACT, 1947

(14 OF 1947)

Amendment

Amendment of section 2. In section 2, in sub-section(i)of clause (a), after “Deposit Insurance Corporation Act, 1961 or” insert the following, namely:–

“The Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963, or”.

PART III

AMENDMENT TO THE INDUSTRIAL FINANCE CORPORATION ACT, 1948

Amendment

Substitution of new section for section 20. For section 20, substitute the following , namely:–

“20. Investment of funds.

The Corporation may invest its funds in the securities of the Central Government or of any State Government and may, with the approval of the Central Government, contribute to the initial capital of the Unit Trust of India established under the Unit Trust of India Act, 1963″.

PART IV

AMENDMENT TO THE STATE BANK OF INDIA ACT, 1955

(23 OF 1955)

Amendment

Amendment of section 33. In section 33, after clause (xixa), insert the following clause, namely:–

“(xixaa) Contributing to the initial capital of the Unit Trust of India established under the Unit Trust of India Act, 1963;”.

Bydeb

The State Bank of Hyderabad Act, 1956

Section 1. Short title and commencement

ACT NO.79 OF 1956

[22nd December, 1956]

An Act to transfer the share capital of the Hyderabad State Bank to the Reserve Bank of India and to provide for its proper management and other matters connected therewith or incidental thereto.

WHEREAS in view of the reorganisation of States, it is necessary to provide for the devolution of the functions of the State Government of Hyderabad in relation to the Hyderabad State Bank on one single authority;

AND WHEREAS in order to secure the more efficient performance of banking and treasury functions by the Hyderabad State Bank as agent to the Reserve Bank of India and to enable the Reserve Bank of India to assist the Hyderabad State Bank, by the grant of subsidies or otherwise, to extend banking facilities to the public on a larger scale, it is expedient and necessary to provide for the transfer of the share capital of the Hyderabad State Bank to the Reserve Bank of India and for its proper management and for other matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Seventh Year of the Republic of India as follows:-

(1) This Act may be called the State Bank of Hyderabad Act, 1956.

(2) It shall be deemed to have come into force on the 22nd day of October, 1956.

Section 2. Definitions

In this Act, unless the context otherwise requires,-

(a) “Appointed day” means the 22nd day of October, 1956;

(b) “Hyderabad Bank” means the Hyderabad State Bank re-named under sub-section (1) of section 3, the State Bank of Hyderabad;

(c) “Hyderabad State Bank” means the Hyderabad State Bank constituted and incorporated under the Hyderabad State Bank Act, 1350F (19 of 1350F);

(d) “Prescribed” means prescribed by regulations made under this Act;

(e) “Reserve Bank” means the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934 (2 of 1934).

Section 3. Change of name of Hyderabad State Bank

(1) On the appointed day, the body corporate constituted by the Hyderabad State Bank Act, 1350F (19 of 1350F), and known as the Hyderabad State Bank shall be re-named as the State Bank of Hyderabad and shall, as from that day, carry on the business of banking and other business in accordance with the provisions of this Act and shall have power to acquire and hold property whether movable or immovable for the purposes of this Act and to dispose of the same.

(2) The said body corporate shall consist of the persons who for the time being hold the office of Governor or Deputy Governor of the Reserve Bank and such other persons, if any, as the Central Government may, from time to time, appoint in this behalf.

(3) The change of name of the Hyderabad State Bank by sub-section (1) shall not affect any rights or obligations of that bank, or render defective any legal proceedings by or against it; and any legal proceedings which might have been continued or commenced by or against the Hyderabad State Bank by its former name may be continued by or against it by its new name.

Section 4. Head Office and branches of Hyderabad Bank

(1) Unless otherwise directed by the Central Government by notification in the Official Gazette, the Head Office of the Hyderabad Bank shall be at Hyderabad.

(2) The Hyderabad Bank shall continue to maintain every branch and agency of the Hyderabad State Bank in existence immediately before the appointed day, and shall not discontinue any such branch or agency or establish any new branch or agency except with the previous approval of the Reserve Bank.

Section 5. Transfer of share capital of Hyderabad State Bank to Reserve Bank

On the appointed day, all shares in the capital of the Hyderabad State Bank shall be transferred to, and shall vest in, the Reserve Bank free of all trusts, liabilities and encumbrances.

Section 6. Compensation to share-holders of Hyderabad State Bank

(1) The Reserve Bank shall pay to the State Government of Hyderabad and every other person who, immediately before the appointed day, is registered as a holder of shares in the Hyderabad State Bank, as compensation for the transfer of such shares to the Reserve Bank under section 5, an amount calculated at the rate of ninety-four rupees four annas and six pies in Indian currency for each share of the face value of one hundred Osmania Sicca rupees.

(2) Notwithstanding the transfer of the shares in the capital of the Hyderabad State Bank to the Reserve Bank, any share-holder who, immediately before the appointed day, was entitled to payment of dividend on the shares of the Hyderabad State Bank held by him shall be entitled to receive from the Hyderabad Bank all dividends declared by the Hyderabad State Bank in respect of his shares for any year which ended before the appointed day and remaining unpaid.

(3) Notwithstanding anything contained in the Hyderabad State Bank Act, 1350F (19 of 1350F), no such shareholder shall be entitled as of right to any dividend on the shares of the Hyderabad State Bank held by him in respect of any period before the appointed day for which that Bank had not declared a dividend:

Provided that the Central Government may, in respect of any such period, authorise the payment of dividend at such rate as it may specify if it is satisfied that there is sufficient balance of profits available after such provisions and contributions for the purposes referred to in section 28 as the Reserve Bank considers necessary have been made.

(4) Nothing contained in sub-section (1) shall affect the rights inter se between the holder of any share in the Hyderabad State Bank and any other person who may have an interest in such share and such other person shall be entitled to enforce his interest against the compensation awarded to the holder of such share but not against the Reserve Bank.

Section 7. Certain officers of the Hyderabad State Bank to vacate office

(1) Every person holding office as director (including the President and the managing director) or as deputy managing director, in the Hyderabad State Bank immediately before the appointed day, shall be deemed to have vacated that office on the appointed day, and notwithstanding anything contained in this Act or in any other law for the time being in force or in any agreement or contract, such person shall not be entitled to any compensation for the loss of office or for the premature termination of any agreement or contract relating to his employment, except such pension, compensation or other benefit, as the Hyderabad Bank may, with the previous approval of the Reserve Bank, grant to him having the previous approval of the Reserve Bank, grant to him having regard to what he would have received, if this Act had not been passed and if his employment had ceased on the appointed day in the ordinary course.

(2) Nothing in sub-section (1) shall be deemed to prevent the Hyderabad Bank from re-appointing or re-employing with the previous permission in writing of the Reserve Bank, the managing director or the deputy managing director of the Hyderabad State Bank on such terms and conditions as are agreed upon between him and the Hyderabad Bank and are approved by the Reserve Bank.

Section 8. Special provisions regarding existing officers and employees

(1) Notwithstanding anything contained in any law or contract of service or other document, no appointment made or promotion, increment in salary, pension or allowance or any other benefit granted to any person by the Hyderabad State Bank after the 19th day of December, 1954, and before the appointed day which would not ordinarily have been made or granted or which would not ordinarily have been admissible under the rules or authorisations of the Hyderabad State Bank, or of any provident, pension, or other fund in force before the 19th day of December, 1954, shall have effect or be payable or claimable from the Hyderabad Bank, or from any provident, pension or other fund or from any authority administering any such fund, unless the Reserve Bank has, by general or special order, confirmed the appointment, promotion or increment or has directed the grant of the pension, allowance or other benefit, as the case may be.

(2) Where any office or other employee of the Hyderabad State Bank has, whether before or after the appointed day, received any amount by reason of any such appointment, promotion or increment or the grant of any such pension, allowance or other benefit, as is referred to in sub-section (1), which has not been confirmed or sanctioned by the Reserve Bank in pursuance of the powers conferred on it by that sub-section, such officer or other employee shall be bound to refund such amount to the Hyderabad Bank and that bank shall be entitled to take all such steps as may be necessary for recovering such amount.

(3) Where any managing director, deputy managing director or other employee of the Hyderabad State Bank has, after the 19th day of December, 1954, and before the appointed day, been paid any sum by way of compensation or gratuity, the Hyderabad Bank shall be entitled to claim refund of any sum so paid if the payment is not confirmed by the Reserve Bank by general or special order.

(4) Notwithstanding anything contained in any law for the time being in force, the re-naming of the Hyderabad State Bank or the transfer of its share capital to the Reserve Bank shall not entitle any officer or other employees of that bank to any compensation to which he may be entitled under any such law, and no such claim shall be entertained by any court, tribunal or other authority.

Section 9. Authorised capital

1[(1) Subject to the provisions of this Act, the authorised capital of the Hyderabad Bank shall be rupees five hundred crores.

(2) The authorised capital of the Hyderabad Bank shall be divided into shares of one hundred rupees each or of such denomination as the Hyderabad Bank may, with the approval of the State Bank, decide.

(3) The Hyderabad Bank may issue the certificates of shares of equivalent values of such denomination as the Hyderabad Bank may decide with the approval of the State Bank, in accordance with the procedure as may be specified by regulations made under Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) and every shareholder of the Hyderabad Bank shall be entitled to have the certificate of shares of equivalent value of such denomination.

(4) Notwithstanding anything contained in sub-section (1), the State bank may, with the approval of the Reserve Bank, authorise the Hyderabad Bank to increase or reduce its authorised capital.]

——————–

1. Subs. by Act No. 30 of 2007 w.e.f. 18-6-2007.

Section 10. Issued capital

(1) Out of the amount in the capital account of the Hyderabad State Bank on the appointed day,

(a) A sum of fifty lakhs of rupees shall be retained as the issued capital of the Hyderabad Bank and such capital shall on that day stand allotted to the Reserve Bank in lieu of the compensation payable by it under section 6;

(b) Any amount in excess of the sum of rupees fifty lakhs aforesaid shall on that day stand transferred to the Reserve Fund Account of the Hyderabad Bank.

1[(1-A) Notwithstanding anything contained in sub-section (1), the issued capital of the Hyderabad Bank, shall consist of such amount as the State Bank may, with the approval of the Reserve Bank, fix, and shall be divided into fully paid-up shares of such denomination in accordance with sub-section (2) of Section 9.]

(2) The Reserve Bank may, with the previous sanction of the Central Government, authorise an increase in the issued capital of the Hyderabad Bank, and such increased capital shall be provided by the Reserve Bank.

2[(3)(3) The Hyderabad Bank may, from time to time, with the approval of the State Bank and the Reserve Bank, increase, whether by public issue or by preferential allotment or private placement in accordance with the procedure as may be specified by regulations made under Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), its issued capital by issue of equity or preference shares.

(3-A) The issued capital of the Hyderabad Bank shall consist of equity shares or equity and preference shares :

Provided that the issue of preference shares shall be in accordance with the guidelines framed by the Reserve Bank specifying the class of preference shares, the extent of issue of each class of such preference shares (whether perpetual of irredeemable or redeemable) and the terms and conditions subject to which, each class of preference shares may be issued.

(3-B) The Hyderabad Bank may, with the approval of the State Bank and the Reserve Bank, increase from time to time by way of issuing bonus shares to existing equity shareholders, its issued capital in such manner as the State Bank, with the approval of the Reserve Bank, direct.

(3-C) No increase or reduction in the issued capital of the Hyderabad Bank shall be made in such a manner that the State Bank holds at any time less than fifty-one per cent of the issued capital consisting of equity shares of the Hyderabad Bank.

(3-D) The Hyderabad Bank may accept the money in respect of shares issued towards increase in issued capital in instalments, make calls and forfeit unpaid shares and re-issue them, in the manner as may be specified by regulations made under Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959).]

——————–

1. Inserted by Act No. 30 of 2007 w.e.f. 18-6-2007.

2. Subs. by Act No. 30 of 2007 w.e.f. 18-6-2007.

Section 11. Management

(1) The Reserve Bank may, from time to time, give directions and instructions to the Hyderabad Bank in regard to any of its affairs and business, and that bank shall be bound to comply with the directions and instructions so given.

(2) Subject to any such directions and instructions, the general superintendence and conduct of the affairs and business of the Hyderabad Bank shall, as from the appointed day, vest in a Board of Directors who may exercise all powers and do all such acts and things as may be exercised or done by that bank.

(3) The Board of Directors in discharging its functions under this Act, shall act on business principles, regard being had to public interest.

Section 12. Composition of Board of Directors

(1) The Board of Directors of the Hyderabad Bank shall consist of the following:-

(a) A managing director to be appointed by the Reserve Bank with the approval of the Central Government;

(b) An officer of the Central Government to be nominated by that Government;

(c) An officer of the Reserve Bank to be nominated by that bank;

(d) Such number of other directors not exceeding three, to be nominated by the Reserve Bank with the approval of the Central Government.

(2) If a director nominated under clause (b) or clause (c) of sub-section (1) is, for any reason, unable to attend any meeting of the Board of Directors or any of its committees, the Central Government or the Reserve Bank, as the case may be, may depute any other person to attend the said meeting and such other person shall have the right to speak in and otherwise take part in the proceedings of the meeting and shall also be entitled to vote at such meeting.

Section 13. Term of office of directors

(1) The managing director shall hold office for such term not exceeding four years as the Reserve Bank may specify at the time of his appointment.

(2) A director nominated under clause (b) or clause (c) of sub-section (1) of section 12 shall hold office at the pleasure of the authority nominating him.

(3) A director nominated under clause (d) of sub-section (1) of section 12 shall hold office for three years:

Provided that he shall continue to hold office until his successor is duly nominated.

(4) A director relinquishing his office shall be eligible for re-appointment or re-nomination, as the case may be.

Section 14. Disqualification for directorship

(1) A person shall be disqualified to be a director of the Hyderabad Bank, if-

(a) He holds the office of director, provisional director, promoter, agent, or manager of any banking company or a banking company for the formation of which a prospectus has been issued; or

(b) He has been removed or dismissed from the service of Government; or

(c) He holds any office of profit under the Hyderabad Bank, other than the office of a managing director; or

(d) He is, or at any time has been adjudicated an insolvent or has suspended payment of his debts or has compounded with his creditors; or

(e) He is declared a lunatic or becomes of unsound mind; or

(f) He is or has been convicted of any offence involving moral turpitude.

(2) No two persons who are partners of the same firm or are directors of the same private company or one of whom is an agent of the other or holds a power of attorney from a firm of which the other is a partner may be directors at the same time.

(3) The appointment or nomination as a director of any person who is a member of either House of Parliament or the Legislature of a State shall be void unless within two months of the date of appointment or nomination, as the case may be, he ceases to be a member of Parliament or the Legislature of the State, and if any director is elected or nominated as a member of Parliament or the Legislature of a State, he shall cease to be a director as from the date of such election or nomination, as the case may be.

(4) In this section,-

(a) ‘Banking company’ has the same meaning as in the Banking Companies Act, 1949 (10 of 1949);

(b) ‘Manager’ means the chief executive officer of a banking company by whatever name called:

(c) ‘Private company’ has the same meaning as in the Companies Act, 1956 (1 of 1956).

Section 15. Vacation of office of directors

If a director-

(a) Becomes subject to any of the disqualifications mentioned in section 14, or

(b) Resigns his office by giving notice in writing under his hand to the Reserve Bank, and his resignation is accepted by that bank, or

(c) Is absent without leave of the Board of Directors for more than three consecutive meetings thereof,

His seat shall thereupon become vacant.

Section 16. Chairman of the Board of Directors

(1) The chairman of the Board of Directors shall be such one of the directors, not being the managing director, as the Reserve Bank may, with the approval of the Central Government, nominate.

(2) The chairman shall hold office for two years or until his successor is nominated:

Provided that the chairman shall, so long as he is a director, be eligible for re-nomination as chairman.

Section 17. Managing director

The managing director-

(a) Shall be a whole-time officer of the Hyderabad Bank;

(b) Subject to the general control of the Board of Directors, shall exercise such powers and perform such duties as may be prescribed; and

(c) Shall receive such salary and allowances as may be determined by the Reserve Bank.

Section 18. Remuneration of directors

A director, shall be paid for attending the meetings of the Board of Directors or of any of its committees and for attending to any other business of the Hyderabad Bank such fees and allowances as may be prescribed:

Provided that no fee shall be payable to the managing director or any other director who is an officer of the Central Government or the Reserve Bank.

Section 19. Removal from office of director

The Reserve Bank may, with the previous approval of the Central Government, remove from office-

(a) The managing director of the Hyderabad Bank, or

(b) A director nominated under clause (d) of sub-section (1) of section 12:

Provided that no such managing director or director shall be removed from office unless he has been given an opportunity of showing cause against the proposed removal.

Section 20. Appointment of another person for discharging the duties of the managing director during his absence

If the managing director of the Hyderabad Bank is rendered incapable of discharging his duties by reason of infirmity or otherwise or is absent on leave or otherwise in circumstances not involving the vacation of his office, the Reserve Bank may appoint another person to discharge the duties of the managing director until the date on which the managing director resumes his duties.

Section 21. Casual vacancies among directors

(1) Where any vacancy occurs before the expiry of the term of office of a director nominated under clause (d) of sub-section (1) of section 12, the vacancy shall be filled by nominated by the Reserve Bank with the approval of the Central Government.

(2) A person nominated under sub-section (1) shall hold office for the unexpired portion of the term of his predecessor.

Section 22. Meetings of the Board of Directors

(1) The Board of Directors shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.

(2) The chairman of the Board of Directors shall preside at all meetings of the Board, but if for any reason, the chairman is unable to be present at a meeting, a director other than the managing director authorised by the chairman in writing in this behalf and in the absence of such authorisation, any such director elected by the directors present from among themselves shall preside at the meeting.

(3) All questions at a meeting of the Board of Directors shall be decided by a majority of the votes of the directors present, and in case of equality of votes, the chairman or any other director presiding at the meeting shall have a second or casting vote.

(4) A director who is directly or indirectly concerned or interested in any contract, loan, arrangement or proposal, entered into or proposed to be entered into by or on behalf of the Hyderabad Bank shall, at the earliest possible opportunity, disclose the nature of his interest to the Board of Directors and shall not be present at any meeting of the Board when any such contract, loan, arrangement or proposal is discussed, unless his presence is required by the other directors for the purpose of eliciting information and where any director is so required to be present, he shall not vote on any such contract, loan, arrangement or proposal.

(5) A copy of the minutes of every meeting of the Board of Directors together with copies of all connected papers shall be forwarded to the Reserve Bank as soon as possible.

Section 23. Executive Committee of Board of Directors

(1) There shall be an executive committee of the Board of Directors consisting of the managing director and such other directors as may be prescribed.

(2) Subject to any regulations made under this Act, the executive committee may deal with any matter within the competence of the Board of Directors.

(3) The minutes of every meeting of the executive committee shall be laid before the Board of Directors as soon as possible after the meeting.

Section 24. Hyderabad Bank to set as agent of the Reserve Bank

(1) The Hyderabad Bank shall, if so required by the Reserve Bank, act as agent of the Reserve Bank at any place in India where it has a branch and where there is no branch of the banking department of the Reserve Bank, for-

(a) Paying, receiving, collecting and remitting money, bullion and securities on behalf of any Government in India, and

(b) Undertaking and transacting any other business which the Reserve Bank may, from time to time, entrust to it.

(2) The terms and conditions on which any such agency business shall be carried on by the Hyderabad Bank on behalf of the Reserve Bank shall be such as may be determined by the Reserve Bank after consultation with the Hyderabad Bank.

(3) The Hyderabad Bank may transact any business or perform any functions entrusted to it under sub-section (1) either by itself or through an agent approved by the Reserve Bank.

(4) Until a new arrangement is made under this section, the Hyderabad Bank shall continue to act as agent of the Reserve Bank at the same places where and for the same purposes for which, and on the same terms and conditions on which, the Hyderabad State Bank was acting as the agent of the Reserve Bank immediately before the appointed day.

Section 25. Other business which the Hyderabad Bank may transact

(1) Subject to the other provisions contained in this Act, the Hyderabad Bank may carry on and transact the business of banking as defined in clause (b) of sub-section (1) of section 5 of the Banking Companies Act, 1949 (10 of 1949), and may engage in such one or more of the other forms of business, as are specified in sub-section (1) of section 6 of the said Act.

(2) The Central Government may, after previous consultation with the Reserve Bank, by order in writing-

(a) Authorise the Hyderabad Bank to do such other forms of business as the Central Government may consider necessary or expedient;

(b) Direct that any form of business as is mentioned in the order, shall be carried on subject to such restrictions, conditions and safeguards as may be specified therein, or

(c) Prohibit the Hyderabad Bank from carrying on or transacting any form of business which, but for this clause, it is lawful for the Hyderabad Bank to engage in.

(3) Subject to the provisions of sub-section (2), the Hyderabad Bank shall not engage in any form of business other than that referred to in sub-section (1).

Section 26. Acquisition of business of other banks

(1) The Hyderabad Bank may, with the previous approval of the Reserve Bank, and shall, if so directed by the Reserve Bank with the previous approval of the Central Government, enter into negotiations for acquiring the business, including the assets and liabilities of any other banking institution.

(2) If the terms and conditions relating to the acquisition of any such banking institution are approved by the Board of Directors of the Hyderabad Bank and the directorate or management of the banking institution concerned and are also approved by the Reserve Bank, they shall be submitted to the Central Government and, if sanctioned by that Government by order in writing, shall, notwithstanding anything to the contrary contained in this Act or the Companies Act, 1956 (1 of 1956), or the Banking Companies Act,1949 (10 of 1949), or in any other law for the time being in force or in the memorandum or articles of association or other document regulating the constitution, of the banking institution, be operative and binding on the Hyderabad Bank and the banking institution as well as their shareholders and creditors, if any.

(3) On the day fixed in this behalf in the order of sanction made by the Central Government under sub-section (2), such assets and liabilities of the banking institution as are specified therein shall, by virtue of this section stand transferred to, and be vested in, or as the case may be, become the liabilities of, the Hyderabad Bank.

Section 27. Reserve Fund

(1) The Hyderabad Bank shall establish a Reserve Fund which shall consist of-

(a) Subject to the provisions of sub-section (2), the amount in credit immediately before the appointed day, in the Reserve Fund Account of the Hyderabad State Bank, together with such amount as is transferred to it under sub-section (1) of section 10; and

(b) Such further amounts as may be transferred to it by the Hyderabad Bank out of its annual net profit, before transferring the balance of profits to the Reserve Bank.

(2) The Hyderabad Bank shall, as soon as may be after the appointed day, consider whether any adjustments in its Reserve Fund Account are necessary by way of transfer towards provision for bad and doubtful debts, depreciation in assets, contingencies, reserve and such other purposes and make, with the previous approval of the Reserve Bank, the necessary adjustments.

Section 28. Disposal of profits

The Hyderabad Bank shall after making provision for bad and doubtful debts, depreciation in assets, contribution to staff and superannuation funds and for all other matters for which provision is necessary by or under this Act or which are usually provided for by banking companies, transfer the balance of its profits to the Reserve Bank.

Section 29. Closing of annual accounts

(1) The Hyderabad Bank shall cause its books to be closed and balanced on the thirty-first day of December in each year:

Provided that the Hyderabad Bank may, with the previous approval of the Reserve Bank and shall, when so directed by it,-

(a) Not close or balance its accounts on the thirty-first day of December in any year, or

(b) Close and balance its books on any other day of the year or for any period other than a calendar year.

(2) Where in pursuance of the proviso to sub-section (1), the Hyderabad Bank closes and balances its accounts on and day other than the thirty-first day of December or for any period more or less than a year, the provisions of this Act relating to the annual closing and audit of annual balance sheet and accounts shall apply to such closing and balancing of accounts mutatis mutandis.

Section 30. Audit

(1) The accounts of the Hyderabad Bank shall be audited by an auditor duly qualified to act as an auditor of companies under sub-section (1) of section 226 of the Companies Act, 1956 (1 of 1956), who shall be appointed by the Reserve Bank, with the approval of the Central Government.

(2) The auditor shall receive such remuneration as the Reserve Bank may fix.

(3) No director or an officer of the Hyderabad Bank shall be eligible to be its auditor during his continuance in office as such director or officer.

(4) The auditor shall be supplied with a copy of the annual balance sheet and profit and loss account, and a list of all books kept by the Hyderabad Bank, and it shall be the duty of the auditor to examine the balance sheet and profit and loss account with the accounts and vouchers relating thereto, and in the performance of his duties, the auditor-

(a) Shall have, at all reasonable times, access to the books, accounts and other documents of the Hyderabad Bank;

(b) May, at the expense of the Hyderabad Bank, employ accountants or other persons to assist him in investigating such accounts, and

(c) May, in relation to such accounts, examine any director or any officer of the Hyderabad Bank.

(5) The auditor shall hold office for such term not exceeding one year as the Reserve Bank may fix at the time of his appointment; and if any vacancy arises before the expiry of the term of an auditor, the vacancy may be filled by the Reserve Bank, with the approval of the Central Government.

(6) The auditor shall on relinquishing office be eligible for re-appointment.

(7) The auditor shall make a report to the Reserve Bank upon the annual balance sheet and accounts, of the Hyderabad Bank, and in every such report he shall state-

(a) Whether, in his opinion, the balance sheet is a full and fair balance sheet containing all the necessary particulars and is properly drawn up so as to exhibit a true and correct view of the affairs of the Hyderabad Bank, and in case he has called for any explanation or information, whether it has been given and whether it is satisfactory;

(b) Whether or not the transactions of the Hyderabad Bank which have come to his notice have been within the competence of the bank;

(c) Whether or not the returns received from the offices and branches of the Hyderabad Bank have been found adequate for the purpose of his audit;

(d) Whether the profit and loss account shows a true balance of profit or loss for the period covered by such account; and

(e) Any other matter which he considers should be brought to the notice of the Reserve Bank.

(8) The auditor shall forward a copy of the audit report to the Hyderabad Bank and to the Central Government.

(9) Without prejudice to the foregoing provisions, the Central Government may at any time appoint such auditors as it thinks fit to examine and report on the accounts of the Hyderabad Bank and such auditors shall have all the rights, privileges and authority in relation to the audit of the accounts of the Hyderabad Bank which an auditor appointed by the Reserve Bank has under this section.

Section 31. Returns to be furnished by the Hyderabad Bank

(1) The Hyderabad Bank shall furnish to the Reserve Bank-

(a) Within two months from the date on which its accounts are closed and balanced, its balance sheet, together with the profit and loss account and the auditor’s report, and a report by the Board of Directors, on the working of the Hyderabad Bank during the period covered by the accounts; and

(b) Any other information relating to the affairs and business of the Hyderabad Bank which the Reserve Bank may require.

(2) The balance sheet and the profit and loss account of the Hyderabad Bank shall be signed by the managing director and a majority of the other directors, including the chairman.

Section 32. Right of Reserve Bank to seek relief in respect of certain transactions

(1) Where the Hyderabad State Bank had at any time within two years before the appointed day,-

(a) Made any payment to any person without or for insufficient consideration;

(b) Made any loan or advance without adequate security or other safeguards;

(c) Sold or disposed of any property of the bank without consideration or for an inadequate consideration;

(d) Acquired any property or rights for an excessive consideration, in satisfaction of any loan or advance or other debt or otherwise;

(e) Entered into or varied any agreement so as to require the payment of excessive consideration, in satisfaction of any loan or advance or other debt or otherwise;

(f) Relinquished any claim or any part thereof or entered into any compromise or released any security or part thereof;

(g) Entered into any other transaction of such an onerous nature as to cause a loss to or impose a liability on the bank exceeding any benefit accrued to it;

And the payment, loan or advance, sale or disposal, acquisition, agreement or variation, relinquishment, compromise or release or other transaction was not proper or not reasonably necessary for the purpose of the business of the bank or was made with an unreasonable lack of prudence on the part of the bank, regard being had to the circumstances at the time, the Reserve Bank may apply for relief to the High Court for the State in which the Head Office of the bank for the time being is situated, in respect of such transaction, and all parties to the transaction (including the managing director, deputy managing director or any officer or other employee of the bank associated with the transaction) shall, unless the High Court otherwise directs, be made parties to the application.

(2) The High Court may make such order against any of the parties to the application as it thinks just, having regard to the extent to which those parties were respectively responsible for the transaction or benefited from it and to the circumstances of the case.

(3) Where an application is made to the High Court under this section in respect of any transaction and the application is determined in favour of the Reserve Bank, the High Court shall have exclusive jurisdiction to determine any claim outstanding in respect of the transaction.

(4) No application made by the Reserve Bank under this section shall be entertained after the expiry of one year from the appointed day.

Section 33. Staff of the Hyderabad Bank

(1) Subject to the provisions of any regulations made under this Act, the Hyderabad Bank may appoint such number of officers, advisers and employees as it considers necessary or desirable for the efficient performance of its functions and on such terms and conditions as it may deem fit.

(2) For the removal of doubts, it is hereby declared that the officers, advisers and employees of the Hyderabad Bank, in whatever capacity engaged, shall not be deemed to be officers, advisers or employees of the Reserve Bank for any purpose, unless otherwise provided in the contract or agreement of service of any such officer, adviser or employee.

Section 34. Cost of development program

The Hyderabad Bank may accept any subsidies offered by the Reserve Bank to meet-

(a) The cost of any specific programme of development undertaken by the Hyderabad Bank with the approval of the Reserve Bank; and

(b) Such losses or expenditure as may be approved by the Reserve Bank, with the consent of the Central Government.

Section 35. Obligation as to fidelity and secrecy

(1) The Hyderabad Bank shall observe, except as otherwise required by law, the practices and usages customary among bankers and, in particular, it shall not divulge any information relating to or to the affairs of its constituents except in circumstances in which it is, in accordance with the law or practice and usage customary among bankers, necessary or appropriate for that bank to divulge such information.

(2) Every director, auditor, adviser, officer or other employee of the Hyderabad Bank shall, before entering upon his duties, make a declaration of fidelity and secrecy as in the form set out in the First Schedule.

Section 36. Bar to liquidation of the Hyderabad Bank

(1) No provision of law relating to the winding up of companies shall apply to the Hyderabad Bank nor shall it be placed in liquidation, save by order of the Central Government and in such manner as the Central Government may direct.

(2) In any such event, the Reserve Bank shall not be called upon to contribute any amounts to meet the liabilities of the Hyderabad Bank but the surplus assets thereof, if any, shall be transferred to the Reserve Bank.

Section 37. Indemnity of directors

(1) Every director of the Hyderabad Bank shall be indemnified by that bank against all losses and expenses incurred by him in or in relation to the discharge of his duties except such as are caused by his own wilful act or default.

(2) A director of the Hyderabad Bank shall not be responsible for any loss or expense caused to the bank by the insufficiency or deficiency of the value of or title to, any property or security acquired or taken on behalf of the bank or by the insolvency or wrongful act of any customer or debtor or by anything done in, or in relation to, the execution of the duties of his office or otherwise than for his wilful act or default.

Section 38. Defects in the appointment or constitution not to invalidate acts or proceedings

(1) No act or proceeding of the Board of Directors of the Hyderabad Bank shall be questioned on the ground merely of the existence of any vacancy in or, defect in the constitution of, the Board.

(2) All acts done by any person acting in good faith as a director of the Hyderabad Bank shall, notwithstanding that he was disqualified to be a director or that there was any other defect in his appointment, be deemed to be valid.

Section 39. Exercise of powers and functions on behalf of the Reserve Bank

Any powers, duties or functions conferred, imposed or entrusted by this Act on, or to, the Reserve Bank shall be exercised or performed by the Governor of the Reserve Bank or, in his absence, a Deputy Governor nominated under sub-section (3) of section 7 of the Reserve Bank of India Act, 1934 (2 of 1934), or, subject to such conditions and limitations and in respect of such matters as the Governor of the Reserve Bank may specify, such officer or officers of the Reserve Bank as may be prescribed.

Section 40. Protection of action taken under this Act

No suit or other legal proceeding shall lie against the Central Government or the Reserve Bank or any officer of the Central Government or the Reserve Bank for any damage caused or likely to be caused by, anything which is in good faith done or intended to be done in pursuance of this Act.

Section 41. Power Central Government to make rules

(1) The Central Government may, in consultation with the Reserve Bank, by notification in the Official Gazette, make rules to give effect to the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for-

(a) The manner of, and the procedure for payment of, compensation under this Act, including the requirements subject to which the payment shall be made;

(b) The determination of persons to whom the said compensation shall be payable in all cases including cases where shares have been held by more than one person, or where they have been transferred before the appointed day, but the transfer has not been registered or where the shareholder is dead;

(c) The circumstances under which claims for payment of the said compensation from persons claiming through or under a shareholder may be entertained;

(d) The requirements to be complied with before receipt of the said compensation by a shareholder, whose share certificate has been lost, destroyed, mutilated or stolen;

(e) The requirements, subject to which information regarding the payment of the said compensation may be granted or refused and the conditions subject to which such information may be given.

(3) All rules made under this section shall be laid for not less than thirty days before both Houses of Parliament as soon as than thirty days before both Houses of Parliament as soon as possible after they are made and shall be subject to such modifications as Parliament may make during the session in which they are so laid or the session immediately following.

Section 42. Power of the Reserve Bank to make Regulations

(1) The Reserve Bank may, with the previous approval of the Central Government, and except in the case of the first regulations, in consultation with the Board of Directors of the Hyderabad Bank, make regulations not inconsistent with this Act and the rules made thereunder, to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for-

(a) The powers and duties of the managing director of the Hyderabad Bank;

(b) The fees and allowances which may be paid to directors for attending any meetings of the Board of Directors or of its committees or for attending to any other work of the Hyderabad Bank;

(c) The time and place at which, and the manner in which, the business of the Board of Directors shall be transacted and the procedure to be followed at the meetings thereof;

(d) The constitution of the executive committee of the Board of Directors and the conditions and limitations subject to which the executive committee may exercise its powers and the procedure to be followed at the meetings thereof;

(e) The formation of any other committees of the Board of Directors and the delegation of powers and functions of the Board to such committees and the conduct of business in such committees;

(f) The delegation of powers and functions of the Board of Directors to the managing director or other directors or officers or other employees of the Hyderabad Bank;

(g) The conditions and limitations subject to which the Hyderabad Bank may appoint officers, advisers and other employees and fix their remuneration and other terms and conditions of service;

(h) The duties and conduct of officers, advisers and other employees of the Hyderabad Bank;

(i) The establishment and maintenance of pension, provident or other funds for the benefit of officers and employees or for the purposes of the Hyderabad Bank;

(j) The conduct and defence of legal proceedings by or against the Hyderabad Bank and the manner of signing pleadings;

(k) The provision of a seal for the Hyderabad Bank and the manner and effect of its use;

(l) The form and manner in which contracts binding on the Hyderabad Bank may be executed;

(m) The maximum amounts which may be advanced or lent or for which bills may be discounted by the Hyderabad Bank, the conditions under which advances may be made and the extent to which accounts may be overdrawn;

(n) The conditions subject to which advances may be made by the Hyderabad Bank to its directors or officers or the relatives of such directors or officers or to companies, firms or individuals with which or with whom such directors or officers or relatives are connected as partners, directors, managers, servants, shareholders or otherwise;

(o) The persons or authorities who shall administer any pension, provident nor other fund constituted by the Hyderabad State Bank before the appointed day, for the benefit of the officers or employees, or for the purposes of the said bank; and the amalgamation of any such fund with any similar fund established by the Hyderabad Bank after the appointed day;

(p) The circumstances in which the specific approval of the Reserve Bank shall be required to the grant of loans and advances and investment of funds by the Hyderabad Bank, or to any contract, arrangement or proposal entered into or proposed to be entered into by the Hyderabad Bank;

(q) The preparation and submission to the Reserve Bank of statements of programmes of activities and financial statements of the Hyderabad Bank and the periods for which and the time within which, such statements and estimates are to be prepared and submitted;

(r) The person or persons in the Reserve Bank by whom any powers, duties or functions conferred, imposed or entrusted on or to the Reserve Bank under this Act may be exercised or performed;

(s) The periodical inspection of the affairs and business of the Hyderabad Bank by the Reserve Bank;

(t) The statements, returns and forms that are required for the purposes of this Act; and

(u) Generally for the efficient conduct of the affairs of the Hyderabad Bank.

Section 43. Amendment of certain enactments

The enactments specified in the Second Schedule shall be amended in the manner directed therein and such amendments shall be deemed to have taken effect on the appointed day notwithstanding anything to the contrary contained in section 43 of the State Bank of Hyderabad Ordinance, 1956 (5 of 1956).

Section 44. References to Hyderabad State Bank in other laws

On and from the appointed day, any reference to the Hyderabad State Bank in any law (other than this Act) or in any contract or other instrument shall, except as otherwise provided any general or special order made by the Central Government, be deemed to be a reference to the Hyderabad Bank.

Section 45. Saving

Nothing in this Act shall be deemed to affect the power of the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), to acquire the business of the Hyderabad Bank in accordance with the provisions of section 35 of that Act, and where the business of the Hyderabad Bank has been so acquired, the bank shall, on such acquisition, stand dissolved and the provisions of this Act shall cease to apply thereto.

Section 46. Repeal and saving

(1) The State Bank of Hyderabad Ordinance, 1956 (5 of 1956), is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken (including any appointment, order, rule or regulation made or direction or instruction given) in the exercise of any powers conferred by or under the said Ordinance shall be deemed to have been done or taken in the exercise of the powers conferred by or under this Act, as if this Act were in force on the date on which such thing was done or action was taken.

Schedule 1.

THE FIRST SCHEDULE

[See section 35]

DECLARATION OF FIDELITY AND SECRECY

I do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as director, auditor, adviser, officer or other employee (as the case may be) of the State Bank of Hyderabad and which properly relate to the office or position held by me in the said bank.

I further declare that I will not communicate or allow to be communicated to any person not legally entitled thereto any information relating to the affairs of the State Bank of Hyderabad or to the affairs of any person having any dealing with the said bank; nor will I allow any such person to inspect or have access to any books or documents belonging to or in the possession of the State Bank of Hyderabad and relating to the business of the said bank or to the business of any person having any dealing with the said bank.

Schedule 2.

THE SECOND SCHEDULE

[See section 43]

AMENDMENTS TO THE HYDERABAD STATE BANK ACT, 1956 (XIX of 1956)

1. In section 2, omit clauses (b) to (k).

2. In section 3, in sub-section (1), omit the words “for the purposes of this Act and for carrying on business in accordance with the provisions of this Act”.

3. Omit sections 4 to 28 and Schedules I and II.

II. AMENDMENTS TO THE RESERVE BANK OF INDIA ACT, 1934 (2 of 1934).

1. In section 10, in clause (e) of sub-section (1), for the words ‘or any of its subsidiary banks”, substitute the following, namely:-

“Or any other bank notified by the Central Government in this behalf”.

2. In section 17,-

(i) In clause (8A), for the words “or any of its subsidiary banks”, substitute the following, namely:-

“or any other bank notified by the Central Government in this behalf”.

(ii) After clause (14), insert the following, namely:-

“(14A) The granting of subsidies to the State Bank of Hyderabad for any of the purposes mentioned in section 34 of the State Bank of Hyderabad Act, 1956”.

3. Section 45 shall be re-numbered as sub-section (1) thereof, and-

(i) In sub-section (1) as so re-numbered, for the proviso, substitute the following, namely:-

“Provided that nothing herein contained shall affect the provisions of any agreement subsisting on the 1st day of July, 1955, between the Bank and any other banking institution for the conduct of Government business or other matters.”; and

(ii) After sub-section (1) as so re-numbered insert the following sub-sections, namely:-

“(2) Notwithstanding anything contained in sub-section (1), the Bank may employ or continue to employ as its agent-

(i) The Hyderabad Bank as defined in the State Bank of Hyderabad Act, 1956, at such places where, and for such purposes for which, the said bank was agent of the Reserve Bank immediately before the 1st day of November, 1956; and

(ii) Any other banking institution notified by the Central Government in this behalf for the conduct of Government business or other matters at such places in India as may be approved by the Central Government.

(3) Notwithstanding anything to the contrary contained in any agreement between the Bank and the State Bank, it shall be lawful for the Bank to exclude from the operation of such agreement any place where any of the banking institutions referred to in sub-section (2) may have an office or branch.”

4. In the Second Schedule, for the words “Hyderabad State Bank, Hyderabad (Deccan)”, substitute “State Bank of Hyderabad”.

III. AMENDMENTS TO THE BANKING COMPANIES ACT, 1949 (10 of 1949).

1. In section 39, for the words “the Reserve Bank or the State Bank of India, as the case may be”, substitute the following, namely:-

“The Reserve Bank, the State Bank of India or any other bank notified by the Central Government in this behalf”.

2. or section 51, substitute the following, namely:-

“51. pplication of certain provisions to the State Bank of India and other notified banks.

Without prejudice to the provisions of the State Bank of India Act, 1955 (23 of 1955), or any other enactment, the provisions of sections 10, 13 to 15, 17, 19 to 21, 23 to 28, 29 [excluding sub-section (3)], 31, 34 to 36, 37, 45, 46 to 48, 50, 52 and 53 shall also apply; so far as may be, to and in relation to the State Bank of India or any other banking institution notified by the Central Government in this behalf as they apply to and in relation to banking companies:

Provided that nothing contained in section 46 shall apply to any officer of the Central Government or the Reserve Bank nominated as director of the State Bank of India or any other banking institution notified by the Central Government under this section.”.

Bydeb

The Small Industries Development Bank of India Act, 1989

Section 1. Short title, extent and commencement

No.39 OF 1989

[25th October, 1989.]

An Act to establish the Small Industries Development Bank of India as the principal financial institution for the promotion, financing and development of industry in the small-scale sector and to co-ordinate the functions of the institutions engaged in the promotion, financing or developing industry in the small-scale sector and for matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Fortieth Year of the Republic of India as follows:-

(1) This Act may be called the Small Industries Development Bank of India Act, 1989.

(2) It extends to the whole of India.

(3) It shall come into force on such date as the Central Government may, by notification, appoint and different dates may be appointed for different provisions of this Act.

Section 2. Definitions

In this, Act, unless the context otherwise requires,–

(a) “Board” means the Board Directors of the Small Industries Development Bank of India referred to in section 5;

(b) 1[“chairman and managing director” means the Chairman and Managing Director referred to in clause (a) of sub-section (1) of section 6;]

(c) “Court” means the High Court within the local limits of whose jurisdiction,-

(i) The defendant or respondent or, where there is more than one defendant or respondent, any one of them-

(1) Has his registered office, or

(2) Carries on the whole or part of his business, at the time of commencement of any legal proceedings against him under this Act, or

(ii) The cause of action for such legal proceedings, wholly or in part, arises;

(d) “Development Bank” means the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1946 (18 of 1964);

(e) ” Director” means a Director nominated under sub-section (1) of section 6 and includes the 1[chairman and managing director and whole-time director;]

(f) “Export” means export from India or products or services of any industrial concern in small-scale sector;

(g) “Import” means import into India of services or goods including all materials, commodities and articles in a solid, liquid or gaseous state and all forms or energy for the use of any industrial concern in the small-scale sector;

(h) “Industrial concern in the small-scale sector” means an industrial concern as defined in clause (c) of section 2 of the Industrial Development Bank of India Act, 1964 (18 of 1964), and which is regarded as a small-scale undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951);

(i) “Managing Director” means the Managing Director appointed under sub-section (1) of section 7;

(j) “National Small Industries Corporation” means the National Small Industries Corporation Limited registered under the Companies Act, 1956 (1 of 1956);

(k) “Notification” means a notification published in the Official Gazette;

(l) “Prescribed” means prescribed by regulations made under this Act;

(m) “Small Industries Bank” means the Small Industries Development Bank of India established under sub-section (1) of section 3;

(n) “State Small Industries Corporation” means a State Corporation, registered under the Companies Act, 1956 (1 of 1956), for small industries in a State;

(o) “State Financial Corporation” means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);

(p) “State Industrial Development Corporation” means a State Corporation registered under the Companies Act, 1956 (1 of 1956), for the development of industries in a State;

(q) Words and expressions used herein and not defined but defined in the Industrial Development Bank of India Act, 1964 (18 of 1964), shall have the meanings respectively assigned to them in that Act.

——————–

1. Substituted by Act 7 of The Small Industries Development Bank of India (Amendment) Act, 2000, dt. 27-03-2000.

Section 3. Establishment and incorporation of Small Industries Development Bank of India

(1) With effect from such date as the Central Government may, by notification, appoint, there shall be established, for the purposes of this Act, a corporation to be known as the Small Industries Development Bank of India.

(2) The Small Industries Bank shall be a body corporate with the name aforesaid having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and to contract and may, by that name, sue or be sued.

(3) The head office of the Small Industries Bank shall be at Lucknow or at such other place as the Central Government may, by notification, specify.

(4) The Small Industries Bank shall establish offices, branches or agencies at any place in or outside India.

Section 4. Authorised capital

(1) The authorised capital of the Small Industries Bank shall be two hundred and fifty crores of rupees:

Provided that the Development Bank may increase the said capital up to one thousand crores of rupees.

(2) The issued capital of the Small Industries Bank shall be wholly subscribed by the Development Bank.

Section 5. Management

(1) The general superintendence, direction and management of the affairs and business of the Small Industries Bank shall vest in a Board of Directors, which may exercise all powers and do all acts and things which may be exercised or done by the Small Industries Bank.

(2) In the discharge of its functions under this Act, the Small Industries Bank shall be guided by such directions in matters of policy involving public interest as the Central Government, in consolation with the Development Bank, or the Development Bank, may given in writing.

(3) Save as otherwise provided in regulations made under this Act, the Chairman shall also have power of general superintendence and direction of the affairs and business of the Small Industries Bank and may also exercise all powers and do all acts and things which may be exercised or done by that Bank.

(4) Subject to the provisions of this Act, the Board in discharging its functions shall act on business principles with due regard to public interest.

Section 6. Constitution of Board

(1) The Board shall consist of the following, namely:–

(a) The Chairman of the Development Bank, if he is a whole-time Chairman, and if he is not a whole-time Chairman, the Managing Director of that Bank, shall be the ex officio Chairman of the Small Industries Bank;

(b) Two Directors to be nominated by the Central Government from amongst its officials;

(c) One Director to be nominated by the Reserve Bank from amongst its officials of, or above, the rank of the Executive Director;

(d) Ten Directors to be nominated by the Development Bank, of whom-

(i) One shall be from amongst its officials;

(ii) One representing the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);

(iii) One representing the Khadi and Village Industries Commission established under section 4 of the Khadi and Village Industries Commission Act, 1956 (61 of 1981);

(iv) Seven from amongst the experts in industry in small-scale sector or co-operative sector or persons having such special knowledge or professional experience as the Development Bank may consider desirable or useful to the Small Industries Bank, or persons representing scheduled banks, State Financial Corporation, State Small Industries Corporations or the National Small Industries Corporation;

(e) The Managing Director, ex officio Director.

(2) Every Director referred to in clause (b), clause (c) or sub-clause (i) of clause (d) shall hold during the pleasure of the authority nominating him.

(3) Every Director, other than those referred to in sub-section (2), shall hold office for such term not exceeding three years as the Development Bank may specify in this behalf and shall be eligible for reappointment;

Provided that no such Director shall hold office continuously for a period exceeding six years.

(4) The Directors shall be paid such fees and allowances as may be prescribed for attending the meetings of the Board or any of its Committees and for attending to any other work of the Small Industries Bank.

Section 7. Managing Director

(1) The Development Bank shall appoint a Managing Director of the Small Industries Bank who shall be the whole-time chief executive of that Bank.

(2) Subject to the provisions of section 5 and, save as otherwise provided in regulations made under this Act, the power of general superintendence, directions and management of the affairs and business of the Small Industries Bank shall vest in the Managing Director who shall also exercise such powers and perform such duties as may be delegated to him by Board or the Chairman.

(3) The Managing Director shall, in exercise of his powers and performance of his duties under this Act, follow such directions as the Board or the Chairman may give.

(4) The salary, allowances and other conditions of service of the Managing Director shall be such as may by the Development Bank.

(5) The Managing Director shall hold office for such term not exceeding five years as the Development Bank may specify in this behalf and shall be eligible for reappointment.

(6) The Development Bank may remove the Managing Director at any time after giving him a reasonable opportunity of showing cause against the proposed removal.

(7) Notwithstanding anything contained in sub-section (5) and (6), the Development Bank shall have the right to terminate the term of office of the Managing Director at any time by giving him notice, in writing, of not less than three months or three month’s salary and allowances in lieu thereof, and the Managing Director shall also have the right to relinquish his office at any time by giving to the Development bank notice, in writing, of not less than three months.

Section 8. Disqualifications

No person shall be a Director if he-

(a) Is, or becomes, of unsound mind or is so declared by a competent court; or

(b) Is, or has been, convicted of any offence which, in the opinion of the Development Bank, involves moral turpitude; or

(c) Is, or at any, time has been, adjudicated as insolvent or has suspended payment of his debts or has compounded with his creditors.

Section 9. Vacation and resignation of office by Directors

(1) If a Director-

(a) Becomes subject to any of the disqualifications mentioned in section 8 or

(b) Is absent without leave of the Board for three or more consecutive meetings thereof,

His seat shall thereupon become vacant.

(2) Any Director may resign his office by giving notice thereof in writing to the authority that nominated him and on his resignation being accepted by such authority or if his resignation is not sooner accepted, on the expiry of three months from the receipt thereof by such nominating authority, he shall be deemed to have vacated his office.

Section 10. Casual vacancies in office of Managing Director

If the Managing Director is, by infirmity, or otherwise rendered incapable of carrying out his duties or absent on leave or otherwise in circumstances not involving the vacation of his office, the Development Bank may appoint another person to act in his place during his absence.

Section 11. Meetings of the Board

(1) The Board shall meet at such time and places and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.

(2) The Chairman or, if for any reason he is unable to attend a meeting of the Board, any Director nominated by the Charm in this behalf and in the absence of such nomination any other Director, elected by the Directors present from amongst themselves at the meeting, shall preside at the meeting.

(3) All questions which come up before any meeting of the Board shall be decided by a majority of votes of the Directors present and voting, and in the event of an equality of votes, the Chairman, or in his absence, the person presiding, shall have a second or casting vote.

Section 12. Committees

(1) The Board may constitute such committees whether consisting wholly of Directors or wholly of other persons or partly of Directors and partly of other persons for such purposes as it may think fit.

(2) The members of a committee shall be paid such fees and allowances as may be determined by the Board for attending the meetings of any committee constituted under sub-section (1) and for attending to any other work of the Small Industries Bank.

Section 13. Business of Small Industries Bank

(1) The Small Industries Bank shall function as the principal financial institution for the promotion, financing and development of industrial concerns in the small-scale sector and shall also co-ordinate the functions off institutions engaged in promoting, financing and developing the industrial concerns in the small-scale sector and may carry on and transact any of the following business, namely:-

(i) Granting loans and advances to any State Financial Corporation, State Industrial Development Corporation, State Small Industries Corporation, scheduled bank, State Co-operative Bank or such other financial institutions, as the Central Government may, on the recommendation of the Development bank, specify, by way of refinance on such terms and conditions as it may deem fit to impose, of any loans or advances granted to industrial concerns in the small-scale sector by such corporation, bank or institution, which are repayable within a period not exceeding twenty-five years;

(ii) Accepting discounting or rediscounting bills of exchange and promissory notes made, drawn accepted or endorsed by industrial concerns in the small-scale sector or by any person selling products manufactured by an industrial concern in the small-scale sector;

(iii) Subscribing to or purchasing stocks, shares bonds or debentures of, any State Financial Corporation, State Industrial Development Corporation, State Small Industries Corporation, National Small Industries Corporation or such other financial institutions, as the Central Government may, on the recommendation of the Development bank, specify;

(iv) Granting lines of credit or loans and advances to any State Financial Corporation, State Industrial Development Corporation, State Small Industries Corporation, National Small Industries Corporation or such other financial institutions, as the Central Government may, on the recommendation of the Development Bank, specify;

(v) Granting loans and advances to any industrial concern in the small-scale sector or subscribing to, or purchasing, or under-writing the issue of stocks, shares, bonds or debentures of, any such concern:

Provided that nothing contained in this clause shall be deemed to preclude the Small Industries Bank from granting loans or advances to, or subscribing to the debentures of, an industrial concern in the small-scale sector, the amounts outstanding thereon may be convertible at the option of the Small Industries Bank into stocks or shares of that concern within the period the loan, advance or debenture is repayable.

Explanation. In this clause, the expression “the amounts outstanding thereon” used in relation to any loan or advance, shall men the principal, interest and other charges payable on such loan or advances as at the time when the amounts are sought to be converted into stocks or shares;

(vi) Granting loans and advances-

(a) To any person exporting; or

(b) To any person outside India, in connection with the export; or

(c) For the execution of turn-key projects outside India by any industrial concern in the small-scale sector;

(vii) Granting loans and advances to a scheduled bank or any other bank or such financial institutions as the Central Government may, on the recommendation of the Development Bank, specify, by way of refinance of loans and advances granted by it for purposes of export;

(viii) Accepting, collecting, discounting, rediscounting, purchasing, selling or negotiating in or outside India, bills of exchange or promissory notes arising out of transactions, relating to export or import and granting of loans and advances in or outside India against such bills or promissory notes;

(ix) Granting, opening, issuing, confirming or endorsing letters of credit and negotiating or collecting bills or other documents drawn thereunder;

(x) Granting lines of credit to the Government of any foreign State or any financial institution or person outside India for the purpose of export or import;

(xi) Financing export from or import into India of machinery, equipment or other assets including vehicles, ships and aircraft’s on lease, sub-lease or hire purchase basis by or for any industrial concern in small-scale sector;

(xii) Buying or selling of or entering into such other dealings in, foreign exchange, as may be necessary for the discharge of the functions of the Small Industries Bank;

(xiii) Opening of any account in any bank in or outside India or making of any agency arrangements with, or acting as an agent or correspondent of, any bank or other institution in or outside India;

(xiv) Transferring for consideration any instrument relating to loans and advances granted by it o any industrial concern in the small-scale sector;

(xv) Granting loans and advances to any person for purposes of investment in any industrial concern in the small-scale sector;

(xvi) Guaranteeing loans raised from, or credit arrangements made with, any bank, financial institution or other lending agency in any country outside India in foreign currency, with the approval of the Central Government, by industrial concern in the small-scale sector;

(xvii) Guaranteeing deferred payments due from any industrial concern in the small-scale sector;

(xviii) Guaranteeing-

(a) Loans raised by industrial concerns in the small-scale sector which are floated in the public market, or

(b) Loans raised by any industrial concern in the small-scale sector from any scheduled bank or State Co-operative Bank or State Financial Corporation or State Industrial Corporation or such other financial institutions as the Central Government may, on the recommendation of the Development Bank specify;

(xix) Guaranteeing the obligations of any scheduled bank or State Co-operative Bank or State Financial Corporation or State Industrial Development Corporation or State Small Industries Corporation or such other finical institution as the Central Government may, on the recommendation of the Development Bank, specify, arising out of, or in connection with, underwriting the issue of stocks, shares, bonds or debentures of any industrial concern in the small-scale sector;

(xx) Providing factoring services to any industrial concern in the small-scale sector;

(xxi) Providing technical and financial consultancy, merchant banking and extension services;

(xxii) Undertaking activities for promotion of industry in the small-scale sector including entrepreneurial development programs, raw material purchase, marketing support and promotion of, or financial support to, agencies engaged in such activities;

(xxiii) Acquiring, with the approval of the Central Government on the recommendation of the Development Bank, the undertaking including the business, assets and liabilities of any institution the principal object of which is the promotion or development of industry in the small-scale sector in India, or the grant of financial assistance for such promotion or development;

(xxiv) Leasing, sub-leasing or giving on hire or hire-purchase any movable or immovable assets to any industrial concern in the small-scale sector;

(xxv) Undertaking research and surveys for evaluating or dealing with marketing or investments and undertaking and carrying on techno-economic studies in connection with the development of industry in the small-scale sector;

(xxvi) Providing technical, legal, marketing and administrative assistance to any industrial concern in the small-scale sector or any person for promotion, management or expansion of any industrial concern in the small-scale sector;

(xxvii) Planning, promoting and developing industries and in the small-scale sector;

(xxviii) Promoting, forming or conducting or associating in the promotion, formation or conduct of companies, subsidiaries societies, trusts or such other association of person as it may deem fit;

(xxix) Acting as agent of-

(a) The Central Government or of the Reserve Bank or of the Development Bank, or

(b) Such other Government or person as the Development Bank may authorise;

(xxx) Doing any other kind of business which the Central Government may, on the recommendation of the Development Bank, authorise;

(xxxi) Generally doing such other acts and things as may be incidental to, or consequential upon, the exercise of its powers or the discharge of its duties under this Act or any other law for the time being in force including sale or transfer of any of its assets.

(2) The Small Industries Bank may receive in consideration of any of the services mentioned in sub-section (1) such commission, brokerage, interest, remuneration or fees as may be agreed upon.

(3) The Small Industries Bank shall not grant any loan or advance or other financial accommodation on the security of its own bonds or debentures.

Section 14. Loans by Central Government

The Central Government may, after due appropriation made by Parliament by law in this behalf, advance to the Small Industries Bank-

(a) An interest free loan of such amount and repayable in such instalments and in such other manner as may be determined by the Central Government; and

(b) Such further sums of money by way of loan on such terms and conditions as may be agreed upon:

Provided that the Central Government may, on a request being made to it by the Small Industries Bank, increase the number of instalments or alter the amount of any instalment or vary the date on which any instalment is payable under clause (a).

BUSINESS OF THE SMALL INDUSTRIES BANK

Section 15. Borrowings and acceptance of deposits by the Small Industries Bank

(1) The Small Industries Bank any, for the purpose of carrying out its functions under this Act,-

(a) Issue and sell bonds and debentures with or without the guarantee of the Central Government;

(b) Borrow money from the Reserve Bank-

(i) Repayable on demand or on the expiry of the fixed periods not exceeding ninety days from the date on which the money is so borrowed against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law of the time being in force in India;

(ii) Against bills of exchange or promissory notes arising out of bona fide commercial or trade transactions, bearing two or more goods signatures and maturing within five years from the date of the borrowing;

(iii) Out of the National Industrial Credit (Long Term Operations) Fund established under section 46C of the Reserve Bank of India Act, 1934 (2 of 1934), for any of the purposes specified in that section;

(c) Borrow money from the Development Bank or such other authority, organisation or institution as may be generally or specially approved by the Development Bank;

(d) Accept deposits repayable after the expiry of such period and on such terms as may be generally or specially approved by the Development Bank.

(2) The Central Government may, on a request being made to it by the Small Industries Bank, guarantee the bonds and debentures issued by that Bank as to the repayment of principal and the payment of interest at such rate as may be fixed by that Government.

Section 16. Investment

The Small Industries Bank may invest its funds in the securities of the Central Government or of any State Government or in deposits with any scheduled bank.

Section 17. Power to transfer rights

The rights and interests of the Small Industries Bank (including any other rights incidental thereto) in relation to any loan or advance granted, or any amount recoverably, by it may be transferred by the Small Industries Bank, either in whole or in part, by the execution or issue of any instrument or by the transfer of any instrument by endorsement, or in any other manner in which the rights and interests in relation to such loan or advance may be lawfully transferred, and the Small Industries Bank may, notwithstanding such transfer, act as the trustee for the transferee.

Section 18. Power to acquire rights

The Small Industries Bank shall have the right to acquire, by transfer or assignment, the rights and interests of any public financial institution as defined in section 4A of the Companies Act, 1956 (1 of 1956) (including any other rights incidental thereto) in relation to any loan or advance granted, or any amount recoverable by such institution, either in whole or in part, by the execution or issue of any instrument or by the transfer of any instrument or in any other manner.

Section 19. Loans in foreign currency

(1) Notwithstanding anything contained in the Foreign Exchange Regulation Act, 1973 (46 of 1973), or in any other enactment for the time being in force relating to foreign exchange, the Small Industries Bank may, for the purposes of granting loans and advances under this Act, borrow, with the previous consent of the Central Government and the Development Bank, foreign currency from any bank or financial institution in any foreign country or otherwise.

(2) The Central Government may, where necessary, guarantee any loan taken by the Small Industries Bank under sub-section (1) or any part thereof as to the repayment of principal and the payment of interest and other or otherwise.

(3) All loans and advances granted by the Small Industries Bank out of foreign currency borrowed under sub-section (1) shall be expressed in terms of foreign currency as equivalent of Indian currency calculated in accordance with the rate of exchange prevailing at the time of grant thereof, and the amount due thereunder shall be repayable in equivalent Indian currency, calculated in accordance with threat of exchange prevailing at the time of repayment of such loan or advance.

(4) Unless otherwise provided by the Central Government, any loss or profit in connection with any borrowing of foreign currency under sub-section (1) for the purpose of granting loans ad advances under this Act, or with its repayment to the concerned foreign lending agency, on account of any fluctuations in the exchange accruing-

(a) During the period within which the loan or advance is repayable by the industrial concern in the small-scale sector or the period of actual repayment thereof by the concern, whichever is longer, shall be reimbursed by, or paid to, as the case may be, the recipient of such loans and advances;

(b) After the expiry of the period specified in clause (a),-

(i) Shall be by the Small Industries Bank in respect of normal market fluctuations in the rate of foreign exchange;

(ii) Shall be reimbursed by, or paid to, as the case may be, the Central Government in respect of fluctuations other than the normal market fluctuations in foreign exchange.

Explanation. If any question arises as to whether any fluctuation as aforesaid is a normal market fluctuation or not, the same shall be decided by the Central Government whose decision thereon shall be final.

Section 20. Grants, donations, etc., to the small Industries Bank

The Small Industries Bank may receive gifts, grants, donations, benefactions or other monies from Government or any other source.

Section 21. Small Industries Development Assistance Fund

(1) With effect from such date as the Central Government may, by notification, appoint, the Small Industries Bank shall establish and maintain, a special fund to be called the Small Industries Development Assistance Fund.

(2) The Small Industries Bank may, at any time, establish any fund as part of the Small Industries Development Assistance Fund for such purpose or purposes as may be approved by the Central Government on the recommendation of the Development Bank, or establish any other fund as may be required by or under any law for the time being in force.

Section 22. Credits to Small Industries Development Assistance Fund

To Small Industries Development Assistance Fund shall be credited-

(a) All amounts received for the purpose of that Fund by way of loans, fits, grants, donations, benefactions or otherwise from Government or any other source;

(b) Repayments or recoveries in respect of loans, advances or other facilities granted from the Fund;

(c) Income or profits from investments made from the Fund; and

(d) Income accruing or arising to the Fund, by way of interest or otherwise, on account of the application of the Fund in accordance with the provisions of section 23.

Section 23. Utilisation of Small Industries Development Assistance Fund

The Small Industries Bank may disburse or spend from the Small Industries Development Assistance Fund, any amount for such purposes as the Central Government may, on the recommendation of the Development Bank, specify.

Section 24. Debits to Small Industries Development Assistance Fund

(1) To the Small Industries Development Assistance Fund shall be debited-

(a) Such amounts as may from time to time be disbursed or spent under section 23;

(b) Such amounts as may be required for discharging the liabilities in respect of loans received for the purpose of that Fund;

(c) Any loss arising on account of investment made out of that Fund; and

(d) Such expenditure arising out of, or in connection with, the administration and application of that fund as may be determined by the Board.

(2) No amount shall be debited to the Small Industries Development Assistance Fund except as provided for in sub-section (1).

Section 25. Accounts and audit of Small Industries Development Assistance Fund

(1) The balance-sheet and accounts of Small Industries Development Assistance Fund shall be prepared in such form and manner as may be prescribed.

(2) The Board shall cause the books and accounts the Small Industries Development Assistance Fund to be closed and balanced as on the 31st day of March each year or such other date as the Development Bank may specify.

(3) The Small Industries Development Assistance Fund shall be audited by one or more auditors appointed by the Development Bank under section 30 who shall make a separate report thereon.

(4) The provisions of sub-sections (2), (3) and (4) of section 30 shall, so far as may be, apply in relation to the audit of the Small Industries Development Assistance Fund.

(5) The Small Industries Bank shall furnish to the Central Government and the Development Bank within four months from the date on which the accounts of the Small Industries Development Assistance Fund are closed and balanced, a copy of balance-sheet and accounts together with a copy of its auditors’ report and a report on the operation of that Fund during the relevant year and the Central Government shall, as soon as may be after they are received by it, cause the same to be laid before each House of Parliament.

Section 26. Liquidation of Small Industries Development Assistance Fund

The Small Industries Development Assistance Fund shall not be closed or wound up save by order of the Central Government and in such manner as that Government may, on the recommendation of the Development Bank, direct.

Section 27. Small Industries General Fund

All receipts of the Small Industries Bank other than those which are to be credited to the Small Industries Development Assistance Fund under this Act shall be credited to a fund to be called the Small Industries General Fund and all payments by the Small Industries Bank, other than those which are to be debited to the Small Industries Development Assistance Fund, shall be made out of the Small Industries General Fund.

Section 28. Preparation of accounts and balance sheet

(1) The balance-sheet and accounts of the Small Industries Bank shall be prepared in such form and manner as may be prescribed.

(2) The Board shall cause the books and accounts of the Small Industries Bank to be closed and balanced as on the 31st day of March each year or such other date, as the Development Bank may specify.

Section 29. Disposal of profits accruing to Small Industries General fund

(1) The Small Industries Bank may establish a reserve fund to which may be transferred such sums as that Bank may deem fit out of the annual profits accruing to the Small Industries General Fund.

(2) After making provision for bad and doubtful debts, depreciation of assets and for all other matters for which provision is necessary or expedient or which is usually provided for by bankers and for the reserve fund referred to in sub-section (1), the Small Industrial Bank shall transfer the balance of the net profits to the Development Bank.

The Small Industries Development Bank of India Act, 1989

Section 30. Audit

(1) The accounts of the Small Industries Bank shall be audited by auditors duly qualified to act as auditors under sub-section (1) of section 226 of the Companies Act, 1956 (1 of 1956) who shall be appointed by the Development Bank for such term and on such remuneration as the Development Bank may fix.

(2) The auditors shall be supplied with a copy of the annual balance-sheet of the Small Industries Bank and it shall be their duty to examine it together with the accounts and vouchers relating thereto and they shall have a list delivered to them of all books kept by the Small Industries Bank and shall at all reasonable times have access to the books, accounts, vouchers and other documents of the Small Industries Bank.

(3) The auditors may, in relation to such accounts, examine any Director or any officer or other employee of the Small Industries Bank and shall be entitled to require from the Board or officers or other employees of the Small Industries Bank such information and explanation as they may think necessary for the performance of their duties.

(4) The auditors shall make a report to the Small Industries bank upon the annual balance-sheet and accounts examined by them and in every such report they shall state whether in their opinion the balance-sheet is a full and fair balance-sheet containing all necessary particulars and property drawn up so as to exhibit a true and fair view of the state of affairs of the Small Industries Bank and in case they had called for any explanation or information from the Board or any officer or other employee of the Small Industries Bank whether it has been given and whether it is satisfactory.

(5) The Small Industries Bank shall furnish to the Central Government and the Development Bank within four months from the date on which its accounts are closed and balanced, a copy of its balance-sheet and accounts together with a copy of the auditors’ report and a report of the working of the Small Industries Bank during the relevant year, and the Central Government shall, as soon as may be after they are received by it, cause the same to be laid before each House of Parliament.

Section 31. Saving

Save as otherwise provided in sub-section (4) of section 25, nothing contained in this Chapter shall apply to the Small Industries Development Assistance Fund.

Section 32. Transfer of part of business of Development Bank

(1) On such date as the Central Government may by notification, appoint, the business, assets and liabilities, rights, interests, privileges and obligations of the Development Bank relating to the Small Industries Development Fund and the National Equity Fund (hereinafter in this section referred to as Fund) shall stand transferred to, and vest in, the Small Industries Bank.

Explanation. “Small Industries Development Fund” and “National Equity Fund” mean the Small Industries Development Fund and National Equity Fund referred to as such in the books and accounts of the Development Bank on the day immediately preceding the date appointed in this sub-section.

(2) For the transfer to ad vesting in, the Small Industries Bank under sub-section (1) of the Funds, that Bank shall pay to the pay to the Development Bank such amount and on such terms and conditions as the Development Bank may determine.

(3) All contract, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature which relate to the Funds and which are subsisting or having effect immediately before the date referred to in sub-section (1) and to which the Development Bank is a part or which are in favour of the Development Bank shall,-

(a) If they relate exclusively to the Funds, be of full force and effect against or in favour of the Small Industries Bank and may be enforced and acted upon as fully and effectively as I, instead of the Development Bank, the Small Industries Bank had been a party thereto or as if they had been issued in favour of the Small Industries Bank; and

(b) If they relate not only to the Funds but also to any of the other business or functions of the Development Bank, be of full force and effect against or in favour of both the Development Bank and the Small Industries Bank and may be enforced or acted upon as fully and effectively as if, in addition to the Development Bank, the Small Industries Bank had also been a party thereto or as if they had been issued in favour of the Development Bank and also the Small Industries Bank.

(4) If, on the date referred to in sub-section (1), any suit, appeal or other legal proceeding of whatever nature relating to the Funds is pending, the same shall not abate, e discontinued or be in any way prejudicially affected by reason of the transfer to the Small Industries Bank of the business of the Development Bank or of anything contained in this Act, but the suit, appeal or other proceeding may,–

(a) Where it relates exclusively to the Funds, be continued, prosecuted and enforced by or against the Small Industries Bank; and

(b) Where it relates not only to the Funds but also to any of the other business or functions of the Development Bank be continued, prosecuted and enforced by or against the Development Bank and the Small Industries Bank or, if the Central Government by order in writing so directs, by or against such one of them, as may be specified in such order.

(5) If any question arises as to whether any contract, deed, bond, agreement, power of attorney, grant of legal representation or other instrument referred to in sub-section (3) or any suit, appeal or other legal proceeding referred to in sub-section (4) relates or relate exclusively to the Funds it shall be referred to the Development Bank for decision and the decision of the Development Bank thereon shall be final.

(6) The provisions of this section shall have effect notwithstanding anything contained in the Industrial Development Bank of India Act, 1964 (18 of 1964), or any other law or any instrument having force by virtue of the said Act or other law.

Section 33. Staff of Small Industries Bank

(1) The Small Industries Bank may appoint such number of officers and other employees as it considers necessary or desirable for the efficient performance of its functions and determine the terms and conditions of their appointment and service.

(2) At any time before the expiry of six months from the appointed day, the Development Bank may in public interest, transfer to the Small Industries Bank such members of it staff whom the Development Bank considers as relevant to, or suitable for, the functions of the Small Industries Banks, as on deputation with the Small Industries Bank but such members shall hold office by the same tenure and upon the same terms and conditions of service as respects remuneration, leave, provident fund, retirement or other terminal benefits as they would have held such office if the Small Industries Bank had not been established and shall continue to do so until the Development Bank either on its own motion or at the request of the Small Industries Bank recalls such member of staff to its service:

Provided that every member of the staff so transferred may elect to go back to the Development Bank by exercising an option in writing to that effect before the expiry of a period of nine months from the appointed day and on the exercise of such option, the Development Bank shall, before the expiration of a period of eighteen moths from the appointed day, take back such member of the staff and he shall be deemed to have been on deputation to the Small Industries Bank during the period he was a member of the staff of the Small Industries Bank.

(3) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947) or in any other law for the time being in force, the absorption of any member of the staff by the Small Industries Bank in its regular service under this section shall not entitle such employee to any compensation under that Act or other law and no such claim shall be entertained by any court, tribunal or other authority.

Explanation. For the purposes of this section, “appointed day” means the date of establishment of the Small Industries Bank under section 3.

Section 34. Delegation of powers

The Board may, by general or special order, delegate to any Director or committee constituted under section 12 or to any officer or other employee of the Small Industries Bank, subject to such conditions and limitations, if any, as may be specified in the order, such of its powers and duties under this Act as it may deem necessary.

Section 35. Returns

The Small Industries Bank shall furnish from time to time to the Central Government, the Reserve Bank such returns as they may require.

Section 36. Obligations as to fidelity and secrecy

(1) The Small Industries Bank shall not, except as otherwise required by this Act or any other law, divulge any information relating to, or to the affairs of, its constituents excepts in circumstances which it is, in accordance with the law or practice and usage customary among bankers necessary or appropriate for the Small Industries Bank to divulge such information.

(2) The Small Industries Bank may, for the purpose of the efficient discharge of the functions under this Act, collect from or furnish to the Central Government, Reserve Bank, Development Bank.State Bank, any subsidiary bank, nationalised bank or other scheduled bank, State Co-operative bank, State Financial Corporation, State Industrial Development Corporation, State Small Industries Corporation or the National Small Industries Corporation or such other institutions as may be specified by the Development Bank, credit information or other information as it may consider useful for the purpose, in such manner and at such times, as it may think fit.

Explanation. For the purpose of this sub-section, the expression “credit information” shall have the same meaning as in clause (c) of section 45A of the Reserve Bank of India Act, 1934 (2 of 1934), subject to the modification that banking company” referred to therein shall mean a bank corporation or other institution referred to in this sub-section.

(3) Every Director, member of committee, auditor, officer or other employee of the Small Industries Bank or the Development Bank whose services are utilised by the Small Industries Bank under the provisions of this Act, shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the First Schedule to this Act.

Section 37. Defects in appointment not to invalidate acts etc

(1) No act or proceeding of the Board or of any committee of the Small Industries Bank shall be questioned on the ground merely of the existence of any vacancy in, or defect in the constitution of, the Board or the committee, as the case may be.

(2) No act done by any person acting in good faith as a Director shall be deemed to be invalid merely on the ground that he was disqualified to be a Director or that there was any other defect in his appointment

Section 38. Rights of Small Industries Bank in case of default

(1) Where any industrial concern in the small-scale sector, which is under a liability to the Small Industries Bank under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Small Industries Bank or otherwise fails to comply with the terms of its agreement, with the Small Industries Bank, the Small Industries Bank shall have the right to take over the management, or possession, or both of such industrial concern in the small-scale sector, as well as the right to transfer by way of lease or sale and realise the property pledged mortgaged, hypothecated or assigned to the Small Industries Bank.

(2) Any transfer of property made by the Small Industries Bank, in exercise of its powers under sub-section (1), shall vest in the transfer all rights in or to the property transferred as if the transfer had been made by the owner of the property.

(3) The Small Industries Bank shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods.

(4) Where any action has been taken against an industrial concern in the small-scale sector under the provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Small Industries Bank have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern in the small-scale sector and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Small Industries Bank, and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.

(5) Where the Small Industries Bank takes over the management or possession of an industrial concern in the small-scale sector under the provisions of sub-section (1), the Small Industries Bank shall be deemed to be to the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern.

Section 39. Power to seek assistance of Chief Metropolitan Magistrate or District Magistrate

(1) Where any property, effects or actionable claims are cold or leased in pursuance of any power conferred by section 38, the Small Industries Bank or any other person authorised by it may, for the purpose of taking into custody or under control any such property, effects or actionable claims, request, in writing, the chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such property, effects, actionable claims, books of account or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or the District Magistrate shall, on such request being made to him,-

(a) Take possession of such property, effects, actionable claims, or books of account or other documents relating thereto; an

(b) Forward them to the Small Industries Bank or such other person, as the case may be.

(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be itself, such force as may, to his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done is pursuance of this section shall be called in question in any court or before any authority.

Section 40. Power to call for repayment before agreed period

Notwithstanding anything in any agreement to the contrary, the Small Industries Bank may, by notice in writing, require any industrial concern in the small-scale sector to which it has granted any loan or advance to discharge forthwith in full its liabilities to the Small Industries Bank,-

(a) If it appears to the Board that false or misleading information in any material particular was given in the application for the loan or advance; or

(b) If the industrial concern in the small-scale sector has failed to comply with the terms of its contract with the Small Industries Bank in the matter of the loan or advance; or

(c) If there is a reasonable apprehension that the industrial concern in the small-scale sector is unable to pay its debt or that proceedings for liquidation may be commenced in respect thereof; or

(d) If the property pledged, mortgaged, hypothecated or assigned to the Small Industries Bank as security for the loan or advance is not insured and kept insured by the industrial concern in the small-scale sector to the satisfaction of the Small Industries Bank; or depreciates in value to such an extent that, in the opinion of the Board, further security to the satisfaction of the Board should be given and such security in no given; or

(e) If, without the permission of the Board, any machinery, plant or other equipment, whether forming part of the security or otherwise, is removed form the premises of the industrial concern in the small-scale sector without being replaced; or

(f) If for any reason it is necessary to protect the interests of the Small Industries Bank

Section 41. Special provisions for enforcement of claims by Small Industries Bank

(1) Where an industrial concern in the small-scale sector, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting it obligations in relation to any guarantee given by the Small Industries Bank or otherwise fails to comply with the terms of its agreement with that Bank, or where the Small-scale Industries Bank requires any industrial concern in the small-scale sector to make repayment of any loan or advance under section 40 and such industrial concern fails to make such repayment, then, without prejudice to the provisions of section 38 of this Act and section 69 of the Transfer of Property Act, 1882 (4 of 1882), any officer of that Bank, generally or specially authorised by that Bank in this behalf, may apply to the Court for one or more of the following reliefs, namely:-

(a) For an order for the sale of the property assigned, charged, hypothecated, mortgaged or pledged to that Bank a security for the loan or advance; or

(b) For enforcing the liability of any surety; or

(c) For an ad interim injunction restraining the industrial concern in the small-scale sector from transferring or removing its machinery, plant or equipment from the premises of such industrial concern without the permission of the Small Industries Bank, where such transfer or removal is apprehended.

(2) An application under sub-section (1) shall state the nature and extent of the liability of the industrial concern in the small-scale sector to the Small Industries Bank, the ground on which it is made and such other particulars as may be necessary for obtaining the relief prayed for.

(3) Where the application is for the reliefs mentioned in clause (a) and clause (c) of sub-section (1), the Court shall pass an ad interim order attaching the security, or so much of the property of the industrial concern in the small-scale sector as would on being sold realise in its estimation an amount equivalent in value to the outstanding liability of such industrial concern to the Small Industries Bank together with costs of the proceedings taken under this section with or without an ad interim injunction restraining such industrial concern from transferring or removing it s machinery, plant or equipment.

(4) Where the application is for the relief mentioned in clause (b) of sub-section (1), the Court shall issue a notice calling upon the surety to show cause on a date to be specified in the notice as to why the liability should not be enforced.

(5) Before passing any order under sub-section (3), or issuing a notice under sub-section (4), the Court may ,if it thinks fit, examine the officer making the application.

(6) At the same time as it passes an order under sub-section (3), the Court shall issue to the industrial concerning the small-scale sector or to the owner of the security attached, a notice accompanied by copies of the order, the application and the evidence, if any, recorded by the Court calling upon such industrial concern or owner, to show cause on a date to be specified in the notice, as to why the ad interim order of attachment should be made absolute or the injunction confirmed.

(7) If no cause is shown, on or before the date specified in the notice under sub-section (4), the Court shall forthwith order the enforcement of the liability of the surety.

(8) If no cause is shown on or before the date specified in the notice under sub-section (6), the Court shall forthwith make the ad interim order absolute and direct the sale of the attached property or confirm the injunction.

(9) If cause is shown, the Court shall proceed to investigate the claim of the Small Industries Bank in accordance with the provisions contained in the Code of Civil Procedure, 1908 (5 of 1908), in so far as such provisions may be applied thereto.

(10) After making an investigation under sub-section (9), the Court may-

(a) Confirm the order of attachment and direct the sale of the attached property;

(b) Vary the order of attachment so as to release a portion of the property from attachment and direct the sale of the remainder of the attached property;

(c) Release the property from attachment;

(d) Confirm or dissolve the injunction; or

(e) Direct the enforcement of the liability of the surety or reject the claim made in this behalf:

Provided that when making an order under clause (c)making an order rejecting the claim to enforce the liability of the surety under clause (e), the Court may make such further order as it think necessary to protect the interests of the Small Industries Bank and may apportion the cost of the proceedings in such manner as it think fit:

Provided further that unless the Small Industries Bank intimates to the Court that it will not appeal against any order releasing any property from attachment or rejecting the claim to enforce the liability of the surety, such order shall not be given effect to, until the expiry of the period fixed under sub-section (12) within which an appeal may be preferred or, if an appeal is preferred, unless the Court empowered to hear appeals from the decisions of the said Court otherwise directs, until the appeal is disposed of.

(11) An order of attachment or sale of property under this section shall be carried into effect as far as practicable in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908), for the attachment or sale of property in execution of a decree as if the Small Industries Bank were the decree holder.

(12) Any party aggrieved by an order under sub-section (7), sub-section (8) or sub-section (10) may, within thirty days from the date of the order, appeal to the Court empowered to hear appeals from the decisions of the Court which passed the order and upon such appeal the appellate Court may, after hearing the parties, pass such orders as it thinks proper.

(13) Where proceedings for liquidation in respect of an industrial concern in the small-scale section have commenced before an application is made under sub-section (1), nothing in this section shall be construed as giving to the Small Industries Bank any preference over the other creditors of such industrial concern not conferred on it by any other law.

(14) For the removal of doubts, it is hereby declared that any Court competent to grant an ad interim injection under this section shall also have the power to appoint a receiver and to exercise all the other powers incidental thereto.

Section 42. Small Industries Bank to have access to records

(1) The Small Industries Bank shall have free access to all such records of any institution which seeks to avail any credit facilities from the Small Industries Bank and to all such records of any such person who seeks to avail of any credit facilities from such institution, perusal whereof may appear to the Small Industries Bank to he necessary in connection with the providing of finance or other assistance to such institution or the refinancing of any loan or advance made to such person by the borrowing institution.

(2) The Small Industries Bank may require any institution or person referred to in sub-section (1) to furnish to it copies of any of the records referred to in that sub-section and the institution or the person, as the case may be shall be bound to comply with such requisition

Section 43. Validity of loan or advance not to be questioned

Notwithstanding anything to the contrary contained in any other law for the time being in force, the validity of any loan or advance granted by the Small Industries Bank in pursuance of the provisions of this Act shall not be called in question merely on the ground of non-compliance with the requirements of such other law as aforesaid or of any resolution, contract, memorandum, articles of association or other instrument:

Provided that nothing in this section shall under render valid any loan or advance obtained by any company or co-operative society where such company or co-operative society is not empowered by its memorandum to obtain or advances.

Section 44. Indemnity of Directors

(1) Every Director shall be indemnified by the Small Industries Bank against all losses and expenses incurred by him in, or in relation to, the discharge of his duties, except such as are caused by his won wilful act or default.

(2) A Director shall not be responsible of any other Director or for any officer or other employee of the Small Industries Bank or for any loss or expenses resulting to the Small Industries Bank or from the insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf of the Small Industries Bank or the insolvency or wrongful act of any debtor or any person under obligation to the Small Industries Bank or anything done in good faith in the execution of the duties of his office or in relation thereto.

Section 45. Protection of action taken under this Act

No suit or other legal proceeding shall lie against the Small Industries Bank, Chairman or any Director or any officer or other employee of such Bank or any other person authorised by that Bank to discharge any functions under this Act for any loss or damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of this Act or any other law or provision having the force of law.

Section 46. Nomination by depositors or holders of bonds or other securities

(1) Notwithstanding anything contained in any other law, where a nomination in respect of any deposits, bonds or other securities kept with or issued by the Small Industries Bank is made in the prescribed manner, the amount due on such deposits, bonds or other securities shall, on the death of the depositor or holder thereof, vest in, and be payable to, the nominee subject to any right, title, interest or claim of any other person, in relation to such deposits, bonds or their securities.

(2) Any payment by the Small Industries Bank in accordance with the provisions of sub-section (1) shall be a full discharge of its liability in respect of such deposits, bonds or securities.

Section 47. Arrangement with Small Industries Bank on appointment of directors to prevail

(1) Where any arrangement entered into by the Small Industries Bank with an industrial concern in the small-scale sector provides for the appointment by the Small Industries Bank of one or more directors of such industrial concern, such provision and any appointment of directors made in pursuance thereof shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (5 of 1908), or in any other law for the time being in force or in the memorandum, articles of association or any other instrument relating to that industrial concern, and any provision regarding share qualification, age-limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any director appointed by the Small Industries Bank in pursuance of the arrangement as aforesaid.

(2) Any director appointed as aforesaid shall-

(a) Hold office during the pleasure of the Small Industries Bank and may be removed or substituted by any person by order in writing of the Small Industries Bank;

(b) Not incur any obligation or liability by person only of his being a director or for anything done or omitted to be done in good faith in the discharge of his duties as a director or anything in relation thereto;

(c) Not be liable to retirement by rotation and shall not be taken into account for computing the number of directors liable to such retirement.

Section 48. Act 18 of 1801 to apply in relation to Small Industries Bank

The bankers’ Books Evidence Act, 1891 shall apply in relation to Small Industries Bank as if it were a bank as defined in section 2 of that Act.

Section 49. Act 10 of 1949 not to apply to Small Industries Bank

Nothing contained in the Banking Regulation Act, 1949, except section 34A and section 36AD thereof, shall apply to the Small Industries Bank.

Section 50. Act 43 of 1961 not to apply to Small Industries Bank

Notwithstanding anything to the contrary contained in the Income-tax Act.1961 or any other enactment for the time being in force relating to income-tax or any other tax on income, profits or gains, the Small Industries Bank shall not be liable to pay income-tax or any other tax in respect of-

(a) Any income, profits or gains accruing or arising to the Small Industries Development Assistance Fund or any amount received in that Fund; and

(b) Any income, profits or gains derived or any amount received by the Small Industries Bank.

Section 51. Liquidation of Small Industries Bank

No provision of law relating to the winding up of companies or corporations shall apply to the Small Industries Bank and that Bank shall not be placed in liquidation save by order of the Central Government and in such manner as it may direct.

Section 52. Power to make regulations

(1) The Board may, with the previous approval of the Development Bank, by notification make regulations not inconsistent with the provisions of this Act to provide for all matters for with provision is necessary or expedient for the purpose of giving effect to the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such regulation may provide for-

(a) The times and places of the meetings of the Board and the procedure to be followed at such meetings under sub-section (1) of section 11 including quorum necessary for the transaction of business;

(b) The form and manner in which the balance-sheets and the account of the Small Industries Development Assistance Fund under sub-section (1) of section 25 and the Small Industries Bank under sub-section (1) of section 28 shall be prepared;

(c) The manner in which nominations may be made in terms of sub-section (1) of section 46;

(d) Generally the efficient conduct of the affairs of the Small Industries Bank;

(e) Any other matter which is to be, or may be, prescribed.

(3) Every regulation made this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or e of no effect, as the case may be; so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.

Section 53. Amendment of certain enactments

The enactment’s specified in Parts I, II, III and IV of the Second Schedule to this Act shall be amended in the manner specified therein and such amendments shall taken effect on the date of establishment of the Small Industries Bank.

Section 54. Power to remove difficulties

If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, in consultation with the Development Bank, by order, do anything, not inconsistent with such provisions, for the purpose of removing the difficulty:

Provided that no such order shall be made after the expiration of three years from the date on which this Act receives the assent of the President.

Schedule 1

Declaration of fidelity and secrecy

THE FIRST SCHEDULE

[See section 36 (3)]

Declaration of fidelity and secrecy

1,……………………………………………….., do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as director, member of……………………………………………committee, auditor, officer, other employee (as the case may be ) of the Small Industries Development Bank of India and which properly relate to the office or position held by me in or in relation to the said Bank.

I further declare that I will not communicate or allow to be communicated to any person not legally entitled thereto any information relating to the affairs of the Small Industries Development Bank of India or to the affairs of any person having any dealing with the said Bank, nor will I allow any such person to inspect or have access to any books or documents belonging to or in the possession of the said Bank relating to the business of the said Bank or the business of any person any dealing with the said Bank.

Singed before me.

(Signature)

Schedule 2

AMENDMENT OF CERTAIN ENACTMENTS

THE SECOND SCHEDULE

(See section 53)

AMENDMENT OF CERTAIN ENACTMENTS

PART I

AMENDMENT TO THE RESERVE BANK OF INDIA ACT, 1934

(2 OF 1934)

1. In section 2, after clause (e), insert the following clause, namely:-

‘(el) “Small Industries Bank” means the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989;’

2. In section 17,-

(a) In clause (4G), after the words “the Reconstruction Bank”, insert the words “or the Small Industries Bank”,

(b) In clause (4H), after the words “the Development Bank”, insert the words “or the Small Industries Bank”;

(c) In clause (4-I), for the words “or the Reconstruction Bank”, substitute the words “the Reconstruction Bank or the Small Industries Bank”;

(d) In clause (12B), for the words “the Reconstruction Bank”, substitute the words “the Reconstruction Bank or the Small Industries Bank”.

3. In section 42, in sub-clause (ii) of clause (c) of the Explanation to sub-section (1), after the two words “or from the National Bank”, insert the words “or from the Small Industries Bank”.

4. In section 45C, in sub-section (2),in clauses (c) and (d), after the words “or the Reconstruction Bank” wherever they occur, insert the words “or the Small Industries Bank”.

PART II

AMENDMENT TO THE INDUSTRIAL DISPUTES ACT, 1947

(14 OF 1949)

In section 2, in clause (bb), after the words “the Industrial Development Bank of India,”, insert the words “the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989,”.

PART III

AMENDMENTS TO THE BANKING REGULATION ACT, 1949

(10 OF 1949)

1. In section 5, after clause (n), insert the following clause, namely,:-

‘(ni) “Small Industries Bank” mean the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989;’

2. In section 18, in sub-section (1), in the Explanation, in clause (a), in sub-clause (ii), after the words “or from the National Bank”, insert the words”, or from the Small Industries Bank”,

3. In section 34A.in sub-section (3), after the words “the National Bank”, insert the words”, the Small Industries Bank,

4. In section 36AD, in sub-section (3), after the words “the National Bank”, insert the words”, the small Industries Bank,

5. In section 56, in sub-clause (ii) of clause (a) of the Explanation under clause (j), after the words “, the National Bank”, insert the words “,the Small Industries Bank,”

PART IV

AMENDMENT TO THE PAYMENT OF BONUS ACT, 1965

(21 OF 1965)

In section 32, in clause (ix), after sub-clause (f), the following sub-clause shall be inserted namely:-

“(fa) The Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989;”

Bydeb

State Bank of India (Amendment) Act, 2010

Section 1. Short title and commencement

STATE BANK OF INDIA (AMENDMENT) ACT, 20101

[NO. 27 OF 2010]

[24th August, 2010]

An Act further to amend the State Bank of India Act, 1955

Be it enacted by Parliament in the Sixty-first Year of the Republic of India as follows—

——————–

1. Received the assent of the President on August 24, 2010 and published in the Gazette of India, Extra., Part II, Section 1, dated 25th August, 2010, pp. 1-9, No. 36

Prefatory Note—Statement of Objects and Reasons.

The State Bank of India Act, 1955 (hereinafter referred to as the SBI Act) was last amended in 1993 to enable the State Bank of India to access capital market. While State Bank of India can access capital market by issuing equity shares or bonds, or by both equity share and bonds, there is no express provision under the SBI Act to enable the State Bank to issue preference shares and also bonus shares.

2. The Basel Capital Accord, the current international framework on Capital Adequacy, was adopted in the year 1988 by many banks worldwide and by India in the year 1992.

Thereupon the Reserve Bank of India had introduced a set of norms for income recognition, provisioning and also for capital adequacy in relation to risk weighted assets. These norms were designed to put the financial accounting and prudential standards of Indian banks on a sound footing in line with current international practices.

3. The Basel Committee on Banking Supervision has worked on a new framework for international convergence on capital standards and in June 2004 related the new capital adequacy framework known as Basel II.

With the introduction of the Basel II, all the public sector banks including the State Bank of India and its subsidiary banks would be required to increase their capital base to meet the minimum requirements. Achievement of the capital adequacy norms under Basel II will improve the basic financial health of the banking system and thus improve its international credibility, since banks in many countries are also in the process of adopting these standards.

4. The State Bank of India (Amendment) Bill, 2006 was introduced in the Lok Sabha on the 18th December, 2006 which was examined by the Standing Committee on Finance. The said Bill lapsed due to the dissolution of the 14th Lok Sabha.

5. It is proposed to introduce the State Bank of India (Amendment) Bill, 2010 broadly on the same lines of the lapsed Bill incorporating therein certain recommendations of the Standing Committee on Finance.

6. The State Bank of India (Amendment) Bill, 2010 seeks to provide for enhancement of the capital of the State Bank by issue of preference shares, to enable it to raise resources from the market by public issue or preferential allotment or private placement. The Bill also aims to provide for flexibility in the management of the bank. The Bill proposes to amend the, SBI Act, inter alia, to—

(i) increase the authorised capital of the State Bank of India to Rupees Five thousand crores divided into shares of ten rupees each or of such denomination as may be decided by the Central Board, with the approval of the Reserve Bank and also enable the Central Government to increase or reduce the authorised capital in consultation with the Reserve Bank;

(ii) allow the issued capital of the State Bank to be raised by preferential allotment of share or private placement or public issue or rights issue in accordance with the procedure as may be prescribed by regulations with the previous approval of the Reserve Bank and the Central Government, and the preference shares may be issued in accordance with guidelines framed by the Reserve Bank;

(iii) allow the State Bank to issue bonus shares to the existing equity shareholders with the direction of the Central Government;

(iv) allow reduction of shareholding of the Central Government from fifty-five per cent to fifty-one per cent consisting of the equity shares of the issued capital;

(v) allow the State Bank to accept share monies in instalments, make calls, and forfeiture of unpaid shares and their re-issue;

(vi) provide for nomination facility in respect of shares held by an individual or joint shareholders;

(vii) restrict the voting rights of preference shareholders of the State Bank only to resolutions directly affecting their rights and also restrict the preference shareholders, other than the Central Government, to exercise voting rights in respect of preference shares held by them to a ceiling of ten per cent of total voting rights of all the shareholders holding preference share capital only;

(viii) allow the Central Government to appoint not more than four managing directors in consultation with the Reserve Bank;

(ix) abolish the post of vice-chairman;

(x) enable a sole shareholder or a first named holder of shares (when held jointly) of a nominal value of at least five thousand rupees to contest the election for the directorship of State Bank;

(xi) specify the qualifications for election of directors of the State Bank and to confer powers upon the Reserve Bank to notify eligibility criteria for such directors;

(xii) allow the Reserve Bank to appoint additional directors as and when considered necessary in the interest of banking policy and depositors’ interest;

(xiii) confer power upon the Central Government to supersede the Central Board in certain cases on the recommendations of the Reserve Bank and to appoint an administrator for the period during which the Central Board stands superseded;

(xiv) allow the State Bank to hold Central Board meetings through video conferencing or such other electronic means as may be prescribed by regulations;

(xv) allow transfer of unpaid or unclaimed dividend of the State Bank up to thirty days to “unpaid dividend account” and after seven years to the “Investor Education and Protection Fund” established under Section 205-C of the Companies Act, 1956;

(xvi) entitle the shareholders present in an annual general meeting to “adopt” the balance sheet;

(xvii) to amend sub-section (3-A) of Section 20 of the SBI Act to restrict the tenure of Workmen Employee Director/Officer Employee Director to three years. 7. The Bill seeks to achieve the above objects.

(1) This Act may be called the State Bank of India (Amendment) Act, 2010.

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

Section 2. Amendment of Section 2

In Section 2 of the State Bank of India Act, 1955 (23 of 1955) (hereinafter referred to as the principal Act), clause (i) shall be omitted.

Section 3. Substitution of new section for Section 4

For Section 4 of the principal Act, the following section shall be substituted, namely—

“4. Authorised capital.—Subject to the provisions of this Act, the authorised capital of the State Bank shall be five thousand crores of rupees divided into five hundred crores of fully paid-up shares of ten rupees each:

Provided that the Central Board may reduce the nominal or face value of the shares, and divide the authorised capital into such denomination as it may decide with the approval of the Reserve Bank:

Provided further that the Central Government may, in consultation with the Reserve Bank, increase or reduce the authorised capital so however that the shares in all cases shall be fully paid-up shares.

Section 4. Amendment of Section 5

In Section 5 of the principal Act,—

(a) for sub-section (2), the following sub-section shall be substituted, namely—

“(2) The issued capital of the State Bank shall consist of equity shares or equity and preference shares:

Provided that the issue of preference shares shall be in accordance with the guidelines framed by the Reserve Bank specifying the class of preference shares, the extent of issue of each class of such preference shares (whether perpetual or irredeemable or redeemable) and the terms and conditions subject to which, each class of preference shares may be issued:

Provided further that the Central Board may from time to time increase, with the previous approval of the Reserve Bank and the Central Government, whether by public issue or rights issue or preferential allotment or private placement, in accordance with the procedure as may be prescribed, the issued capital by the issue of equity or preference shares:

Provided also that the Central Government shall, at all times, hold not less than fifty-one per cent of the issued capital consisting of equity shares of the State Bank.”

(b) after sub-section (3), the following sub-sections shall be inserted, namely—

“(4) Subject to the provisions contained in sub-section (2), the Central Board may increase from time to time, by way of issuing bonus shares to existing equity shareholders, the issued capital in such manner as the Central Government may, after consultation with the Reserve Bank, direct.

(5) The State Bank may, accept the money in respect of shares issued towards increase in the issued capital in instalments, make calls, forfeit unpaid shares and re-issue them, in such manner as may be prescribed.”

Section 5. Amendment of Section 10

In Section 10 of the principal Act, in sub-section (2), for the words “fifty-five per cent of the issued capital”, the words “fifty-one per cent of the issued capital consisting of equity shares,” shall be substituted.

Section 6. Insertion of new Section 10-A

After Section 10 of the principal Act, the following section shall be inserted, namely—

“10-A. Right of registered shareholders to nominate.—(1) Every individual registered shareholder may, at any time, nominate, in the prescribed manner, an individual to whom all his rights in the shares shall vest in the event of his death.

(2) Where the shares are registered in the name of more than one individual jointly, the joint holders may together nominate in the prescribed manner, an individual to whom all their rights in the shares shall vest in the event of the death of all the joint holders.

(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, where a nomination in respect of shares is made in the prescribed manner and which purports to confer on the nominee the right to vest the shares, the nominee shall, on the death of the shareholder or, as the case may be, on the death of all the joint holders, become entitled to all the rights of the shareholder or, as the case may be, of all the joint holders, in relation to such shares and all other persons shall be excluded unless the nomination is varied or cancelled in the prescribed manner.

(4) Where the nominee is a minor, it shall be lawful for the individual registered holder of the shares to make nomination to appoint, in the prescribed manner, any person to become entitled to the shares in the event of his death during the minority of the nominee.”.

Section 7. Amendment of Section 11

In Section 11 of the principal Act, after the proviso, the following provisos shall be inserted, namely—

“Provided further that the shareholder holding any preference share capital in the State Bank shall, in respect of such capital, have a right to vote only on resolutions placed before the State Bank which directly affect the rights attached to his preference shares:

Provided also that no preference shareholder, other than the Central Government, shall be entitled to exercise voting rights in respect of preference shares held by him in excess of ten per cent of total voting rights of all the shareholders holding preference share capital only.”

Section 8. Amendment of Section 13

In Section 13 of the principal Act, in sub-section (2), for the words “in computer floppies or diskettes”, the words “in computer floppies or diskettes or any other electronic form” shall be substituted.

Section 9. Amendment of Section 16

In Section 16 of the principal Act,—

(a) in sub-section (1), for the word “Bombay”, the words “Mumbai, and shall also be known as Corporate Centre” shall be substituted;

(b) in sub-section (2), for the words “Bombay, Calcutta and Madras”, the words “Mumbai, Kolkata and Chennai” shall be substituted.

Section 10. Amendment of Section 19

In Section 19 of the principal Act,—

(a) in clause (a), the words “and a vice-chairman” shall be omitted;

(b) for clause (b), the following clause shall be substituted, namely—

“(b) such number of managing directors not exceeding four, as may be appointed by the Central Government in consultation with the Reserve Bank;”;

(c) clause (bb) shall be omitted;

(d) in clause (d), the words “in consultation with the Reserve Bank,” shall be omitted;

(e) for clause (f), the following clause shall be substituted, namely—

“(f) one director, possessing necessary expertise and experience in matters relating to regulation or supervision of commercial banks to be nominated by the Central Government on the recommendation of the Reserve Bank.”

Section 11. Insertion of new Sections 19-A and 19-B

After Section 19 of the principal Act, the following sections shall be inserted, namely—

“19-A. Qualifications for election of directors elected by shareholders.—

(1) The directors elected under clause (c) of Section 19 shall—

(a) have special knowledge or experience in respect of one or more of the following areas, namely—

(i) agriculture and rural economy,

(ii) banking,

(iii) co-operation,

(iv) economics,

(v) finance,

(vi) law,

(vi) small-scale industry,

(vii) any other area the special knowledge of, and experience in, which in the opinion of the Reserve Bank shall be useful to the State Bank.

(b) represent the interests of depositors; or

(c) represent the interests of farmers, workers and artisans.

(2) Without prejudice to the provisions of sub-section (1) and notwithstanding anything to the contrary contained in this Act or in any other law for the time being in force, no person shall be eligible to be elected as director under clause (c) of Section 19 unless he is a person having fit and proper status based upon track record, integrity and such other criteria as the Reserve Bank may notify from time to time in this regard and the Reserve Bank may specify in the notification issued under this sub-section, the authority to determine the fit and proper status, the manner of such determination, the procedure to be followed for such determinations and such other matters as may be considered necessary or incidental thereto.

(3) Where the Reserve Bank is of the opinion that any director of the State Bank elected under clause (c) of Section 19 does not fulfil the requirements of sub-sections (1) and (2), it may, after giving to such director and the State Bank a reasonable opportunity of being heard, by order, remove such director.

(4) On the removal of a director under sub-section (3), the Central Board shall co-opt any other person fulfilling the requirements of sub-sections (1) and (2), as a director in place of the person so removed, till a director is duly elected by the shareholders of the State Bank in the next annual general meeting; and the person so co-opted shall be deemed to have been duly elected by the shareholders of the State Bank as a director.

19-B. Power of Reserve Bank to appoint additional directors.

(1) If the Reserve Bank is of the opinion that in the interest of banking policy or in the public interest or in the interests of the State Bank or its depositors, it is necessary so to do, it may, from time to time and by order in writing appoint, with effect from such date as may be specified in the order, one or more persons as additional directors of the State Bank.

(2) Any person appointed as additional director under sub-section (1) shall,—

(a) hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank may, by order, specify;

(b) not incur any obligation or liability by reason only of his being an additional directors or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto; and

(c) not be required to hold qualification shares in the State Bank.

(3) For the purpose of reckoning any proportion of the total number of directors of the State Bank, any additional director appointed under this section shall not be taken into account.”

Section 12. Amendment of Section 20

In Section 20 of the principal Act,—

(a) in sub-section (1), the words “.vice-chairman” shall be omitted;

(b) in sub-section (1-A), the word “, vice-chairman”, occurring at both the places, shall be omitted;

(c) in sub-section (3-A), the words “and thereafter until his successor shall have been duly appointed or nominated”, shall be omitted.

Section 13. Amendment of Section 21

In Section 21 of the principal Act,—

(a) in sub-section (1)—

(i) for clause (a), the following clause shall be substituted, namely—

“(a) the chairman, ex officio or the managing director nominated by the chairman;”

(ii) in clause (c), the words “in consultation with the Reserve Bank” shall be omitted;

(b) in sub-section (5), for the words “Governor of the Reserve Bank”, the words “Central Government” shall be substituted.

Section 14. Substitution of new section for Section 21-B

For Section 21-B of the principal Act, the following section shall be substituted, namely—

“21-B. Powers of Local Board.—In respect of the area falling within the jurisdiction of the local head office for which the Local Board has been constituted, a Local Board shall, subject to such general or special direction as the Central Board may give from time to time, exercise such powers and perform such duties and functions as may be entrusted or delegated to it by the Central Board.”

Section 15. Amendment of Section 21-C

In Section 21-C of the principal Act, for sub-section (2), the following sub-section shall be substituted, namely—

“(2) The chairman or the managing director nominated by him shall be an ex officio member of every such Local Committee.”

Section 16. Amendment of Section 22

In Section 22 of the principal Act, in sub-section (1),-

(a) in clause (d), the word “vice-chairman” shall be omitted;

(b) for clause (h), the following clause shall be substituted, namely—

“(h) in the case of an elected director, he is not registered as a holder in his own right of unencumbered shares in the State Bank, either as sole holder or as first named holder when jointly held, of a nominal value of at least five thousand rupees:”

Section 17. Amendment of Section 23

In Section 23 of the principal Act, in clause (b), the word “.vice-chairman” shall be omitted.

Section 18. Amendment of Section 24

In section 24 of the principal Act,—

(a) in sub-section (1), the word “.vice-chairman” shall be omitted;

(b) in sub-section (3), the words “after consulting the Reserve Bank,” shall be omitted.

Section 19. Insertion of new Section 24-A

After Section 24 of the principal Act, the following section shall be inserted, namely—

“24-A. Supersession of Central Board in certain cases.—

(1) Where the Central Government, on the recommendation of the Reserve Bank is satisfied that in the public interest or for preventing the affairs of the State Bank being conducted in a manner detrimental to the interest of the depositors or the State Bank or for securing the proper management of the State Bank, it is necessary so to do, the Central Government may, for reasons to be recorded in writing, by order, supersede the Central Board for a period not exceeding six months as may be specified in the order:

Provided that the period of supersession of the Central Board may be extended from time to time, so, however, that the total period shall not exceed twelve months.

(2) On supersession of the Central Board under sub-section (1), the Central Government may, in consultation with the Reserve Bank, appoint an Administrator (not being an officer of the Central Government or a State Government) who has experience in law, finance, banking, economics or accountancy, for such period as it may determine.

(3) The Central Government may issue such directions to the Administrator as it may consider necessary and the Administrator shall be found to follow such directions.

(4) Notwithstanding anything contained in this Act, upon making the order of supersession of the Central Board—

(a) the chairman, managing director and other directors shall, as from the date of supersession, vacate their offices as such;

(b) all the powers, functions and duties which may, by or under the provisions of this Act or any other law for the time being in force, be exercised and discharged by or on behalf of the Central Board, or by a resolution passed in the general meeting of the State Bank, shall, until the Central Board is reconstituted, be exercised and discharged by the Administrator appointed under sub-section (2):

Provided that the powers exercised by the Administrator shall be valid notwithstanding that such power is also exercisable by a resolution passed in the general meeting of the State Bank.

(5) The Central Government may, in consultation with the Reserve Bank, constitute a committee of three or more persons who have experience in law, finance, banking, economics or accountancy to assist the Administrator in the discharge of his duties.

(6) The committee shall meet at such times and places and observe such rules of procedure as may be specified by the rules made under this Act.

(7) The salary and allowances of the Administrator and the members of the committee shall be such as may be specified by the rules made under this Act and be payable by the State Bank.

(8) On and before the expiration of two months before the expiry of the period of supersession of the Central Board, the Administrator of the State Bank shall call the general meeting of the State Bank to elect new directors and re-constitute the said Board.

(9) Notwithstanding anything contained in any other law for the time being in force or in any contract, no person shall be entitled to claim any compensation for the loss or termination of his office on supersession of the Central Board.

(10) The Administrator appointed under sub-section (2) shall vacate office immediately after the re-constitution of the Central Board.”

Section 20. Amendment of Section 25

In Section 25 of the principal Act,—

(a) in sub-section (1), the word “.vice-chairman” shall be omitted;

(b) in sub-section (2),—

(i) the word “.vice-chairman” shall be omitted;

(ii) in clause (b), the words “in consultation with the Reserve Bank” shall be omitted.

Section 21. Omission of Section 28

Section 28 of the principal Act shall be omitted.

Section 22. Amendment of Section 29

In Section 29 of the principal Act, in sub-section (1) —

(a) in clause (a), the word “and” shall be omitted;

(b) in clause (b),—

(i) the words “and the vice-chairman” shall be omitted;

(ii) at the end, the word “; and” shall be inserted;

(c) after clause (b), the following clause shall be inserted, namely—

“(c) when authorised by the chairman, shall preside at the meetings of the Central Board in his absence.”

Section 23. Amendment of Section 31

In Section 31 of the principal Act,—

(a) for sub-sections (1) and (2), the following sub-sections shall be substituted, namely—

“(1) The Central Board shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed; and the meeting of the Central Board may be held by participation of the directors of the Central Board through videoconferencing or such other electronic means, as may be prescribed, which are capable of recording and recognising the participation of the directors and the proceedings of such meetings are capable of being recorded and stored:

Provided that the Central Government may in consultation with the Reserve Bank, by notification in the Official Gazette, specify the matters which shall not be discussed in a meeting of the Central Board held through videoconferencing or such other electronic means.

(2) All questions at the meeting shall be decided by a majority of the votes of the directors present in the meeting or through videoconferencing or such other electronic means and in the case of equality of votes the chairman or, in his absence, the managing director authorised by the chairman shall have a second or casting vote.”;

(b) in sub-section (4), for the word “vice-chairman”, the words “managing director authorised by the chairman” shall be substituted.

Section 24. Amendment of Section 31-A

In Section 31-A of the principal Act, in sub-section (5), for the words “the vice-chairman, if he is a member of the Local Board”, the words “the managing director authorised by the chairman” shall be substituted.

Section 25. Insertion of new Section 38-A

After Section 38 of the principal Act, the following section shall be inserted, namely—

’38-A. Transfer of unpaid or unclaimed dividend.—

(1) Where, after the commencement of the State Bank of India (Amendment) Act, 2010, a dividend has been declared by the State Bank but which has not been paid to a shareholder or claimed by any shareholder entitled to it, within thirty days from the date of declaration, the State Bank shall, within seven days from the date of expiry of the said period of thirty days, transfer the total amount of dividend which remains unpaid, or unclaimed, to a special account to be named, the “unpaid dividend account” maintained by it.

Explanation

In this sub-section, the expression “dividend which remains unpaid” means any dividend the warrant in respect thereof has not been encashed or which has otherwise not been paid or claimed.

(2) Where the whole or any part of any dividend, declared by the State Bank before the commencement of the State Bank of India (Amendment) Act, 2010, remains unpaid at such commencement, the State Bank shall, within a period of six months from such commencement, transfer such unpaid amount to the account referred to in sub-section (1).

(3) Any money transferred to the unpaid dividend account of the State Bank, in pursuance of this section which remains unpaid or unclaimed for a period of seven years from the date of such transfer shall be transferred by the State Bank to the Investor Education and Protection Fund established under sub-section (1) of Section 205-C of the Companies Act, 1956 (1 of 1956) for being utilised for the purpose and in the manner specified in that section.

Section 26. Amendment of Section 39

In Section 39 of the principal Act, for the word “December”, the word “March” shall be substituted.

Section 27. Amendment of Section 40

In Section 40 of the principal Act,—

(a) in sub-section (1), for the word “December”, the word “March” shall be substituted;

(b) for sub-section (2), the following sub-section shall be substituted, namely—

“(2) The balance sheet and the profit and loss account shall be signed by the chairman, managing directors and at least three other directors of the Central Board.”

Section 28. Amendment of Section 41

In Section 41 of the principal Act,—

(a) in sub-section (1), for the words “the Reserve Bank in consultation with the Central Government”, the words “the State Bank with the previous appoval of the Reserve Bank” shall be substituted;

(b) in sub-section (5), for the words “the Reserve Bank”, the words “the State Bank with the previous approval of the Reserve Bank” shall be substituted.

Section 29. Substitution of new section for Section 42

For Section 42 of the principal Act, the following section shall be substituted, namely—

“42. Balance sheet, etc., of State Bank may be discussed at general meeting.—

(1) An annual general meeting shall be held in each financial year at the Corporate Centre or at such other place in Mumbai other than the Corporate Centre or at such other place in India and at such time, as shall from time to time be specified by the Central Board and a general meeting other than an annual general meeting may be convened by the State Bank at any other time and at such place in India as shall from time to time be specified by the Central Board:

Provided that such annual general meeting shall be held before the expiry of six weeks from the date on which the balance sheet together with the profit and loss account and auditors’ report, under sub-section (1) of Section 40, is forwarded to the Central Government or to the Reserve Bank, whichever date is earlier.

(2) The shareholders present at an annual general meeting shall be entitled to discuss and adopt the balance sheet and the profit and loss account of the State Bank made up to the previous 31st day of March or the date specified under Section 39, as the case may be, the report of the Central Board on the working and activities of the State Bank for the period covered by the accounts and the auditors’ report on the balance sheet and accounts.”.

Section 30. Amendment of Section 43

In Section 43 of the principal Act, for sub-section (2), the following sub-section shall be substituted, namely—

“(2) The officers, advisers and employees of the State Bank shall individually or jointly or with other officers, advisers and employees in a Local Committee exercise such powers and perform such duties as may by general or special order, be entrusted or delegated to them by the Central Board or its executive committee.”

Section 31. Amendment of Section 49

In Section 49 of the principal Act, in sub-section (2), after clause (c), the following clauses shall be inserted, namely—

“(d) the time and place of meeting of the Committee and the rules of procedure to be observed by it under sub-section (6) of Section 24-A;

(e) the salary and allowances of the Administrator and the members of the committee under sub-section (7) of Section 24-A.”

Section 32. Amendment of Section 50

In Section 50 of the principal Act, in sub-section (2),-

(i) after clause (a), the following clauses shall be inserted, namely—

“(ad) the procedure for increasing issued capital by the issue of equity or preference shares under sub-section (2) and the manner of accepting money for issued capital, forfeiture and re-issue of shares under sub-section (5), of Section 5;

(ab) the manner of nominating an individual by one individual under sub¬section (1), the manner of nominating an individual by the joint holders under sub-section (2), the manner of varying or cancellation of nomination under sub¬section (3), and the manner of nominating a minor under sub-section (4), of Section 10-A;”;

(ii) in clause (Jb), for the words “floppies or diskettes”, the words “floppies or diskettes or any other electronic form” shall be substituted.

Section 33. Amendment of enactment

The enactment specified in the Schedule is hereby amended to the extent and in the manner as given below—

THE SCHEDULE

(See Section 33)

Short title

The State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959)

In Section 26, in sub-section (2-A), the words “and thereafter until his successor shall have been duly appointed” shall be omitted.

Bydeb

State Bank of India (Amendment) Act, 2007

STATE BANK OF INDIA (AMENDMENT) ACT, 20071

[Act No. 32 of 2007]

[September 3, 2007]

An Act further to amend the State Bank of India Act, 1955

Be it enacted by Parliament in the Fifty-eighth Year of the Republic of India as follows:-

——————–

1. Received the assent of the President on September 3, 2007 and published in the Gazette of India, Extra, Part II, Section 1, dated 7th September, 2007, pp. 1-2, No. 39

1. Short title and commencement.

(1) This Act may be called the State Bank of India (Amendment) Act, 2007.

(2) It shall be deemed to have come into force on the 29th day of June, 2007.

2. Amendment of Section 3.

In the State Bank of India Act, 1955 (23 of 1955) (hereinafter referred to as the principal Act), in Section 3, in sub-section (2), for the words “Reserve Bank”, the words “Central Government” shall be substituted.

3. Amendment of Section 5.

In Section 5 of the principal Act, in sub-section (2), for the words “Reserve Bank”, the words “Central Government” shall be substituted.

4. Amendment of Section 10.

In Section 10 of the principal Act, in sub-section (2), for the words “Reserve Bank”, the words “Central Government” shall be substituted.

5. Amendment of Section 11.

In Section 11 of the principal Act, for the words “Reserve Bank”, the words “Central Government” shall be substituted.

6. Amendment of Section 18.

In Section 18 of the principal Act, in sub-section (2), for the words “All directions given by the Central Government shall be given through the Reserve Bank”, the words “All directions shall be given by the Central Government” shall be substituted.

7. Amendment of Section 19.

In Section 19 of the principal Act, in clause (c), for the words “Reserve Bank”, the words “Central Government” shall be substituted.

8. Amendment of Section 24.

In Section 24 of the principal Act, in sub-section (4), for the words “Reserve Bank”, the words “Central Government” shall be substituted.

9. Amendment of Section 36.

In Section 36 of the principal Act,-

(1) in sub-section (1),-

(a) in clause (a), for the words “Reserve Bank”, the words “Central Government” shall be substituted’,

(b) in clause (b),-

(i) the words “the Reserve Bank or” shall be omitted:

(ii) in the proviso,-

(A) for the words “Reserve Bank”, occurring at both the places, the words “Central Government” shall be substituted;

(B) for the words “paid to that Bank”, the words “paid to that Government” shall be substituted;

(2) in clause (a) and clause (aa) of sub-section (2) and in sub-section (3), for the words “Reserve Bank”, wherever they occur, the words “Central Government” shall be substituted.

10. Repeal and saving.

(1) The State Bank of India (Amendment) Ordinance, 2007 (Ordinance 5 of 2007), is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the principal Act, as amended by the said Ordinance, shall be deemed to have been done or taken under the principal Act, as amended by this Act.

Bydeb

State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007

Section 1. Short title and commencement

STATE BANK OF INDIA (SUBSIDIARY BANKS LAWS) AMENDMENT ACT, 20071

[Act No. 30 of 2007]

[June 18, 2007]

An Act further to amend the State Bank of Saurashtra Act, 1950, the State Bank of Hyderabad Act, 1956 and the State Bank of India (Subsidiary Banks) Act, 1959

Be it enacted by Parliament in the Fifty-eighth Year of the Republic of India as follows:-

Prefatory Note-Statement of Objects and Reasons.-The State Bank of the Saurashtra Act, 1950, the State Bank of Hyderabad Act, 1956 and the State Bank of India (Subsidiary Banks) Act, 1959 has been in force for more than four decades. The said three Acts contain provisions regarding constitution of the State Bank of Saurashtra, the State Bank of Hyderabad and other Subsidiary Banks of the State Bank of India (being the State Bank of Patiala, the State Bank of Bikaner and Jaipur, the State Bank of Indore, the State Bank of Mysore and the State Bank of Travancore), their capital, management and control and other connected matters.

2. There are more than twenty-eight lakhs shares held by private shareholders (other than the State Bank of India) of the four subsidiary banks, i.e., the State Bank of Bikaner and Jaipur, the State Bank of Indore, the State Bank of Mysore and the State Bank of Travancore. The shareholders of these four subsidiary banks are facing certain difficulties due to certain restrictions imposed under the State Bank of India (Subsidiary Banks) Act, 1959. These restrictions, inter alia, include, (a) lack of dematerialization facility for the shares (b) difficulty in free transferability (c) restrictions on individual holdings of shares and their voting rights etc. The shareholders, at the annual general meetings of these four banks, have been expressing, time and again, the difficulty faced by them due to such restrictive provisions in the said Act.

3. The Basel Capital Accord, the current international framework on Capital Adequacy, was adopted in the year 1988 by many banks worldwide and in the year 1992 in India. Afterwards, over the past several years, the Basel Committee on Banking Supervision has worked on a new accord for international convergence on capital standards and released the latest version of the new Basel Capital Accord known as Basel II in June 2004. With the introduction of the new capital adequacy framework (Basel II), all the banks (including subsidiary banks of the State Bank of India) may be required to increase their capital base to meet minimum requirements. Achievement of the capital adequacy norms under Basel II will improve the basic financial health of the banking system and thus improve its international credibility since banks in many countries are also in the process of adopting these standards.

4. In order to remove the difficulties faced by the shareholders of the subsidiary banks and to facilitate increase of the capital of the subsidiary banks to enable them to raise resources from the market and also to comply with certain guidelines issued by the Securities Exchange Board of India (SEBI) under the Securities Exchange Board of India Act, 1992 and the Depositories Act, 1996, it has become necessary to amend the State Bank of the Saurashtra Act, 1950, the State Bank of Hyderabad Act, 1956 and the State Bank of India (Subsidiary Banks) Act, 1959. The Bill proposes to amend the said three Acts, inter alia, to-

(a) increase the authorised capital of subsidiary banks to five hundred crores and divide the authorised capital into shares of one hundred rupees each or of such denomination as may be decided by the subsidiary banks, with the approval of the State Bank of India (SBI);

(b) allow the subsidiary banks to issue share certificates of such denomination as may be prescribed by regulations made by the SBI with the approval of the RBI to the existing shareholders;

(c) fix the issued capital of subsidiary banks by the SBI with the approval of the RBI and also decide, with the approval of the SBI, on the denomination of shares of subsidiary banks;

(d) allow the subsidiary banks to raise issued capital by preferential allotment or private placement or public issue in accordance with the procedure as may be specified by regulations made by the SBI with the approval of the RBI and to issue preference shares in accordance with guidelines framed by the RBI;

(e) allow the subsidiary banks to issue, with the approval of the SBI and RBI, bonus shares to the equity shareholders;

(f) allow reduction of the SBI’s shareholding in the subsidiary banks from fifty-five per cent to fifty-one per cent;

(g) allow the subsidiary banks to accept share monies in instalments, make calls, and forfeiture of unpaid shares and their re-issue;

(h) provide for nomination facility in respect of shares held by individual/joint shareholders of the subsidiary banks;

(i) remove the restriction on individual shareholdings in excess of two hundred shares and increase the percentage of voting rights of shareholders (other than the SBI) from one per cent to ten per cent of the issued capital of the subsidiary bank concerned;

(j) restrict the voting rights of preference shares of subsidiary bank only to resolutions directly affecting their rights and also restrict the preference shareholder to exercise voting rights in respect of preference shares held by him to a ceiling of ten per cent of total voting rights of all the shareholders holding preference share capital only.

(k) allow the chairman of the SBI to nominate an official of the SBI as the Chairman of the Board of a subsidiary bank, with the approval of the RBI;

(l) omit the provisions relating to nomination of official of the RBI on the Board of Directors of subsidiary bank and to make provisions for nomination of additional director by the RBI as and when considered necessary, in the interest of banking policy and depositors’ interest etc.;

(m) increase the number of elected directors representing shareholders of subsidiary bank limited to a maximum of three subject to different percentage of public ownership;

(n) specify the qualification regarding eligibility criteria including “fit and proper” criteria for elected directors of subsidiary bank and to confer power upon the RBI to remove elected directors who are not fit and proper and also to allow the Board of Directors of a subsidiary bank to co-opt any other person who is fit and proper in his place;

(o) confer power upon the RBI to supersede the Board of Directors of subsidiary banks in public interest or for depositor’s interest or for securing proper management of the subsidiary banks on the recommendation of the SBI and to appoint an administrator and a committee to assist the administrator;

(p) allow transfer of unpaid or unclaimed dividend of subsidiary bank up to thirty days to “unpaid dividend account” and after seven years to the “Investor Education and Protection Fund” established under Section 205-C of the Companies Act, 1956;

(q) entitle the shareholders present in the annual general meeting to “adopt” the balance-sheet.

5. The Bill seeks to achieve the above objectives.

——————–

1. Received the assent of the President on June 18, 2007 and published in the Gazette of India, Extra., Part II, Section 1, dated 19th June, 2007, pp. 1-11, No. 35

(1) This Act may be called the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007.

(2) It shall come into force on such date1 as the Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

——————–

1. W.e.f. 9-7-2007

Section 2. Substitution of new section for Section 5

For Section 5 of the State Bank of Saurashtra Act, 1950 (hereafter in this Chapter referred to as the State Bank of Saurashtra Act), the following section shall be substituted, namely:-

“5. Authorised capital.-

(1) Subject to the provisions of this Act, the authorised capital of the Saurashtra Bank shall be rupees five hundred crores.

(2) The authorised capital of the Saurashtra Bank shall be divided into shares of one hundred rupees each or of such denomination as the Saurashtra Bank may, with the approval of the State Bank, decide.

(3) The Saurashtra Bank may issue the certificates of shares of equivalent values of such denomination as the Saurashtra Bank may decide with the approval of the State Bank, in accordance with the procedure as may be specified by regulations made under Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) and every shareholder of the Saurashtra Bank shall be entitled to have the certificate of shares of equivalent value of such denomination.

(4) Notwithstanding anything contained in sub-section (1), the State Bank may, with the approval of the Reserve Bank, authorise the Saurashtra Bank to increase or reduce its authorised capital.”

Section 3. Amendment of Section 6

In Section 6 of the State Bank of Saurashtra Act,-

(a) after sub-section (1), the following sub-section shall be inserted, namely:-

“(1-A) Notwithstanding anything contained in sub-section (1), the issued capital of the Saurashtra Bank, shall consist of such amount as the State Bank may, with the approval of the Reserve Bank, fix, and shall be divided into fully paid-up shares of such denomination in accordance with sub-section (2) of Section 5.”;

(b) for sub-section (3), the following sub-sections shall be substituted, namely:-

“(3) The Saurashtra Bank may, from time to time, with the approval of the State Bank and the Reserve Bank, increase, whether by public issue or by preferential allotment or private placement in accordance with the procedure as may be specified by regulations made under Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), its issued capital by issue of equity or preference shares.

(3-A) The issued capital of the Saurashtra Bank shall consist of equity shares or equity and preference shares :

Provided that the issue of preference shares shall be in accordance with the guidelines framed by the Reserve Bank specifying the class of preference shares, the extent of issue of each class of such preference shares (whether perpetual or irredeemable or redeemable) and the terms and conditions subject to which, each class of preference shares may be issued.

(3-B) The Saurashtra Bank may, with the approval of the State Bank and the Reserve Bank, increase from time to time by way of issuing bonus shares to existing equity shareholders, its issued capital in such manner as the State Bank, with the approval of the Reserve Bank, direct.

(3-C) No increase or reduction in the issued capital of the Saurashtra Bank shall be made in such a manner that the State Bank holds at any time less than fifty-one per cent of the issued capital consisting of equity shares of the Saurashtra Bank.

(3-D) The Saurashtra Bank may accept the money in respect of shares issued towards increase in issued capital in instalments, make calls and forfeit unpaid shares and re-issue them, in the manner as may be specified by regulations made under Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959).”.

Section 4. Substitution of new section for Section 9

For Section 9 of the State Bank of Hyderabad Act, 1956 (79 of 1956) (hereafter in this chapter referred to as the State Bank of Hyderabad Act), the following section shall be substituted, namely:-

“9. Authorised capital.-

(1) Subject to the provisions of this Act, the authorised capital of the Hyderabad Bank shall be rupees five hundred crores.

(2) The authorised capital of the Hyderabad Bank shall be divided into shares of one hundred rupees each or of such denomination as the Hyderabad Bank may, with the approval of the State Bank, decide.

(3) The Hyderabad Bank may issue the certificates of shares of equivalent values of such denomination as the Hyderabad Bank may decide with the approval of the State Bank, in accordance with the procedure as may be specified by regulations made under Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) and every shareholder of the Hyderabad Bank shall be entitled to have the certificate of shares of equivalent value of such denomination.

(4) Notwithstanding anything contained in sub-section (1), the State bank may, with the approval of the Reserve Bank, authorise the Hyderabad Bank to increase or reduce its authorised capital.”

Section 5. Amendment of Section 10

In Section 10 of the State Bank of Hyderabad Act,-

(a) after sub-section (1), the following sub-section shall be inserted, namely:-

“(1-A) Notwithstanding anything contained in sub-section (1), the issued capital of the Hyderabad Bank, shall consist of such amount as the State Bank may, with the approval of the Reserve Bank, fix, and shall be divided into fully paid-up shares of such denomination in accordance with sub-section (2) of Section 9.”;

(b) for sub-section (3), the following sub-sections shall be substituted, namely:-

“(3) The Hyderabad Bank may, from time to time, with the approval of the State Bank and the Reserve Bank, increase, whether by public issue or by preferential allotment or private placement in accordance with the procedure as may be specified by regulations made under Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), its issued capital by issue of equity or preference shares.

(3-A) The issued capital of the Hyderabad Bank shall consist of equity shares or equity and preference shares :

Provided that the issue of preference shares shall be in accordance with the guidelines framed by the Reserve Bank specifying the class of preference shares, the extent of issue of each class of such preference shares (whether perpetual of irredeemable or redeemable) and the terms and conditions subject to which, each class of preference shares may be issued.

(3-B) The Hyderabad Bank may, with the approval of the State Bank and the Reserve Bank, increase from time to time by way of issuing bonus shares to existing equity shareholders, its issued capital in such manner as the State Bank, with the approval of the Reserve Bank, direct.

(3-C) No increase or reduction in the issued capital of the Hyderabad Bank shall be made in such a manner that the State Bank holds at any time less than fifty-one per cent of the issued capital consisting of equity shares of the Hyderabad Bank.

(3-D) The Hyderabad Bank may accept the money in respect of shares issued towards increase in issued capital in instalments, make calls and forfeit unpaid shares and re-issue them, in the manner as may be specified by regulations made under Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959).”

Section 6. Substitution of new section for Section 6

For Section 6 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) [hereafter in this chapter referred to as the State Bank of India (Subsidiary Banks) Act], the following section shall be substituted, namely:-

“6. Authorised capital of new bank.-(1) Subject to the provisions of this Act, the authorised capital of every new bank shall be rupees five hundred crores.

(2) The authorised capital of every new bank shall be divided into shares of one hundred rupees each or of such denomination as the new bank may, with the approval of the State Bank, decide.

(3) Every new bank may issue the certificates of shares of equivalent values of such denomination as the new bank may, decide, with the approval of the State Bank, in accordance with the procedure as may be prescribed and every shareholder of the new bank shall be entitled to have the certificate of shares of equivalent value of such denomination.

(4) Notwithstanding anything contained in sub-section (1), the State Bank may, with the approval of the Reserve Bank, authorise a new bank to increase or reduce its authorised capital.”.

Section 7. Amendment of Section 7

In Section 7 of the State Bank of India (Subsidiary Banks) Act,-

(a) after sub-section (1), the following sub-section shall be inserted, namely:-

“(1-A) Notwithstanding anything contained in sub-section (1), the issued capital of a new bank shall, consist of such amount as the State Bank may, with the approval of the Reserve Bank, fix, and shall be divided into fully paid-up shares of such denomination in accordance with sub-section (2) of Section 6.”;

(b) for sub-sections (4) and (5), the following sub-sections shall be substituted, namely:-

“(4) A new bank may from time to time, with the approval of the State Bank and the Reserve Bank, increase, whether by public issue or by preferential allotment or private placement in accordance with the procedure as may be prescribed, its issued capital by issue of equity or preference shares.

(5) The issued capital of a new bank shall consist of equity shares or equity and preference shares :

Provided that the issue of preference shares shall be in accordance with the guidelines framed by the Reserve Bank specifying the class of preference shares, the extent of issue of each class of such preference shares (whether perpetual or irredeemable or redeemable) and the terms and conditions subject to which, each class of preference shares may be issued.

(6) A new bank may, with the approval of the State Bank and the Reserve Bank, increase from time to time by way of issuing bonus shares to existing equity shareholders, its issued capital in such manner as the State Bank, with the approval of the Reserve Bank, direct.

(7) No increase or reduction in the issued capital of a new bank shall be made in such a manner that the State Bank holds at any time less than fifty-one per cent of the issued capital consisting of equity shares of new bank.

(8) A new bank may accept the money in respect of shares issued towards increase in issued capital in instalments, make calls and forfeit unpaid shares and re-issue them, in the manner as may be prescribed.”.

Section 8. Amendment of Section 18

In Section 18 of the State Bank of India (Subsidiary Banks) Act, in sub-section (2), for the words “fifty-five per cent of the issued capital”, the words “fifty-one per cent of the issued capital consisting of equity shares” shall be substituted.

Section 9. Insertion of new Section 18-A

After Section 18 of the State Bank of India (Subsidiary Banks) Act, the following section shall be inserted, namely:-

“18-A. Right of registered shareholder to nominate.-(1) Every individual registered shareholder of a subsidiary bank may, at any time, nominate, in the prescribed manner, an individual to whom all his rights in the snares shall vest in the event of his death.

(2) Where the shares are registered in the name of more than one individual jointly, the joint holders may together nominate in the prescribed manner, an individual to whom all their rights in the shares shall vest in the event of the death of all the joint holders.

(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such shares where a nomination made in the prescribed manner purports to confer on any individual the right to vest the shares, the nominee shall, on the death of the shareholder or, as the case may be, on the death of all the joint holders, become entitled to all the rights of the shareholder or, as the case may be, of all the joint holders, in relation to such shares to the exclusion of all other persons unless the nomination is varied or cancelled in the prescribed manner.

(4) Where the nominee is a minor, it shall be lawful for the individual registered as the holder of the shares to make nomination to appoint, in the prescribed manner, any person to become entitled to the shares in the event of his death during the minority of the nominee.”.

Section 10. Substitution of new section for Section 19

For Section 19 of the State Bank of India (Subsidiary Banks) Act, the following section shall be substituted, namely:-

“19. Restriction on voting rights.-No shareholder, other than the State Bank, shall be entitled to exercise voting rights in respect of any shares held by him in excess of ten per cent of the issued capital of the subsidiary bank concerned:

Provided that the shareholder holding any preference share capital in the subsidiary bank shall, in respect of such capital, have a right to vote only on resolutions placed before such subsidiary bank which directly affect the rights attached to his preference shares:

Provided further that no preference shareholder shall be entitled to exercise voting rights in respect of preference shares held by him in excess of ten per cent of the total voting rights of all the shareholders holding preference share capital only.”

Section 11. Amendment of Section 21

Section 21 of the State Bank of India (Subsidiary Banks) Act shall be numbered as sub-section (1) thereof and after sub-section (1) as so numbered, the following sub-sections shall be inserted, namely:-

“(2) Notwithstanding anything contained in sub-section (1), it shall be lawful for a subsidiary bank to keep the register of shareholders in computer floppies or diskettes or any other electronic form subject to such safeguards as may be prescribed.

(3) Notwithstanding anything contained in the Indian Evidence Act, 1872 (1 of 1872), a copy of, or extract from, the register of shareholders, certified to be a true copy under the hand of any officer of the subsidiary bank authorised in this behalf shall in all legal proceedings, be admissible in evidence.”

Section 12. Amendment of Section 22

In Section 22 of the State Bank of India (Subsidiary Banks) Act, for the words and figures “Notwithstanding anything contained in Section 19, no notice of any trust,”, the words “No notice of any trust,” shall be substituted.

Section 13. Amendment of Section 25

In Section 25 of the State Bank of India (Subsidiary Banks) Act,-

(i) in sub-section (1)-

(a) for clause (a), the following clause shall be substituted, namely:-

“(a) the Chairman for the time being of the State Bank, ex officio or an official of the State Bank or of the subsidiary bank nominated by him as Chairman, with the approval of the Reserve Bank;”;

(b) for clause (b), the following clause shall be substituted, namely:-

“(b) one director, possessing necessary expertise and experience in the matters relating to regulation or supervision of commercial banks, to be nominated by the Reserve Bank;”

(c) for clause (d), the following clause shall be substituted, namely:-

“(d) not more than three directors to be elected in the following manner, namely:-

(i) if the total amount of holdings of the shareholders (other than the State Bank) of a subsidiary bank is more than one per cent of the total issued capital, and equal to or less than sixteen per cent of such capital, one director to be elected, in the prescribed manner, by such shareholders and two directors shall be nominated by the State Bank, or

(ii) if the total amount of holdings of the shareholders (other than the State Bank) of a subsidiary bank is more than sixteen per cent of the total issued capital and equal to or less than thirty-two per cent of such capital, two directors to be elected in the prescribed manner by such shareholders and one director shall be nominated by the State Bank, or

(iii) if the total amount of holdings of the shareholders (other than the State Bank) of a subsidiary bank is more than thirty-two per cent of the total issued capital, all the three directors to be elected, in the prescribed manner, by such shareholders:

Provided that in case, the total amount of holdings of the shareholders of a subsidiary bank (other than the State Bank) is not more than one per cent of the total issued capital, all three directors shall be nominated by the State Bank and such directors shall, for the purposes of this Act, be deemed to be directors elected under this clause.

Explanation

For the purposes of this sub-section, the total amount of holdings of the shareholders (other than the State Bank) whose names are on the register of shareholders of the subsidiary bank three months before the date fixed for election of directors shall be taken into account.”;

(ii) sub-section (3) shall be omitted;

(iii) in sub-section (4), the words “the Reserve Bank or” shall be omitted.

Section 14. Insertion of new Sections 25-A and 25-B

After Section 25 of the State Bank of India (Subsidiary Banks) Act, the following sections shall be inserted, namely:-

“25-A. Fit and proper status of an elected director.-(1) The Directors to be elected under clause (d) of sub-section (1) of Section 25 shall-

(a) have special knowledge or practical experience in respect of one or more of the following matters, namely:-

(i) agricultural and rural economy,

(ii) banking,

(iii) co-operation,

(iv) economics,

(v) finance,

(vi) law,

(vii) small-scale industry,

(viii) any other matter the special knowledge of, and practical experience in, which would, in the opinion of the Reserve Bank, be useful to the subsidiary bank;

(b) represent the interests of depositors; or

(c) represent the interests of farmers, workers and artisans.

(2) Without prejudice to the provisions of sub-section (1) and notwithstanding anything to the contrary contained in this Act or in any other law for the time being in force, no person shall be eligible to be elected as director under clause (d) of sub-section (1) of Section 25 unless he is a person having fit and proper status based upon track record, integrity and such other criteria as the Reserve Bank may notify from time to time in this regard.

(3) The Reserve Bank may also specify in the notification issued under sub-section (2), the authority to determine the fit and proper status, the manner of such determination, the procedure to be followed for such determinations and such other matters as may be considered necessary or incidental thereto.

(4) Where the Reserve Bank is of the opinion that any director of a subsidiary bank elected under clause (d) of sub-section (1) of Section 25 does not fulfil the requirements of sub-sections (1) and (2), it may, after giving to such director and the subsidiary bank a reasonable opportunity of being heard, by order, remove such director and on such removal, the Board of Directors shall co-opt any other person fulfilling the requirements of the said sub-sections as a director in place of the person so removed till a director is duly elected by the shareholders of the subsidiary bank in the next annual general meeting and the person so co-opted shall be deemed to have been duly elected by the shareholders of the subsidiary bank as a director.

25-B. Power of Reserve Bank to appoint additional directors.

(1) If the Reserve Bank is of the opinion that in the interest of banking policy or in the public interest or in the interests of the subsidiary bank or its depositors, it is necessary so to do, it may, from time to time and by order in writing appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the subsidiary bank.

(2) Any person appointed as additional director in pursuance of this section shall-

(a) hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further period not exceeding three years at a time as the Reserve Bank may specify;

(b) not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto; and

(c) not be required to hold qualification shares in the subsidiary bank.

(3) For the purpose of reckoning any proportion of the total number of directors of the subsidiary bank, any additional director appointed under this section shall not be taken into account.”

Section 15. Amendment of Section 27

In Section 27 of the State Bank of India (Subsidiary Banks) Act, in sub-section (5), in clause (a), for the words and figures “Banking Companies Act, 1949”, the words and figures “Banking Regulation Act, 1949” shall be substituted.

Section 16. Amendment of Section 34

In Section 34 of the State Bank of India (Subsidiary Banks) Act,-

(a) for sub-section (1), the following sub-section shall be substituted, namely:-

“(1) The Board of Directors of a subsidiary bank shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed; and the meeting of the Board of Directors may be held by participation of the directors of the Board through video-conferencing or such other electronic means, as may be prescribed, which are capable of recording and recognizing the participation of the directors and the proceedings of such meetings are capable of being recorded and stored :

Provided that the Central Government may in consultation with the Reserve Bank, by a notification in the Official Gazette, specify the powers which shall not be exercised in a meeting of the Board of Directors held through videoconferencing or such other electronic means.”;

(b) in sub-section (2), for the words “The Chairman of the State Bank”, the words “The Chairman of the Board of Directors of a subsidiary bank” shall be substituted’,

(c) for sub-section (3), the following sub-section shall be substituted, namely:-

“(3) All questions at the meeting of the Board of Directors of a subsidiary bank shall be decided by a majority of the votes of the directors present in the meeting or through video-conferencing or such other electronic means and in the case of equality of votes, the Chairman of Board of Directors of a subsidiary bank or, in his absence, the person presiding at the meeting shall have a second or casting vote.”;

(d) in sub-section (5), in the proviso, in clause (ii), for the words, brackets and letters “of the Reserve Bank or the State Bank nominated under clause (b) or clause (c)” the words, brackets and letter “of the State Bank nominated under clause (c)” shall be substituted;

(e) in sub-section (6), the words “and the Reserve Bank” shall be omitted.

Section 17. Insertion of new Section 35-A

After Section 35 of the State Bank of India (Subsidiary Banks) Act, the following section shall be inserted, namely:-

“35-A. Supersession of Board of Directors in certain cases.-

(1) Where the Reserve Bank, on the recommendation of the State Bank is satisfied that in the public interest or for preventing the affairs of a subsidiary bank being conducted in a manner detrimental to the interest, of the depositors or the subsidiary bank or for securing the proper management of the subsidiary bank, it is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing , by order, supersede the Board of Directors of the subsidiary bank for a period not exceeding six months as may be specified in the order:

Provided that the period of supersession of the Board of Directors may be extended from time to time, so, however, that the total period shall not exceed twelve months.

(2) The Reserve Bank may, on supersession of the Board of Directors of the subsidiary bank under sub-section (1), appoint, for such period as it may determine, an Administrator (not being an officer of the Central Government or a State Government) who has experience in law, finance, banking, economics or accountancy.

(3) The Reserve Bank may issue such directions to the Administrator as it may deem appropriate and the Administrator shall be bound to follow such directions.

(4) Upon making the order of supersession of the Board of Directors of the subsidiary bank, notwithstanding anything contained in this Act,-

(a) the Chairman, Managing Director and other directors shall, as from the date of supersession, vacate their offices as such;

(b) all the powers, functions and duties which may, by or under this Act, or any other law for the time being in force, be exercised and discharged by or on behalf of the Board of Directors of such subsidiary bank, or by a resolution passed in general meeting of the subsidiary bank, shall, until the Board of Directors of the subsidiary bank is reconstituted, be exercised and discharged by the Administrator appointed by the Reserve Bank under subsection (2):

Provided that the power exercised by the Administrator shall be valid notwithstanding that such power is exercisable by a resolution passed in the general meeting of the subsidiary bank.

(5) The Reserve Bank may constitute a committee of three or more persons who have experience in law, finance, banking, economics or accountancy to assist the Administrator in the discharge of his duties.

(6) The committee referred to in sub-section (5) shall meet at such times and places and observe such rules of procedure as may be specified by the Reserve Bank.

(7) The salary and allowances payable to the Administrator and the members of the Committee constituted under sub-section (5) by the Reserve Bank shall be such as may be specified by the Reserve Bank and be payable by the concerned subsidiary bank.

(8) On and before the expiration of two months before expiry of the period of supersession of the Board of Directors as specified in the order issued under sub-section (1), the Administrator of the subsidiary bank, shall call the general meeting of the subsidiary bank to elect new directors and reconstitute its Board of Directors.

(9) Notwithstanding anything contained in any other law or in any contract, the memorandum or articles of association, no person shall be entitled to claim any compensation for the loss or termination of his office.

(10) The Administrator appointed under sub-section (2) shall vacate office immediately after the Board of Directors of the subsidiary bank has been reconstituted.”.

Section 18. Amendment of Section 38

In Section 38 of the State Bank of India (Subsidiary Banks) Act, in sub-section (10), in clause (a), for the words and figures “Banking Companies Act, 1949”, the words and figures “Banking Regulation Act, 1949” shall be substituted.

Section 19. Amendment of Section 39

In Section 39 of the State Bank of India (Subsidiary Banks) Act, for the word “December”, the word “March” shall be substituted.

Section 20. Insertion of new Section 40-A

After Section 40 of the State Bank of India (Subsidiary Banks) Act, the following section shall be inserted, namely:-

’40-A. Transfer of unpaid or unclaimed dividend to unpaid dividend account.-(1) Where, after the commencement of the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007, a dividend has been declared by the subsidiary bank but has not been paid, or claimed, within thirty days from the date of declaration, to or by any shareholder entitled to the payment of the dividend, the subsidiary bank shall, within seven days from the date of the expiry of such period of thirty days, transfer the total amount of dividend which remains unpaid, or unclaimed within the said period of thirty days, to a special account to be called “unpaid dividend account of…………………………… (Name of the subsidiary bank)”

Explanation

In this sub-section, the expression “dividend which remains unpaid” means any dividend the warrant in respect thereof has not been encashed or which has otherwise not been paid or claimed.

(2) Where the whole or any part of any dividend, declared by the subsidiary bank before the commencement of the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007, remains unpaid at such commencement, the subsidiary bank shall, within a period of six months from such commencement, transfer such unpaid amount to the account referred to in sub-section (1).

(3) Any money transferred to the unpaid dividend account of the subsidiary bank in pursuance of this section, which remains unpaid or unclaimed for a period of seven years from the date of such transfer shall be transferred by the subsidiary bank to the Investor Education and Protection Fund established under sub-section (1) of Section 205-C of the Companies Act, 1956 (1 of 1956).

(4) The money transferred under sub-section (3) to the Investor Education and Protection Fund shall be utilised for the purposes and in the manner specified in Section 205-C of the Companies Act, 1956 (1 of 1956).’

Section 21. Amendment of Section 43

In Section 43 of the State Bank of India (Subsidiary Banks) Act,-

(a) in sub-section (1), in clause (a), for the word “December”, the word “March” shall be substituted;

(b) for sub-section (2), the following sub-section shall be substituted, namely:-

“(2) The balance-sheet and profit and loss account of the subsidiary bank shall be signed by persons holding the office of the Chairman, Managing Director, and a majority of the other directors of the subsidiary bank in office.”

Section 22. Amendment of Section 44

In Section 44 of the State Bank of India (Subsidiary Banks) Act,-

(a) in sub-section (2),-

(i) for the words “discuss the balance-sheet”, the words “discuss and adopt the balance-sheet” shall be substituted;

(ii) for the word “December”, the word “March” shall be substituted.

(b) in sub-section (3), for the word “December”, the word “March” shall be substituted.

Section 23. Amendment of Section 48

In Section 48 of the State Bank of India (Subsidiary Banks) Act, in sub-section (2), for the words and figures “Indian Income Tax Act, 1922 (11 of 1922)”, the words and figures “Income Tax Act, 1961 (43 of 1961)” shall be substituted.

Section 24. Amendment of Section 50

In Section 50 of the State Bank of India (Subsidiary Banks) Act, after sub-section (1), the following sub-section shall be inserted, namely:-

“(1-A) The officers, advisers and employees of the subsidiary bank concerned shall individually or jointly, or with other officers, advisers and employees in a committee exercise such powers and perform such duties as may, by general or special order, be entrusted or delegated to them by the Board of Directors or its Executive Committee.”.

Section 25. Amendment of Section 55

In Section 55 of the State Bank of India (Subsidiary Banks) Act, for the words “Banking Companies Act”, the words “Banking Regulation Act” shall be substituted.

Section 26. Amendment of Section 63

In Section 63 of the State Bank of India (Subsidiary Banks) Act,-

(a) for sub-section (1), the following sub-section shall be substituted, namely:-

“(1) The Board of Directors of a subsidiary bank may, after consultation with the State Bank and with the previous approval of the Reserve Bank, by notification in the Official Gazette, make regulations not inconsistent with this Act and the rules made thereunder, to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act or any other law for the time being in force;”;

(b) in sub-section (2),-

(i) after clause (f), the following clauses shall be inserted, namely:-

“(fa) the procedure for issuing the certificates of shares;

(fb) the procedure with respect to increase, whether by public issue or by preferential allotment or private placement, the issued capital by issue of equity or preference shares;

(fc) the manner of acceptance of share money in instalments, the manner of making calls and the manner of forfeiture of unpaid shares and their re-issue;”;

(ii) for clause (g), the following clauses shall be substituted, namely:-

“(g) the maintenance of share registers, and the particulars to be entered in such addition to those specified in sub-section (1) of Section 21, the safeguards to be observed in the maintenance of the register of shareholders on computer floppies or diskettes or any other electronic form, the inspection and closure of the registers and all other matters connected therewith;

(ga) the manner in which every individual registered shareholder nominate, an individual to whom all his rights in the shares shall vest in the event of his death under sub-section (1) of Section 18-A;

(gb) the manner in which, the joint holders may nominate an individual to whom all their rights in the shares shall vest in the event of the death of all the joint holders under sub-section (2) of Section 18-A;

(gc) the manner in which nomination is varied or cancelled under subsection (3) of Section 18-A;

(gd) the manner in which every individual registered as the holder of the shares to make nomination where nominee is a minor to appoint, any person to become entitled to the shares in the event of his death during the minority of the nominee under sub-section (4) of Section 18-A;”;

(c) in sub-section (4), for the words “made under this Act”, the words “made under this section” shall be substituted.