RESERVE BANK OF INDIA ACT, 1934

1934

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 and 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 01: 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 come into force on such date or dates as the Central Government may, by notification in the Gazette of India, appoint.

SECTION 02: DEFINITIONS

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

(a) to [***]

(ai)

(aii) "the Bank" means the Reserve Bank of India constituted by this Act ;

(aiii) "Bank for International Settlement" means by body corporate estab- lished 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) to [***]

(bv)

(bvi) "Deposit Insurance Corporation" means the Deposit Insurance Cor poration established undersection 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)-;

(bvia) [***]

(bviiia) "Exim Bank" means the Export-Import Bank of India establishe under theExport-Import Bank of India Act, 1981-;

( bix) "foreign currency" and "foreign exchange" have the meanings respec lively 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-;

(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)-;

(cccc) "National Housing Bank" means the National Housing Bank established under section 3 of the National Housing Bank Act,

SECTION 03: 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 04: CAPITAL OF THE BANK

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

SECTION 05: INCREASE AND REDUCTION OF SHARE CAPITAL

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SECTION 06: 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 07: 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 interest.

(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.

SECTION 08: 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 appoint- ed 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: 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) [***]

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

SECTION 09: LOCAL BOARDS, THEIR CONSTITUTION AND FUNCTIONS

(1) A Local Board shall be constituted for each of the four areas specified in the First Schedule 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 cooperative 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 cooperative 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 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 subsection (2) of section 10-.

(4) A Director or member of a 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 of 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 other- wise 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) [***]

(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.

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 votes, shall have a second or casting vote.

SECTION 14:-16 GENERAL MEETINGS

First constitution of the Central Board - First constitution of Local Boards

[***]

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 Government, 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 cooperative 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 schedule 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;

(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 schedule 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 ;

(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 -

SECTION 18: POWER OF DIRECT DISCOUNT

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) [* * *]

(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 cooperative 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.

SECTION 18A: 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, 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-and45-, 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 accounts.

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.

SECTION 21A: 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 21B: EFFECT OF AGREEMENTS MADE BETWEEN THE BANK AND CERTAIN STATES BEFORE THE 1^ST NOVEMBER, 1956

(1) Any agreement made under section 21-orsection 21A-between the Bank and the Government of a State specified in the Explanation below and in force immediately before the 1st 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 any, 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 1 st 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.

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 26A: 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 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.

SECTION 28A: 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 (Ord. 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, the 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; and

(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 as 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 authorized 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: PENALTY

[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.

(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 valuated at ƒ[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 '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.

SECTION 34: LIABILITIES OF THE ISSUE DEPARTMENT

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.

SECTION 35: INITIAL ASSETS AND LIABILITIES

{Rep. by Act 62 of 1948, w.e.f. 1-1-1949].

SECTION 36: METHOD OF DEALING WITH FLUCTUATIONS IN RUPEE COIN ASSETS

[Rep. by Act 55 of 1963, w.e.f. l-2-1964].

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 the 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 note 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

The Bank shall sell to or buy from any authorized 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.

SECTION 41: REPEALED

SECTION 41A: OBLIGATION TO PROVIDE REMITTANCE BETWEEN INDIA AND BURMA

[Repealed by Act 11 of 1947, w.e.f. l-4-1947].

SECTION 42: CASH RESERVES OF SCHEDULED BANKS TO BE KEPT WITH THE' BANK

(1) Every bank included in the Second Schedule shall maintain with the Bank an average daily balance the amount of which shall not be less than 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) : 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 than6[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 of each day of a fortnight;

(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 or from the Exim Bank or from the Reconstruction or from the National Housing Bank or from the National Bank 7[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 or from the National Co - operative Development Corporation established under the National Co -operative Development Corporation Act, 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;

(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, 1954 (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)-;

(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);

SECTION 43: PUBLICATION OF CONSOLIDATED STATEMENT BY THE BANK

The Bank shall cause to be published each 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.

SECTION 43A: 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-orsection 43-or in pursuance of the provisions 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-orsection 43-or in pursuance of the provisions of Chapter IIIA.

SECTION 44: POWER TO REQUIRE RETURNS FROM CO-OPERATIVE BANKS

[Repealed by the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965). w.e.f. 1-3-1966].

SECTION 45: 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.

SECTION 45A: 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, its 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 creditworthiness 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 45B: 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 45C: 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 the 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 45D: 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 45E: 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 : 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-.

SECTION 45F: 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 45G: PENALTIES

[Repealed by the Reserve Bank of India (Amendment) Act, ] 974].

SECTION 45H: CHAPTER IIIB NOT TO APPLY IN CERTAIN CASES

The provisions of this Chapter shall not apply to the State Bank or a banking company as defined in section 5 of the Banking Regulation Act, 1949(10 of 1949)-or a corresponding new Bank as defined in clause (da) of section 5 of the Act or a subsidiary bank as defined in 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.

SECTION 45I: DEFINITIONS

In this Chapter, unless the context otherwise requires,-

9[(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);]

10[(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;

(bb) "deposit" includes and shall be deemed always to have include 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.

(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:-

SECTION 45IA: 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 lakh rupees, as the Bank may, by notification in the Official Gazette, specify.

(2) Every non-banking financial company shall make an application for registra - tion 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, 1997and 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 reason. 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, economic growth and considering such other relevant factors which the Bank may, by notification in the Official Gazette, specify; and

SECTION 45IB: MAINTENANCE 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 percent 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 percent per annum above the bank rate on such short fall 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)Not with standing any thing 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.

SECTION 45IC: 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 45J: 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 45JA: 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.]

SECTION 45K: 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) [***]

(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.

SECTION 45L: 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 rates 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 and business of such financial institution is likely to have on trends in the money and capital markets.

SECTION 45M: 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 45MA: 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.

15{(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 account 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 account or any matter relating thereto.]

(2) Where, in the case of16[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.

17[(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 the 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.]

SECTION 45MB: 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.

SECTION 45MC: 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 the 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 45N: 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 (hereafter in this section referred to as the inspecting authority)-

(i) of any non-banking institution, including a financial institution, for the purpose 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 furnish 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 inspecting authority may examine on oath any 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 45NA: 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 45NB: 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 subsection (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) Not with standing 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 inspection of any statement or other material obtained by the Bank under any provisions of this Chapter.

SECTION 45NC: 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 conditions, limitations or restrictions as it may think fit to impose.]

SECTION 45O: PENALTIES

[Repealed by the Reserve Bank of India (Amendment) Act, 1974.]

SECTION 45P: COGNIZANCE OF OFFENCES

[Repealed by the Reserve Bank of India (Amendment) Act, 1974.]

SECTION 45Q: CHAPTER IIIB 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 45QA: 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.

SECTION 45QB: NOMINATION BY DEPOSITORS

(1) Where a deposit is held by a non-banking 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 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 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 (1O 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 of1949)-, 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 institution in accordance with the provisions of this section shall constitute a full discharge to the non-banking 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 institution, shall be receivable by the non-banking institution, nor shall the non-banking 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 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 45S: 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 -1; 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 1st 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, which- ever 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 repay 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 date of 1st 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.

[Contd. from p. 1808.51] TABLE (i) Individual Not more than twenty-five depositors, excluding depositors who are relatives of the individual, (ii) Firm Not more than twenty-five depositors per partner and not more than two hundred and fifty depositors in all, excluding, in either case, depositors who are relatives of any of the partners. (ill) Unincorporated as - Not more than twenty-five depositors per individual and not association of individual more than two hundred and fifty depositors in all, excluding, in duals either case, depositors who are relatives of any of the individuals constituting the association. (2) Where at the commencement of section 10 of the Banking Laws

(Amendment) Act, 1983, the deposits held by any such person are not in accordance with sub-section (1), he shall, before the expiry of a period of two years from the date of such commencement, repay such of the deposits as are necessary for bringing the number of depositors within the relative limits specified in that sub-section. Explanation.-For the purposes of this section,- (a) 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, Daugher's daughter's husband, 19, Brother (including stepbrother), 20. Brother's wife, 21. Sister (including step-sister), 22. Sister's husband; ( b) a person in whose favour a credit balance is outstanding for a period not exceeding six months in any account relating to mutual dealings in the ordinary course of trade or business shall not, on account of such balance alone, be deemed to be a depositor." 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. Fathers mother, 8. Mothers mother, 9. Mothers 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. Daughters daughter, 18. Daughters daughters husband, 19. Brother (including

step-brother), 20. Brother's wife, 21. Sister (including step-sister), 22. Sister's husband.]

SECTION 45T: 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 staling 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 (2 of 1974).

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 46A: CONTRIBUTION TO NATIONAL RURAL CREDIT (LONG TERM OPERATIONS) FUND AND NATIONAL RURAL CREDIT (STABILIZATION) 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-and43-respectively, of the National Bank for Agriculture and Rural Development Act, 1981

SECTION 46B:

[Repeated]

SECTION 46C: 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;

(c) the making to the Exim Bank or the Reconstruction Bank ƒ[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 22[or the Small Industries Bank], as the case may be ;

(d) the purchasing of bonds and debentures issued by the Exim Bank or the  reconstruction Bank22[or the Small Industries Bank], as the case may be.

SECTION 46D: 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.

SECTION 47: ALLOCATION OF SURPLUS PROFITS

After making provision 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 BANKS 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 its 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 re-appointment.

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 account 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 auditors, 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

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.

SECTION 54A: 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 54AA: 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 think 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 be 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:-56 REPORTS BY THE BANK, POWER TO REQUIRE DECLARATION AS TO OWNERSHIP OF REGISTERED SHARES

[Repealed by Act 62 of 1948, w.e.f. 1-1-1949].

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.

SECTION 58: POWER OF THE CENTRAL BOARD TO MAKE REGULATIONS

(1) The Central Board may, with the previous sanction of the Central Government 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:-

(a) to [***]

(e)

(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 the banks (including post office savings banks);

(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

SECTION 58A: 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 proceedings shall lie against the Central Government or the Bank for any 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 58B: 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.

23[(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) If any person23[other than an auditor]-

(a) receives any deposit in contravention of any direction given or order made under Chapter IIIB; or

23[(aa) fails to comply with any direction given or order made by the Bank under any of the provisions of Chapter IIIB; 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.

(5A) If any person contravenes any provision of section 45S, he shall be punish- able 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 the 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.

SECTION 58C: 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 incharge 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 or 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.

SECTION 58D: 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 58E: 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: 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 anything 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.

SECTION 58F: 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 58G: 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 not exceeding 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) No 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 any penalty has been imposed by the Bank under this section.

(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.]

SECTION 59:-61 AMENDMENT OF ACT 3 OF 1906

[Repeated by Act 20 of 1937].

RESERVE BANK OF INDIA (BOARD FOR FINANCIAL SUPERVISION) REGULATIONS, 1994

DBOD NO. BP-213/21.04.050-94. dated 21st July, 19941. - In pursuance of sub-section (1) of Sec. 58 of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Board of the Reserve Bank of India hereby publishes the annexed Reserve Bank of India (Board for Financial Supervision) Regulations, 1994, which have received the sanction of the Central Government under sub-section (1) of Sec. 58 of the Reserve Bank of India Act, 1934 (2 of 1934). In exercise of the powers conferred by Sec. 58 of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Board of the Reserve Bank of India, with the previous sanction of the Central Government, is pleased to make the following regulations, namely:

REGULATION 01: SHORT TITLE AND COMMENCEMENT

(1) These regulations may be called the Reserve Bank of India (Board for Financial Supervision) Regulations, 1994.

(2) These regulations shall come into force on the date of their publication in the Official Gazette.

REGULATION 02: REGULATIONS NOT IN DEROGATION OF THE GENERAL REGULATIONS, 1949

The provisions of these regulations shall be in addition to and not in derogation of the Reserve Bank of India Regulations, 1949, save as hereinafter expressly provided in these regulations. In case of inconsistency, the provisions of these regulations shall have overriding effect.

REGULATION 03: DEFINITIONS

In these regulations, unless there is anything repugnant in the subject or context :—

(a) "Act" means the Reserve Bank of India Act, 1934-(2 of 1934);

(b) "the Bank" means the Reserve Bank of India constituted by the Act;

(c) "the banking company" means a banking company as defined in Section 5 (c) of the Banking Regulation Act, 1949(10 of 1949), and shall include a corresponding new bank constituted under Section 3 of the Banking Companies (Acquisition and Transfer of

Undertakings) Act, 1970(5 of 1970), or under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980(40 of 1980) the State Bank of India constituted under the State Bank of India Act, 1955(33 of 1955), and a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959(38 of 1959) ;

(d) "Board" means the Committee known as the Board for Financial Supervision constituted under regulation 4-;

(e) "Central Board" means the Central Board of Directors of the Bank constituted under Section 8-of the Act;

(f) "Director" means director of the Central Board nominated under Sec. 8 (1) (b) or Sec. 8 (1) (c) of the Act;

(g) "Executive Committee" means a sub-committee known as the executive committee constituted under sub-regulation (1) of regulation 12-;

(h) "General Regulations" means the Reserve Bank of India General Regulations, 1949;

(i) "member" means a member of the Board;

(j) "notified" means notified in the Official Gazette;

(k) "vice-chairman" means the Deputy Governor designated as vice-chairman of the Board;

(l) Other expressions used but not defined in these regulations and defined in the Act shall have the meanings respectively assigned to them in the Act.

REGULATION 04: COMPOSITION OF THE BOARD

(1) There shall be a Committee to be known as the "Board for Financial Supervision" (hereinafter referred to as the Board).

(2) The Board shall consist of the following members, namely:—

(a) Governor, Reserve Bank of India, who shall be the chairman of the Board;

(b) Deputy Governor, Reserve Bank of India of whom one Deputy Governor shall be nominated by the Governor as full time vice-chairman;

(c) Four directors from the Central Board of Reserve Bank of India to be nominated by the Governor as members.

REGULATION 05: FUNCTIONS AND POWERS OF THE BOARD

(1) The Board shall perform the functions and exercise the powers of supervision and inspection under the Act and under the Banking Regulation Act, 1949(10 of 1949), in relation to different sectors of the financial system such as banking companies financial institutions and non-banking institutions.

(2) It shall also perform such other functions and exercise such other powers, as may be notified by the Central Board, from time to time.

REGULATION 06: ASSISTANCE TO THE BOARD

The Board shall be assisted by the Department of Supervision constituted from the staff of the Bank which shall report directly to the Board and wherever necessary personnel from outside either on deputation or through direct recruitment or on contract or tenure basis, may be taken by the Board.

REGULATION 07: NOMINATIONS

All nominations to the Board shall be made by the Governor In consultation with the Central Board for such terms as may be specified

REGULATION 08: VACATION OF OFFICES

A member shall cease to hold office if he absents himself without the leave of the chairman from three consecutive meetings of the Board convened under Regulation 11-

REGULATION 09: POWERS ON BEHALF OF THE BOARD BY WHOM TO BE EXERCISED

Notwithstanding anything contained in sub-regulation (1) of regulation 17of the General Regulations, but subject to the provisions of the Act, any regulation made by the Central Board in regard to expenditure to be incurred by or on behalf of the Bank and any direction which may be given by the Central Board generally or in particular with regard to the conduct of the business of the Bank;

(1) The Board is authorised to exercise the powers of supervision and Inspection under the Act and under the Banking Regulation Act, 1949(10 of 1949), in relation to the banking companies, financial institutions and the non-banking institutions and such other powers and functions as may be notified by the Central Board from time to time;

(2) The chairman, the vice-chairman and the members shall jointly and severally exercise such powers as may be specified from time to time by the Central Board;

(3) Any other officer of the Department of Supervision of the Bank no below the rank of an officer in Grade 'D' may, if authorized and to the extend that he is so authorised by the Board with prior approval of the Central Board, exercise all the powers in relation to matters pertaining to the Department of Supervision and in relation to such matters do all acts and things which may be exercised or done by the Bank provided, that power exercised or action taken under this sub-regulation shall be exercised of taken subject to such directions, if any, as may be given by any higher officer or authority in this behalf.

REGULATION 10: APPLICABILITY OF THE GENERAL REGULATIONS

The following provisions ions of the General Regulations shall apply mutatis mutandis as specified below:

(a)regulation 3-,regulation 4-,regulation 7-,regulation 13-andregulation 24of the General Regulation' shall apply to the members of the Board.

(b)regulation 3andregulation 24shall apply to the members of the Advisory Council and the Sub-Committees.

(c)regulation 16,regulation 18andregulation 19shall apply to the officers of the Department of Supervision.

REGULATION 11: MEETINGS OF THE BOARD AND QUORUM

(1) The Board shall ordinarily meet at least once a month at the office of the Bank or any other place in the area in which the Governor or in his absence the vice-chairman has his headquarters for the time being, to attend to the current business of the Board Sufficient notice shall be given to the members to enable them to attend.

(2) Three members of whom one shall be the chairman or the vice-chairman shall form a quorum for the transaction of business of the Board.

(3) Save as otherwise provided in these regulations, the provisions of the Act and the General Regulations shall apply to meetings of the Board, as if they were meetings of the Central Board.

REGULATION 12: CONSTITUTION OF SUB-COMMITTEES

(1) The Board shall have the power to constitute Sub-Committees as may be deemed necessary to assist it in its work from time to time. From such committees, one Sub-Committee shall be known as the Executive Committee.

(2) The Executive Committee shall comprise of the vice-chairman who shall be the ex-officio chairman and not less than two members of the Board.

REGULATION 13: FUNCTIONS AND MEETINGS OF EXECUTIVE COMMITTEE

REGULATION 14: FUNCTIONS AND MEETINGS OF ADVISORY COUNCIL

(1) Subject to the provisions of the Act or regulations made thereunder, the Governor may constitute an Advisory Council from time to time which shall consist of not less than five persons having special knowledge of accountancy, law, economics, banking, finance and management.

(2) The Advisory Council shall tender advice to the Board on such matters relating to supervision and Inspection of financial system, as may be deemed fit by the Board.

(3) The Governor shall whenever present preside over the meetings of the Advisory Council and the Vice-Chairman and the members of the Board shall be permanent invitees to the meetings. In the absence of the Governor, the members of the Advisory

Council who are present may elect one amongst themselves to preside over the meeting of the Advisory Council.

REGULATION 15: REPORT TO THE CENTRAL BOARD

The Board shall submit a report to the Central Board half-yearly.

GOLD DEPOSIT SCHEME, 1999

14th September, 1999

MINISTRY OF FINANCE:G.S.R. 634(E) New Delhi, the 14th September, 1999.- The Central Government, with a view to bringing privately held stock of gold in circulation, reduce the country's reliance on import of gold and providing its owners with some income apart from freeing them from the problems of storage, movement and security of gold in their possession, hereby notifies the Gold Deposit Scheme as announced in the Budget, 1999-2000.

SCHEME 01: SHORT TITLE AND COMMENCEMENT

(i) This Scheme shall be called the Gold Deposit Scheme, 1999.

(ii) It shall come into force immediately.

SCHEME 02: DEFINITION

In this Scheme, unless the context otherwise requires,-

(i) "Designated Bank" means-a bank authorised by Reserve Bank to operate the Scheme:

(ii) "Gold Certificate" means- the final receipt issued to a subscriber of the Scheme after the gold tendered by him has been assayed and accepted as deposit by a designated bank;

(iii) "Statement of Accounts" means a statement reflecting the Credit of Gold tendered by the depositor and its Debit, where such account is being maintained in a dematerialised form;

(iv) "Subscriber" means- a person resident in India being-

(a) an individual in his capacity as such individual or acting as guardian on behalf of a minor child,

(b) more than one individual jointly,

(c) a Hindu Undivided family.

(d) a Trust,

(e) a Company who tender gold to a designated bank under this Scheme.

(v) "Pass Book" means- a hook issued by a hank reflecting the deposit of Gold tendered under the Scheme and its withdrawal;

(vi) all other words and expression used in this scheme and not defined shall have the meaning assigned to it under the General Clauses Act, 1897-.

SCHEME 03: WHO CAN OPERATE THE SCHEME

- All designated banks may operate the Scheme after getting the operational details approved by the Reserve Bank.

SCHEME 04: FORM OF SUBSCRIPTION

The Gold shall be tendered by a Subscriber in the form of Bars, Coins and Gold Jewellery.

SCHEME 05: PROCEDURE FOR MAKING APPLICATION FOR SUBSCRIPTION OF GOLD

(i) Every subscriber desirous of making subscription of Gold under the Scheme shall apply to a designated bank in such form as may be prescribed by the said bank.

(ii) After the Gold has been assayed, the designated bank shall accept the Gold and at the option of the subscriber shall issue-(a) a Gold Certificate or (b) a Statement of Account or (c) a Passbook to the Subscriber.

SCHEME 06: PREMATURE PAYMENT

Premature payment, either in the form of Gold or in Cash equivalent to the price of Gold on the date of encashment shall be allowed after initial lock in period.

SCHEME 07: REPAYMENT AND PAYMENT OF INTEREST

(i) The Gold Certificate shall be repaid in Gold. Such repayment may also be made in rupee equivalent to the price of Gold as on the date of maturity at the option of the subscriber. The option in this regard will have to be exercised in the manner prescribed by the designated bank.

(ii) The designated bank shall pay interest at such rate and at such intervals as it may decide subject however, to the interest rate directive on Gold Deposit, issued by Reserve Bank.

SCHEME 08: NOMINATION FACILITY

The nomination facility shall be available on the lines of usual rupee deposit scheme prevalent in banks.

SCHEME 09: TRANSFER OF GOLD CERTIFICATE

The Gold Certificate shall be transferable by endorsement and delivery.

SCHEME 10: PERIOD OF SCHEME

The Scheme shall remain in operation until further notice.