THE BANKING REGULATION ACT, 1949 

__________ 

ARRANGEMENT OF SECTIONS 

____________ 

PART I 

PRELIMINARY 

SECTIONS 

1. Short title, extent and commencement. 

2. Application of other laws not barred. 

3. Act not to apply to certain co-operative societies. 

4. Power to suspend operation of Act. 

5. Interpretation. 

5A. Act to override memorandum, articles, etc. 

PART II 

BUSINESS OF BANKING COMPANIES 

6. Form of business in which banking companies may engage. 

7. Use of words “bank”, “banker”, “banking” or “banking company”. 

8. Prohibition of trading. 

9. Disposal of non-banking assets. 

10.  Prohibition  of  employment  of  managing  agents  and  restrictions  on  certain  forms  of 

employment. 

10A. Board of directors to include persons with professional or other experience. 

10B. Banking company to be managed by whole time chairman. 

10BB.  Power  of  Reserve  Bank  to  appoint  chairman  of  the  Board  of  directors  appointed  on  a             

whole-time basis or a managing director of a banking company. 

10C. Chairman and certain directors not to be required to hold qualification shares. 

10D. Provisions of sections 10A and 10B to override all other laws, contracts, etc. 

11. Requirement as to minimum paid-up capital and reserves. 

12.  Regulation  of  paid-up  capital,  subscribed  capital  and  authorised  capital  and  voting  rights  of 

shareholders. 

12A. Election of new directors. 

12B. Regulation of acquisition of shares or voting rights. 

13. Restriction on commission, brokerage, discount, etc., on sale of shares. 

14. Prohibition of charge on unpaid capital. 

14A. Prohibition of floating charge on assets. 

15. Restrictions as to payment of dividend. 

16. Prohibition of common directors. 

17. Reserve Fund. 

1 

 
 
 
SECTIONS 

18. Cash reserve. 

19. Restriction on nature of subsidiary companies. 

20. Restrictions on loans and advances. 

20A. Restrictions on power to remit debts. 

21. Power of Reserve Bank to control advances by banking companies. 

21A. Rates of interest charged by banking companies not to be subject to scrutiny by courts. 

22. Licensing of banking companies. 

23. Restrictions on opening of new, and transfer of existing, places of business. 

24. Maintenance of a percentage of assets. 

25. Assets in India. 

26. Return of unclaimed deposits. 

26A. Establishment of Depositor Education and Awareness Fund. 

27. Monthly returns and power to call for other returns and information. 

28. Power to publish information. 

29. Accounts and balance-sheet. 

29A. Power in respect of associate enterprises. 

30. Audit. 

31. Submission of returns. 

32. Copies of balance-sheets and accounts to be sent to registrar. 

33. Display of audited balance-sheet by companies incorporated outside India. 

34. Accounting provision of this Act not retrospective. 

34A. Production of documents of confidential nature. 

35. Inspection. 

35A. Power of the Reserve Bank to give directions. 

35B. Amendments of provisions relating to appointments of managing directors, etc., to be subject 

to previous approval of the Reserve Bank. 

36.  Further powers and functions of Reserve Bank. 

36A. Certain provisions of the Act not to apply to certain banking companies. 

PART IIA 

CONTROL OVER MANAGEMENT 

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

36AB. Power of Reserve Bank to appoint additional directors. 

36AC. Part IIA to override other laws. 

2 

 
 
 
 
SUPERSESSION OF BOARD OF DIRECTORS OF BANKING COMPANY 

PART IIAB 

SECTIONS 

36ACA. Supersession of Board of Directors in certain cases. 

PART IIB 

PROHIBITION OF CERTAIN ACTIVITIES IN RELATION TO BANKING COMPANIES 

36AD. Punishments for certain activities in relation to banking companies. 

PART IIC 

ACQUISITION OF THE UNDERTAKINGS OF BANKING COMPANIES IN CERTAIN CASES 

36AE. Power of Central Government to acquire undertakings of banking companies in certain 

cases. 

36AF. Power of the Central Government to make scheme. 

36AG. Compensation to be given to shareholders of the acquired bank. 

36AH. Constitution of the Tribunal. 

36AI. Tribunal to have powers of a civil court. 

36AJ. Procedure of the Tribunal. 

SUSPENSION OF BUSINESS AND WINDING UP OF BANKING COMPANIES 

PART III 

36B. High Court defined. 

37. Suspension of business. 

38. Winding up by High Court. 

38A. Court liquidator. 

39. Reserve Bank to be official liquidator. 

39A. Application of Companies Act to liquidators. 

40. Stay of proceedings. 

41. Preliminary report by official liquidator. 

41A. Notice to preferential claimants and secured and unsecured creditors. 

42. Power to dispense with meetings of creditors, etc. 

43. Booked depositors' credits to be deemed proved. 

43A. Preferential payments to depositors. 

44. Powers of High Court in voluntary winding up. 

44A. Procedure for amalgamation of banking companies. 

44B. Restriction on compromise or arrangement between banking company and creditors. 

45.  Power  of  Reserve  Bank  to  apply  to  Central  Government  for  suspension  of  business  by  a 

banking company and to prepare scheme of reconstitution or amalgamation. 

3 

 
 
 
SPECIAL PROVISIONS FOR SPEEDY DISPOSAL OF WINDING UP PROCEEDINGS 

PART IIIA 

SECTIONS 

45A. Part IIIA to override other laws. 

45B. Power of High Court to decide all claims in respect of banking companies. 

45C. Transfer of pending proceedings. 

45D. Settlement of list of debtors. 

45E. Special provisions to make calls on contributories. 

45F. Documents of banking company to be evidence. 

45G. Public examination of directors and auditors. 

45H. Special provisions for assessing damages against delinquent directors, etc. 

45-I. Duty of directors and officers of banking company to assist in the realisation of property. 

45J. Special provisions for punishing offences in relation to banking companies being wound up. 

45K. [Omitted.]. 

45L.  Public  examination  of  directors  and  auditors,  etc.,  in  respect  of  a  banking  company  under 

schemes of arrangement. 

45M.  Special  provisions  for  banking  companies  working  under  schemes  of  arrangement  at  the 

commencement of the Amendment Act. 

45N. Appeals. 

45-O. Special period of limitation. 

45P. Reserve Bank to tender advice in winding up proceedings. 

45Q. Power to Inspect. 

45R. Power to call for returns and information. 

45S.  Chief  Presidency  Magistrate  and  District  Magistrate  to  assist  official  liquidator  in  taking 

charge of property of banking company being wound up. 

45T. Enforcement of orders and decisions of High Court. 

45U. Power of High Court to make rules. 

45V. References to directors, etc., shall be construed as including references to past directors, etc. 

45W. Part II not to apply to banking companies being wound up. 

45X. Validation of certain proceedings. 

PART IIIB 

PROVISIONS RELATING TO CERTAIN OPERATIONS OF BANKING COMPANIES 

45Y. Power of Central Government to make rules for the preservation of records. 

45Z. Return of paid instruments to customers. 

45ZA. Nomination for payment of depositors' money. 

45ZB. Notice of claims of other persons regarding deposits not receivable. 

45ZC. Nomination for return of articles kept in safe custody with banking company. 

4 

 
SECTIONS 

45ZD. Notice of claims of other persons regarding articles not receivable. 

45ZE. Release of contents of safety lockers. 

45ZF. Notice of claims of other persons regarding safety lockers not receivable. 

PART IV 

MISCELLANEOUS 

46. Penalties. 

46A.  Chairman,  director,  etc.,  to  be  public servants  for  the  purposes  of  Chapter  IX  of  the  Indian 

Penal Code. 

47. Cognizance of offences. 

47A. Power of Reserve Bank to impose penalty. 

48. Application of fines. 

49. Special provisions for private banking companies. 

49A. Restriction on acceptance of deposits withdrawable by cheque. 

49B. Change of name by a banking company. 

49C. Alteration of memorandum of a banking company.  

50. Certain claims for compensation barred. 

51. Application of certain provisions to the State Bank of India and other notified banks. 

51A. Powers of Reserve Bank not to apply to International Financial Services Centre. 

52. Power of Central Government to make rules. 

53. Power to exempt in certain cases. 

54. Protection of action taken under Act. 

55. Amendment of Act 2 of 1934. 

55A. Power to remove difficulties. 

PART V 

APPLICATION OF THE ACT TO CO-OPERATIVE BANKS 

56. Act to apply to co-operative societies subject to modifications. 

THE FIRST SCHEDULE 

THE SECOND SCHEDULE. 

THE THIRD SCHEDULE. 

THE FOURTH SCHEDULE. 

THE FIFTH SCHEDULE. 

5 

 
 
 
 
 
 
THE BANKING REGULATION ACT, 1949 
ACT NO. 10 OF 19491 

[10th March, 1949.] 

An Act to consolidate and amend the law relating to banking 2***. 

WHEREAS it is expedient to consolidate and amend the law relating to banking 2***; 
It is hereby enacted as follows:— 

PART I 
PRELIMINARY 
1. Short title, extent and commencement.—(1) This Act may be called the Banking 3[Regulation] 

Act, 1949. 

4[(2) It extends to the whole of India 5***.] 
(3)  It  shall  come  into  force  on  such  date6  as  the  Central  Government  may,  by  notification  in  the 

Official Gazette, appoint in this behalf. 

2. Application of other laws not barred.—The provisions of this Act shall be in addition to, and 
not, save as hereinafter expressly provided, in derogation of the  7[Companies Act, 1956 (1 of 1956)], 
any other law for the time being in force. 

8[3.  Act  not  to  apply to certain  co-operative  societies.—Notwithstanding  anything  contained  in 
the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981), this Act shall not 
apply to— 

(a) a primary agricultural credit society; or 
(b)  a  co-operative  society  whose  primary  object  and  principal  business  is  providing  of  long-

term finance for agricultural development, 

if such society does not use as part of its name, or in connection with its business, the words “bank”, 
“banker” or “banking” and does not act as drawee of cheques.] 

 4. Power to suspend operation of Act.—(1) The Central Government, if on a representation made 
by the Reserve Bank in this behalf is satisfied that it is expedient so to do, may by notification in the 
Official  Gazette,  suspend  for  such  period,  not  exceeding  sixty  days,  as  may  be  specified  in  the 
notification, the operation of all or any of the provisions of this Act,  either generally or in relation to 
any specified banking company. 

(2) In a case of special emergency, the Governor of the Reserve Bank, or in his absence a Deputy 
Governor of the Reserve Bank nominated by him in this behalf may, by order in writing, exercise the 
powers of the Central Government under sub-section (1) so however that the period of suspension shall 
not exceed thirty days, and where the Governor or the Deputy Governor, as the case may be, does so, he 
shall report the matter to the Central Government forthwith, and the order shall, as soon as may be, be 
published in the Gazette of India. 

1. For statement of Objects and Reasons, see Gazette of India, 1948, Part V,  pp. 311 and 312; for Report of Select Committee, 
see ibid., 1949. Part V. pp. 45 to 48. Extended to Dadra and Nagar Haveli by Regulation 6 of 1963, section 2 and Schedule I 
(w.e.f. 1-7-1965) and to Goa, Daman and Diu by Regulation 11 of 1963, section 3 and Schedule (w.e.f. 1-2-1965). 
 Nothing  in  this  Act  (except  section 34A)  shall  apply  to  the  Industrial  Development  Bank  of  India,  vide  Act  18  of  1964,  
section 34. 

2. The word “companies” omitted by Act 23 of 1965, s. 10 (w.e.f. 1-3-1966).  
3. Subs. by s. 11, ibid., for “Companies” (w.e.f. 1-3-1966).  
4.  Subs. by Act 20 of 1950, s. 2, for sub-section (2) (w.e.f. 18-3-1950).   
5. The words “except the State of Jammu and Kashmir” omitted by Act 62 of 1956, s. 2 and the Schedule (w.e.f. 1-11-1956).  
6. 16th March, 1949, see Notification No. F. 4 (46)-FI/49, dated the 10th March, 1949, Gazette of India, 1949, Part I.  
7. Subs. by Act 95 of 1956, s. 14 and the Schedule, for “Indian Companies Act, 1913 (7 of 1913)” (w.e.f. 14-1-1957). 
8. Subs. by Act 39 of 2020, s. 2, for section 3 (w.e.f. 26-6-2020). 

6 

 
 
                                                      
(3) The Central Government may, by notification in the Official Gazette, extend from time to time 
the  period  of  any  suspension  ordered  under  sub-section  (1)  or  sub-section  (2)  for  such  period,  not 
exceeding sixty days at any one time, as it thinks fit so however that the total period does not exceed 
one year. 

(4)  A  copy  of  any  notification  issued  under  sub-section  (3)  shall  be  laid  on  the  table 

of 1[Parliament] as soon as may be after it is issued.  

5. Interpretation.—2[In this Act], unless there is anything repugnant in the subject or context,— 

3[(a) “approved securities” means the securities issued by the Central Government or any State 

Government or such other securities as may be specified by the Reserve Bank from time to time.]  

 (b)  “banking”  means  the  accepting,  for  the  purpose  of  lending  or  investment,  of  deposits  of 
money  from  the  public,  repayable  on  demand  or  otherwise,  and  withdrawable  by  cheque,  draft, 
order or otherwise; 

(c)  “banking  company”  means  any  company  which  transacts  the  business  of  banking                   

4[in India]; 

Explanation.—Any company which is engaged in the manufacture of goods or carries on any 
trade and which accepts deposits of money from the public merely for the purpose of financing its 
business  as  such  manufacturer  or  trader  shall  not  be  deemed  to  transact  the  business  of  banking 
within the meaning of this clause; 

5[(ca) “banking policy” means any policy which is specified from time to time by the Reserve 
Bank in the interest of the banking system or in the interest of monetary stability or sound economic 
growth,  having  due  regard  to  the  interests  of  the  depositors,  the  volume  of  deposits  and  other 
resources of the bank and the  need for equitable allocation and the efficient use of these deposits 
and resources;] 

6[(cc)  “branch”  or  “branch  office”,  in  relation  to  a  banking  company,  means  any  branch  or 
branch office, whether called a pay office or sub-pay office or by any other name, at which deposits 
are received, cheques cashed or moneys lent, and for the purposes of section 35 includes any place 
of  business  where  any  other  form  of  business  referred  to  in  sub-section  (1)  of  section  6  is 
transacted;] 

7[(d)  “company”  means  any  company  as  defined  in  section  3  of  the  Companies  Act,  1956            

(1 of 1956); and includes foreign company within the meaning of section 591 of that Act;] 

8[(da) “corresponding new bank” means 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);] 

9* 

* 

* 

* 

*

1. Subs. by the A.O. 1950, for “the Dominion Legislature”. 
2. Subs. by Act 55 of 1963, s. 6, for “(1) In this Act” (w.e.f. 1-2-1964). 
3. Subs. by Act 4 of 2013, s. 2 (w.e.f. 18-1-2013). 
4. Subs. by Act 20 of 1950, s. 3, for “in any State”. 
5. Ins. by Act 58 of 1968, s. 2 (w.e.f. 1-2-1969). 
6. Ins. by Act 33 of 1959, s. 2 (w.e.f. 1-10-1959). 
7. Subs. by s. 2, ibid., for clause (d) (w.e.f. 1-10-1959). 
8. Ins. by Act 1 of 1984, s. 13 (w.e.f. 15-2-1984). 
9. Clause (e) omitted by Act 52 of 1953, s. 2 (w.e.f. 30-12-1953). 

7 

 
 
 
 
 
 
 
 
 
 
 
                                                      
(f) “demand liabilities” means liabilities which must be met on demand, and “time liabilities” 

means liabilities which are not demand liabilities; 

1[(ff)  “Deposit  Insurance  Corporation”  means  the  Deposit  Insurance  Corporation  established 

under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961);]  
* 

2[ 3* 
(ffb) “Exim Bank”  means the Export-Import Bank of  India established under section 3 of the 

* 

* 

* 

Export-Import Bank of India Act, 1981 (28 of 1981);] 

4[(ffc)  “Reconstruction  Bank”  means  the  Industrial  Reconstruction  Bank  of  India  established 

under Section 3 of the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984);] 

5[(ffd) “National Housing Bank” means the National Housing Bank established under section 3 

of the National Housing Bank Act, 1987 (53 of 1987);] 

(g)  “gold”  includes  gold  in  the  form  of  coin,  whether  legal  tender  or  not,  or  in  the  form  of 

bullion or ingot, whether refined or not; 

6[(gg) “managing agent” includes,—  
(i) secretaries and treasurers, 
(ii)  where  the  managing  agent  is  a  company,  any  director  of  such  company,  and  any 

member thereof who holds substantial interest in such company,  

(iii) where the managing agent is a firm, any partner of such firm;]  

7[(h) “managing director”, in relation to a banking company, means a director who, by virtue of 
an  agreement  with  the  banking  company  or  of  a  resolution  passed  by  the  banking  company  in 
general  meeting  or  by  its  Board  of  directors  or,  by  virtue  of  its  memorandum  or  articles  of 
association, is entrusted with the management of the whole, or substantially the whole of the affairs 
of the company, and includes a director occupying the position of a managing director, by whatever 
name called:] 

8[Provided that the managing director shall exercise his powers subject to the superintendence, 

control and direction of the Board of directors.] 

9[(ha)  “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);] 

10[(hb)  “National  Bank  for  financing  Infrastructure  and  Development”  means  the  Institution 
established under section 3 of the National Bank for Financing Infrastructure and Development Act, 
2021; 

(hc)  “other  development  financial  institution”  means  a  development  financial  institution 
licensed under section 29 of the National Bank for Financing Infrastructure and Development Act, 
2021;] 
11* 
 (j) “prescribed” means prescribed by rules made under this Act; 
9[(ja)  “regional  rural  bank”  means  a  regional  rural  bank  established  under  section  3  of  the 

* 

* 

* 

* 

Regional Rural Banks Act, 1976 (21 of 1976);] 

1. Ins. by Act 47 of 1961, s. 51 and the Second Schedule, Part II (w.e.f. 1-1-1962). 
2. Ins. by Act 1 of 1984, s. 13 (w.e.f. 15-2-1984). 
3. Omitted by Act 53 of 2003, s. 12 and Schedule, Part II (w.e.f. 2-7-2004). 
4. Ins. by Act 62 of 1984, s. 71 and the Third Schedule (w.e.f. 20-3-1985). 
5. Ins. by Act 53 of 1987, s. 56 and the Second Schedule (w.e.f. 9-7-1988).  
6. Ins. by Act 58 of 1968, s. 2 (w.e.f. 1-2-1969). 
7. Subs. by Act 33 of 1959, s. 2, for clause (h) (w.e.f. 1-10-1959). 
8. Added by Act 58 of 1968, s. 2 (w.e.f. 1-2-1969). 
9. Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 1-5-1982). 
10. Ins. by Act 17 of 2021, s. 48 and the third Schedule (w.e.f. 19-4-2021). 
11. Omitted by Act 33 of 1959, s. 2 (w.e.f. 1-10-1959). 

8 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
1* 

* 

* 

* 

* 

2[(l)  “Reserve  Bank”  means  the  Reserve  Bank  of  India  constituted  under  section  3  of  the 

Reserve Bank of India Act, 1934 (2 of 1934):] 

1* 

* 

* 

* 

* 

(n)  “secured  loan  or  advance”  means  a  loan  or  advance  made  on  the  security  of  assets  the 
market  value  of  which  is  not  at  any  time  less  than  the  amount  of  such  loan  or  advance;  and 
“unsecured loan or advance” means a loan or advance not so secured; 

3[(ni)  “Small  Industries  Bank”  means  the  Small  Industries  Development  Bank  of  India 

established  under  section  3  of  the  Small  Industries  Development  Bank  of  India  Act,  1989               
(39 of 1989);] 

4[(na) “small-scale industrial concern” mean an industrial concern in which the investment in 
plant and machinery is not in excess of seven and a half lakhs of rupees or such higher amount, not 
exceeding twenty lakhs of rupees, as the Central Government may, by notification in the Official 
Gazette,  specify  in  this  behalf,  having  regard  to  the  trends  in  industrial  development  and  other 
relevant factors; 

5[(nb) “Sponsor Bank” has the meaning assigned to it in the Regional Rural Banks Act, 1976 

(21 of 1976) : 

(nc)  “State  Bank  of  India”  means  the  State  Bank  of  India  constituted  under  section  3  of  the 

State Bank of India Act, 1955 (23 of 1955);] 

6[(nd)] “subsidiary bank” has the meaning assigned to it in the State Bank of India (Subsidiary 

Banks) Act, 1959 (38 of 1959); 

7[(ne)] “substantial interest”,— 

(i) in relation to a company, means the holding of a beneficial interest by an individual or 
his spouse  or  minor child, whether  singly  or taken  together in the  shares  thereof,  the  amount 
paid-up  on  which  exceeds  five  lakhs  of  rupees  or  ten  per  cent.  of  the  paid-up  capital  of  the 
company, whichever is less; 

 (ii) in relation to a firm, means the beneficial interest held therein by an individual or his 

spouse  or  minor  child,  whether  singly  or  taken  together,  which  represents  more  than  ten              
per cent. of the total capital subscribed by all the partners of the said firm;]  
8[(o) all other words and expressions used herein but not defined and defined in the Companies 

Act, 1956 (1 of 1956), shall have the meanings respectively assigned to them in that Act.] 

9* 

* 

* 

* 

* 

10[5A. Act to override memorandum, articles, etc.—Save as otherwise expressly provided in this 

Act,— 

(a)  the  provisions  of  this  Act  shall  have  effect  notwithstanding  anything  to  the  contrary 
contained in the memorandum or articles of a banking company, or in any agreement executed by 
it,  or  in  any  resolution  passed  by  the  banking  company  in  general  meeting  or  by  its  Board  of 

1. Omitted by Act 33 of 1959, s. 2 (w.e.f. 1-10-1959). 
2. Subs. by Act 1 of 1984, s. 13, for clause (l) (w.e.f. 15-2-1984). 
3. Ins. by Act 39 of 1989, s. 53 and the Second Schedule (w.e.f. 25-10-1989). 
4. Ins. by Act 58 of 1968, s. 2 (w.e.f. 1-2-1969). 
5. Ins. by Act 1 of 1984, s. 13, (w.e.f. 15-2-1984). 
6. Clause (nb) re-lettered as clause (nd) by Act 1 of 1984, s. 13 (w.e.f. 15-2-1984). 
7. Clause (nc) re-lettered as clause (ne) by s. 13, ibid. (w.e.f. 15-2-1984). 
8. Ins. by Act 33 of 1959, s. 2 (w.e.f. 1-10-1959). 
9. Omitted by the A.O. 1950. 
10.  Ins. by Act 33 of 1959, s. 3 (w.e.f. 1-10-1959). 

9 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
Directors, whether the same be registered, executed or passed, as the case may be, before or after 
the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959); and 

(b)  any  provision  contained  in  the  memorandum,  articles,  agreement  or  resolution  aforesaid 
shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the 
case may be.] 

PART II 

BUSINESS OF BANKING COMPANIES 

6. Forms of business in which banking companies may engage.—(1) In addition to the business 
of  banking,  a  banking  company  may  engage  in  any  one  or  more  of  the  following  forms  of  business, 
namely:— 

(a)  the  borrowing,  raising,  or  taking  up  of  money;  the  lending  or  advancing  of  money  either 
upon or without security; the drawing,  making, accepting, discounting, buying,  selling, collecting 
and  dealing  in  bills  of  exchange,  hoondees,  promissory  notes,  coupons,  drafts,  bills  of  lading, 
railway  receipts,  warrants,  debentures,  certificates,  scripts  and  other  instruments,  and  securities 
whether  transferable  or  negotiable  or  not;  the  granting  and  issuing  of  letters  of  credit,  traveller's 
cheques  and circular notes;  the buying,  selling  and  dealing  in  bullion  and specie;  the  buying  and 
selling  of  foreign  exchange  including  foreign  bank  notes;  the  acquiring,  holding,  issuing  on 
commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, 
obligations, securities and investments of all kinds; the purchasing and selling of bonds, scripts or 
other forms of securities on behalf of constituents or others, the negotiating of loans and advances; 
the receiving of all kinds of bonds, scripts or valuables on deposit or for safe custody or otherwise; 
the providing of safe deposit vaults; the collecting and transmitting of money and securities; 

(b) acting as agents for any Government or local authority or any other person or persons; the 
carrying on of agency business of any description including the clearing and forwarding of goods, 
giving  of  receipts  and  discharges  and  otherwise  acting  as  an  attorney  on  behalf  of  customers  but 
excluding the business of a 1[managing agent or secretary and treasurer] of a company;  

(c) contracting for public and private loans and negotiating and issuing the same; 

(d)  the  effecting,  insuring,  guranteeing,  underwriting,  participating  in  managing  and  carrying 
out of any issue, public or private, of State, municipal or other loans or of shares, stock, debentures 
or  debenture  stock  of  any  company, corporation  or  association  and  the  lending  of  money  for  the 
purpose of any such issue; 

(e) carrying on and transacting every kind of guarantee and indemnity business; 

(f)  managing,  selling  and  realising  any  property  which  may  come  into  the  possession  of  the 

company in satisfaction or part satisfaction of any of its claims; 

(g) acquiring and holding and generally dealing with any property or any right, title or interest 
in any such property which may form the security or part of the security for any loans or advances 
or which may be connected with any such security; 

(h) undertaking and executing trusts; 

(i) undertaking the administration of estates as executor, trustee or otherwise; 

(j)  establishing  and  supporting  or  aiding  in  the  establishment  and  support  of  associations, 
institutions, funds, trusts and conveniences calculated to benefit employees or ex-employees of the 
company  or  the  dependents  or  connections  of  such  persons;  granting  pensions  and  allowances             

1. Subs. by Act 33 of 1959, s. 4, for “managing agent” (w.e.f. 1-10-1959). 

10 

 
                                                      
and making payments towards insurance; subscribing to or guaranteeing moneys for charitable or 
benevolent objects or for any exhibition or for any public, general or useful object; 

(k) the acquisition, construction, maintenance and alteration of any building or works necessary 

or convenient for the purposes of the company; 

(l) selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or 
turning  into  account  or  otherwise  dealing  with  all  or  any  part  of  the  property  and  rights  of  the 
company; 

(m) acquiring and undertaking the whole or any part of the business of any person or company, 

when such business is of a nature enumerated or described in this sub-section; 

(n) doing all such other things as are incidental or conducive to the promotion or advancement 

of the business of the company; 

(o)  any  other  form  of  business  which  the  Central  Government  may,  by  notification  in  the 
Official  Gazette,  specify  as  a  form  of  business  in  which  it  is  lawful  for  a  banking  company  to 
engage. 

(2)  No  banking  company  shall  engage  in  any  form  of  business  other  than  those  referred  to  in             

sub-section (1). 

1[7.  Use  of  words  “bank”,  “banker”,  “banking”  or  “banking  company”.—(1)  No  company 
other than a banking company shall use as part of its name  2[or in connection with its business] any of 
the  words  “bank”,  “banker”  or  “banking”  and  no  company  shall  carry  on  the  business  of  banking  in 
India unless it uses as part of its name at least one of such words. 

(2) No firm, individual or group of individuals shall, for the purpose of carrying on any business, 

use as part of its or his name any of the words “bank”, “banking” or “banking company”. 

(3) Nothing in this section shall apply to— 

 (a) a subsidiary of a banking company formed for one or more of the purposes mentioned in 
sub-section (1) of section 19, whose name indicates that it is a subsidiary of that banking company; 

(b) any association of banks formed for the protection of their mutual interests and registered 

under section 25 of the Companies Act, 1956 (1 of 1956).]  

 8. Prohibition of trading.—Notwithstanding anything contained in section 6 or in any contract, no 
banking company shall directly or indirectly deal in the buying or selling or bartering of goods, except 
in connection with the realisation of security given to or held by it, or engage in any trade, or buy, sell 
or barter goods for others otherwise than in connection with bills of exchange received for collection or 
negotiation or with such of its business as is referred to in clause (i) sub-section (1) of section 6: 

3[Provided that this section shall not apply to any such business as is specified in pursuance of 

clause (o) of sub-section (1) of section 6.] 

Explanation.— For the purposes of this section, “goods” means every kind of moveable property, 
other than actionable claims, stocks, shares, money, bullion and specie, and all instruments referred to 
in clause (a) of sub-section (1) of section 6.  

9. Disposal of non-banking assets.—Notwithstanding anything contained in section 6, no banking 
company shall hold any immovable property howsoever acquired, except such as is required for its own 
use, for any period exceeding seven years from the acquisition thereof or from the commencement of 
this  Act,  whichever  is  later  or  any  extension  of  such  period  as  in  this  section  provided,  and  such 
property shall be disposed of within such period or extended period, as the case may be: 

1. Subs. by Act 55 of 1963, s. 7, for  section 7 (w.e.f. 1-2-1964). 
2.  Ins. by Act 1 of 1984, s. 14 (w.e.f. 15-2-1984). 
3. Subs. by s. 15, ibid., for the proviso (w.e.f. 15-2-1984). 

11 

 
                                                      
Provided that the banking company may, within the period of seven years as aforesaid, deal or trade 

in any such property for the purpose of facilitating the disposal thereof: 

Provided further that the Reserve Bank may in any particular case, extend the aforesaid period of 
seven years by such period not exceeding five years where it is satisfied that such extension would be in 
the interest of the depositors of the banking company. 

1[10.  Prohibition  of  employment  of  managing  agents  and  restrictions  on  certain  forms  of 

employment.—(1) No banking company— 

(a) shall employ or be managed by a managing agent; or 

(b) shall employ or continue the employment of any person— 

(i) who is, or at any time has been, adjudicated insolvent, or has suspended payment or has 
compounded  with  his  creditors,  or  who  is,  or  has  been,  convicted  by  a  criminal  court  of  an 
offence involving moral turpitude; or 

(ii) whose remuneration or part of whose remuneration takes the form of commission or of 

a share in the profits of the company:  

2[Provided  that  nothing  contained  in  this  sub-clause  shall  apply  to  the  payment  by  a 

banking company of— 

(a) any bonus in pursuance of a settlement or award arrived at or made under any law 
relating  to  industrial  disputes  or  in  accordance  with  any  scheme  framed  by  such  banking 
company or in accordance with the usual practice prevailing in banking business; 

(b)  any  commission  to  any  broker  (including  guarantee  broker),  cashier-contractor, 
clearing  and  forwarding  agent,  auctioneer  or  any  other  person,  employed  by  the  banking 
company under a contract otherwise than as a regular member of the staff of the company; 
or] 

(iii) whose remuneration is, in the opinion of the Reserve Bank, excessive; or 

(c) shall be managed by any person— 

3[(i) who is a director of any other company not being— 

(a) a subsidiary of the banking company, or 

(b) a company registered under section 25 of the Companies Act, 1956 (1 of 1956):  

Provided  that  the  prohibition  in  this  sub-clause  shall  not  apply  in  respect  of  any  such 
director for a temporary period not exceeding three months or such further period not exceeding 
nine months as the Reserve Bank may allow; or] 

(ii) who is engaged in any other business or vocation; or 

(iii)  4[whose term of office as a person managing the company is] for a period exceeding 

five years at any one time: 

5[Provided  that  the  term  of  office  of  any  such  person  may  be  renewed  or  extended  by  further 
periods  not  exceeding  five  years  on  each  occasion  subject  to  the  condition  that  such  renewal  or 
extension shall not be sanctioned earlier than two years from the date on which it is to come into force:  

1. Subs. by Act 95 of 1956, s. 2, for section 10 (w.e.f. 14-1-1957). 
2. Subs. by Act 33 of 1959, s. 6, for the proviso (w.e.f. 1-10-1959). 
3.  Subs. by s. 6, ibid., for sub-clause (i) (w.e.f. 1-10-1959). 
4. Subs. by Act 55 of 1963, s. 8, for “who has a contract with the company for its management” (w.e.f. 1-2-1964). 
5. Subs. by s. 8, ibid., for the first proviso (w.e.f. 1-2-1964). 

12 

 
                                                      
Provided also that  where the  term  of  office  of  such person is for  an  indefinite period, such  term, 
unless it otherwise comes to an end earlier, shall come to an end immediately on the expiry of five years 
from the date of his appointment or on the expiry of three months from the date of commencement of 
section 8 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963), whichever is later:]  

Provided  further  that  nothing  in  this  clause  shall  apply  to  a  director,  other  than  the  managing 

director, of a banking company by reason only of his being such director. 

Explanation.—For the purpose of sub-clause (iii) of clause (b), the expression “remuneration”, in 
relation to person employed or continued in employment, shall include salary, fees and perquisites but 
shall not include any allowances or other amounts paid to him for the purpose of reimbursing him in 
respect of the expenses actually incurred by him in the performance of his duties. 

(2) In forming its opinion under sub-clause (iii) of clause (b) sub-section (1), the Reserve Bank may 

have regard among other matters to the following:— 

(i) the financial condition and history of the banking company, its size and area of operation, its 

resources, the volume of its business, and the trend of its earning capacity; 

(ii) the number of its branches or offices; 

(iii) the qualifications, age and experience of the person concerned; 

(iv) the remuneration paid to other persons employed by the banking company or to any person 

occupying a similar position in any other banking company similarly situated; and 

(v) the interests of its depositors. 
1[ 2* 

* 

* 

* 

* 

 (6)  Any  decision  or  order  of  the  Reserve  Bank  made  under  this  section  shall  be  final  for  all 

purposes.]] 

3[10A.  Board  of  directors  to  include  persons  with  professional  or  other  experience.—(1) 
Notwithstanding  anything  contained  in  any  other  law  for  the  time  being  in  force,  every  banking 
company,— 

(a)  in  existence  on  the  commencement  of  section  3  of  the  Banking  Laws  (Amendment)  Act, 

1968 (58 of 1968), or 

(b) which comes into existence thereafter, 

shall comply with the requirements of this section: 

Provided that nothing contained in this sub-section shall apply to a banking company referred to in 

clause (a) for a period of three months from such commencement. 

(2) Not less than fifty-one per cent. of the total number of members of the Board of directors of a 

banking company shall consist of persons, who— 

(a)  shall  have  special  knowledge  or  practical  experience  in  respect  of  one  or  more  of  the 

following matters, namely:— 

(i) accountancy, 

(ii) agriculture and rural economy, 

(iii) banking, 

(iv) co-operation, 

(v) economics, 

1. Subs. by Act 33 of 1959, s. 6, for sub-section (3) (w.e.f. 1-10-1959).    
2. Omitted by Act 55 of 1963, s. 8 (w.e.f. 1-2-1964). 
3. Ins. by Act 58 of 1968, s. 3 (w.e.f. 1-2-1969). 

13 

 
 
 
 
 
 
 
 
                                                      
(vi) finance, 

(vii) law, 

(viii) small-scale industry, 

(ix) any other matter the special knowledge of, and practical experience in, which would, in 

the opinion of the Reserve Bank, be useful to the banking company: 

Provided that  out  of the  aforesaid number  of  directors,  not  less than two  shall be  persons  having 
special knowledge or practical experience in respect of agriculture and rural economy, co-operation or 
small-scale industry; and 

(b) shall not— 

(1)  have  substantial  interest  in,  or  be  connected  with,  whether  as  employee,  manager  or 

managing agent,— 

(i)  any  company,  not  being  a  company  registered under  section  25  of  the  Companies 

Act, 1956 (1 of 1956.), or 

(ii)  any  firm,  which  carries  on  any  trade,  commerce  or  industry  and  which,  in  either 

case, is not a small-scale industrial concern, or 

(2) be proprietors of any trading, commercial or industrial concern, not being a small-scale 

industrial concern. 

 1[(2A)  Notwithstanding  anything  to  the  contrary  contained  in  the  Companies  Act,  1956                   

(1 of 1956), or in any other law for the time being in force,— 

(i)  no  director  of  a  banking  company,  other  than  its  chairman  or  whole-time  director,  by 

whatever name called, shall hold office continuously for a period exceeding eight years; 

(ii) a chairman or other whole-time director of a banking company who has been removed from 
office as such chairman, or whole-time director, as the case may be, under the provisions of this Act 
shall  also  cease  to  be  a  director  of  the  banking  company  and  shall  also  not  be  eligible  to  be 
appointed as a director of such banking company, whether by election or co-option or otherwise, for 
a period of four years from the date of his ceasing to be the chairman or whole-time director, as the 
case may be.] 

(3) If, in respect of any banking company, the requirements, as laid down in sub-section (2), are not 
fulfilled at any time, the Board of directors of such banking company shall re-constitute such Board so 
as to ensure that the said requirements are fulfilled. 

(4) If, for the purpose of re-constituting the Board under sub-section (3), it is necessary to retire any 
director or directors, the Board may, by lots drawn in such manner as may be prescribed, decide which 
director or directors shall cease to hold office and such decision shall be binding on every director of 
the Board. 

(5)  Where  the  Reserve  Bank  is  of  opinion  that  the  composition  of  the  Board  of  directors  of  a 
banking company is such that it does not fulfil the requirements of sub-section (2), it may, after giving 
to  such  banking  company  a  reasonable  opportunity  of  being  heard,  by  an  order  in  writing,  direct  the 
banking company to so re-constitute its Board of directors as to ensure that the said requirements are 
fulfilled and, if within two months from the date of receipt of that order, the banking company does not 
comply with the directions made by the Reserve Bank, that Bank may, after determining, by lots drawn 
in such manner as may be prescribed, the person who ought to be removed from the membership of the 
Board of directors, remove such person from the office of the director of such banking company and 
with a view to complying with the provisions of sub-section (2), appoint a suitable person as a member 

1.  Ins. by Act 1 of 1984, s. 16 (w.e.f. 15-2-1984). 

14 

 
                                                      
of the Board of directors in the place of the person so removed whereupon the person so appointed shall 
be deemed to have been duly elected by the banking company as its director. 

(6)  Every  appointment, removal  or reconstitution duly  made,  and  every  election  duly  held, under 

this section shall be final and shall not be called into question in any court. 

(7) Every director elected or, as the case may be, appointed under this section shall hold office until 
the date up to which his predecessor would have held office, if the election had not been held, or, as the 
case may be, the appointment had not been made. 

(8) No act or proceeding of the Board of directors of a banking company shall be invalid by reason 
only of any defect in the composition thereof or on the ground that it is subsequently discovered that 
any of its members did not fulfil the requirements of this section. 

10B.  Banking  company  to  be  managed  by  whole  time  chairman.—1[(1)  Notwithstanding 
anything  contained  in  any  law  for  the  time  being  in  force  or  in  any  contract  to  the  contrary,  every 
banking  company  in  existence  on  the  commencement  of  the  Banking  Regulation  (Amendment)  Act, 
1994 (20 of 1994), or which comes into existence thereafter shall have one of its directors, who may be 
appointed on a whole-time or a part-time basis as chairman of its Board of directors, and where he is 
appointed on a whole-time basis, as chairman of its Board of directors, he shall be entrusted with the 
management of the whole of the affairs of the banking company: 

Provided  that  the  chairman  shall  exercise  his  powers  subject  to  the  superintendence,  control  and 

direction of the Board of directors. 

(1A) Where a chairman is appointed on a part-time basis,— 

(i) such appointment shall be with the previous approval of the Reserve Bank and be subject to 

such conditions as the Reserve Bank may specify while giving such approval; 

(ii) the management of the whole of the affairs of such banking company shall be entrusted to a 
managing  director  who  shall  exercise  his  powers  subject  to  the  superintendence,  control  and 
direction of the Board of directors.] 
(2)  2[Every chairman of the Board of directors who is appointed on a whole-time basis and every 
managing director] of a banking company shall be in the whole time employment of such company and 
shall hold office for such period, not exceeding five years, as the Board of directors may fix, but shall, 
subject to the provisions of this section, be eligible for re-election or re-appointment: 

Provided that nothing in this sub-section shall be construed as prohibiting a chairman from being a 
director of a subsidiary of the banking company or a director of a company registered under section 25 
of the Companies Act, 1956 (1 of 1956). 

(3)  Every  person  holding  office  on  the  commencement  of  section  3  of  the  Banking  Laws 

(Amendment) Act, 1968 (58 of 1968), as managing director of a banking company shall— 

(a) if there is a chairman of its Board of directors, vacate office on such commencement, or  
(b)  if  there  is  no  chairman  of  its  Board  of  directors,  vacate  office  on  the  date  on  which  the 
chairman of its Board of directors is elected or appointed in accordance with the provisions of this 
section. 
(4)  3[Every  chairman  who  is  appointed  on  a  whole-time  basis  and  every  managing  director  of  a 
banking company appointed under sub-section (1A)] shall be a person who has special knowledge and 
practical experience of— 

(a) the working of a banking company, or of the State Bank of India or any subsidiary bank or a 

financial institution, or 

1. Subs. by Act 20 of 1994, s. 2, for sub-section (1) (w.e.f. 31-1-1994). 
2.  Subs. by s. 2, ibid., for “Every chairman of the Board of directors” (w.e.f. 31-1-1984). 
3.  Subs. by s. 2, ibid., for “Every chairman of the Board of directors of a banking company” (w.e.f. 31-1-1994). 

15 

 
                                                      
(b) financial, economic or business administration: 

Provided  that  a  person  shall  be  disqualified  for  being  a  1[chairman  who  is  appointed  on  a              

whole-time basis or a managing director] if he— 

(a)  is  a  director  of  any  company  other  than  a  company  referred  to  in  the  proviso  to                      

sub-section (2), or 

(b) is a partner of any firm which carries on any trade, business or industry, or 

(c) has substantial interest in any other company or firm, or 

(d) is a director, manager, managing agent, partner or proprietor of any trading, commercial or 

industrial concern, or 

(e) is engaged in any other business or vocation. 

(5) 2[A chairman of the Board of directors appointed on a whole-time basis or a managing director] 
of  a  banking  company  may,  by  writing,  under  his  hand  addressed  to  the  company,  resign  his  office, 
3*** 

4[(5A) 2[A chairman of the Board of directors appoint on a whole-time basis or a managing director] 
whose term of office has come to an end, either by reason of his resignation or by reason of expiry of 
the period of his office, shall, subject to the approval of the Reserve Bank, continue in office until his 
successor assumes office.] 

(6) Without prejudice to the provisions of section 36AA, where the Reserve Bank is of opinion that 
any person who is, or has been elected to be, the 5[chairman of the Board of directors who is appointed 
on a whole-time basis or the managing director] of a banking company is not a fit and proper person to 
hold  such  office,  it  may,  after  giving  to  such  person  and  to  the  banking  company  a  reasonable 
opportunity of being heard, by order in writing, require the banking company to elect or appoint any 
other person as the 6[chairman of the Board of directors who is appointed on a whole-time basis or the 
managing  director]  and  if,  within  a  period  of  two  months  from  the  date  of  receipt  of  such  order,  the 
banking company fails to elect or appoint a suitable person as the  6[chairman of the Board of directors 
who  is  appointed  on  a  whole-time  basis  or  the  managing  director]  the  Reserve  Bank  may,  by  order, 
remove the first-mentioned person from the office of the  5[chairman of the Board of directors who  is 
appointed  on  a  whole-time  basis  or  the  managing  director]  of  the  banking  company  and  appoint  a 
suitable  person  in  his  place  whereupon  the  person  so  appointed  shall  be  deemed  to  have  been  duly 
elected or appointed, as the case may be, as the  5[chairman of the Board of directors who is appointed 
on a whole-time basis or the managing director] of such banking company and any persons elected or 
7[appointed as chairman on a whole-time basis or managing director] under this sub-section shall hold 
office  for  the  residue  of  the  period  of  office  of  the  person  is  whose  place  he  has  been  so  elected  or 
appointed. 

(7)  The  banking  company  and  any  person  against  whom  an  order  of  removal  is  made  under               

sub-section  (6)  may,  within  thirty  days  from  the  date  of  communication  to  it  or  to  him  of  the  order, 
prefer an appeal to the Central Government and the decision of the Central Government thereon, and 
subject thereto, the order made by the Reserve Bank under sub-section (6), shall be final and shall not 
be called into question in any court. 

1. Subs. by Act 20 of 1994, s. 2, for “chairman” (w.e.f. 31-1-1994). 
2. Subs. by s. 2, ibid., for “A chairman of the Board of directors” (w.e.f. 31-1-1994). 
3.  The  words  “but  shall  continue  in  office  until  his  successor  assumes  office”  omitted  by  Act  1  of  1984,  s.  17                        

(w.e.f. 15-2-1984). 

4. Ins. by s. 17, ibid. (w.e.f. 15-2-1984). 
5. Subs. by Act 20 of 1994, s. 2, for “chairman of the Board of directors” (w.e.f. 31-1-1994). 
6.  Subs. by s. 2, ibid., for “chairman of its Board of directors” (w.e.f. 31-1-1994). 
7. Subs. by s. 2, ibid., for “appointed as chairman” (w.e.f. 31-1-1994). 

16 

 
                                                      
(8) Notwithstanding anything contained in this section, the Reserve Bank may, if in its opinion it is 
necessary  in  the  public  interest  so  to  do,  permit  1[the  chairman  of  the  Board  of  directors  who  is 
appointed on a whole-time basis or the managing director] to undertake such part-time honorary work 
as is not likely to interfere with his duties as 2[such chairman or managing director].  

(9)  Notwithstanding  anything  contained  in  this  section,  where  a  person  3[appointed  on  a               

whole-time basis, as chairman of the Board of directors or managing director] dies or resigns or is by 
infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise in 
circumstances not involving the vacation of his office, the banking company may, with the approval of 
the Reserve Bank, make suitable arrangements for carrying out the  4[duties of chairman or managing 
director] for a total period not exceeding four months. 

5[10BB. Power of Reserve Bank to appoint 6[chairman of the Board of directors appointed on 
a  whole-time  basis  or  a  managing  director]  of  a  banking  company.—(1)  Where  the  office  of  the 
6[chairman  of  the  Board  of  directors  appointed  on  a  whole-time  basis  or  a  managing  director]  of  a 
banking  company  is  vacant,  the  Reserve  Bank  may,  if  it  is  of  opinion  that  the  continuation  of  such 
vacancy  is  likely  to  adversely  affect  the  interests  of  the  banking  company,  appoint  a  person,  eligible 
under sub-section (4) of section 10B to be so appointed, to be the 6[chairman of the Board of directors 
appointed on a whole-time basis or a managing director] of the banking company and where the person 
so appointed is not a director of such banking company, he shall, so long as he holds the office of the 
6[chairman  of  the  Board  of  directors  appointed  on  a  whole-time  basis  or  a  managing  director],  be 
deemed to be a director of the banking company. 

(2)  The  6[chairman  of  the  Board  of  directors  appointed  on  a  whole-time  basis  or  a  managing 
director]  so  appointed  by  the  Reserve  Bank  shall  be  in  the  whole-time  employment  of  the  banking 
company  and  shall  hold  office  for  such  period  not  exceeding  three  years,  as  the  Reserve  Bank  may 
specify, but shall, subject to other provisions of this Act, be a eligible for reappointment. 

(3)  The  6[chairman  of  the  Board  of  directors  appointed  on  a  whole-time  basis  or  a  managing 
director]  so  appointed  by  the  Reserve  Bank  shall  draw  from  the  banking  company  such  pay  and 
allowances as the Reserve Bank may determine and may be removed from office only by the Reserve 
Bank. 

(4) Save as otherwise provided in this section, the provisions of section 10B shall, as far as may be, 
apply  to  the  6[chairman  of  the  Board  of  directors  appointed  on  a  whole-time  basis  or  a  managing 
director]  appointed  by  the  Reserve  Bank  under  sub-section  (1)  as  they  apply  to  a  6[chairman  of  the 
Board of directors appointed on a whole- time basis or a managing director] appointed by the banking 
company]. 

7[10C. Chairman and certain directors not to be required to hold qualification shares.—8[A 
chairman of the Board of directors who is appointed on a whole-time basis or a managing director] of a 
banking company (by whomsoever appointed) and a director of a banking company (appointed by the 
Reserve  Bank  under  section  10A)  shall  not  be  required  to  hold  qualification  shares  in  the  banking 
company.] 

1. Subs. by Act 20 of 1994, s. 2, for “the chairman” (w.e.f. 31-1-1994). 
2. Subs. by s. 2, ibid., for  “such chairman” (w.e.f. 31-1-1994). 
3. Subs. by s. 2, ibid., for “appointed as chairman” (w.e.f. 31-1-1994). 
4. Subs. by s. 2, ibid., for “duties as chairman” (w.e.f. 31-1-1994).  
5.  Ins. by Act 1 of 1984, s. 18 (w.e.f. 15-2-1984). 
6. Subs. by Act 20 of 1994, s. 3, for “chairman” (w.e.f. 31-1-1994). 
7. Subs. by Act 1 of 1984, s. 19, for section 10C (w.e.f. 15-2-1984). 
8. Subs. by Act 20 of 1994, s. 4, for “A chairman” (w.e.f. 31-1-1994). 

17 

 
                                                      
 
10D.  Provisions  of  sections  10A,  10B  and  10BB  to  override  all  other  laws,  contracts,                

etc.— Any appointment or removal of a 1[director, chairman of the Board of directors who is appointed 
on a whole-time basis or managing director] in pursuance of section 10A or section 10B  2[or section 
10BB] shall have effect and any such person shall not be entitled to claim any compensation for the loss 
or  termination  of  office,  notwithstanding  anything  contained  in  any  law  or  in  any  contract, 
memorandum or articles of association.] 

 11. Requirement as to minimum paid-up capital and reserves.—(1) Notwithstanding anything 
contained in 3[section 149 of the Companies Act, 1956 (1 of 1956)], no banking company in existence 
on the commencement of this Act, shall, after the expiry of three years from such commencement or of 
such further period not exceeding one year as the Reserve Bank, having regard to the interests of the 
depositors of the company, may think fit in any particular case to allow, carry on business  4[in India], 
and  no  other  banking  company  shall  after  the  commencement  of  this  Act,  commence  or  carry  on 
business 4[in India], 5[unless it complies with such of the requirements of this section as are applicable 
to it]. 

6[(2) In the case of a banking company incorporated outside India— 

(a) the aggregate value of its paid-up capital and reserves shall not be less than fifteen lakhs of 
rupees and if it has a place or places of business in the city of Bombay or Calcutta or both, twenty 
lakhs of rupees; and 

(b)  7[the  banking  company  shall  deposit  and  keep  deposited  with  the  Reserve  Bank  either  in 
cash or in the form of unencumbered approved securities, or partly in cash and partly in the form of 
such securities— 

(i) an amount which shall not be less than the minimum required by clause (a); and 

(ii) as soon as may be after the expiration of each 8*** year, an amount calculated at twenty 
per cent. of its profit for that year in respect of all business transacted through its branches in 
India,  as  disclosed  in  the  profit  and  loss  account  prepared  with  reference  to  that  year  under 
section 29:] 

Provided that any such banking company may at any time replace— 

(i)  any  securities  so  deposited  by  cash  or  by  any  other  unencumbered approved securities,  or 
partly by cash and partly by other such securities, so however, that the total amount deposited is not 
affected; 

(ii) any cash so deposited by unencumbered approved securities of an equal value.]  

9[(2A) Notwithstanding anything contained in sub-section (2), the Central Government may, on the 
recommendation  of  the  Reserve  Bank,  and  having  regard  to  the  adequacy  of  the  amounts  already 
deposited  and  kept  deposited  by  a  banking  company  under  sub-section  (2),  in  relation  to  its  deposit 
liabilities  in  India,  declare  by  order  in  writing  that  the  provisions  of  sub-clause  (ii)  of  clause  (b)  of             
sub-section  (2)  shall  not  apply  to  such  banking  company  for  such  period  as  may  be  specified  in  the 
order.] 

1. Subs. by Act 20 of 1994, s. 5, for “director or chairman” (w.e.f. 31-1-1994). 
2.  Ins. by Act 1 of 1984, s. 20 (w.e.f. 15-2-1984). 
3. Subs. by Act 95 of 1956, s. 14 and the Schedule, for “section 103 of the Indian Companies Act, 1913 (7 of 1913)” (w.e.f. 14-1-1957). 
4. Subs. by Act 20 of 1950, s. 3, for “in any State” (w.e.f. 18-3-1950).  
5. Subs. by Act 33 of 1959, s. 7, for certain words (w.e.f. 1-10- 1959). 
6.  Subs. by s. 7, ibid., for sub-section (2) (w.e.f. 1-10-1959).  
7. Subs. by Act 36 of 1962, s. 2, for certain words (w.e.f. 16-9-1962). 
8. The word “calendar” omitted by Act 66 of 1988, s. 7 (w.e.f. 30-12-1988). 
9. Ins. by Act 36 of 1962, s. 2 (w.e.f. 16-9-1962). 

18 

 
 
 
                                                      
(3) In the case of any banking company to which the provisions of sub-section (2) do not apply, the 

aggregate value of its paid-up capital and reserves shall not be less than— 

(i) if it has places of business in more than one State, five lakhs of rupees, and if any such place 
or  places  of  business  is  or  are  situated  in  the  city  of  Bombay  or  Calcutta  or  both,  ten  lakhs  of 
rupees; 

(ii)  if  it  has  all  its  places  of  business  in  one  State  none  of  which  is  situated  in  the  city  of 
Bombay  or  Calcutta,  one  lakh  of  rupees  in  respect  of  its  principal  place  of  business,  plus  ten 
thousand  rupees  in  respect  of  each  of  its  other  places  of  business  situated  in  the  same  district  in 
which  it  has  its  principal  place  of  business,  plus  twenty-five  thousand  rupees  in  respect  of  each 
place of business situated elsewhere in the State otherwise than in the same district: 

Provided that no banking company to which this clause applies shall be required to have paid-

up capital and reserves exceeding an aggregated value of five lakhs of rupees: 

Provided further that no banking company to which this clause applies and which has only one 
place  of  business  shall  be  required  to  have  paid-up  capital  and  reserves  exceeding  an  aggregate 
value of fifty thousand rupees: 

1[Provided further that in the case of every banking company to which this clause applies and 
which  commences  banking  business  for  the  first  time  after  the  commencement  of  the  Banking 
Companies (Amendment) Act, 1962 (36 of 1962), the value of its paid-up capital shall not be less 
than five lakhs of rupees;] 

(iii) if it has all its places of business in one State, one or more of which is or are situated in the 
city  of  Bombay  or  Calcutta,  five  lakhs  of  rupees,  plus  twenty-five  thousand  rupees  in  respect  of 
each place of business situated outside the city of Bombay or Calcutta, as the case may be: 

Provided  that  no  banking  company  to  which  this  clause  applies  shall  be  required  to  have             

paid-up capital and reserves exceeding an aggregate value of ten lakhs of rupees. 

Explanation.—For the purposes of this sub-section, a place of business situated  2[in a State] other 
than that in which the principal place of business of the banking company is situated shall, if it is not 
more  than  twenty-five  miles  distant  from  such  principal  place  of  business,  be  deemed  to  be  situated 
within the same State as such principal place of business. 

(4) Any amount deposited and kept deposited with the Reserve Bank under 3*** sub-section (2) by 
any banking company incorporated  4[outside India] shall, in the event of the company ceasing for any 
reason to carry on banking business 5[in India], be an asset of the company on which the claims of all 
the creditors of the company 5[in India] shall be a first charge.  

6[(5) For the purposes of this section,— 

(a) “place of business” means any office, sub-office, sub- pay office and any place of business 

at which deposits are received, cheques cashed or moneys lent; 

(b)  “value”  means  the  real  or  exchangeable  value,  and  not  the  nominal  value  which  may  be 

shown in the books of the banking company concerned.] 

(6) If any dispute arises in computing the aggregate value of the paid-up capital and reserves of any 
banking company, a determination thereof by the Reserve Bank shall be final for the purposes of this 
section. 

1.  Ins. by Act 36 of 1962, s. 2 (w.e.f. 16-9-1962). 
2. Subs. by Act 62 of 1956, s. 2 and Sch., for “in India” (w.e.f. 1- 11-1956). 
3. The words “the proviso to” omitted by Act 33 of 1959, s. 7 (w.e.f. 1-10-1959). 
4.  Subs. by Act 20 of 1950, s. 3, for “elsewhere than in a State” (w.e.f. 18-3-1950). 
5. Subs. by s. 3, ibid., for “in the States”(w.e.f. 18-3-1950). 
6. Subs. by Act 33 of 1959, s. 7, for sub-section (5) (w.e.f. 1-10- 1959). 

19 

 
                                                      
1[12.  Regulation  of  paid-up  capital,  subscribed  capital  and  authorised  capital  and  voting 
rights of shareholders.— (1) No banking company shall carry on business in India, unless it satisfies 
the following conditions, namely:— 

(i) that the subscribed capital of the company is not less than one-half of the authorised capital, 
and the paid- up capital is not less than one-half of the subscribed capital and that, if the capital is 
increased, it complies with the conditions prescribed in this clause within such period not exceeding 
two years as the Reserve Bank may allow; 

2[(ii)  that,  notwithstanding  anything  contained  in  the  Companies  Act,  1956  (1  of  1956),  the 

capital of such banking company consists of— 

(a) equity shares only; or 

(b) equity shares and preferences shares: 

Provided  that  the  issue  of  preference  share  shall  be  in  accordance  with  the  guidelines 
framed  by  the  Reserve  Bank  specifying  the  class  of  preference  shares,  the  extent  of  issue  of 
each class of such preference shares (whether perpetual or irredeemable or redeemable), and the 
terms and conditions subject to which each class of preference shares may be issued: 

Provided  further  that  no  holder  of  the  preference  share,  issued  by  the  company,  shall  be 
entitled to exercise the voting right specified in clause (b) of sub-section (2) of section 87 of the 
Companies Act, 1956 (1 of 1956);] 

3* 

* 

* 

* 

* 

 (2)  No  person  holding  shares in a  banking  company  shall, in respect  of  any  shares held  by  him, 
exercise voting rights 4[on poll] 5[in excess of 6[ten per cent]] of the total voting rights of all the share-
holders of the banking company: 

7[Provided that the Reserve Bank may increase, in a phased manner, such ceiling on voting rights 

from ten per cent. to twenty-six per cent.] 

(3) Notwithstanding anything contained in any law for the time being in force or in any contract or 
instrument no suit or other proceeding shall be maintained against any person registered as the holder of 
a share in a banking company on the ground that the title to the said share vests in a person other than 
the registered holder: 

Provided that nothing contained in this sub-section shall bar a suit or other proceeding— 

(a) by a transferee of the share on the ground that he has obtained from the registered holder a 

transfer of the share in accordance with any law relating to such transfer; or 

(b) on behalf of a minor or a lunatic on the ground that the registered holder holds the share on 

behalf of the minor or lunatic. 

(4)  Every  chairman,  managing  director  or  chief  executive  officer  by  whatever  name  called  of  a 
banking company shall furnish to the Reserve Bank through that banking company returns containing 
full  particulars  of  the  extent  and  value  of  his  holding  of  shares,  whether  directly  or  indirectly,  in  the 
banking  company  and  of  any  change  in  the  extent  of  such  holding  or  any  variation  in  the  rights 
attaching thereto and such other information relating to those shares as the Reserve Bank may, by order, 
require and in such form and at such time as may be specified in the order.] 

1. Subs. by Act 95 of 1956, s. 3, for section 12 (w.e.f. 14- 1-1957). 
2. Subs. by Act 4 of 2013, s. 3, for clause (ii) (w.e.f.  18-1-2013). 
3. The proviso omitted by s. 3, ibid. (w.e.f. 18-1-2013).  
4. Ins. by Act 33 of 1959, s. 8 (w.e.f. 1-10-1959). 
5. Subs. by Act 55 of 1963, s. 9, for “in excess of five per cent.” (w.e.f. 1-2-1964). 
6. Subs. by Act 20 of 1994, s. 6, for “one per cent.” (w.e.f. 31-1-1994).  
7. Ins. by Act 4 of 2013, s. 3 (w.e.f. 18-1-2013). 

20 

 
 
 
 
 
 
 
 
 
                                                      
1[12A.  Election  of  new  directors.—(1)  The  Reserve  Bank  may,  by  order,  require  any  banking 
company to call a general meeting of the share holders of the company within such time, not less than 
two months from the date of the order, as may be specified in the order or within such further time as 
the  Reserve  Bank  may  allow  in  this  behalf,  to  elect  in  accordance  with  the  voting  rights  permissible 
under this Act fresh directors, and the banking company shall be bound to comply with the order. 

(2)  Every  director  elected  under  sub-section  (1)  shall  hold  office  until  the  date  up  to  which  his 

predecessor would have held office, if the election had not been held. 

(3) Any election duly held under this section shall not be called in question in any court.] 

2[12B. Regulation of acquisition of shares or voting rights.—(1) No person (hereinafter referred 
to as “the applicant”) shall, except with the previous approval of the Reserve Bank, on an application 
being made, acquire or agree to acquire, directly or indirectly, by himself or acting in concert with any 
other  person,  shares  of  a  banking  company  or  voting  rights  therein,  which  acquisition  taken  together 
with shares and voting rights, if any, held by him or his relative or associate enterprise or person acting 
in concert with him, makes the applicant to hold five per cent. or more of the paid-up share capital of 
such  banking  company  or  entitles  him  to  exercise  five  per  cent.  or  more  of  the  voting  rights  in  such 
banking company.  

Explanation 1.—For the purposes of this sub-section,— 

(a) “associate enterprise” means a company, whether incorporated or not, which,— 

(i) is a holding company or a subsidiary company of the applicant; or 

(ii) is a joint venture of the applicant; or 

(iii)  controls  the  composition  of  the  Board  of  Directors  or  other  body  governing  the 

applicant; or  

(iv) exercises, in the opinion of the Reserve Bank, significant influence on the applicant in 

taking financial or policy decisions; or 

(v) is able to obtain economic benefits from the activities of the applicant; 

(b)  “relative”  shall  have  the  meaning  assigned  to  it  in  section  6  of  the  Companies  Act,  1956            

(1 of 1956); 

(c) persons shall be deemed to be “acting in concert” who, for a common objective or purpose 
of acquisition of shares or voting rights in excess of the percentage mentioned in this sub-section, 
pursuant to an agreement or understanding (formal or informal), directly or indirectly cooperate by 
acquiring or agreeing to acquire shares or voting rights in the banking company. 

Explanation 2.—For the purposes of this Act, joint venture means a legal entity in the nature of a 
partnership  engaged  in  the  joint  undertaking  of  a  particular  transaction  for  mutual  profit  or  an 
association  of  persons  or  companies  jointly  undertaking  some  commercial  enterprise  wherein  all 
contribute assets and share risks. 

(2) An approval under sub-section (1) may be granted by the Reserve Bank if it is satisfied that— 

(a) in the public interest; or 

(b) in the interest of banking policy; or 

(c) to prevent the affairs of any banking company being conducted in a manner detrimental or 

prejudicial to the interests of the banking company; or 

(d) in view of the emerging trends in banking and international best practices; or 

1. Ins. by Act 95 of 1956, s. 4 (w.e.f. 14-1-1957). 
2. Ins. by Act 4 of 2013, s. 4 (w.e.f.  18-1-2013). 

21 

 
                                                      
(e) in the interest of the banking and financial system in India,  

the applicant is a fit and proper person to acquire shares or voting rights:  

Provided that the Reserve Bank may call for such information from the applicant as it may deem 

necessary for considering the application referred to in sub-section (1): 

Provided  further  that  the  Reserve  Bank  may  specify  different  criteria  for  acquisition  of  shares  or 

voting rights in different percentages. 

(3) Where  the  acquisition is  by  way  of transfer  of  shares  of  a  banking  company  and  the  Reserve 
Bank is satisfied that such transfer should not be permitted, it may, by order, direct that no such share 
shall be transferred to the proposed transferee and may further direct the banking company not to give 
effect to the transfer of shares and in case the transfer has been registered, the transferee shall not be 
entitled to exercise voting rights on poll in any of the meetings of the banking company. 

(4) The approval for acquisition of shares may be subject to such conditions as the Reserve Bank 
may deem fit to impose, including a condition that any further acquisition of shares shall require prior 
approval of the Reserve Bank and that the applicant continues to be a fit and proper person to hold the 
shares or voting rights. 

(5)  Before issuing  or  allotting  any  share to any  person  or  registering  the transfer  of  shares in the 
name  of  any  person,  the  banking  company  shall  ensure  that  the  requirements  of  sub-section  (1)  are 
complied with by that person and where the acquisition is with the approval of the Reserve Bank, the 
banking company shall further ensure that the conditions imposed under sub-section (4), if any, of such 
approval are fulfilled. 

(6) The decision of the Reserve Bank on the application made under sub-section (1) shall be taken 

within a period of ninety days from the date of receipt of the application by the Reserve Bank:  

Provided  that  in  computing  the  period  of  ninety  days,  the  period  taken  by  the  applicant  for 

furnishing the information called for by the Reserve Bank shall be excluded. 

(7) The Reserve Bank may specify the minimum percentage of shares to be acquired in a banking 
company  if  it  considers  that  the  purpose  for  which  the  shares  are  proposed  to  be  acquired  by  the 
applicant warrants such minimum shareholding. 

(8) The Reserve Bank may, if it is satisfied that any person or persons acting in concert with him 
holding shares or voting rights in excess of five per cent. of the total voting rights of all the shareholders 
of  the  banking  company,  are  not  fit  and  proper  to  hold  such  shares  or  voting  rights,  pass  an  order 
directing  that  such  person  or  persons  acting  in  concert  with  him  shall  not,  in  the  aggregate,  exercise 
voting rights on poll in excess of five per cent. of the total voting rights of all the shareholders of the 
banking company: 

Provided  that  the  Reserve  Bank  shall  not  pass  any  such  order  without  giving  an  opportunity  of 

being heard to such person or persons acting in concert with him.]  

13. Restriction on commission, brokerage, discount, etc., on sale of shares.—Notwithstanding 
anything to the contrary contained in 1[sections 76 and 79 of the Companies Act, 1956 (1 of 1956)], no 
banking  company  shall  pay  out  directly  or  indirectly  by  way  of  commission,  brokerage,  discount  or 
remuneration in any form in respect of any shares issued by it, any amount exceeding in the aggregate 
two and one-half per cent. of the 2[price at which the said shares are issued]. 

3[Explanation.—For the removal of doubts, it is hereby declared that the expression “price at which 

the said shares are issued” shall include amount or value of premium on such shares.]  

1.  Subs.  by  Act  95  of  1956,  s.  14  and  Sch.  I,  for  “sections  105  and  105A  of  the  Indian  Companies  Act,  1913  (7  of  1913)  

(w.e.f. 14-1-1957). 

2. Subs. by Act 4 of 2013, s. 5, for “paid-up value of the said shares” (w.e.f. 18-1-2013). 
3. Ins. by s. 5, ibid. (w.e.f. 18-1-2013). 

22 

 
                                                      
14. Prohibition of charge on unpaid capital.—No banking company shall create any charge upon 

any unpaid capital of the company, and any such charge shall be invalid. 

1[14A.  Prohibition  of  floating  charge  on  assets.—  (1)  Notwithstanding  anything  contained  in 
section 6, no banking company shall create a floating charge on the undertaking or any property of the 
company or any part thereof, unless the creation of such floating charge is certified in writing by the 
Reserve Bank as not being detrimental to the interests of the depositors of such company. 

(2) Any such charge created without obtaining the certificate of the Reserve Bank shall be invalid. 

(3)  Any  banking  company  aggrieved  by  the  refusal  of  a  certificate  under  sub-section  (1)  may, 
within  ninety  days  from  the  date  on  which  such  refusal  is  communicated  to  it,  appeal  to  the  Central 
Government. 

(4) The  decision  of  the  Central  Government  where  an  appeal  has  been  perferred  to  it  under  sub-

section (3) or of the Reserve Bank where no such appeal has been preferred shall be final.] 

15. Restrictions as to payment of dividend.—2[(1)] No banking company shall pay any dividend 
on its shares until all its capitalised expenses (including preliminary expenses, organisation expenses, 
share-selling commission, brokerage, amounts of losses incurred and any other item of expenditure not 
represented by tangible assets) have been completely written off. 

3[(2)  Notwithstanding  anything  to  the  contrary  contained  in  sub-  section (1)  or  in  the  Companies 

Act, 1956 (1 of 1956), a banking company may pay dividends on its shares without writing off— 

 (i) the depreciation, if any, in the value of its investments in approved securities in any case 

where such depreciation has not actually been capitalised or otherwise accounted for as a loss; 

(ii) the depreciation, if any, in the value of its investments in shares, debentures or bonds (other 
than  approved  securities)  in  any  case  where  adequate  provision  for  such  depreciation  has  been 
made to the satisfaction of the auditor of the banking company; 

(iii) the bad debts, if any, in any case where adequate provision for such debts has been made to 

the satisfaction of the auditor of the banking company.] 

4[16.  Prohibition  of  common  directors.—5[(1)  No  banking  company  incorporated  in  India  shall 
have as a director in its Board of directors any person who is a director of any other banking company.  

(1A) No banking company referred to in sub-section (1) shall have in its Board of directors, more 
than  three  directors  who  are  directors  of  companies which  among  themselves  are  entitled  to  exercise 
voting  rights  in  excess  of  twenty  per  cent.of  the  total  voting  rights  of  all  the  shareholders  to  that 
banking company.] 

(2) If immediately before the commencement of the Banking Companies (Amendment) Act, 1956 
(95  of  1956),  any  person  holding  office  as  a  director  of  a  banking  company  is  also  a  director  of 
companies which among themselves are entitled to exercise voting rights in excess of twenty per cent. 
of the total voting rights of all the share-holders of the banking company, he shall, within such period 
from such commencement as the Reserve Bank may specify in this behalf— 

(a) either resign his office as a director of the banking company; or 
(b) choose such number of companies as among themselves are not entitled to exercise voting 
rights in excess of twenty per cent. of the total voting rights of all the share-holders of the banking 

1. Ins. by Act 33 of l959, s. 9 (w.e.f. 1.10.1959).  
2. S. 15 was re-numbered as sub-section (1) of that section by s. 10, ibid. (w.e.f. 1-10-1959). 
3. Ins. by Act 33 of 1959, s. 10 (w.e.f. 1-10-1959). 
4. Subs. by Act 95 of 1956, s. 5, for s. 16 (w.e.f. 14-1-1957).   
5. Subs. by Act 20 of 1994, s. 7, for sub-section (1) (w.e.f. 31-1-1994). 

23 

 
                                                      
company as companies in which he wishes to continue to hold the office of a director and resign his 
office as a director in the other companies.] 
1[(3)  Nothing  in  sub-section  (1)  shall  apply  to,  or  in  relation  to,  any  director  appointed  by  the 

Reserve Bank.] 

2[17. Reserve Fund.—(1) Every banking company incorporated in India shall create a reserve fund 
and  3***  shall,  out  of  the  balance  of  profit  of  each  year  as  disclosed  in  the  profit  and  loss  account 
prepared  under  section  29  and  before  any  dividend  is  declared,  transfer  to  the  reserve  fund  a  sum 
equivalent to not less than twenty per cent. of such profit. 

4[(1A) Notwithstanding anything contained in sub-section (1), the Central Government may, on the 
recommendation  of  the  Reserve  Bank  and  having  regard  to  the  adequacy  of  the  paid-up  capital  and 
reserves of a banking company in relation to its deposit liabilities, declare by order in writing that the 
provisions  of  sub-section  (1)  shall  not  apply  to  the  banking  company  for  such  period  as  may  be 
specified in the order: 

Provided that no such order shall be made unless, at the time it is made, 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 banking company.] 

(2)  Where  a  banking  company  appropriates  any  sum  or  sums  from  the  reserve  fund  or  the  share 
premium account, it shall, within twenty-one days from the date of such appropriation, report the fact to 
the Reserve Bank, explaining the circumstances relating to such appropriation: 

Provided that the Reserve Bank may, in any particular case, extend the said period of twenty-one 

days by such period as it thinks fit or condone any delay in the making of such report. 

5[18. Cash reserve.—(1) Every banking company, not being a scheduled bank,  6[shall maintain in 
India on a daily basis]  by way of cash reserve with itself or by way of balance in a current account with 
the Reserve Bank, or by way of net balance in current accounts or in one or more of the aforesaid ways, 
a sum equivalent to 7[such per cent.] of the total of its demand and time liabilities in India as on the last 
Friday  of  the  second  preceding  fortnight  8[as  the  Reserve  Bank  may  specify,  by  notification  in  the 
Official Gazette, from time to time, having regard to the needs of securing the monetary stability in the 
country]  and  shall  submit  to  the  Reserve  Bank  before  the  twentieth  day  of  every  month  a  return 
showing the amount so held on alternate Fridays during a month with particulars of its demand and time 
liabilities  in  India  on  such  Fridays  or  if  any  such  Friday  is  a  public  holiday  under  the  Negotiable 
Instruments Act, 1881 (26 of 1881), at the close of business on the preceding working day.  

Explanation.—In this section, and in section 24,— 
(a) “liabilities in India” shall not include— 

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

the banking company; 

(ii) any advance taken from the Reserve Bank  9*** or from the Exim Bank  10[or from the 
Reconstruction Bank 11[or from the National Housing Bank]] or from the National Bank 12[, or 
from the small Industries Bank ,13[or from the National Bank for Financing Infrastructure and 
Development or from the other development financial institution]] by the banking company; 

1.  Ins. by Act 58 of 1968, s. 4 (w.e.f. 1-2-1969). 
2.  Subs. by Act 33 of 1959, s. 11, for ss. 17 and 18 (w.e.f. 1-10-1959). 
3. Certain words omitted by Act 36 of 1962, s. 3 (w.e.f. 16-9-1962). 
4. Ins. by s. 3, ibid. (w.e.f. 16-9-1962). 
5. Subs. by Act 1 of 1984, s. 21, for section 18 (w.e.f. 29-3-1985). 
6. Subs. by Act 4 of 2013, s. 6, for “shall maintain in India” (w.e.f. 18-1-2013). 
7. Subs. by s. 6, ibid., for “at least three per cent.” (w.e.f. 18-1-2013). 
8.  Ins. by s. 6, ibid. (w.e.f. 18-1-2013). 
9. The words “or from the Development Bank” omitted by s. 6, ibid. (w.e.f. 18-1-2013). 
10. Ins. by Act 62 of 1984, s. 71 and the Third Schedule (w.e.f. 20-3-1985). 
11. Ins. by Act 53 of 1987, s. 56 and the Second Schedule (w.e.f. 9-7-1988). 
12. Ins. by Act 39 of 1989, s. 53 and the Second Schedule (w.e.f. 7-3-1990). 
13. Ins. by Act 17 of 2021, s. 48 and the third Schedule (w.e.f. 19-4-2021). 

24 

 
                                                      
(iii)  in  the  case  of  a  Regional  Rural  Bank,  also  any  loan  taken  by  such  bank  from  its 

Sponsor Bank; 

(b) “fortnight” shall mean the period from Saturday to the second following Friday, both days 

inclusive; 

(c) “net balance in current accounts” shall, in relation to a banking company, mean the excess, 
if  any,  of  the  aggregate  of  the  credit  balances  in  current  account  maintained  by  that  banking 
company with the State Bank of India or a subsidiary bank or a corresponding new bank over the 
aggregate  of  the  credit  balances  in  current  account  held  by  the  said  banks  with  such  banking 
company; 

(d)  for the  purposes  of  computation  of  liabilities, the  aggregate  of  the liabilities  of  a  banking 
company to the State Bank of India, a subsidiary bank, a corresponding new bank, a regional rural 
bank, another banking company, a co-operative bank or any other financial institution notified by 
the Central Government in this behalf, shall be reduce by the aggregate of the liabilities of all such 
banks institutions to the banking company; 

(e) the expression “co-operative bank” shall have the meaning assigned to it in clause (cci) of 

section 56. 

1[(1A)  If  the  balance  held  by  such  banking  company  at  the  close  of  business  on  any  day  is 
below the minimum specified under sub-section (1), such banking company shall, without prejudice 
to the provisions of any other law for the time being in force, be liable to pay to the Reserve Bank, 
in respect of that day, penal interest at a rate of three per cent. above the bank rate on the amount by 
which such balance falls short of the specified minimum, and if the shortfall continues further, the 
penal interest so charged shall be increased to a rate of five per cent. above the bank rate in respect 
of each subsequent day during which the default continues. 

(1B) Notwithstanding anything contained in this section, if the Reserve Bank, is satisfied, on an 
application  in  writing  by  the  defaulting  banking  company,  that  such  defaulting  banking  company 
had  sufficient  cause  for  its  failure  to  company  with  the  provisions  of  sub-section  (1),  it  may  not 
demand the payment of the penal interest. 

(1C)  The  Reserve  Bank  may,  for  such  period  and  subject  to  such  conditions  as  may  be 
specified, grant to any banking company such exemptions from the provisions of this section as it 
thinks fit with reference to all or any of its offices or with reference to the whole or any part of its 
assets and liabilities.] 

(2) The Reserve Bank may, for the purposes of this section and section 24, specify from time to 
time, with reference to any transaction or class of transactions, that such transaction or transactions 
shall be regarded as liability in India of a banking company and, if any question arises as to whether 
any transaction or class of transactions shall be regarded for the purposes of this section and section 
24  as  liability  in  India  of  a  banking  company,  the  decision  of  the  Reserve  Bank  thereon  shall  be 
final.]  

 19.  Restriction  on  nature  of  subsidiary  companies.—2[(1)  A  banking  company  shall  not  form 
any  subsidiary  company  except  a  subsidiary  company  formed  for  one  or  more  of  the  following 
purposes, namely:— 

(a) the undertaking of any business which, under clauses (a) to (o) of sub-section (1) of  section 

6, is permissible for a banking company to undertake, or 

1. Ins. by Act 4 of 2013, s. 6 (w.e.f. 18-1-2013). 
2. Subs. by Act 1 of 1984, s. 22, for sub-section (1) (w.e.f. 15-2-1984). 

25 

 
                                                      
(b) with the previous permission in writing of the Reserve Bank, the carrying on of the business 

of banking exclusively outside India, or 

(c)  the  undertaking  of  such  other  business,  which  the  Reserve  Bank  may,  with  the  prior 
approval of the Central Government, consider to be conducive to the spread of banking in India or 
to be otherwise useful or necessary in the public interest. 

Explanation.—For  the  purposes  of  section  8,  a  banking  company  shall  not  be  deemed,  by 
reason  of  its  forming  or  having  a  subsidiary  company,  to  be  engaged  indirectly  in  the  business 
carried on by such subsidiary company.] 

(2) Save as provided in sub-section (1), no banking company shall hold shares in any company, 
whether as pledgee, mortgagee or absolute owner, of an amount exceeding thirty per cent. of the 
paid-up  share  capital  of  that  company  or  thirty  per  cent.  of  its  own  paid-up  share  capital  and 
reserves, whichever is less: 

Provided  that  any  banking  company  which  is  on  the  date  of  the  commencement  of  this  Act 
holding any shares in contravention of the provisions of this sub-section shall not be liable to any 
penalty therefor if it reports the matter without delay to the Reserve Bank and if it brings its holding 
of shares into conformity with the said provisions within such period, not exceeding two years, as 
the Reserve Bank may think fit to allow. 

(3) Save as provided in sub-section (1) and notwithstanding anything contained in sub-section 
(2), a banking company shall not, after the expiry of one year from the date of the commencement 
of this Act, hold shares, whether as pledgee, mortgagee or absolute owner, in any company in the 
management of which any managing director or manager of the banking company is in any manner 
concerned or interested. 

1[(4)  Save  as  provided  in  clause  (c)  of  sub-section  (1),  a  banking  company  may  form  a 
subsidiary  company  to  carry  on  the  business  of  credit  information  in  accordance  with  the  Credit 
Information Companies (Regulation) Act, 2005 (30 of 2005)] 

2[20.  Restrictions  on  loans  and  advances.—(1)  Notwithstanding  anything  to  the  contrary 

contained in section 77 of the Companies Act, 1956, (1 of 1956) no banking company shall,— 

(a) grant any loans or advances on the security of its own shares, or 

(b) enter into any commitment for granting any loan or advance to or on behalf of— 

(i) any of its directors, 

(ii)  any  firm  in  which  any  of  its  directors  is  interested  as  partner,  manager,  employee  or 

guarantor, or 

(iii) any company (not being a subsidiary of the banking company or a company registered 
under section 25 of the Companies Act, 1956 (1 of 1956), or a Government company) of which 
3[,  or  the  subsidiary  or  the  holding  company  of  which]  any  of  the  directors  of  the  banking 
company is a director, managing agent, manager, employee or guarantor or in which he holds 
substantial interest, or 

(iv) any individual in respect of whom any of its directors is a partner or guarantor.  

(2)  Where  any  loan  or  advance  granted  by  a  banking  company  is  such  that  a  commitment  for 
granting it could not have been made if clause (b) of sub-section (1) had been in force on the date on 
which the loan or advance was made, or is granted by a banking company after the commencement of 
section 5 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), but in pursuance of a commitment 
entered into before such commencement, steps shall be taken to recover the amounts due to the banking 

1. Ins. by Act 30 of 2005, s. 34 and the Schedule (w.e.f. 14-12-2006). 
2. Subs. by Act 58 of 1968, s. 5, for section 20 (w.e.f. 1-2-1969). 
3.  Ins. by Act 1 of 1984, s. 23 (w.e.f. 15-2-1984). 

26 

 
                                                      
company on account of the loan or advance together with interest, if any, due thereon within the period 
stipulated at the time of the grant of the loan or advance, or where no such period has been stipulated, 
before the expiry of one year from the commencement of the said section 5: 

Provided  that the  Reserve  Bank  may,  in  any  case,  on  an  application in  writing  made  to  it  by  the 
banking company in this  behalf, extend the period for the recovery of the loan or advance until such 
date, not being a date beyond the period of three years from the commencement of the said section 5, 
and subject to such terms and conditions, as the Reserve Bank may deem fit: 

Provided further that this sub-section shall not apply if and when the director concerned vacates the 

office of the director of the banking company, whether by death, retirement, resignation or otherwise. 

(3) No loan or advance, referred to in sub-section (2), or any part thereof shall be remitted without 
the previous approval of the Reserve Bank, and any remission without such approval shall be void and 
of no effect. 

(4) Where any loan or advance referred to in sub-section (2), payable by any person, has not been 
repaid to the banking company within the period specified in that sub-section, then, such person shall, if 
he is a director of such banking company on the date of the expiry of the said period, be deemed to have 
vacated his office as such on the said date. 

Explanation.—In this section— 

(a) “loans or advance” shall not include any transaction which the Reserve Bank may, having 
regard to the nature of the transaction, the period within which, and the manner and circumstances 
in which, any amount due on account of the transaction is likely to be realised, the interest of the 
depositors and other relevant considerations, specify by general or special order as not being a loan 
or advance for the purpose of this section; 

(b) “director” includes a member of any board or committee in India constituted by a banking 
company  for  the  purpose  of  managing,  or  for  the  purpose  of  advising  it  in  regard  to  the 
management of, all or any of its affairs. 

(5)  If  any  question  arises  whether  any  transaction  is  a  loan  or  advance  for  the  purposes  of  this 

section, it shall be referred to the Reserve Bank, whose decision thereon shall be final.] 

1[20A.  Restrictions  on  power  to  remit  debts.—(1)  Notwithstanding  anything  to  the  contrary 
contained in section 293 of the Companies Act, 1956, (1 of 1956) a banking company shall not, except 
with the prior approval of the Reserve Bank, remit in whole or in part any debt due to it by— 

(a) any of its directors, or 

(b)  any  firm  or  company  in  which  any  of  its  directors  is  interested  as  director,  partner, 

managing agent or guarantor, or 

(c) any individual if any of its directors is his partner or guarantor. 

(2) Any remission made in contravention of the provisions of sub-section (1) shall be void and of 

no effect.] 

21. Power of Reserve Bank to control advances by banking companies.—(1) Where the Reserve 
Bank  is  satisfied  that  it  is  necessary  or  expedient  in  the  public  interest 2[or  in  the  interests  of 
depositors] 3[or  banking  policy]  so  to  do,  it  may  determine  the  policy  in  relation  to  advances  to  be 
followed  by  banking  companies  generally  or  by  any  banking  company  in  particular,  and  when  the 

1. Ins. by Act 55 of 1963, s. 12 (w.e.f. 1-2-1964). 
2. Ins. by s.13, ibid. (w.e.f. 1-2-1964). 
3. Ins. by Act 58 of 1968, s. 6 (w.e.f. 1-2-1969).  

27 

 
                                                      
policy has been so determined, all banking companies or the banking company concerned, as the case 
may be, shall be bound to follow the policy as so determined. 

(2) Without prejudice to the generality of the power vested in the Reserve Bank under sub-section 
(1),  the  Reserve  Bank  may  give  directions  to  banking  companies,  either  generally  or  to  any  banking 
company or group of banking companies in particular, 1[as to— 

(a) the purposes for which advances may or may not be made, 

(b) the margins to be maintained in respect of secured advances, 

(c) the maximum amount of advances or other financial accommodation which, having regard 
to  the  paid-up  capital,  reserves  and  deposits  of  a  banking  company  and  other  relevant 
considerations,  may  be  made  by  that  banking  company  to any  one  company,  firm,  association  of 
persons or individual, 

(d) the maximum amount up to which, having regard to the considerations referred to in clause 
(c),  guarantees  may  be  given  by  a  banking  company  on  behalf  of  any  one  company,  firm, 
association of persons or individual, and 

(e)  the  rate  of  interest  and  other  terms  and  conditions  on  which  advances  or  other  financial 

accommodation may be made or guarantees may be given.] 

2[(3)  Every  banking  company  shall  be  bound  to  comply  with  any  directions  given  to  it  under  this 
section.] 

 3[21A.  Rates  of  interest  charged  by  banking  companies  not  to  be  subject  to  scrutiny  by 
courts.—Notwithstanding  anything  contained  in  the  Usurious  Loans  Act,  1918  (10  of  1918),  or  any 
other law relating to indebtedness in force in any State, a transaction between a banking company and 
its  debtor  shall  not  be  re-opened  by  any  Court  on  the  ground  that  the  rate  of  interest  charged  by  the 
banking company in respect of such transaction is excessive.] 

22. Licensing of banking companies.—4[(1) Save as hereinafter provided, no company shall carry 
on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any 
such licence may be issued subject to such conditions as the Reserve Bank may think fit to impose.] 

(2) Every banking company in existence on the commencement of this Act, before the expiry of six 
months from such commencement, and every other company before commencing banking business 5[in 
India], shall apply in writing to the Reserve Bank for a licence under this section:  

Provided  that  in  the  case  of  a  banking  company  in  existence  on  the  commencement  of  this  Act, 
nothing in sub-section (1) shall be deemed to prohibit the company from carrying on banking business 
until  it  is  granted  a  licence  in  pursuance  of  6[this  section]  or  is  by  notice  in  writing  informed  by  the 
Reserve Bank that a licence cannot be granted to it: 

Provided further that the Reserve Bank shall not give a notice as aforesaid to a banking company in 
existence  on  the  commencement  of  this  Act  before  the  expiry  of  the  three  years  referred  to  in  sub- 
section (1) of section 11 or of such further period as the Reserve Bank may under that sub-section think 
fit to allow. 

1. Subs. by Act 55 of 1963, s. 13, for certain words (w.e.f. 1.2.1964). 
2. Ins. by s. 13, ibid. (w.e.f. 1-2-1964). 
3. Ins. by Act 1 of 1984 s. 24 (w.e.f. 15.2.1984). 
4. Subs. by Act 33 of 1959, s. 13, for “sub-section (1)” (w.e.f. 1- 10-1959). 
5. Subs. by Act 20 of 1950, s. 3, for “in any State” (w.e.f.18-3-1950). 
6. Subs. by Act 33 of 1959, s. 13, for “sub-section (2)” (w.e.f. 1- 10-1959). 

28 

 
                                                      
(3) Before granting any licence under this section, the Reserve Bank may require to be satisfied by 
an inspection of the books of the company or otherwise that 1*** the following conditions are fulfilled, 
namely:— 

2[(a) that the company is or will be in a position to pay its present or future depositors in full as 

their claims accrue; 

(b) that the affairs of the company are not being, or are not likely to be conducted in a manner 

detrimental to the interests of its present or future depositors;] 

 3[(c)  that  the  general  character  of  the  proposed  management  of  the  company  will  not  be 

prejudicial to the public interest or the interest of its depositors; 

(d) that the company has adequate capital structure and earning prospects; 

(e) that the public interest will be served by the grant of a licence to the company to carry on 

banking business in India; 

(f)  that  having  regard  to  the  banking  facilities  available  in  the  proposed  principal  area  of 
operations of the company, the potential scope for expansion of banks already in existence in the 
area and other relevant factors the grant of the licence would not be prejudicial to the operation and 
consolidation of the banking system consistent with monetary stability and economic growth; 

(g) any other condition, the fulfilment of which would, in the opinion of the Reserve Bank, be 
necessary to ensure that the carrying on of banking business in India by the company will not be 
prejudicial to the public interest or the interests of the depositors.]  

4[(3A) Before granting any licence under this section to a company incorporated outside India, the 
Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise 
that the conditions specified in sub-section (3) are fulfilled and that the carrying on of banking business 
by such company in India will be in the public interest and that the Government or law of the country in 
which it is incorporated does not discriminate in any way against banking companies registered in India 
and  that  the  company  complies  with  all  the  provisions  of  this  Act  applicable  to  banking  companies 
incorporated outside India.] 

5[(4) The Reserve Bank may cancel a licence granted to a banking company under this section— 

(i) if the company ceases to carry on banking business in India; or  

(ii) if the company at any time fails to comply with any of the conditions imposed upon it under 

sub-section (1); or 

(iii) if at any time, any of the conditions referred to in sub-section (3) 4[and sub-section (3A)] is 

not fulfilled:  

Provided that before cancelling a licence under clause (ii) or clause (iii) of this sub-section on 
the  ground  that  the  banking  company  has  failed  to  comply  with  or  has  failed  to  fulfil  any  of  the 
conditions  referred  to  therein,  the  Reserve  Bank,  unless  it  is  of  opinion  that  the  delay  will  be 
prejudicial to the interests of the company's depositors or the public, shall grant to the company on 
such terms  as it  may  specify,  an  opportunity  of  taking  the  necessary  steps for  complying  with  or 
fulfilling such condition. 

1. The words “all or any of” omitted by Act 1 of 1984, s. 25(w.e.f. 15-2-1984). 
2. Subs. by Act 33 of 1959 s. 13, ibid., for clauses (a) and (b) (w.e.f. 1-10-1959). 
3. Subs. by Act 1 of 1984, s. 25, for clause (c) (w.e.f. 15-2-1984). 
4. Ins. by s. 25, ibid. (w.e.f. 15-2-1984). 
5. Subs. by Act 33 of 1959, s. 13, for sub-sections (4) and (5) (w.e.f. 1-10-1959). 

29 

 
                                                      
(5) Any banking company aggrieved by the decision of the Reserve Bank cancelling a licence 
under this section may, within thirty days from the date on which such decision is communicated to 
it, appeal to the Central Government. 

(6)  The  decision  of  the  Central  Government  where  an  appeal  has  been  preferred  to  it  under  

sub-section (5) or of the Reserve Bank where no such appeal has been preferred shall be final.] 

1[23. Restrictions on opening of new and transfer of existing, places of business.—(1) Without 

obtaining the prior permission of the Reserve Bank— 

(a) no banking company shall open a new place of business in India or change otherwise than 
within the same city, town or village, the location of an existing place of business situated in India; 
and 

(b) no banking company incorporated in India shall open a new place of business outside India 
or change, otherwise than within the same city, town or village in any country or area outside India, 
the location of an existing place of business situated in that country or area: 

Provided that nothing in this sub-section shall apply to the opening for a period not exceeding one 
month  of  a  temporary  place  of  business  within  a  city,  town  or  village  or  the  environs  thereof  within 
which  the  banking  company  already  has  a  place  of  business  for  the  purpose  of  affording  banking 
facilities  to  the  public  on  the  occasion  of  an  exhibition,  a  conference  or  a  mela  or  any  other  like 
occasion. 

(2) Before granting any permission under this section, the Reserve Bank may require to be satisfied 
by an inspection under section 35 or otherwise as to the financial condition and history of the company, 
the general character of its management, the adequacy of its capital structure and earning prospects and 
that public interest will be served by the opening or, as the case may be, change of location, of the place 
of business. 

(3) The Reserve Bank may grant permission under sub-section (1) subject to such conditions as it 

may think fit to impose either generally or with reference to any particular case. 

(4)  Where,  in  the  opinion  of  the  Reserve  Bank,  a  banking  company  has,  at  any  time,  failed  to 
comply with any of the conditions imposed on it under this section, the Reserve Bank may, by order in 
writing and after affording reasonable opportunity to the banking company for showing cause against 
the action proposed to be taken against it, revoke any permission granted under this section.  

2[(4A)  Any  regional  rural  bank  requiring  the  permission  of  the  Reserve  Bank  under  this  section 
shall  forward  its  application  to  the  Reserve  Bank  through  the  National  Bank  which  shall  give  its 
comments on the merits of the application and send it to the Reserve Bank: 

Provided that the regional rural bank shall also send an advance copy of the application directly to 

the Reserve Bank.] 

(5) For the purposes of this section “place of business” includes any sub-office, pay office, sub-pay 

office and any place of business at which deposits are received, cheques cashed or moneys lent.] 

24. Maintenance of a percentage of assets.—3* 

* 

* 

* 

* 

4[(2A) A scheduled bank, in addition to the average daily balance which it is, or may be, required to 
maintain under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934) and every other banking 
company,  in  addition  to  the  cash  reserve  which  it  is  required  to  maintain  under  section  18,  shall 
maintain in India, assets, the value of which shall not be less than such percentage not exceeding forty 
per  cent.  of  the  total  of  its  demand  and  time  liabilities  in  India  as  on  the  last  Friday  of  the  second 

1. Subs. by Act 33 of 1959, s. 14, for section 23 (w.e.f. 1-10-1959). 
2. Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 1-5-1982). 
3. Omitted by Act 17 of 2007, s. 2 (w.e.f. 23-1-2007). 
4. Subs. by s. 2, ibid., for sub-section (2A) (w.e.f. 23-1-2007). 

30 

 
 
 
                                                      
preceding fortnight as the Reserve Bank may, by notification in the Official Gazette, specify from time 
to  time  and  such  assets  shall  be  maintained,  in  such  form  and  manner,  as  may  be  specified  in  such 
notification.] 

1* 

* 

* 

* 

* 

2[(3)  For  the  purpose  of  ensuring  compliance  with  the  provisions  of  this  section,  every  banking 
company shall, not later than twenty days after the end of the month to which it relates, furnish to the 
Reserve  Bank  in  the  prescribed  form  and  manner  a  monthly  return  showing  particulars  of  its  assets 
maintained in accordance with this section, and its demand and time liabilities in India at the close of 
business  on  each  alternate  Friday  during  the  month,  or  if  any  such  Friday  is  a  public  holiday,  at  the 
close of business on the preceding working day: 

Provided that every Regional Rural Bank shall also furnish a copy of the said return to the National 

Bank. 

 (4) (a) If on any alternate Friday or, if such Friday is a public holiday, on the preceding working 
day, the amount maintained by a banking company at the close of business on that day falls below the 
minimum prescribed by or under 3*** sub-section (2A), such banking company shall be liable to pay to 
the Reserve Bank in respect of that day's default, penal interest for that day at the rate of three per cent. 
per annum above the bank rate on the amount by which the amount actually maintained falls short of 
the prescribed minimum or that day; and 

(b) if the default occurs again on the next succeeding alternate Friday, or, if such Friday is a public 
holiday,  on  the  preceding  working  day,  and  continues  on  succeeding  alternate  Fridays  or  preceding 
working days, as the case may be, the rate of penal interest shall be increased to a rate of five per cent. 
per  annum  above  the  bank  rate  on  each  such  shortfall  in  respect  of  that  alternate  Friday  and  each 
succeeding alternate Friday or preceding working day, if such Friday is a public holiday, on which the 
default continues. 

(5)  (a)  Without  prejudice  to  the  provisions  of  sub-section  (3),  the  Reserve  Bank  may  require  a 
banking company to furnish to it a return in the form and manner specified by it showing particulars of 
its assets maintained in accordance with this section and its demand and time liabilities in India, as at 
the close of business on each day of a month; and 

(b) without prejudice to the provisions of sub-section (4), on the failure of a banking company to 
maintain as on any day, the amount so required to be maintained by or under 3*** sub-section (2A) the 
Reserve  Bank  may,  in  respect  of  such  default, require the  banking  company  to  pay  penal interest  for 
that day as provided in clause (a) of sub-section (4) and if the default continues on the next succeeding 
working  day,  the  penal  interest  may  be  increased  as provided  in  clause (b)  of  sub-section  (4)  for  the 
concerned days. 

(6) (a) The penalty payable under sub-section (4) and sub-section (5) shall be paid within a period 
of fourteen days from the date on which a notice issued by the Reserve Bank demanding payment of the 
same is served on the banking company and in the event of failure of the banking company to pay the 
same  within  such  period,  the  penalty  may  be  levied by  a  direction  of the principal civil  court  having 
jurisdiction in the area where an office of the defaulting banking company is situated, such direction to 
be made only upon an application made by the Reserve Bank in this behalf to the court; and  

(b) when the court makes a direction under clause (a), it shall issue a certificate specifying the sum 
payable by the banking 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. 

1. Omitted by Act 17 of 2007, s. 2 (w.e.f. 23-1-2007).   
2. Subs. by Act 1 of 1984, s. 26, for sub-section (3) (w.e.f. 29-3-1985). 
3. The words, brackets and letter “clause (a) of” omitted by Act 4 of 2013, s. 7 (w.e.f. 18-1-2013). 

31 

 
 
 
 
 
 
 
 
 
                                                      
(7) When under the provisions of clause (b) of sub-section (4), penal interest at the increased rate of 
five per cent. above the bank rate has become payable by a banking company, if thereafter the amount 
required to be maintained on the next succeeding alternate Friday, or if such Friday is a public holiday, 
the  next  preceding  working  day,  is  still  below  the  prescribed  minimum,  every  director,  manager  or 
secretary  of  the  banking  company,  who  is  knowingly  and  wilfully  a  party  to  the  default,  shall  be 
punishable  with  fine  which  may  extend  to  five  hundred  rupees  and  with  a  further  fine  which  may 
extend to five hundred rupees for each subsequent alternate Friday or the preceding working day, as the 
case may be, on which the default continues. 

(8)  Notwithstanding  anything  contained  in  this  section,  if  the  Reserve  Bank  is  satisfied,  on  an 
application  in  writing  by  the  defaulting  banking  company,  that  the  banking  company  had  sufficient 
cause for its failure to comply with the provisions of  1*** sub-section (2A), the Reserve Bank may not 
demand the payment of the penal interest. 

Explanation.—In  this  section,  the  expression  “public  holiday”  means  a  day  which  is  a  public 

holiday under the Negotiable Instruments Act, 1881 (26 of 1881).]  

25. Assets in India.—2[(1) The assets in India of every banking company at the close of business 
on the last Friday of every quarter or, if that Friday is a public holiday under the Negotiable Instruments 
Act, 1881 (26 of 1881), at the close of the business on the preceding working day, shall not be less than 
seventy-five per cent. of its demand and time liabilities in India. 

(2) Every banking company shall, within one month from the end of every quarter, submit to the 
Reserve  Bank  a  return  in  the  prescribed  form  and  manner  of  the  assets  and  liabilities  referred  to  in           
sub-section (1) as at the close of business on the last Friday of the previous quarter, or, if that Friday is 
a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), at the close of business on 
the preceding working day:] 

3[Provided that every regional rural bank shall also furnish a copy of the said return to the National 

Bank.] 

(3) For the purposes of this section,— 

4[(a) “assets in India” shall be deemed to include export bills drawn in, and import bills drawn 
on and payable in India and expressed in such currencies as the Reserve Bank may from time to 
time approve in this behalf and also such securities as the Reserve Bank may approve in this behalf 
notwithstanding that all or any of the said bills or securities are held outside India;] 

5[(b)  “liabilities  in  India”  shall  not  include  the  paid-up  capital  or  the  reserves  or  any  credit 

balance in the profit and loss account of the banking company;] 

6[(c)]  “quarter”  means  the  period  of  three  months  ending  on  the  last  day  of  March,  June, 

September or December. 

26.  Return  of  unclaimed  deposits.—  Every  banking  company  shall,  within  thirty  days  after  the 
close of each calendar year, submit a return in the prescribed form and manner to the Reserve Bank as 
at the end of such calendar year of all accounts 7[in India] which have not been operated upon for ten 
years, 8***: 

Provided that in the case of money deposited for a fixed period the said term of ten years shall be 

reckoned from the date of the expiry of such fixed period: 

1. The words, brackets and letter “clause (a) of” omitted by Act 4 of 2013, s. 7 (w.e.f. 18-1-2013). 
2. Subs. by Act 33 of 1959 s. 16, for sub-sections (1) and (2) (w.e.f. 1-10-1959). 
3. Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 1-5-1982). 
4. Subs. by Act 20 of 1950, s. 7, for clause (a) (w.e.f. 18-3-1950). 
5. Ins. by Act 33 of 1959, s. 16 (w.e.f. 1-10-1959). 
6.  Clause (b) relettered as clause (c) by s. 16, ibid. (w.e.f. 1-10-1959). 
7.  Subs. by Act 20 of 1950, s. 3, for “in the States” (w.e.f.18-3-1950). 
8. Certain words omitted by Act 55 of 1963, s. 14 (w.e.f. 1-2-1964). 

32 

 
                                                      
1[Provided further that every regional rural bank shall also furnish a copy of the said return to the 

National Bank.] 

2[26A.  Establishment  of  Depositor  Education  and  Awareness  Fund.—(1)  The  Reserve  Bank 
shall  establish  a  Fund  to  be  called  the  “Depositor  Education  and  Awareness  Fund”  (hereafter  in  this 
section referred to as the “Fund”). 

(2)  There  shall  be  credited  to  the  Fund  the  amount  to  the  credit  of  any  account  in  India  with  a 
banking  company  which  has  not  been  operated  upon  for  a  period  of  ten  years  or  any  deposit  or  any 
amount remaining unclaimed for more than ten years, within a period of three months from the expiry 
of the said period of ten years: 

Provided that nothing contained in this sub-section shall prevent a depositor or any other claimant 
to claim  his  deposit  or  unclaimed  amount  or  operate his  account  or  deposit  account  from  or  with  the 
banking company after the expiry of said period of ten years and such banking company shall be liable 
to repay such deposit or amount at such rate of interest as may be specified by the Reserve Bank in this 
behalf. 

(3)  Where  the  banking  company  has  paid  outstanding  amount  referred  to  in  sub-section  (2)  or 
allowed  operation  of  such  account  or  deposit,  such  banking  company  may  apply  for  refund  of  such 
amount  in  such  manner  as  may  be  specified  by  the  authority  or  committee  referred  to  in                         
sub-section (5). 

(4)  The  Fund  shall  be  utilised  for  promotion  of  depositors'  interests  and  for  such  other  purposes 
which may be necessary for the promotion of depositors’ interests as may be specified by the Reserve 
Bank from time to time. 

(5)  The  Reserve  Bank  shall,  by  notification  in  the  Official  Gazette,  specify  an  authority  or 
committee,  with  such  members  as  the  Reserve  Bank  may  appoint,  to  administer  the  Fund,  and  to 
maintain separate accounts and other relevant records in relation to the Fund in such forms as may be 
specified by the Reserve Bank. 

(6) It shall be competent for the authority or committee appointed under sub-section (5) to spend 

moneys out of the Fund for carrying out the objects for which the Fund has been established.] 

27. Monthly returns and power to call for other returns and information.—(1) Every banking 
company shall, before the close of the month succeeding that to which it relates, submit to the Reserve 
Bank a return in the prescribed form and manner showing its assets and liabilities  3[in India] as at the 
close  of  business  on  the  last  Friday  of  every  month  or  if  that  Friday  is  a  public  holiday  under  the 
Negotiable Instruments Act, 1881 (26 of 1881), at the close of business on the preceding working day. 

4[(2) The Reserve Bank may at any time direct a banking company to furnish it within such time as 
may be specified by the Reserve Bank, with such statements and information relating to the business or 
affairs of the banking company (including any business or affairs with which such banking company is 
concerned) as the Reserve Bank may consider necessary or expedient to obtain for the purposes of this 
Act, and without prejudice to the generality of the foregoing power may call for information every half-
year regarding 5[the investments of a banking company and the classification of its advances in respect 
of industry, commerce and agriculture].] 

6[(3) Every regional rural bank shall submit a copy of the return which it submits to the Reserve 
Bank under sub-section (1) also to the National Bank and the powers exercisable by the Reserve Bank 
under sub-section (2) may also be exercised by the National Bank in relation to regional rural banks.] 

1.  Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 1-5-1982). 
2. Ins. by Act 4 of 2013, s. 8 (w.e.f. 18-1-2013). 
3. Subs. by Act 20 of 1950, s. 3, for “in the States” (w.e.f. 18-3-1950). 
4. Subs. by Act 95 of 1956, s. 6, for sub-section (2) (w.e.f. 14-1- 1957). 
5. Subs. by Act 33 of 1959, s. 17, for certain words (w.e.f. 1-10- 1959). 
6. Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 1-5-1982). 

33 

 
                                                      
1[28.  Power  to  publish  information.—The  Reserve  Bank  or  the  National  Bank,  or  both,  if  they 

consider it in the public interest so to do, may 2[publish— 

 (a) any information obtained by them under this Act in such consolidated form as they think 

fit; 

(b)  in  such  manner  as  they  may  consider  proper,  any  credit  information  disclosed  under  the 

Credit Information Companies (Regulation) Act, 2005 (30 of 2005).] 
29. Accounts and balance-sheet.—(1) At the expiration of each calendar year 3[or at the expiration 
of a period of twelve months ending with such date as the Central Government may, by notification in 
the Official Gazette, specify in this behalf,] every banking company incorporated  4[in India], in respect 
of all business transacted by it, and every banking company incorporated  5[outside India], in respect of 
all  business  transacted  through  its  branches  6[in  India],  shall  prepare  with  reference  to  7[that  year  or 
period, as the case may be,] a balance-sheet and profit and loss account as on the last working day of 
8[that year or the period, as the case may be,] in the Forms   set out in the Third Schedule or as near 
thereto as circumstances admit: 

9[Provided that with a view to facilitating the transition from one period, of accounting to another 
period  of  accounting  under  this  sub-section  the  Central  Government  may,  by  order  published  in  the 
Official Gazette, make such provisions as it considers necessary or expedient for the preparation of, or 
for  other  matters  relating  to,  the  balance-sheet  or  profit  and  loss  account  in  respect  of  the  concerned 
year or period, as the case may be.] 

(2) The balance-sheet and profit and loss account shall be signed— 

(a) in the case of a banking company incorporated  6[in India], by the manager or the principal 
officer of the company and where there are more than three directors of the company, by at least 
three of those directors, or where there are not more than three directors, by all the directors, and 

(b) in the case of a banking company incorporated  5[outside India] by the manager or agent of 

the principal office of the company 6[in India]. 

(3) Notwithstanding that the balance-sheet of a banking company is under sub-section (1) required 
to be prepared in a form other than the form  10[set out in Part I of Schedule VI to the Companies Act, 
1956 (1 of 1956)], the requirements of that Act relating to the balance-sheet and profit and loss account 
of  a  company  shall,  in  so  far  as  they  are  not  inconsistent  with  this  Act,  apply  to  the                            
balance-sheet or profit and loss account, as the case may be, of a banking company. 

3[(3A) Notwithstanding anything to the contrary contained in sub-section (3) of section 210 of the 
Companies Act, 1956 (1 of 1956), the period to which the profit and loss account relates shall, in the 
case  of  a  banking  company,  be  the  period  ending  with  the  last  working  day  of  the  year  immediately 
preceding the year in which the annual general meeting is held.] 

11[Explanation.—In  sub-section  (3A),  “year”  means  the  year  or,  as  the  case  may  be,  the  period 

referred to in sub-section (1).] 

1.  Subs. by Act 61 of 1981, s. 61 and the Second Schedule, for s. 28 (w.e.f. 12-7-1982).  
2.  Subs. by Act 30 of 2005, s. 34 and the Schedule, for certain words (w.e.f. 14-12-2006). 
3. Ins. by Act 66 of 1988, s. 8 (w.e.f. 30-12-1988). 
4. Subs. by Act 20 of 1950, s. 3, for “in a State” (w.e.f.18-3-1950). 
5. Subs. by s. 3, ibid., for “outside the State” (w.e.f.18-3-1950).  
6. Subs. by s. 3, ibid., for “in the State” (w.e.f. 18-3-1950). 
7.  Subs. by Act 66 of 1988, s. 8, for “that year” (w.e.f. 30-12-1988).  
8. Subs. by s. 8, ibid., for “the year” (w.e.f. 30-12-1988). 
9.  Subs. by s. 8, ibid., for the proviso (w.e.f. 30-12-1988). 
10.  Subs.  by  Act  95  of  1956,  s.  14  and  Sch.  for  “marked  F  in  the  Third  Schedule  to  the  Indian  Companies  Act,  1913                     

(7 of 1913)” (w.e.f. 14-1-1957). 

11.  Ins. by Act 66 of 1988, s. 8 (w.e.f. 30-12-1988). 

34 

 
                                                      
(4) The Central Government, after giving not less than three months’notice of its intention so to do 
by a notification in the Official Gazette, may from time to time by a like notification amend the Forms 
set out in the Third Schedule. 

1[29A. Power in respect of associate enterprises.—(1) The Reserve Bank may, at any time, direct 
a banking company to annex to its financial statements or furnish to it separately, within such time and 
at such intervals as may be specified by the Reserve Bank, such statements and information relating to 
the  business  or  affairs  of  any  associate  enterprise  of  the  banking  company  as  the  Reserve  Bank  may 
consider necessary or expedient to obtain for the purpose of this Act. 

(2) Notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), the 
Reserve Bank may, at any time, cause an inspection to be made of any associate enterprise of a banking 
company and its books of account jointly by one or more of its officers or employees or other persons 
along with the Board or authority regulating such associate enterprise. 

(3)  The  provisions  of  sub-sections  (2)  and  (3)  of  section  35  shall  apply  mutatis  mutandis  to  the 

inspection under this section. 

Explanation.—“associate  enterprise”  in  relation  to  a  banking  company  includes  an  enterprise 

which— 

(i) is a holding company or a subsidiary company of the banking company; or 

(ii) is a jont venture of the banking company; or 
(iii)  is  a  subsidiary  company  or  a  joint  venture  of  the  holding  company  of  the  banking 

company; or 

(iv)  controls  the  composition  of  the  Board  of  directors  or  other  body  governing  the  banking 

company; or 

(v) exercises, in the opinion of the Reserve Bank, significant influence on the banking company 

in taking financial or policy decisions; or 

(vi) is able to obtain economic benefits from the activities of the banking company.] 

30.  Audit.—2[(1)  The  balance-sheet  and  profit  and  loss  account  prepared  in  accordance  with 
section 29 shall be audited by a person duly qualified under any law for the time being in force to be an 
auditor of companies.] 

3[(1A) Notwithstanding anything contained in any law for the time being in force or in any contract 
to the contrary, every banking company shall, before appointing, re-appointing or removing any auditor 
or auditors, obtain the previous approval of the Reserve Bank. 

(1B) Without prejudice to anything contained in the Companies Act, 1956 (1 of 1956), or any other 
law for the time being in force, where the Reserve Bank is of opinion that it is necessary in the public 
interest or in the interest of the banking company or its depositors so to do, 4[it may at any time by order 
direct  that  a  special  audit  of  the  banking  company's  accounts,  for  any  such  transaction  or  class  of 
transactions or for such period or periods as may be specified in the order, shall be conducted and may 
by the same or a different order either appoint a person duly qualified under any law for the time being 
in force to be an auditor of companies or direct the auditor of the banking company himself to conduct 
such special audit] and the auditor shall comply with such directions and make a report of such audit to 
the Reserve Bank and forward a copy thereof to the company. 

(1C)  The  expenses  of,  or  incidental  to  5[the  special  audit]  specified  in  the  order  made  by  the 

Reserve Bank shall be borne by the banking company.] 

1. Ins. by Act 4 of 2013, s. 9 (w.e.f.  18-1-2013). 
2. Subs. by Act 58 of 1968, s. 8, for sub-section (1) (w.e.f. 1-2- 1969).  
3. Ins. by s. 8, ibid. (w.e.f. 1-2-1969). 
4. Subs. by Act 66 of 1988, s. 9, for certain words (w.e.f. 30-12-1988).   
5. Subs. by s. 9, ibid., for “the audit of the transaction or class of transactions” (w.e.f. 30-12-1988).   

35 

 
                                                      
(2) The auditor shall have the powers of, exercise the functions vested in, and discharge the duties 
and be subject to the liabilities and penalties imposed on, auditors of companies by 1[section 227 of the 
Companies  Act,  1956  (1  of  1956)].  2[,  and  auditors,  if  any,  appointed  by  the  law  establishing, 
constituting or forming the banking company concerned]. 

(3) In addition to the matters which under the aforesaid Act the auditor is required to state in his 

report, he shall, in the case of a banking company incorporated 3[in India], state in his report,— 

(a)  whether  or  not  the  information  and  explanations  required  by  him  have  been  found  to  be 

satisfactory; 

(b) whether or not the transactions of the company which have come to his notice have been 

within the powers of the company; 

(c)  whether  or not the returns  received  from  branch offices  of the  company  have  been  found 

adequate for the purposes of his audit; 

(d) whether the profit and loss account shows a true balance  4[of profit or loss] for the period 

covered by such account; 

(e) any other matter which he considers should be brought to the notice of the share holders of 

the company. 

31.  Submission  of  returns.—The  accounts  and  balance-sheet  referred  to  in  section  29  together 
with the auditor's report shall be published in the prescribed manner and three copies thereof shall be 
furnished as returns to the Reserve Bank within three months from the end of the period to which they 
refer: 

Provided  that  the  Reserve  Bank  may  in  any  case  extend  the  said  period  of  three  months  for  the 

furnishing of such returns by a further period not exceeding three months: 

5[Provided further that a regional rural bank shall furnish such returns also to the National Bank.] 

 32.  Copies  of  balance-sheets  and  accounts  to  be  sent  to  registrar.—6[(1)  Where  a  banking 
company  in  any  year  furnishes  its  accounts  and  balance-sheet  in  accordance  with  the  provisions  of 
section 31, it shall at the same time send to the registrar three copies of such accounts and balance-sheet 
and of the auditor's report, and where such copies are so sent, it shall not be necessary to file with the 
registrar, in the case of a public company, copies of the accounts and balance-sheet and of the auditor's 
report, and, in the case of a private company, copies of the balance-sheet and of the auditor's report as 
required by sub-section (1) of section 220 of the Companies Act, 1956 (1 of 1956); and the copies so 
sent shall be chargeable with the same fee and shall be dealt with in all respects as if they were filed in 
accordance with that section.] 

(2) When in pursuance of sub-section (2) of section 27 the Reserve Bank requires any additional 
statement or information in connection with the balance-sheet and accounts furnished under section 31, 
the banking company shall, when supplying such statement or information, send a copy thereof to the 
registrar. 

33.  Display  of  audited  balance-sheet  by  companies  incorporated  outside  India.—Every 
banking company incorporated  7[outside India] shall, not later than the first Monday in August of any 
year in which it carries on business, display in a conspicuous place in its principal office and in every 

1. Subs. by Act 58 of 1968, s. 8, for “section 145 of the Indian Companies Act, 1913 (7 of 1913)” (w.e.f. 1-2-1969). 
2. Ins. by Act 66 of 1988, s. 9 (w.e.f. 30-12-1988). 
3. Subs. by Act 20 of 1950, s. 3, for “in a State” (w.e.f. 18-3-1950). 
4. Subs. by Act 55 of 1963, s. 15, for “of profit and loss” (w.e.f. 1-2-1964). 
5. Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 1-5-1982). 
6. Subs. by Act 33 of 1959, s. 19, for sub-section (1) (w.e.f. 1-10- 1959). 
7. Subs. by Act 20 of 1950, s. 3, for “outside the States” (w.e.f. 18-3-1950). 

36 

 
                                                      
branch office  1[in India] a copy of its last audited balance-sheet and profit and loss account prepared 
under  section  29,  and  shall  keep  the  copy  so  displayed  until  replaced  by  a  copy  of  the  subsequent 
balance-sheet and profit and loss account so prepared, and every such banking company shall display in 
like  manner  copies  of  its  complete  audited  balance-sheet  and  profit  and  loss  account  relating  to  its 
banking business as soon as they are available, and shall keep the copies so displayed until copies of 
such subsequent accounts are available. 

34. Accounting provisions of this Act not retrospective.—Nothing in this Act shall apply to the 
preparation of accounts by a banking company and the audit and submission thereof in respect of any 
accounting  year  which  has  expired  prior  to  the  commencement  of  this  Act,  and  notwithstanding  the 
other provisions of this Act, such accounts shall be prepared, audited and submitted in accordance with 
the law in force immediately before the commencement of this Act. 

2[34A. Protection of documents of confidential nature.—(1) Notwithstanding anything contained 
in section 11 of the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being in 
force,  no  banking  company  shall,  in  any  proceeding  under  the  said  Act  or  in  any  appeal  or  other 
proceeding arising therefrom or connected therewith, be compelled by any authority before which such 
proceeding is pending to produce, or give inspection of, any of its books of account or other document 
or  furnish  or  disclose  any  statement  or  information,  when  the  banking  company  claims  that  such 
document, statement or information is of a confidential nature and that the production or inspection of 
such  document  or  the  furnishing  or  disclosure  of  such  statement  or  information  would  involve 
disclosure of information relating to— 

(a) any reserves not shown as such in its published balance-sheet; or 
(b) any particulars not shown therein in respect of provisions made for bad and doubtful debts 

and other usual or necessary provisions. 
(2) If, in any such proceeding in relation to any banking company other than the Reserve Bank of 
India, any question arises as to whether any amount out of the reserves or provisions referred to in sub-
section (1) should be taken into account by the authority before which such proceeding is pending, the 
authority  may,  if  it  so  thinks  fit,  refer the  question  to  the  Reserve  Bank  and  the  Reserve  Bank  shall, 
after  taking  into  account  principles  of  sound  banking  and  all  relevant  circumstances  concerning  the 
banking  company,  furnish  to  the  authority  a  certificate  stating  that  the  authority  shall  not  take  into 
account  any  amount  as  such  reserves  and  provisions  of  the  banking  company  or  may  take  them  into 
account  only  to  the  extent  of  the  amount  specified  by  it  in  the  certificate,  and  the  certificate  of  the 
Reserve Bank on such question shall be final and shall not be called in question in any such proceeding.  
3[(3) For the purposes of this section “banking company” includes the Reserve Bank, 4*** the Exim 
Bank,  5[the  Reconstruction  Bank],  6[the  National  Housing  Bank],  the  National  Bank,  7[,  the  Small 
Industries  Bank  8[,the  National  Bank  for  Financing  Infrastructure  and  Development  or  the  other 
development financial institution,]] the State Bank of India, a corresponding new bank, a regional rural 
bank and a subsidiary bank.]]  

35.  Inspection.—(1)  Notwithstanding  anything  to  the  contrary  contained  in  9[section  235  of  the 
Companies Act, 1956 (1 of 1956)], the Reserve Bank at any time may, and on being directed so to do 
by the Central Government shall, cause an inspection to be made by one or more of its officers of any 
banking  company  and  its  books  and  accounts;  and  the  Reserve  Bank  shall  supply  to  the  banking 
company a copy of its report on such inspection. 

1.  Subs. by Act 20 of 1950, s. 3, for “in the States” (w.e.f. 18-3-1950).   
2. Ins. by Act 23 of 1960, s. 2 (w.e.f. 26-8-1960). 
3. Subs. by Act 1 of 1984, s. 28, for sub-section (3) (w.e.f. 15-2-1984). 
4. The words “the Development Bank” omitted by Act 53 of 2003, s. 12 and the Schedule (w.e.f. 2-7-2004). 
5. Ins. by Act 62 of 1984, s. 71 and the Third Schedule (w.e.f. 20-3-1985). 
6. Ins. by Act 53 of 1987, s. 56 and the Second Schedule (w.e.f. 9-7-1988). 
7. Ins. by Act 39 of 1989, s. 53 and the Second Schedule (w.e.f. 7-3-1990). 
8. Ins. by Act 17 of 2021, s. 48 and the third Schedule (w.e.f. 19-4-2021). 
9.  Subs.  by  Act  95  of  1956,  s.  14  and  Schedule,  for  “section  138  of  the  Indian  Companies  Act,  1913  (7  of  1913)”                          

(w.e.f. 14-10-1957). 

37 

 
                                                      
 1[(1A)  (a)  Notwithstanding  anything  to  the  contrary  contained  in  any  law  for  the  time  being  in 
force  and  without  prejudice  to  the  provisions  of sub-section (1), the  Reserve  Bank,  at  any  time,  may 
also  cause  a  scrutiny  to  be  made  by  any  one  or  more  of  its  officers,  of  the  affairs  of  any  banking 
company and its books and accounts; and 

 (b) a copy of the report of the scrutiny shall be furnished to the banking company if the banking 
company  makes  a  request  for  the  same  or  if  any  adverse  action  is  contemplated  against  the  banking 
company on the basis of the scrutiny.]  

 (2) It shall be the duty of every director or other officer 2[or employee] of the banking company to 
produce  to  any  officer  making  an  inspection  under  sub-section  (1)  3[or  a  scrutiny  under  sub-section 
(1A)] all such books, accounts and other documents in his custody or power and to furnish him with any 
statements  and  information  relating  to  the  affairs  of  the  banking  company  as  the  said  officer  may 
require of him within such time as the said officer may specify. 

(3) Any person making an inspection under sub-section (1)  3[or a scrutiny under sub-section (1A)] 
may examine on oath any director or other officer 2[or employee] of the banking company in relation to 
its business, and may administer an oath accordingly. 

(4)  The  Reserve  Bank  shall,  if  it  has  been  directed  by  the  Central  Government  to  cause  an 
inspection to be made, and may, in any other case, report to the Central Government on any inspection 
4[or scrutiny] made under this section, and the Central Government, if it is of opinion after considering 
the report that the affairs of the banking company are being conducted to the detriment of the interests 
of its depositors, may, after giving such opportunity to the banking company to make a representation in 
connection with the report as, in the opinion of the Central Government, seems reasonable, by order in 
writing— 

(a) prohibit the banking company from receiving fresh deposits; 

(b)  direct  the  Reserve  Bank  to  apply  under  section  38  for  the  winding  up  of  the  banking 

company:  

Provided that the Central Government may defer, for such period as it may think fit, the passing of 
an order under this sub-section, or cancel or modify any such order, upon such terms and conditions as 
it may think fit to impose. 

(5) The Central Government may, after giving reasonable notice to the banking company, publish 

the report submitted by the Reserve Bank or such portion thereof as may appear necessary. 

4[Explanation.—For  the  purposes  of  this  section,  the  expression  “banking  company”  shall 

include— 

(i) in the case of a banking company incorporated outside India, all its branches in India; and 

(ii) in the case of a banking company incorporated in India— 

(a)  all  its  subsidiaries  formed  for  the  purpose  of  carrying  on  the  business  of  banking 

exclusively outside India; and 

(b) all its branches whether situated in India or outside India.] 

5[(6)  The  powers  exercisable  by  the  Reserve  Bank  under  this  section  in  relation  to  regional  rural 
banks  may  (without  prejudice to  the  exercise of  such  powers  by  the  Reserve  Bank  in  relation to  any 
regional  rural  bank  whenever  it  considers  necessary  so  to  do)  be  exercised  by  the  National  Bank  in 
relation to  the regional  rural  banks,  and  accordingly, sub-sections  (1) to  (5)  shall  apply  in  relation to 
regional rural banks as if every reference therein to the Reserve Bank included also a reference to the 
National Bank.] 

1. Ins. by Act 1 of 1984, s. 29 (retrospectively).  
2. Ins. by Act 55 of 1963, s. 17 (w.e.f. 1-2-1964). 
3. Ins. by Act 1 of 1984, s. 29 (w.e.f. 15-2-1984). 
4. Added by Act 33 of 1959, s. 20 (w.e.f. 1-10-1959). 
5. Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 12-7-1982). 

38 

 
                                                      
 1[35A. Power of the Reserve Bank to give directions.—(1) Where the Reserve Bank is satisfied 

that— 

(a) in the 2[public interest]; or 
3[(aa) in the interest of banking policy; or] 
(b) to prevent the affairs of any banking company being conducted in a manner detrimental to 
the interests of the depositors or in a manner prejudicial to the interests of the banking company; or 

(c) to secure the proper management of any banking company generally, 

it  is  necessary  to  issue  directions  to  banking  companies  generally  or  to  any  banking  company  in 
particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or 
the banking company, as the case may be, shall be bound to comply with such directions. 

(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any 
direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such 
conditions as it thinks fit, subject to which the modification or cancellation shall have effect.] 

4[35AA.  Power  of  Central  Government  to  authorise  Reserve  Bank  for  issuing  directions  to 
banking  companies  to  initiate  insolvency  resolution  process.—The  Central  Government  may,  by 
order, authorise the Reserve Bank to issue directions to any banking company or banking companies to 
initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and 
Bankruptcy Code, 2016 (31 of 2016). 

Explanation.—For  the  purposes  of  this  section,  “default”  has  the  same  meaning  assigned  to  it  in 

clause (12) of section 3 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016).  

35AB.  Power  of  Reserve  Bank  to  issue  directions  in  respect  of  stressed  assets.—(1)  Without 
prejudice to the provisions of section 35A, the Reserve Bank may, from time to time, issue directions to 
any banking company or banking companies for resolution of stressed assets. 

(2) The Reserve Bank may specify one or more authorities or committees with such members as the 
Reserve  Bank  may  appoint  or  approve  for  appointment  to  advise  any  banking  company  or  banking 
companies on resolution of stressed assets.] 

5[35B. Amendments of provisions relating to appointments of managing directors, etc., to be 

subject to previous approval of the Reserve Bank.—(1) In the case of a banking company— 

(a) no amendment of any provision relating to  4[the maximum permissible number of directors 
or]  the  6[appointment  or  re-appointment  or  termination  of  appointment  or  remuneration  of  a 
chairman, a] 7[managing director or any other director, whole-time or otherwise] or of a manager or 
a  chief  executive  officer  by  whatever  name  called,  whether  that  provision  be  contained  in  the 
company's memorandum or articles of association, or in an agreement entered into by it, or in any 
resolution passed by the company in general meeting or by its Board of directors shall have effect 
unless approved by the Reserve Bank;  

8[(b)  no  appointment  or  re-appointment  or  termination  of  appointment  of  a  chairman,  a 
managing or whole-time director, manager or chief executive officer by whatever name called, shall 
have  effect  unless  such  appointment,  re-appointment or  termination  of  appointment  is  made  with 
the previous approval of the Reserve Bank.] 
9[Explanation.—For  the  purposes  of  this  sub-section,  any  provision  conferring  any  benefit  or 
providing any amenity or perquisite, in whatever form, whether during or after the termination of the 
term of office 10[of the chairman or the manager] or the chief executive officer by whatever name called 

1. Ins. by Act 95 of 1956, s. 7 (w.e.f. 14-1-1957). 
2. Subs. by Act 7 of 1961, s. 2, for “national interest” (w.e.f. 24-3-1961). 
3. Ins. by Act 58 of 1968, s. 10, (w.e.f. 1-2-1969). 
4. Ins. by Act 30 of 2017, s. 2, (w.e.f. 4-5-2017). 
5. Ins. by Act 1 of 1984, s. 30 (w.e.f. 15-2-1984). 
6. Subs. by Act 58 of 1968, s. 11, ibid, for “appointment or re-appointment or remuneration of a” (w.e.f. 1-2-1969). 
7.  Subs.  by  Act  33  of  1959,  s.  21,  for  “managing  or  whole-time  director  or  of  a  director  not  liable  to  retire  by  rotation”             

(w.e.f. 1-10-1959). 

8. Subs. by Act 58 of 1968, s. 11, for clause (b) (w.e.f. 1-2-1969). 
9. Added by Act 33 of 1959, s. 21 (w.e.f. 1-10-1959). 
10. Subs. by Act 58 of 1968, s. 11, for “of the manager” (w.e.f. 1-2- 1969). 

39 

 
                                                      
or  the  managing  director,  or  any  other  director,  whole-time  or  otherwise,  shall  be  deemed  to  be  a 
provision relating to his remuneration.] 

(2)  Nothing  contained  in  sections  1[268  and  269,  the  proviso  to  sub-section  (3)  of  section  309, 
sections 310 and 311, the proviso to section 387, and section 388] (in so far as section 388 makes the 
2[provisions  of  sections  269,  310]  and  311  apply  in  relation  to  the  manager  of  a  company)  of  the 
Companies Act, 1956 (1 of 1956), shall  3[apply to any matter in respect of which the approval of the 
Reserve Bank has to be obtained under sub-section (1)]. 

4[(2A) Nothing contained in section 198 of the Companies Act, 1956 (1 of 1956) shall apply to a 
Banking company and the provisions of sub-section (1) of section 309 and of section 387 of that Act 
shall, insofar as they are applicable to a banking company, have effect as if no reference had been made 
in the said provisions to section 198 of that Act.] 

(3) No act done by a person  5[as chairman or a managing or whole-time director] or a director not 
liable to retire by rotation or a manager or a chief executive officer by whatever name called, shall be 
deemed  to  be  invalid  on  the  ground  that  it  is  subsequently  discovered  that  his  6[appointment  or                 
re-appointment] had not taken effect by reason of any of the provisions of this Act; but nothing in this 
sub-section shall be construed as rendering valid any act done by such person after his 8[appointment or          
re-appointment] has been shown to the banking company not to have had effect.] 

36. Further powers and functions of Reserve Bank.—(1) The Reserve Bank may— 

(a)  caution  or  prohibit  banking  companies  generally  or  any  banking  company  in  particular 
against entering into any particular transaction or class of transactions, and generally give advice to 
any banking company; 

(b) on a request by the companies concerned and subject to the provisions of section  7[44A], 
assist, as intermediary or otherwise, in proposals for the amalgamation of such banking companies;  
(c)  give  assistance  to  any banking  company  by  means  of  the  grant  of  a  loan  or  advance to it 

under  clause  (3)  of  sub-section  (1)  of  section  18  of  the  Reserve  Bank  of  India  Act,  1934                    
(2 of 1934);  

8[(d) 9[at any time, if it is satisfied that in the public interest or in the interest of banking policy 
or for preventing the affairs of the banking company  being conducted in a manner detrimental to 
the interests of the banking company or its depositors it is necessary so to do,] by order in writing 
and on such terms and conditions as may be specified therein— 

 (i)  require  the  banking  company  to  call  a  meeting  of  its  directors  for  the  purpose  of 
considering  any  matter  relating  to  or  arising  out  of  the  affairs  of  the  banking  company,  or 
require an officer of the banking company to discuss any such matter with an officer an officer 
of the Reserve Bank; 

 (ii) depute one or more of its officers to watch the proceedings at any meeting of the Board 
of directors of the banking company or of any committee or of any other body constituted by it; 
require that banking company to give an opportunity to the officers so deputed to be heard at 
such meetings and also require such officers to send a report of such proceedings to the Reserve 
Bank; 

(iii) require the Board of directors of the banking company or any committee or any other 
body  constituted  by  it  to  give  in  writing  to  any  officer  specified by  the  Reserve  Bank  in this 

1.  Subs. by Act 36 of 1962, s. 7, for “268, 269, 310, 311 and 388”. 
2.  Subs. by Act 1 of 1984, s. 30, for “provisions of section 310” (w.e.f. 15-2-1984). 
3. Subs. by Act 33 of 1959, s. 21, for certain words (w.e.f. 1-10-1959). 
4. Ins. by Act 1 of 1984, s. 30 (w.e.f. 15-2-1984). 
5. Subs. by Act 58 of 1968, s. 11, for “as a managing or whole-time director” (w.e.f. 1-2-1969). 
6.  Subs. by s. 11, ibid., for “appointment” (w.e.f. 1-2-1969). 
7. Subs. by Act 33 of 1959, s. 22, for “45” (w.e.f. 1-10-1959). 
8. Subs. by Act 95 of 1956, s. 8, for cl. (d) (w.e.f. 14-1-1957). 
9. Subs. by Act 58 of 1968, s. 12, for certain words (w.e.f. 1-2- 1969). 

40 

 
                                                      
behalf at his usual address all notices of, and other communications relating to, any meeting of 
the Board, committee or other body constituted by it; 

(iv)  appoint  one  or  more  of  its  officers to  observe  the  manner  in  which the affairs  of the 

banking company or of its offices or branches are being conducted and make a report thereon; 

(v)  require  the  banking  company  to  make,  within  such  time  as  may  be  specified  in  the 

order, such changes in the management as the Reserve Bank may consider necessary 1***.] 
(2)  The  Reserve  Bank  shall  make  an  annual  report  to  the  Central  Government  on  the  trend  and 
progress of banking in the country, with particular reference to its activities under clause (2) of section 
17 of the Reserve Bank of India Act, 1934 (2 of 1934), including in such report its suggestions, if any, 
for the strengthening of banking business throughout the country. 

(3)  The  Reserve  Bank  may  appoint  such  staff  at  such  places  as  it  considers  necessary  for  the 
scrutiny of the returns, statements and information furnished by banking companies under this Act, and 
generally to ensure the efficient performance of its functions under this Act. 

2[36A.  Certain  provisions  of  the  Act  not  to  apply  to  certain  banking  companies.—(1)  The 
provisions of section 11, sub-section (1) of section 12, and sections 17, 18, 24 and 25 shall not apply to 
a banking company— 

(a) which, whether before or after the commencement of the Banking Companies (Amendment) 
Act, 1959 (33 of 1959), has been refused a licence under section 22, or prohibited from accepting 
fresh deposits by a compromise, arrangement or scheme sanctioned by a court or by any order made 
in  any  proceeding  relating  to  such  compromise,  arrangement  or  scheme,  or  prohibited  from 
accepting deposits by virtue of any alteration made in its memorandum; or 

(b)  whose  licence  has  been  cancelled  under  section  22,  whether  before  or  after  the 

commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959). 
(2)  Where  the  Reserve  Bank  is  satisfied  that  any  such  banking  company  as  is  referred  to  in              

sub-section  (1)  has  repaid,  or  has  made  adequate  provision  for  repaying  all  deposits  accepted  by  the 
banking company, either in full or to the maximum extent possible, the Reserve Bank may, by notice 
published in the Official Gazette, notify that the banking company has ceased to be a banking company 
within the meaning of this Act, and thereupon all the provisions of this Act applicable to such banking 
company  shall cease to  apply  to it, except as respects  things  done  or  omitted  to  be  done  before such 
notice.] 

3[PART IIA 
CONTROL OVER MANAGEMENT 
36AA.  Power  of  Reserve  Bank  to  remove  managerial  and  other  persons  from  office.—(1) 
Where the Reserve Bank is satisfied that in the public interest or for preventing the affairs of a banking 
company being conducted in a manner detrimental to the interests of the depositors or for securing the 
proper  management  of  any  banking  company  it  is  necessary  so  to  do,  the  Reserve  Bank  may,  for 
reasons to be recorded in writing, by order, remove from office, with effect from such date as may be 
specified in the order,  4[any chairman, director,] chief executive officer (by whatever name called) or 
other officer or employee of the banking company. 

(2) No order under sub-section (1) shall be made 5[unless the chairman, director] or chief executive 
officer  or  other  officer  or  employee  concerned  has  been  given  a  reasonable  opportunity  of  making  a 
representation to the Reserve Bank against the proposed order: 

Provided that if, in the opinion of the Reserve Bank, any delay would be detrimental to the interests 

of  the  banking  company  or  its  depositors,  the  Reserve  Bank  may,  at  the  time  of  giving  the             
opportunity  aforesaid  or  at  any  time  thereafter,  by  order  direct  that,  pending  the  consideration  of  the 

1. Certain words omitted by Act 58 of 1968, s. 12 (w.e.f. 1-2-1969). 
2. Ins. by Act 33 of 1959, s. 23 (w.e.f. 1-10-1959). 
3.  Ins. by Act 55 of 1963, s. 18 (w.e.f. 1-2-1964). 
4.  Subs. by Act 58 of 1968, s. 13, for “any director” (w.e.f. 1-2- 1969). 
5. Subs. by s. 13, ibid., for “unless the director” (w.e.f. 1-2- 1969). 

41 

 
                                                      
representation  aforesaid,  if  any,  1[the  chairman  or,  as  the  case  may  be,  director  or  chief  executive 
officer] or other officer or employee, shall not, with effect from the date of such order— 

(a) 2[act as such chairman or director] or chief executive officer or other officer or employee of 

the banking company; 

(b)  in  any  way,  whether  directly  or  indirectly,  be  concerned  with,  or  take  part  in  the 

management of, the banking company. 

(3) (a) Any person against whom an order of removal has been made under sub-section (1) may, 
within thirty days from the date of communication to him of the order, prefer an appeal to the Central 
Government. 

(b) The decision of the Central Government on such appeal, and subject thereto, the order made by 
the Reserve Bank under sub-section (1), shall be final and shall not be called into question in any court. 

(4) Where any order is made in respect of 3[a chairman, director] or chief executive officer or other 
officer or employee of a banking company under sub-section (1), he shall cease to be  4[a chairman or, 
as  the  case  may  be,  a  director,]  chief  executive  officer  or  other  officer  or  employee  of  the  banking 
company and shall not, in any way, whether directly or indirectly, be concerned with, or take part in the 
management of, any banking company for such period not exceeding five years as may be specified in 
the order. 

(5) If any person in respect of whom an order is made by the Reserve Bank under sub-section (1) or 
under the proviso to sub-section (2) contravenes the provisions of this section, he shall be punishable 
with  fine  which  may  extend  to  two  hundred  and  fifty  rupees  for  each  day  during  which  such 
contravention continues. 

(6)  Where  an  order  under  sub-section  (1)  has  been  made,  the  Reserve  Bank  may,  by  order  in 
writing, appoint a suitable person in place of  5[the chairman or director] or chief executive officer or 
other  officer  or  employee  who  has  been  removed  from  his  office  under  that  sub-section,  with  effect 
from such date as may be specified in the order. 

(7)  Any  person  appointed  as  6[chairman,  director  or  chief  executive  officer]  or  other  officer  or 

employee under this section, shall— 

(a)  hold  office  during  the  pleasure  of  the  Reserve  Bank  and  subject  thereto  for  a  period  not 
exceeding  three  years  or  such  further  periods  not  exceeding  three  years  at  a  time  as  the  Reserve 
Bank may specify; 

(b)  not  incur  any  obligation  or  liability  by  reason  only  of  his  being  a  [chairman,  director  or 
chief executive officer] or other officer or employee or for anything done or omitted to be done in 
good faith in the execution of the duties of his office or in relation thereto. 

(8) Notwithstanding anything contained in any law or in any contract, memorandum or articles of 
association, on the removal of a person from office under this section, that person shall not be entitled 
to claim any compensation for the loss or termination of office. 

36AB. Power of Reserve Bank to appoint additional directors.—(1) If the Reserve Bank is of 
7[opinion  that  in  the  interest  of  banking  policy  or  in  the  public  interest  or]  in  the  interests  of  the  
banking company or its depositors it is necessary so to do, it may, from time to time by order in writing, 

1. Subs. by Act 58 of 1968, s. 13, for “the director or, as the case may be, chief executive officer” (w.e.f. 1-2-1969). 
2. Subs. by s. 13, ibid., for “act as such director” (w.e.f. 1-2- 1969). 
3.  Subs. by s. 13, ibid., for “a director” (w.e.f. 1-2-1969). 
4. Subs. by s. 13, ibid., for “a director or as the case may be,” (w.e.f. 1-2-1969). 
5. Subs. by s. 13, ibid., for “the director” (w.e.f. 1-2-1969). 
6. Subs. by s. 13, ibid., for “director or chief executive officer” (w.e.f. 1-2-1969). 
7. Subs. by s. 14, ibid., for “opinion that” (w.e.f. 1-2-1969). 

42 

 
                                                      
appoint, with effect from such date as may be specified in the order, one or more persons to hold office 
as additional directors of the banking company. 

1* 

 * 

 * 

 * 

 * 

(2) Any person appointed as additional director in pursuance of this section— 

 (a) shall hold office during the pleasure of the Reserve Bank and subject thereto for a period 
not exceeding three years or such further periods not exceeding three years at a time as the Reserve 
Bank may specify; 

(b)  shall  not  incur  any  obligation  or  liability  by  reason  only  of  his  being  a  director  or  for 
anything done or omitted to be done in good faith in the execution of the duties of his office or in 
relation thereto; and  

(c) shall not be required to hold qualification shares in the banking company. 

(3)  For  the  purpose  of  reckoning  any  proportion  of  the  total  number  of  directors  of  the  banking 

company, any additional director appointed under this section shall not be taken into account. 

36AC.  Part  IIA  to  override  other  laws.—Any  appointment  or  removal  of  a  director,  chief 
executive officer or other officer or employee in pursuance of section 36AA or section 36AB shall have 
effect notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or 
any other law for the time being in force or in any contract or any other instrument.] 

2[PART IIAB 

SUPERSESSION OF BOARD OF DIRECTORS OF BANKING COMPANY 

36ACA. Supersession of Board of Directors in certain cases.—(1) Where the Reserve Bank is 
satisfied, in consultation with the Central Government, that in the public interest or for preventing the 
affairs  of  any  banking  company  being  conducted  in  a  manner  detrimental  to  the  interest  of  the 
depositors or any banking company or for securing the proper management of any banking company, it 
is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing, by order, supersede 
the  Board  of  Directors  of  such  banking  company  for  a  period  not  exceeding  six  months  as  may  be 
specified in the order:  

Provided that the period of supersession of the Board of Directors may be extended from time to 

time, so, however, that the total period shall not exceed twelve months. 

(2)  The  Reserve  Bank  may,  on  supersession  of  the  Board  of  Directors  of  the  banking  company 
under  sub-section  (1)  appoint  in  consultation  with  the  Central  Government  for such  period  as  it  may 
determine, an Administrator (not being an officer of the Central Government or a State Government) 
who has experience in law, finance, banking, economics or accountancy. 

(3) The Reserve Bank may issue such directions to the Administrator as it may deem appropriate 

and the Administrator shall be bound to follow such directions. 

(4)  Upon  making  the  order  of  supersession  of  the  Board  of  Directors  of  a  banking  company, 

notwithstanding anything contained in the Companies Act, 1956 (1 of 1956),— 

(a) the chairman, managing director and other directors shall, as from the date of supersession, 

vacate their offices as such; 

(b)  all  the  powers,  functions  and  duties  which  may,  by  or  under  the  provisions  of  the 
Companies  Act,  1956  (1  of  1956)  or  this  Act,  or  any  other  law  for  the  time  being  in  force,  be 
exercised and discharged by or on behalf of the Board of Directors of such banking company, or           
by  a  resolution  passed  in  general  meeting  of  such  banking  company,  shall,  until  the  Board  of 

1. Proviso omitted by Act 1 of 1984, s. 31 (w.e.f. 15-2-1984). 
2. Ins. by Act 4 of 2013, s. 10 (w.e.f. 18-1-2013). 

43 

 
 
 
 
 
 
 
 
 
                                                      
Directors  of  such  banking  company  is  reconstituted,  be  exercised  and  discharged  by  the 
Administrator appointed by the Reserve Bank under sub-section (2): 

Provided  that  the  power  exercised  by  the  Administrator  shall  be  valid  notwithstanding  that  such 

power is exercisable by a resolution passed in the general meeting of such banking company. 

(5) The Reserve Bank may constitute, in consultation with the Central Government, a committee of 
three  or  more  persons  who  have  experience  in  law,  finance,  banking,  economics  or  accountancy  to 
assist the Administrator in the discharge of his duties. 

(6) The committee shall meet at such times and places and observe such rules of procedure as may 

be specified by the Reserve Bank. 

(7) The salary and allowances to the Administrator and the members of the committee constituted 
under sub-section (5) by the Reserve Bank shall be such as may be specified by the Reserve Bank and 
be payable by the concerned banking company. 

(8) On and before the expiration of two months before the expiry of the period of supersession of 
the Board of Directors as specified in the order issued under sub-section (1), the Administrator of the 
banking company, shall call the general meeting of the company to elect new directors and reconstitute 
its Board of Directors.  

(9)  Notwithstanding  anything  contained in  any  other law  or  in any  contract, the  memorandum  or 
articles of association, no person shall be entitled to claim any compensation for the loss or termination 
of his office. 

(10)  The  Administrator  appointed  under  sub-section  (2)  shall  vacate  office  immediately  after  the 

Board of Directors of such banking company has been reconstituted.] 

1[PART IIB 

PROHIBITION OF CERTAIN ACTIVITIES IN RELATION TO BANKING COMPANIES 

36AD.  Punishments  for  certain  activities  in  relation  to  banking  companies.—(1)  No  person 

shall— 

(a) obstruct any person from lawfully entering or leaving any office or place of business of a 

banking company or from carrying on any business there, or 

(b)  hold,  within  the  office  or  place  of  business  of  any  banking  company,  any  demonstration 
which is violent or which prevents, or is calculated to prevent, the transaction of normal business by 
the banking company, or 

(c) act in any manner calculated to undermine the confidence of the depositors in the banking 

company. 

(2) Whoever contravenes any provision of sub-section (1) without any reasonable excuse 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. 

2[(3) For the purposes of this section “banking company” includes the Reserve Bank, 3*** the Exim 
Bank  4[the  Reconstruction  Bank],  5[the  National  Housing  Bank],  the  National  Bank,  6[the  Small 
Industries  Bank  7[,  the  National  Bank  for  Financing  Infrastructure  and  Development  or  the  other 
development financial institution,]] the State Bank of India, a corresponding new bank, a regional rural 
bank and a subsidiary bank].  

1.  Ins. by Act 58 of 1968, s. 15 (w.e.f. 1-2-1969). 
2. Subs. by Act 1 of 1984, s. 32, for sub-section (3) (w.e.f. 15-2-1984). 
3. The words “the Development Bank” omitted by Act 53 of 2003, s. 12 and Schedule (w.e.f. 2-7-2004). 
4. Ins. by Act 62 of 1984, s. 71 and the Third Schedule (w.e.f. 20-3-1985). 
5. Ins. by Act 53 of 1987 s. 56 and the Second Schedule (w.e.f. 9-7-1988). 
6. Ins. by Act 39 of 1989, s. 53 and the Second Schedule (w.e.f. 7-3-1990). 
7. Ins. by Act 17 of 2021, s. 48 and the third Schedule (w.e.f. 19-4-2021). 

44 

 
                                                      
PART IIC 

ACQUISITION OF THE UNDERTAKINGS OF BANKING COMPANIES IN CERTAIN CASES 

36AE.  Power  of  Central  Government  to  acquire  undertakings  of  banking  companies  in 
certain  cases.—(1)  If,  upon  receipt  of  a  report  from  the  Reserve  Bank,  the  Central  Government  is 
satisfied that a banking company— 

(a) has, on more than one occasion, failed to comply with the directions given to it in writing 

under section 21 or section 35A, in so far as such directions relate to banking policy, or 

(b) is being managed in a manner detrimental to the interests of its depositors,— 

 and that— 

(i) in the interests of the depositors of such banking company, or 

(ii) in the interest of banking policy, or 

(iii) for the better provision of credit generally or of credit to any particular section of the 

community or in any particular area,  

it is necessary to acquire the undertaking of such banking company, the Central Government may, after 
such consultation with the Reserve Bank as it thinks fit, by notified order, acquire the undertaking of 
such  company  (hereinafter  referred  to  as  the  acquired  bank)  with  effect  from  such  date  as  may  be 
specified in this behalf by the Central Government (hereinafter referred to as the appointed day): 

Provided  that  no  undertaking  of  any  banking  company  shall  be  so  acquired  unless  such  banking 

company has been given a reasonable opportunity of showing cause against the proposed action.  

Explanation.—In this Part,—  

(a) “notified order” means an order published in the Official Gazette; 

(b)  “undertaking”,  in  relation  to  a  banking  company  incorporated  outside  India,  means  the 

undertaking of the company in India. 

(2) Subject to the other provisions contained in this Part, on the appointed day, the undertaking of 
the acquired bank and all the assets and liabilities of the acquired bank shall stand transferred to, and 
vest in, the Central Government. 

(3) The undertaking of the acquired bank and its assets and liabilities shall be deemed to include all 
rights, powers, authorities and privileges and all property, whether movable or immovable, including, in 
particular,  cash  balances,  reserve  funds,  investments,  deposits  and  all  other  interests  and  rights  in,  or 
arising out of, such property as may be in the possession of, or held by, the acquired bank immediately 
before  the  appointed  day  and  all  books,  accounts  and  documents  relating  thereto,  and  shall  also  be 
deemed to include all debts, liabilities and obligations, of whatever kind, then existing of the acquired 
bank. 

(4)  Notwithstanding  anything  contained  in  sub-section  (2),  the  Central  Government  may,  if  it  is 
satisfied that the undertaking of the acquired bank and its assets and liabilities should, instead of vesting 
in the Central Government, or continuing to so vest, vest in a company established under any scheme 
made under this Part or in any corporation (hereinafter in this Part and in the Fifth Schedule referred to 
as the transferee bank) that Government may, by order, direct that the said undertaking, including the 
assets and liabilities thereof, shall vest in the transferee bank either on the publication of the notified 
order or on such other date as may be specified in this behalf by the Central Government.  

(5)  Where  the  undertaking  of  the  acquired  bank  and  the  assets  and  liabilities  thereof  vest  in  the 
transferee bank under sub-section (4), the transferee bank, shall, on and from the date of such vesting, 
be  deemed  to  have  become  the  transferee  of  the  acquired  bank  and  all  the  rights  and  liabilities  in 
relation to the acquired bank shall, on and from the date of such vesting, be deemed to have been the 
rights and liabilities of the transferee bank. 

45 

 
(6)  Unless  otherwise  expressly  provided  by  or  under  this  Part,  all  contracts,  deeds,  bonds, 
agreements, powers of attorney, grants of legal representation and other instruments of whatever nature 
subsisting or having effect immediately before the appointed day and to which the acquired bank is a 
party or which are in favour of the acquired bank shall be of as full force and effect against or in favour 
of the Central Government, or as the case may be, of the transferee bank, and may be enforced or acted 
upon  as  fully  and  effectually  as  if  in  the  place  of  the  acquired  bank  the  Central  Government  or  the 
transferee  bank  had  been  a  party  thereto  or  as  if  they  had  been  issued  in  favour  of  the  Central 
Government or the transferee bank, as the case may be. 

(7) If, on the appointed day, any suit, appeal or other proceeding of whatever nature is pending by 
or against the acquired bank, the same shall not abate, be discontinued or be, in any way, prejudicially 
affected by reason of the transfer of the undertaking of the acquired bank or of anything contained in 
this  Part,  but  the  suit,  appeal  or  other  proceeding  may  be  continued,  prosecuted  and  enforced  by  or 
against the Central Government or the transferee bank, as the case may be. 

36AF. Power of the Central Government to make scheme.—(1) The Central Government may 
after consultation with the Reserve Bank, make a scheme for carrying out the purposes of this Part in 
relation to any acquired bank. 

(2) In particular, and without prejudice to the generality of the foregoing power, the said scheme 

may provide for all or any of the following matters, namely:— 

(a)  the  corporation,  or  the  company  incorporated  for  the  purpose,  to  which  the  undertaking 
including  the  property,  assets  and  liabilities  of  the  acquired  bank  may  be  transferred,  and  the 
capital, constitution, name and office thereof; 

(b)  the  constitution  of  the  first  Board  of  management  (by  whatever  name  called)  of  the 
transferee  bank,  and  all  such  matters  in  connection  therewith  or  incidental  thereto  as  the  Central 
Government may consider to be necessary or expedient; 

(c) the continuance of the services of all the employee of the acquired bank (excepting such of 
them as, not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947), 
are specifically mentioned in the scheme) in the Central Government or in the transferee bank, as 
the case may be, on the same terms and conditions so far as may be, as are specified in clauses (i) 
and (j) of sub-section (5) of section 45; 

(d) the continuance of the right of any person who, on the appointed day, is entitled to or is in 
receipt  of,  a  pension  or  other  superannuation  or  compassionate  allowance  or  benefit,  from  the 
acquired bank or any provident, pension or other fund or any authority administering such fund, to 
be paid by, and to receive from, the Central Government or the transferee bank, as the case may be, 
or any provident, pension or other fund or any authority administering such fund, the same pension, 
allowance  or  benefit  so  long  as  he  observes  the  conditions  on  which  the  pension,  allowance  or 
benefit  was  granted,  and  if  any  question  arises  whether  he  has  so  observed  such  conditions,  the 
question  shall  be  determined  by  the  Central  Government  and  the  decision  of  the  Central 
Government thereon shall be final; 

(e) the manner of payment of the compensation payable in accordance with the provisions of 
this Part to the shareholders of the acquired bank, or where the acquired bank is a banking company 
incorporated outside India, to the acquired bank in full satisfaction of their, or as the case may be, 
its, claims; 

(f) the provision, if any, for completing the effectual transfer to the Central Government or the 
transferee  bank  of  any  asset  or  any  liability  which  forms  part  of  the  undertaking  of  the  acquired 
bank in any country outside India; 

(g) such incidental, consequential and supplemental matters as may be necessary to secure that 
the  transfer  of  the  business,  property,  assets  and  liabilities  of  the  acquired  bank  to  the  Central 
Government or transferee bank, as the case may be, is effectual and complete. 

46 

 
(3) The Central Government may, after consultation with the Reserve Bank, by notification in the 

Official Gazette, add to, amend or vary any scheme made under this section. 

(4) Every scheme made under this section shall be published in the Official Gazette. 

(5) Copies of every scheme made under this section shall be laid before each House of Parliament 

as soon as may be after it is made. 

(6)  The  provisions  of  this  Part  and  of  any  scheme  made  thereunder  shall  have  effect 
notwithstanding anything to the contrary contained in any other provisions of this Act or in any other 
law or any agreement, award or other instrument for the time being in force. 

(7) Every scheme  made under this section shall be binding on the Central Government or, as the 
case may be, on the transferee bank and also on all members, creditors, depositors and employees of the 
acquired bank and of the transferee bank and on any other person having any right, liability, power or 
function in relation to, or in connection with, the acquired bank or the transferee bank, as the case may 
be. 

36AG.  Compensation  to  be  given  to  shareholders  of  the  acquired  bank.—(1)  Every  person 
who, immediately before the appointed day, is registered as a holder of shares in the acquired bank or, 
where the acquired bank is a banking company incorporated outside India, the acquired bank, shall be 
given  by  the  Central  Government,  or  the  transferee  bank,  as  the  case  may  be,  such  compensation  in 
respect of the transfer of the undertaking of the acquired bank as is determined in accordance with the 
principles contained in the Fifth Schedule. 

(2) Nothing contained in sub-section (1) shall affect the rights  inter se between the holder of any 
share  in  the  acquired  bank  and  any  other  person  who  may  have  any  interest  in  such  shares  and  such 
other person shall be entitled to enforce his interest against the compensation awarded to the holder of 
such share, but not against the Central Government, or the transferee bank. 

(3)  The  amount  of  compensation  to  be  given  in  accordance  with  the  principles  contained  in  the 
Fifth  Schedule  shall  be  determined  in  the  first  instance  by  the  Central  Government,  or  the  transferee 
bank, as the case may be, in consultation with the Reserve Bank, and shall be offered by it to all those 
to whom compensation is payable under sub- section (1) in full satisfaction thereof. 

(4)  If  the  amount  of  compensation  offered  in  terms  of  sub-section  (3)  is  not  acceptable  to  any 
person to whom the compensation is payable, such person may, before such date as may be notified by 
the Central Government in the Official Gazette, request the Central Government in writing, to have the 
matter referred to the Tribunal constituted under section 36AH. 

(5) If, before the date notified under sub-section (4), the Central Government receives requests, in 
terms of that sub-section, from not less than one-fourth in number of the shareholders holding not less 
than one-fourth in value of the paid-up share capital of the acquired bank, or, where the acquired bank 
is a banking company incorporated outside India, from the acquired bank, the Central Government shall 
have the matter referred to the Tribunal for decision. 

(6)  If,  before  the  date  notified  under  sub-section  (4),  the  Central  Government  does  not  receive 
requests as provided in that sub- section, the amount of compensation offered under sub-section (3), and 
where  a  reference  has  been  made  to  the  Tribunal,  the  amount  determined  by  it,  shall  be  the 
compensation payable under sub-section (1) and shall be final and binding on all parties concerned. 

36AH. Constitution of the Tribunal.—(1) The Central Government may, for the purpose of this 

Part, constitute a Tribunal which shall consist of a Chairman and two other members. 

(2) The Chairman shall be a person who is, or has been, a Judge of a High Court or of the Supreme 
Court,  and,  of  the  two  other  members,  one  shall  be  a  person,  who,  in  the  opinion  of  the  Central 
Government,  has  had  experience  of  commercial  banking  and  the  other  shall  be  a  person  who  is  a 
chartered accountant within the meaning of the Chartered Accountants’ Act, 1949 (38 of 1949).  

47 

 
(3) If, for any reason, a vacancy occurs in the office of the Chairman or any other member of the 
Tribunal,  the  Central  Government  may  fill  the  vacancy  by  appointing  another  person  thereto  in 
accordance  with  the  provisions  of  sub-section  (2),  and  any  proceeding  may  be  continued  before  the 
Tribunal, so constituted, from the stage at which the vacancy occurred. 

(4) The  Tribunal  may,  for  the  purpose  of  determining  any  compensation  payable  under  this  Part, 
choose one or more persons having special knowledge or experience of any relevant matter to assist it 
in the determination of such compensation.  

36AI. Tribunal to have powers of a civil court.—(1) The Tribunal shall have the powers of a civil 
court,  while  trying  a  suit,  under  the  Code  of  Civil  Procedure,  1908  (5  of  1908),  in  respect  of  the 
following matters, namely:— 

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

(b) requiring the discovery and production of documents; 

(c) receiving evidence on affidavits; 

(d) issuing commissions for the examination of witnesses or documents. 

(2) Notwithstanding anything contained in sub-section (1), or in any other law for the time being in 

force, the Tribunal shall not compel the Central Government or the Reserve Bank,— 

(a) to produce any books of account or other documents which the Central Government, or the 

Reserve Bank, claims to be of a confidential nature; 

(b)  to  make  any  such  books  or  documents  part  of  the  record  of  the  proceedings  before  the 

Tribunal; or 

(c)  to  give  inspection  of  any  such  books  or  documents  to  any  party  before  it  or  to  any  other 

person. 

36AJ.  Procedure  of  the  Tribunal.—(1)  The  Tribunal  shall  have  power  to  regulate  its  own 

procedure. 

(2) The Tribunal may hold the whole or any part of its inquiry in camera. 

(3) Any clerical or arithmetical error in any order of the Tribunal or any error arising therein from 
any  accidental  slip  or  ommission  may,  at  any  time,  be  corrected  by  the  Tribunal  either  of  its  own 
motion or on the application of any of the parties.] 

PART III 

SUSPENSION OF BUSINESS AND WINDING UP OF BANKING COMPANIES 

1[2[36B.] High Court defined.—In this Part and in Part IIIA, “High Court”, in relation to a banking 
company, means the High Court exercising Jurisdiction in the place where the registered office of the 
banking company is situated or, in the case of a banking company incorporated outside India, where its 
principal place of business in India is situated.] 

37. Suspension of business.—(1) The 3[High Court] may on the application of a banking company 
which is temporarily unable to meet its obligations make an order (a copy of which it shall cause to be 
forwarded  to  the  Reserve  Bank)  staying  the  commencement  or  continuance  of  all  actions  and 
proceedings  against  the  company  for  a  fixed  period  of  time  on  such  terms  and  conditions  as  it  shall 
think fit and proper, and may from time to time extend the period so however that the total period of 
moratorium shall not exceed six months. 

1. Ins. by Act 52 of 1953, s. 3.   
2. Section 36A renumbered as section 36B by Act 33 of 1959, s. 24 (w.e.f. 1-10-1959). 
3.  Subs. by Act 52 of 1953, s. 4, for “Court”. 

48 

 
                                                      
(2) No such application shall be maintainable unless it is accompanied by a report of the Reserve 
Bank indicating that in the opinion of the Reserve Bank the banking company  will be able to pay its 
debts if the application is granted: 

Provided that the  1[High Court] may, for sufficient reasons, grant relief under this section even if 
the application is not accompanied by such report, and where such relief is granted, the  1[High Court] 
shall call for a report from the Reserve Bank on the affairs of the banking company, on receipt of which 
it may either rescind any order already passed or pass such further orders thereon as may be just and 
proper in the circumstances. 

2[(3)  When  an  application  is  made  under  sub-section  (1),  the  High  Court  may  appoint  a  special 
officer who shall forthwith take into his custody or under his control all the assets, books, documents, 
effects and actionable claims to which the banking company is or appears to be entitled and shall also 
exercise  such  other  powers  as  the  High  Court  may  deem  fit  to  confer  on  him,  having  regard  to  the 
interests of the depositors of the banking company.] 

3[(4) Where the Reserve Bank is satisfied that the affairs of a banking company in respect of which 
an  order  under  sub-section  (1)  has  been  made,  are  being  conducted  in  a  manner  detrimental  to  the 
interests  of  the  depositors,  it  may  make  an  application  to  the  High  Court  for  the  winding  up  of  the 
company, and where any such application is made, the High Court shall not make any order extending 
the  period  for  which  the  commencement  or  continuance  of  all  actions  and  proceedings  against  the 
company were stayed under that sub- section.]  

4[38.  Winding  up  by  High  Court.—(1)  Notwithstanding  anything  contained  in  section  391  
section 392, section 433 and section 583 of the Companies Act, 1956 (1 of 1956), but without prejudice 
to its powers under sub-section (1) of section 37 of this Act, the High Court shall order the winding up 
of a banking company— 

(a) if the banking company is unable to pay its debts; or 

(b) if an application for its winding up has been made by the Reserve bank under section 37 or 

this section. 

(2) The Reserve Bank shall make an application under this section for the winding up of a banking 

company if it is directed so to do by an order under clause (b) of sub-section (4) of section 35. 

(3) The Reserve Bank may make an application under this section for the winding up of a banking 

company— 

(a) if the banking company— 

(i) has failed to comply with the requirements specified in section 11; or  

(ii)  has  by  reason  of  the  provisions  of  section  22  become  disentitled to  carry  on  banking 

business in India; or 

(iii)  has  been  prohibited  from  receiving  fresh  deposits  by  an  order  under  clause  (a)  of           

sub-section  (4)  of  section  35  or  under  clause  (b)  of  sub-section  (3A)  of  section  42  of  the 
Reserve Bank of India Act, 1934 (2 of 1934.); or 

(iv) having failed to comply with any requirement of this Act other than the requirements 
laid  down  in  section  11,  has  continued  such  failure,  or,  having  contravened  any  provision  of 
this Act has continued such contravention beyond such period or periods as may be specified in 
that  behalf  by  the  Reserve  Bank  from  time  to  time,  after  notice  in  writing  of  such  failure  or 
contravention has been conveyed to the banking company; or 

1. Subs. by Act 52 of 1953, s. 4, for “Court” (w.e.f. 30-12-1953). 
2. Ins. by s. 5, ibid. (w.e.f. 30-12-1953). 
3. Ins. by Act 33 of 1959, s. 25 (w.e.f. 1-10-1959). 
4. Subs. by s. 26, ibid., for section 38 (w.e.f. 1- 10-1959). 

49 

 
                                                      
(b) if in the opinion of the Reserve Bank— 

(i) a compromise or arrangement sanctioned by a Court in respect of the banking company 

cannot be worked satisfactorily with or without modifications; or 

(ii)  the  returns,  statements  or  information  furnished  to  it  under  or  in  pursuance  of  the 

provisions of this Act disclose that the banking company is unable to pay its debts; or 

(iii) the continuance of the banking company is prejudicial to the interests of its depositors. 

(4)  Without  prejudice  to  the  provisions  contained  in  section  434  of  the  Companies  Act,  1956             

(1 of 1956), a banking company shall be deemed to be unable to pay its debts if it has refused to meet 
any lawful demand made at any of its offices or branches within two working days, if such demand is 
made at a place where there is an office, branch or agency of the Reserve Bank, or within five working 
days, if such demand is made elsewhere, and if the Reserve Bank certifies in writing that the banking 
company is unable to pay its debts. 

(5) A copy of every application made by the Reserve Bank under sub-section (1) shall be sent by 

the Reserve Bank to the registrar.] 

1[38A. Court Liquidator.—(1) There shall be attached to every High Court a court liquidator to be 
appointed by the Central Government for the purpose of conducting all proceedings for the winding up 
of  banking  companies  and  performing  such  other  duties  in  reference  thereto  as  the  High  Court  may 
impose. 

2* 

* 

* 

* 

* 

(4) Where having regard to the number of banking companies wound up and other circumstances of 
the case, the Central Government is of opinion that it is not necessary or expedient to attach for the time 
being  a  court  liquidator  to  a  High  Court,  it  may,  from  time  to  time,  by  notification  in  the  Official 
Gazette, direct that this section shall not have effect in relation to that High Court.] 

3[39.  Reserve  Bank  to  be  official  Liquidator.—4[(1)]  Notwithstanding  anything  contained  in 
section 38A of this Act or in section 448 or section 449 of the Companies Act, 1956 (1 of 1956), where 
in any proceeding for the winding up by the High Court of a banking company, an application is made 
by the Reserve Bank in this behalf, the Reserve Bank, the State Bank of India or any other bank notified 
by  the  Central  Government  in  this  behalf  or  any  individual,  as  stated  in  such  application  shall  be 
appointed  as  the  official  liquidator  of  the  banking  company  in  such  proceeding  and  the  liquidator,  if 
any, functioning in such proceeding shall vacate office upon such appointment.] 

5[(2) Subject to such directions as may be made by the High Court, the remuneration of the official 
liquidator  appointed  under  this  section,  the  cost  and  expenses  of  his  establishment  and  the  cost  and 
expenses of the winding up shall be met out of the assets of the banking company which is being wound 
up, and notwithstanding anything to the contrary contained in any other law for the time being in force, 
no fees shall be payable to the Central Government, out of the assets of the banking company.] 

6[39A. Application of Companies Act to liquidators.—(1) All the provisions of the Companies 
Act, 1956 (1 of 1956), relating to a liquidator, in so far as they are not inconsistent with this Act, shall 
apply to or in relation to a liquidator appointed under section 38A or section 39. 

1. Ins. by Act 52 of 1953, s. 6 (w.e.f. 30-12-1953). 
2. Omitted by Act 95 of 1956, s. 14 and Schedule (w.e.f. 14-1-1957). 
3. Section 39 has been amended by Acts 52 of 1953, sections  4 and 7; Act 23 of 1955, s. 53 and the Fourth Schedule; Act 79 
of 1956, s. 43 and the Second Schedule; Act 95 of 1956, s. 14 and the Schedule; Act 33 of 1959, s. 27 and  Act 37 of 1960, 
s. 2 to read as above. 

4. Section 39 re-numbered as sub-section (1) thereof by Act 58 of 1968, s. 16 (retrospectively). 
5.  Ins. by s. 16, ibid. (with retrospective effect). 
6. Ins. by Act 33 of 1959, s. 28 (w.e.f. 1-10-1959). 

50 

 
 
 
 
 
 
 
 
 
                                                      
(2)  Any  reference  to  the  “official  liquidator”  in  this  Part  and  Part  IIIA  shall  be  construed  as 

including a reference to any liquidator of a banking company.] 

40. Stay of proceedings.— Notwithstanding anything to the contrary contained in 1[section 466 of 
the  Companies  Act,  1956  (1  of  1956)],  the  2[High  Court]  shall  not  make  any  order  staying  the 
proceedings in relation to the winding up of a banking company, unless the  2[High Court] is satisfied 
that an arrangement has been made whereby the company can pay its depositors in full as their claims 
accrue. 

3[41.  Preliminary  report  by  official  liquidator.—Notwithstanding  anything  to  the  contrary 
contained in section 455 of the Companies Act, 1956 (1 of 1956), where a winding up order has been 
made  in  respect  of  a  banking  company  whether  before  or  after  the  commencement  of  the  Banking 
Companies  (Second  Amendment)  Act,  1960  (37  of  1960),  the  official  liquidator  shall  submit  a 
preliminary report to the High Court within two months from the date of the winding up order or where 
the  winding  up  order  has  been  made  before  such  commencement,  within  two  months  from  such 
commencement, giving the information required by that section so far as it is available to him and also 
stating  the  amount  of  assets  of  the  banking  company  in  cash  which  are  in  his  custody  or  under  his 
control on the date of the report and the amount of its assets which are likely to be collected in cash 
before the expiry of that period of two months in order that such assets may be applied speedily towards 
the  making  of  preferential  payments  under  section  530  of  the  Companies  Act,  1956  and  in  the 
discharge, as far as possible, of the liabilities and obligations of the banking company to its depositors 
and other creditors in accordance with the provisions hereinafter contained; and the official liquidator 
shall make for the purposes aforesaid every endeavour to collect in cash as much of the assets of the 
banking company as practicable. 

41A. Notice to preferential claimants and secured and unsecured creditors.—(1) Within fifteen 
days from the date of the winding up order of a banking company or where the winding up order has 
been made before the commencement of the Banking Companies (Second Amendment) Act, 1960 (37 
of 1960), within one month from such commencement, the official liquidator shall, for the purpose of 
making  an  estimate  of  the  debts  and  liabilities  of  the  banking  company  (other  than  its  liabilities  and 
obligations  to  its  depositors),  by  notice  served  in  such  manner  as  the  Reserve  Bank  may  direct,  call 
upon— 

(a)  every  claimant  entitled  to  preferential  payment  under  section  530  of  the  Companies  Act, 

1956 (1 of 1956), and 

(b) every secured and every unsecured creditor, 

to send to the official liquidator within one month from the date of the service of the notice a statement 
of the amount claimed by him. 

(2) Every notice under sub-section (1) sent to a claimant having a claim under  section 530 of the 
Companies Act, 1956 (1 of 1956), shall state that if a statement of the claim is not sent to the official 
liquidator before the expiry of the period of one month from the date of the service, the claim shall not 
be treated as a claim entitled to be paid under section 530 of the Companies Act, 1956, in priority to all 
other debts but shall be treated as an ordinary debt due by the banking company. 

(3)  Every  notice  under  sub-section  (1)  sent  to  a  secured  creditor  shall  require  him  to  value  his 
security before the expiry of the period of one month from the date of the service of the notice and shall 
state that if a statement of the claim together with the valuation of the security is not sent to the official 
liquidator  before  the  expiry  of  the  said  period,  then,  the  official  liquidator  shall  himself  value  the 
security and such valuation shall be binding on the creditor. 

1.  Subs.  by  Act  95  of  1956,  s.  14  and  Schedule,  for  “section  173  of  the  Indian  Companies  Act,  1913  (7  of  1913)”               

(w.e.f. 14-1-1957). 

2. Subs. by Act 52 of 1953, s. 4, for “Court” (w.e.f. 30-12-1953). 
3. Subs. by Act 37 of 1960, s. 3, for s. 41. 

51 

 
                                                      
(4) If a claimant fails to comply with the notice sent to him under sub-section (1), his claim will not 
be entitled to be paid under section 530 of the Companies Act, 1956 (1 of 1956), in priority to all other 
debts  but  shall  be treated as  an  ordinary  debt  due  by  the  banking  company;  and  if  a  secured  creditor 
fails to comply  with the notice  sent  to  him  under  sub-section (1),  the  official  liquidator shall himself 
value the security and such valuation shall be binding on the creditor.] 

42. Power to dispense with meetings of creditors, etc.—Notwithstanding anything to the contrary 
contained in  1[  2[section 460] of the Companies Act, 1956 (1 of 1956)], the  3[High Court] may, in the 
proceedings  for  winding  up  a  banking  company,  dispense  with  any  meetings  of  creditors  or 
contributories  4*** if it considers that no object will be secured thereby sufficient to justify the delay 
and expense. 

5[43. Booked depositors' credits to be deemed proved.—In any proceeding for the winding up of 
a banking company, every depositor of the banking company shall be deemed to have filed his claim for 
the amount shown in the books of the banking company as standing to his credit and, notwithstanding 
anything to the contrary contained in  6[section 474 of the Companies Act, 1956 (1 of 1956)] the High 
Court shall presume such claims to have been proved, unless the official liquidator shows that there is 
reason for doubting its correctness.] 

7[43A.  Preferential  payments  to  depositors.—(1)  In  every  proceeding  for  the  winding-up  of  a 
banking company where a winding up order has been made, whether before or after the commencement 
of the Banking Companies (Second Amendment) Act, 1960 (37 of 1960), within three months from the 
date of the winding up order or where the winding up order has been made before such commencement, 
within three months therefrom, the preferential payments referred to in section 530 of the Companies 
Act, 1956 (1 of 1956), in respect of which statements of claims have been sent within one month from 
the date of the service of the notice referred to in section 41A, shall be made by the official liquidator or 
adequate provision for such payments shall be made by him. 

(2)  After  the  preferential  payments  as  aforesaid  have  been  made  or  adequate  provision  has  been 

made in respect thereof, there shall be paid within the aforesaid period of three months— 

(a) in the first place, to every depositor in the savings bank account of the banking company a 

sum of two hundred and fifty rupees or the balance at his credit, whichever is less; and thereafter, 

(b) in the next place, to every other depositor of the banking company a sum of two hundred 

and fifty rupees or the balance at his credit, whichever is less,  

in  priority  to  all  other  debts  from  out  of  the  remaining  assets  of  the  banking  company  available  for 
payment to general creditors: 

Provided that the sum total of the amounts paid under clause (a) and clause (b) to any one person 
who in his own name (and not jointly with any other person) is a depositor in the savings bank account 
of  the  banking  company  and  also  a  depositor  in  any  other  account,  shall  not  exceed  the  sum  of  two 
hundred and fifty rupees. 

(3) Where within the aforesaid period of three months full payment cannot be made of the amounts 
required to be paid under clause (a) or clause (b) of sub-section (2) with the assets in cash, the official 
liquidator shall pay within that period to every depositor under that clause (a) or, as the case may be, 
clause  (b)  of  that  sub-section  on  a  pro  rata  basis  so  much  of  the  amount  due  to  the                             

1. Subs. by Act 95 of 1956, s. 14 and the Schedule, for “sections 178A and 183 of the Indian Companies Act 1913 (7 of 1913)” 

(w.e.f. 14-1-1957). 

2. Subs. by Act 1 of 1984, s. 33, for “sections 460, 464, and 465” (w.e.f. 15-2-1984).  
3. Subs. by Act 52 of 1953, s. 4, for “Court” (w.e.f. 30-12-1953). 
4. The words “or with the appointment of a committee of inspection” omitted by Act 1 of 1984, s. 33 (w.e.f. 15-2-1984). 
5. Subs. by Act 52 of 1953, s. 8, for section 43 (w.e.f. 30-12-1953). 
6.  Subs.  by  Act  95  of  1956,  s.  14  and  the  Schedule,  for  “section  191  of  the  Indian  Companies  Act  1913  (7  of  1913)”                

(w.e.f. 14-1-1957). 

7. Subs. by Act 37 of 1960, s. 4, for section 43A (w.e.f. 19-9-1960). 

52 

 
                                                      
depositor under that clause as the official liquidator is able to pay with those assets; and shall  pay the 
rest of that amount to every such depositor as and when sufficient assets are collected by the official 
liquidator in cash. 

(4) After payments have been made first to depositors in the savings bank account and then to the 
other  depositors  in  accordance  with  the  foregoing  provisions,  the  remaining  assets  of  the  banking 
company available for payment to general creditors shall be utilised for payment on a pro rata basis of 
the debts of the general creditors and of the further sums, if any, due to the depositors; and after making 
adequate provision for payment on a pro rata basis as aforesaid of the debts of the general creditors, the 
official liquidator shall, as and when the assets of the company are collected in cash, make payment on 
a  pro  rata  basis  as  aforesaid,  of  the  further  sums,  if  any,  which  may  remain  due  to  the  depositors 
referred to in clause (a) and clause (b) of sub-section (2). 

(5) In order to enable the official liquidator to have in his custody or under his control in cash as 
much of the assets of the banking company as possible, the securities given to every secured creditor 
may be redeemed by the official liquidator— 

(a) where the amount due to the creditor is more than the value of the securities as assessed by 

him or, as the case may be, as assessed by the official liquidator, on payment of such value; and 

(b) where the amount due to the creditor is equal to or less than the value of the securities as so 

assessed, on payment of the amount due: 
Provided that where the official liquidator is not satisfied with the valuation made by the creditor, 

he may apply to the High Court for making a valuation. 

(6) When any  claimant,  creditor  or  depositor  to  whom  any  payment  is  to  be  made  in  accordance 
with  1[the  provisions  of  this  section],  cannot  be  found  or  is  not  readily  traceable,  adequate  provision 
shall be made by the official liquidator for such payment. 

(7) For the purposes of this section, the payments specified in each of the following clauses shall be 

treated as payments of a different class, namely:— 

(a)  payments  to  preferential  claimants  under  section  530  of  the  Companies  Act,  1956                  

(1 of 1956);  

(b) payments under clause (a) of sub-section (2) to the depositors in the savings bank account; 
(c) payments under clause (b) of sub-section (2) to the other depositors; 
(d)  payments  to  the  general  creditors  and  payments  to  the  depositors  in  addition  to  those 

specified in clause (a) and clause (b) of sub-section (2). 
(8)  The  payments  of  each  different  class  specified  in  sub-section  (7)  shall  rank  equally  among 
themselves and be paid in full unless the assets are insufficient to meet them, in which case they shall 
abate in equal proportion.]] 

2[(9) Nothing contained in sub-sections (2), (3), (4), (7) and (8) shall apply to a banking company in 
respect of the depositors of which the Deposit Insurance Corporation is liable under section 16 of the 
Deposit Insurance Corporation Act, 1961 (47 of 1961). 

(10)  After  preferential  payments  referred  to  in  sub-section  (1)  have  been  made  or  adequate 
provision has been made in respect thereof, the remaining assets of the banking company referred to in 
sub-section  (9)  available  for  payment  to  general  creditors  shall  be  utilised  for  payment  on  pro  rata  
basis of the debts of the general creditors and of the sums due to the depositors: 

Provided  that  where  any  amount  in  respect  of  any  deposit  is  to  be  paid  by  the  liquidator  to  the 

Deposit  Insurance  Corporation  under  section  21  of  the  Deposit  Insurance  Corporation  Act,                      
1961 (47 of 1961), only the balance, if any, left after making the said payment shall be payable to the 
depositor.] 

1. Subs. by Act 47 of 1961, s. 51 and Second Schedule, for “the foregoing provisions” (w.e.f. 1-1-1962). 
2. Ins. by s. 51 and the Second Schedule, ibid. (w.e.f. 1-1-1962). 

53 

 
 
 
                                                      
1[44.  Powers  of  High  Court  in  voluntary  winding  up.—(1)  Notwithstanding  anything  to  the 
contrary contained in section 484 of the Companies Act, 1956 (1 of 1956), no banking company may be 
voluntarily wound up unless the Reserve Bank certifies in writing that the company is able to pay in full 
all its debts to its creditors as they accrue. 

(2)  The  High  Court  may,  in  any  case  where  a  banking  company  is  being  wound  up  voluntarily, 

make an order that the voluntary winding up shall continue, but subject to the supervision of the court.  

(3) Without prejudice to the provisions contained in sections 441 and 521 of the Companies Act, 
1956 (1 of 1956), the High Court may of its own motion and shall on the application of the Reserve 
Bank,  order  the  winding  up  of  a  banking  company  by  the  High  Court  in  any  of  the  following  cases, 
namely:— 

(a)  where  the  banking  company  is  being  wound  up  voluntarily  and  at  any  stage  during  the 

voluntary winding up proceedings the company is not able to meet its debts as they accrue; or 

(b) where the banking company is being wound up voluntarily or is being wound up subject to 
the supervision of the court and the High Court is satisfied that the voluntary winding up or winding 
up subject to the supervision of the court cannot be continued without detriment to the interests of 
the depositors.] 

2[44A.  Procedure  for  amalgamation  of  banking  companies.—(1)  Notwithstanding  anything 
contained  in  any  law  for  the  time  being  in  force,  no  banking  company  shall  be  amalgamated  with 
another banking company, unless a scheme containing the terms of such amalgamation has been placed 
in draft before the shareholders of each of the banking companies concerned separately, and approved 
by a resolution passed by a majority in number representing two-thirds in value of the shareholders of 
each of the said companies, present either in person or by proxy at a meeting called for the purpose. 

(2)  Notice  of  every  such  meeting  as  is  referred  to  in  sub-section  (1)  shall  be  given  to  every 
shareholder  of  each  of  the  banking  companies  concerned  in  accordance  with  the  relevant  articles  of 
association indicating the time, place and object of the meeting, and shall also be published at least once 
a week for three consecutive weeks in not less than two newspapers which circulate in the locality or 
localities  where  the  registered  offices  of  the  banking  companies  concerned  are  situated,  one  of  such 
newspapers being in a language commonly understood in the locality or localities. 

(3)  Any  shareholder,  who  has  voted  against  the  scheme  of  amalgamation  at  the  meeting  or  has 
given notice in writing at or prior to the meeting to the company concerned or to the presiding officer of 
the  meeting  that  he  dissents  from  the  scheme  of  amalgamation,  shall  be  entitled,  in  the  event  of  the 
scheme  being  sanctioned  by  the  Reserve  Bank,  to  claim  from  the  banking  company  concerned,  in 
respect  of  the  shares  held  by  him  in  that  company,  their  value  as  determined  by  the  Reserved  Bank 
when sanctioning the scheme and such determination by the Reserve Bank as to the value of the shares 
to be paid to the dissenting share holder shall be final for all purposes. 

(4)  If  the  scheme  of  amalgamation  is  approved  by  the  requisite  majority  of  shareholders  in 
accordance with the provisions of this section it shall be submitted to the Reserve Bank for sanction and 
shall, if sanctioned by the Reserve Bank by an order in writing passed in this behalf, be bindings on the 
banking companies concerned and also on all the shareholders thereof.  

* 

3* 
 (6)  On  the  sanctioning  of  a  scheme  of  amalgamation  by  the  Reserve  Bank,  the  property  of  the 
amalgamated banking company shall, by virtue of the order of sanction, be transferred to and vest in, 
and the liabilities of the said company shall, by virtue of the said order be transferred to, and become 
the  liabilities  of,  the  banking  company  which  under  the  scheme  of  amalgamation  is  to  acquire  the 

* 

* 

* 

1. Subs. by Act 33 of 1959, s. 30, for section 44 (w.e.f. 1- 10-1959). 
2. Ins. by Act 20 of 1950, s. 8. 
3. Omitted by Act 55 of 1963, s. 19 (w.e.f. 1-2- 1964). 

54 

 
 
 
 
 
 
 
 
 
                                                      
business of the amalgamated banking company, subject in all cases to 1[the provisions of the scheme as 
sanctioned].]  

2[(6A) Where a scheme of amalgamation is sanctioned by the Reserve Bank under the provisions of 
this section, the Reserve Bank  may, by a further order in writing, direct  that on such date as may be 
specified  therein  the  banking  company  (hereinafter  in  this  section  referred  to  as  the  amalgamated 
banking company) which by reason of the amalgamation will cease to function, shall stand dissolved 
and any such direction shall take effect notwithstanding anything to the contrary contained in any other 
law. 

(6B) Where the Reserve Bank directs a dissolution of the amalgamated banking company, it shall 
transmit  a  copy  of  the  order  directing  such  dissolution  to  the  Registrar  before  whom  the  banking 
company has been registered and on receipt of such order the Registrar shall strike off the name of the 
company. 

(6C) An order under sub-section (4) whether made before or after the commencement of section 19 
of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963) shall be conclusive evidence 
that all the requirements of this section relating to amalgamation have been complied with, and a copy 
of the said order certified in writing by an officer of the Reserve Bank to be true copy of such order and 
a copy of the scheme certified in the like manner to be a true copy thereof shall, in all legal proceedings 
(whether in appeal or otherwise and whether instituted before or after the commencement of the said 
section 19), be admitted as evidence to the same extent as the original order and the original scheme.] 

3[(7)  Nothing  in  the  foregoing  provisions  of  this  section  shall  affect  the  power  of  the  Central 
Government  to  provide  for  the  amalgamation  of  two  or  more  banking  companies  4***  under  section 
396 of the Companies Act, 1956 (1 of 1956); 

Provided that no such power shall be exercised by the Central Government except after consultation 

with the Reserve Bank.] 

5[  6[44B.]  Restriction  on  compromise  or  arrangement  between  banking  company  and 
creditors.—7[(1)] Notwithstanding anything contained in any law for the time being in force, no 8[High 
Court] shall sanction a compromise or arrangement between a banking company and its creditors or any 
class  of  them  or  between  such  company  and  its  members  or  any  class  of  them  9[or  sanction  any 
modification  in  any  such  compromise  or  arrangement  unless  the  compromise  or  arrangement  or 
modification, as the case may be,] is certified by the Reserve Bank 10[in writing as not being incapable 
of  being  worked  and  as  not  being  detrimental  to  the  interests  of  the  depositors  of  such  banking 
company].] 

11[(2) Where an application under 12[section 391 of the Companies Act, 1956 (1 of 1956)] is made 
in respect of a banking company, the High Court may direct the Reserve  Bank to make an inquiry in 
relation to the affairs of the banking company and the conduct of its directors and when such a direction 
is given, the Reserve Bank shall make such inquiry and submit its report to the High Court.]  

1. Subs. by Act 55 of 1963, s. 19, for “the terms of the order sanctioning the scheme” (w.e.f. 1-2-1964). 
2. Ins. by s. 19, ibid. (w.e.f. 1-2-1964). 
3. Ins. by Act 37 of 1960, s. 5 (w.e.f. 19-9-1960). 
4. The words “in national interest” omitted by Act 7 of 1961, s. 3 (w.e.f. 24-3-1961). 
5. Subs. by Act 20 of 1950, s. 9, for section 45 (w.e.f. 18-3-1950). 
6. Section 45 renumbered as section 44B by Act 37 of 1960, s. 6 (w.e.f.19-9-1960). 
7. Section 44B re-numbered as sub-section (1) thereof by Act 52 of 1953, s. 9 (w.e.f. 30-12-1953). 
8. Subs. by s. 4, ibid., for “Court” (w.e.f. 30-12-1953). 
9. Subs. by Act 55 of 1963, s. 20, for “unless the compromise or arrangement” (w.e.f. 1-2-1964). 
10.  Subs.  by  Act  52  of  1953,  s.  9,  for  “as  not  being  detrimental  to  the  interests  of  the  depositors  of  such  company”                    

(w.e.f. 30-11-1953). 

11. Ins. by s. 9, ibid. (w.e.f. 30-12-1953). 
12.  Subs.  by  Act  95  of  1956,  s.  14  and  the  Schedule,  for  “section  153  of  the  Indian  Companies  Act,  1913  (7  of  1913)”               

(w.e.f. 14-1-1957). 

55 

 
                                                      
1[45. Power of Reserve Bank to apply to Central Government for suspension of business by a 
2[reconstruction]  or  amalgamation.—(1) 
banking  company  and  to  prepare  scheme  of 
Notwithstanding  anything  contained  in  the  foregoing  provisions  of  this  Part  or  in  any  other  law  or 
3[any agreement or other instrument], for the time being in force, where it appears to the Reserve Bank 
that there is good reason so to do, the Reserve Bank may apply to the Central Government for an order 
of moratorium in respect of 4[a banking company]. 

(2)  The  Central  Government,  after  considering  the  application  made  by  the  Reserve  Bank  under 
sub-section  (1),  may  make  an  order  of  moratorium  staying  the  commencement  or  continuance  of  all 
actions and proceedings against the company for a fixed period of time on such terms and conditions as 
it thinks fit and proper and may from time to time extend the period so however that the total period of 
moratorium shall not exceed six months. 

(3) Except as otherwise provided by any directions given by the Central Government in the  order 
made  by  it  under  sub-section  (2)  or at  any  time  thereafter,  the  banking  company  shall  not  during  the 
period of moratorium make any payment to any depositors or discharge any liabilities or obligations to 
any other creditors 5[or grant any loans or advances or make investments in any credit instruments]. 

6[(4) During the period of moratorium 5[or at any other time], if the Reserve Bank is satisfied that— 

(a) in the public interest; or 

(b) in the interests of the depositors; or 

(c) in order to secure the proper management of the banking company; or 

(d) in the interests of the banking system of the country as a whole,  

it is necessary so to do, the Reserve Bank may prepare a scheme— 

(i) for the reconstruction of the banking company, or 

(ii)  for  the  amalgamation  of  the  banking  company  with  any  other  banking  institution  (in 

this section referred to as “the transferee bank”).] 

(5) The scheme aforesaid may contain provisions for all or any of the following matters, namely:—  

(a)  the  constitution,  name  and  registered  office,  the  capital,  assets,  powers,  rights,  interests, 
authorities  and  privileges,  the  liabilities,  duties  and  obligations  of  the  banking  company  on  its 
reconstruction or, as the case may be, of the transferee bank; 

(b) in the case of amalgamation of the banking company, the transfer to the transferee bank of 
the business, properties, assets and liabilities of the banking company on such terms and conditions 
as may be specified in the scheme; 

(c) and change in the Board of directors, or the appointment of a new Board of directors, of the 
banking  company  on  its  reconstruction  or,  as  the  case  may  be,  of  the  transferee  bank  and  the 
authority by whom, the manner in which, and the other terms and conditions on which, such change 
or appointment shall be made and in the case of appointment of a new Board of directors or of any 
director, the period for which such appointment shall be made; 

1. Ins. by Act 37 of 1960, s. 6 (w.e.f. 19-9-1960). 
2. subs. by Act 39 of 2020, s. 3, for “reconstitution” (w.e.f. 26-6-2020). 
3. Subs. by Act 7 of 1961, s. 4, for “any agreement” (w.e.f. 24-3-1961). 
4. Subs. by s. 4, ibid., for “the banking company”(w.e.f. 24-3-1961). 
5. Ins. by Act 39 of 2020, s. 3 (w.e.f. 26-6-2020). 
6. Subs. by Act 7 of 1961, s. 4, for sub-sections (4) to (9)  (w.e.f. 24-3-1961). 

56 

 
 
 
                                                      
(d) the alteration of the memorandum and articles of association of the banking company on its 
reconstruction or, as the case may be, of the transferee bank for the purpose of altering the capital 
thereof  or  for  such  other  purposes  as  may  be  necessary  to  give  effect  to  the  reconstruction  or 
amalgamation; 

(e) subject to the provisions of the scheme, the continuation by or against the banking company 
on  its  reconstruction  or,  as  the  case  may  be,  the  transferee  bank,  of  any  actions  or  proceedings 
pending against the banking company immediately before the 1[reconstruction or amalgamation]; 

(f) the reduction of the interest or rights which the members depositors and other creditors have 
in or against the banking company before its reconstruction or amalgamation to such extent as the 
Reserve  Bank  considers  necessary  in  the  public  interest  or  in  the  interests  of  the  members, 
depositors and other creditors or for the maintenance of the business of the banking company; 

(g) the payment in cash or otherwise to depositors and other creditors in full satisfaction of their 

claim— 

(i)  in  respect  of  their  interest  or  rights  in  or  against  the  banking  company  before  its 

reconstruction or amalgamation; or 

(ii) where their interest or rights aforesaid in or against the banking company has or have 

been reduced  under clause (f), in respect of such interest or rights as so reduced; 
(h)  the  allotment  to  the  members  of  the  banking  company  for  shares  held  by  them  therein 
before its reconstruction or amalgamation [whether their interest in such shares has been reduced 
under clause (f) or not], of shares in the banking company on its reconstruction or, as the case may 
be,  in  the  transferee  bank  and  where  any  members  claim  payment  in  cash  and  not  allotment  of 
shares,  or  where  it  is  not  possible  to  allot  shares  to  any  members,  the  payment  in  cash  to  those 
members in full satisfaction of their claim— 

(i) in respect of their interest in shares in the banking company before its reconstruction or 

amalgamation; or 

(ii)  where  such  interest  has  been  reduced  under  clause  (f)  in  respect  of  their  interest  in 

shares as so reduced; 
(i) the continuance of the services of all the employees of the banking company (excepting such 
of them as not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947) 
are specifically mentioned in the scheme) in the banking company itself on its reconstruction or, as 
the  case  may  be,  in  the  transferee  bank  at  the  same  remuneration  and  on  the  same  terms  and 
conditions  of  service,  which  they  were  getting  or,  as the  case  may  be,  by  which  they  were  being 
governed, immediately before the 1[reconstruction or amalgamation]: 

Provided that the scheme shall contain a provision that— 
(i) the banking company shall pay or grant not later than the expiry of the period of three years 
from the date on which the scheme is sanctioned by the Central Government, to the said employees 
the same remuneration and the same terms and conditions of service  2[as are, at the time of such 
payment  or  grant,  applicable]  to  employees  of  corresponding  rank  or  status  of  a  comparable 
banking company to be determined for this purpose by the Reserve Bank (whose determination in 
this respect shall be final); 

(ii)  the  transferee  bank  shall  pay  or  grant  not  later  than  the  expiry  of  the  aforesaid  period  of 
three  years,  to  the  said  employees  the  same  remuneration  and  the  same  terms  and  conditions  of 
service  2[as  are,  at  the  time  of  such  payment  or  grant,  applicable]  to  the  other  employees  of 
corresponding rank or status of the transferee bank subject to the qualifications and experience of 
the  said  employees  being  the  same  as  or  equivalent  to  those  of  such  other  employees  of  the 
transferee bank: 

1. Subs. by Act 39 of 2020, s. 3, for “date of the order of moratorium” (w.e.f. 26-6-2020). 
2. Subs. by Act 1 of 1984, s. 34, for “as are applicable” (w.e.f. 15-2-1984). 

57 

 
                                                      
Provided further that if in any case under clause (ii) of the first proviso any doubt or difference 
arises as to whether the qualification and experience of any of the said employees are the same as or 
equivalent  to  the  qualifications  and  experience  of  the  other  employees  of  corresponding  rank  or 
status  of  the  transferee  bank,  1[the  doubt  or  difference  shall  be  referred,  before  the  expiry  of  a 
period of three years from the date of the payment or grant mentioned in that clause,] to the Reserve 
Bank whose decision thereon shall be final; 

(j) notwithstanding anything contained in clause (i) where any of the employees of the banking 
company not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947) 
are specifically mentioned in the scheme under clause (i), or where any employees of the banking 
company  have  by  notice  in  writing  given  to  the  banking  company  or,  as  the  case  may  be,  the 
transferee bank at any time before the expiry of the one month next following the date on which the 
scheme  is  sanctioned  by  the  Central  Government,  intimated  their  intention  of  not  becoming 
employees of the banking company on its reconstruction or, as the case may be, of the transferee 
bank, the payment to such employees of compensation if any, to which they are entitled under the 
Industrial  Disputes  Act,  1947  (14  of  1947),  and  such  pension,  gratuity,  provident  fund  and  other 
retirement  benefits ordinarily  admissible  to  them  under  the rules  or  authorisations  of the  banking 
company immediately before the 2[reconstruction or amalgamation]; 

(k)  any  other  terms  and  conditions  for  the  reconstruction  or  amalgamation  of  the  banking 

company; 

(l) such incidental, consequential and supplemental matters as are necessary to secure that the 

reconstruction or amalgamation shall be fully and effectively carried out. 

(6) (a) A copy of the scheme prepared by the Reserve Bank shall be sent in draft to the banking 
company  and  also  to  the  transferee  bank  and  any  other  banking  company  concerned  in  the 
3[reconstruction  or  amalgamation],  for  suggestions  and  objections,  if  any,  within  such  period  as  the 
Reserve Bank may specify for this purpose. 

(b) The Reserve Bank may make such modifications, if any, in the draft scheme as it may consider 
necessary in the light of the suggestions and objections received from the banking company and also 
from the transferee bank, and any other banking company concerned in the amalgamation and from any 
members, depositors or other creditors of each of those companies and the transferee bank. 

(7) The scheme shall thereafter be placed before the Central Government for its sanction and the 
Central Government may sanction the scheme without any modifications or with such modifications as 
it  may  consider  necessary;  and the  scheme  as  sanctioned  by  the  Central  Government  shall  come  into 
force on such date as the Central Government may specify in this behalf: 

Provided that different dates may be specified for different provisions of the scheme. 

4[(7A) The sanction accorded by the Central Government under sub-section (7), whether before or 
after  the  commencement  of  section  21  of  the  Banking  Laws  (Miscellaneous  Provisions)  Act,  1963           
(55  of  1963),  shall  be  conclusive  evidence  that  all  the  requirements  of  this  section  relating  to 
reconstruction,  or,  as  the  case  may  be,  amalgamation  have  been  complied  with  and  a  copy  of  the 
sanctioned  scheme  certified  in  writing  by  an  officer  of  the  Central  Government  to  be  a  true  copy 
thereof, shall, in all legal proceedings (whether in appeal or otherwise and whether instituted before or 
after  the  commencement  of  the  said  section  21),  be  admitted  as  evidence  to  the  same  extent  as  the 
original scheme.] 

1. Subs. by Act 11 of 1984, s. 34,  for “the doubt or difference shall be referred” (w.e.f. 15-2-1984). 
2. Subs. by Act 39 of 2020, s. 3, for “date of the order of moratorium” (w.e.f. 26-6-2020). 
3. Subs. by s. 3, ibid., for “amalgamation” (w.e.f. 26-6-2020). 
4. Ins. by Act 55 of 1963, s. 21 (w.e.f. 1-2-1964). 

58 

 
                                                      
(8) On and from the date of the coming into operation of the scheme or any provision thereof, the 
scheme  or  such  provision  shall  be  binding  on  the  banking  company  or,  as  the  case  may  be,  on  the 
transferee  bank  and  any  other  banking  company  concerned  in  the  amalgamation  and  also  on  all  the 
members,  depositors  and  other  creditors  and  employees  of  each  of  those  companies  and  of  the 
transferee  bank,  and  on  any  other  person  having  any  right  or  liability  in  relation  to  any  of  those 
companies  or the transferee  bank  1[including  the trustees  or  other  persons  managing,  or  connected  in 
any other manner with, any provident fund or other fund maintained by any of those companies or the 
transferee bank.] 

(9) 2[On and from the date of the coming into operation of, or as the case may be, the date specified 
in this behalf in the scheme] the properties and assets of the banking company shall, by virtue of and to 
the extent  provided in the scheme,  stand transferred  to,  and  vest in,  and  the liabilities  of  the  banking 
company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and become 
the liabilities of the transferee bank. 

(10) If any difficulty arises in giving effect to the provisions of the scheme, the Central Government 
may  by  order  do  anything  not  inconsistent  with  such  provisions  which  appears  to  it  necessary  or 
expedient for the purpose of removing the difficulty. 

(11)  Copies of the  scheme  or of any  order  made  under  sub-section  (10)  shall  be  laid  before  both 
Houses  of  Parliament,  as  soon  as  may  be,  after  the  scheme  has  been  sanctioned  by  the  Central 
Government, or, as the case may be, the order has been made. 

(12)  Where  the  scheme  is  a  scheme  for  amalgamation  of  the  banking  company,  any  business 
acquired by the transferee bank under the scheme or under any provision thereof shall, after the coming 
into operation of the scheme or such provision, be carried on by the transferee bank in accordance with 
the law governing the transferee bank, subject to such modifications in that law or such exemptions of 
the  transferee  bank  from  the  operation  of  any  provisions  thereof  as  the  Central  Government  on  the 
recommendation of the Reserve Bank may, by notification in the Official Gazette, make for the purpose 
of giving full effect to the scheme: 

Provided that no such modification or exemption shall be made so as to have effect for a period of 

more than seven years from the date of the acquisition of such business. 

(13) Nothing in this section shall be deemed to prevent the amalgamation with a banking institution 
by a single scheme of several banking companies in respect of each of which an order  of moratorium 
has been made under this section. 

(14)  The  provisions  of  this  section  and  of  any  scheme  made  under  it  shall  have  effect 
notwithstanding anything to the contrary contained in any other provisions of this Act or in any other 
law or any agreement, award or other instrument for the time being in force. 

(15) In this section, “banking institution” means any banking company and includes the State Bank 

of India 3*** 2[or a corresponding new bank]. 

1[Explanation.—References in this section to the terms and conditions of service of as applicable to 

an employee shall not be construed as extending to the rank and status of such employee.] 

4[PART IIIA 

SPECIAL PROVISIONS FOR SPEEDY DISPOSAL OF WINDING UP PROCEEDINGS 

45A. Part IIIA to override other laws.—The provisions of this Part and the rules made thereunder 

shall have effect notwithstanding anything inconsistent therewith contained in the                       

1. Ins. by Act 1 of 1984, s. 34 (w.e.f. 15-2-1984). 
2. Subs. by s. 34, ibid., for certain words (w.e.f 15-2-1984). 
3. The words “or a subsidiary bank” omitted by Act 39 of 2020, s. 3 (w.e.f. 26-6-2020). 
4. Subs. by Act 52 of 1953, s. 10, for Part IIIA (w.e.f. 30-12-1953). 

59 

 
 
                                                      
1[Companies  Act,  1956  (1  of  1956)]  or  the  Code  of  Civil  Procedure,  1908  (5  of  1908)  of  the              
2[Code of Criminal Procedure, 1973 (2 of 1974)] or any other law for the time being in force or any 
instrument having effect by virtue of any such law; but the provisions of any such law or instrument in 
so  far  as  the  same  are  not  varied  by,  or  inconsistent  with,  the  provisions  of  this  Part  or  rules  made 
thereunder shall apply to all proceedings under this Part. 

45B. Power  of High  Court  to  decide  all  claims  in respect  of  banking  companies.—The  High 
Court  shall,  save  as  otherwise  expressly  provided  in  section  45C,  have  exclusive  jurisdiction  to 
entertain  and  decide  any  claim  made  by  or  against  a  banking  company  which  is  being  wound  up 
(including claims by or against any of its branches in India) or any application made under 3[section 391 
of  the  Companies  Act,  1956  (1  of  1956)]  by  or  in  respect  of  a  banking  company  or  any  question  of 
priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in the 
course of the winding up of a banking company, whether such claim or question has arisen or arises or 
such application has been made or is made before or after the date of the order for the winding up of the 
banking company or before or after the commencement of the Banking Companies (Amendment) Act, 
1953 (52 of 1953). 

45C. Transfer of pending proceedings.—(1) Where a winding up order is made or has been made 
in respect of a banking company, no suit or other legal proceeding, whether civil or criminal, in respect 
of  which  the  High  Court  has  jurisdiction  under  this  Act  and  which  is  pending  in  any  other  court 
immediately  before  the  commencement  of  the  Banking  Companies  (Amendment)  Act,  1953  (52  of 
1953), or the date of the order for the winding up of the banking company, whichever is later, shall be 
proceeded with except in the manner hereinafter provided. 

(2) The official liquidator shall, within three months from the date of the winding up order or the 
commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), whichever is later, or 
such further time as the High Court may allow, submit to the High Court a report containing a list of all 
such pending proceedings together with particulars thereof. 

(3)  On  receipt  of  a  report  under  sub-section  (2),  the  High  Court  may,  if  it  so  thinks  fit,  give  the 
parties concerned an opportunity to show cause why the proceedings should not be transferred to itself 
and after making an inquiry in such manner as may be provided by rules made under section 45U, it 
shall make such order as it deems fit transferring to itself all or such of the pending proceedings as may 
be specified in the order and such proceedings shall thereafter be disposed of by the High Court.  

(4)  If  any  proceeding  pending  in  a  court  is  not  so  transferred  to  the  High  Court  under                    

sub-section (3), such proceeding shall be continued in the court in which the proceeding was pending. 

(5)  Nothing  in  this  section  shall  apply  to  any  proceeding  pending  in  appeal  before  the  Supreme 

Court or a High Court. 

45D. Settlement of list of debtors.—(1) Notwithstanding anything to the contrary contained in any 
law for the time being in force, the High Court may settle in the manner hereinafter provided a list of 
debtors of a banking company which is being wound up. 

(2) Subject to any rules that may be made under section 52, the official liquidator shall, within six 
months  from  the  date  of  the  winding  up  order  or  the  commencement  of  the  Banking  Companies 
(Amendment) Act, 1953 (52 of 1953), whichever is later, from time to time, file 88H to the High Court 
lists of debtors containing such particulars as are specified in the Fourth Schedule: 

Provided that such lists may, with the leave of the High Court, be filed after the expiry of the said 

period of six months. 

1. Subs. by Act 95 of 1956, s. 14 and the Schedule, for “Indian Companies Act, 1913 (7 of 1913)” (w.e.f. 14-1-1957). 
2. Subs. by Act 1 of 1984, s. 35, for “Code of Criminal Procedure 1898 (5 of 1898)” (w.e.f. 15-2-1984). 
3.  Subs.  by  Act  95  of  1956,  s.  14  and  the  Schedule,  for  “section  153  of  the  Indian  Companies  Act,  1913  (7  of  1913)”              

(w.e.f. 14-1-1957). 

60 

 
                                                      
(3)  On  receipt  of  any  list  under  sub-section  (2),  the  High  Court  shall,  wherever  necessary,  cause 
notices  to  be  issued  on  all  persons  affected  and  after  making  an  inquiry  in  such  manner  as  may  be 
provided by rules made under section 45U, it shall make an order settling the list of debtors: 

Provided that nothing in this section shall debar the High Court from settling any such list in part as 
against such of the persons whose debts have been settled without settling the debts of all the persons 
placed on the list. 

(4) At the time of the settlement of any such list, the High Court shall pass an order for the payment 
of the amount due by each debtor and make such further orders as may be necessary in respect of the 
relief claimed, including reliefs against any guarantor or in respect of the realisation of any security. 

(5) Every such order shall, subject to the provisions for appeal, be final and binding for all purposes 
as between the banking company on the one hand and the person against whom the order is passed and 
all persons claiming through or under him on the other hand, and shall be deemed to be a decree in a 
suit. 

(6)  In  respect  of  every  such  order,  the  High  Court  shall  issue  a  certificate  specifying  clearly  the 
reliefs granted and the names and descriptions of the parties whom such reliefs have been granted, the 
amount of costs awarded and by whom, and out of what funds and in what proportions, such costs are 
to  be  paid;  and  every  such  certificate  shall  be  deemed  to  be  a  certified  copy  of  the  decree  for  all 
purposes including execution. 

(7) At the time of settling the list of debtors or at any other time prior or subsequent thereto, the 
High Court shall have power to pass any order in respect of a debtor on the application of the official 
liquidator  for  the  realisation,  management,  protection,  preservation  or  sale  of  any  property  given  as 
security  to  the  banking  company  and  to  give  such  powers  to  the  official  liquidator  to  carry  out  the 
aforesaid directions as the High Court thinks fit. 

(8) The High Court shall have power to sanction a compromise in respect of any debt and to order 

the payment of any debt by instalments. 

(9) In any case in which any such list is settled  ex parte as against any person, such person may, 
within thirty days from the date of the order settling the list, apply to the High Court for an order to vary 
such  list,  so  far  as  it  concerns  him,  and  if  the  High  Court  is  satisfied  that  he  was  prevented  by  any 
sufficient cause from appearing on the date fixed for the settlement of such list and that he has a good 
defence to the claim of the banking company on merits, the High Court may vary the list and pass such 
orders in relation thereto as it thinks fit: 

Provided that the High Court may, if it so thinks fit, entertain the application after the expiry of the 

said period of thirty days. 

(10) Nothing in this section shall— 

(a)  apply  to  a  debt  which  has  been  secured  by  a  mortgage  of  immovable  property,  if  a  third 

party has any interest in such immovable property; or 

(b) prejudice the rights of the official liquidator to recover any debt due to a banking company 

under any other law for the time being in force. 

45E.  Special  provisions to  make  calls  on contributories.—  Notwithstanding that  the list  of the 
contributories  has  not  been  settled  under  1[section  467  of  the  Companies  Act,  1956  (1  of  1956)], the 
High Court may, if it appears to it necessary or expedient so to do, at any time after making a winding 
up  order,  make  a  call  on  and  order  payment  thereof  by  any  contributory  under  sub-section  (1)  of 
2[section  470  of  the  Companies  Act,  1956]  if  such  contributory  has  been  placed  on  the  list  of 
contributories by the official liquidator and has not appeared to dispute his liability. 

1.  Subs.  by  Act  95  of  1956,  s.  14  and  the  Schedule,  for  “section  184  of  the  Indian  Companies  Act,  1913  (7  of  1913)”               

(w.e.f. 14-1-1957). 

2. Subs. by s. 14 and the Schedule, ibid., for “section 187 of the Indian Companies Act, 1913 (7 of 1913)” (w.e.f. 14-1-1957).  

61 

 
                                                      
45F.  Documents  of  banking  company  to  be  evidence.—(1)  Entries  in  the  books  of  account  or 
other documents of a banking company which is being wound up shall be admitted in evidence in all 
1[legal  proceedings];  and  all  such  entries  may  be  proved  either  by  the  production  of  the  books  of 
account or other documents of the banking company containing such entries or by the production of a 
copy  of  the  entries,  certified  by  the  official  liquidator  under  his  signature  and  stating  that it  is  a  true 
copy of the original entries and that such original entries are contained in the books of account or other 
documents of the banking company in his possession. 

 (2)  Notwithstanding  anything  to  the  contrary  contained  in  the  Indian  Evidence  Act,  1872  (1  of 
1872)  all  such  entries  in  the  books  of  account  or  other  documents  of  a  banking  company  shall,  as 
against  the directors  2[officers  and  other  employees]  of the  banking  company  in  respect of  which the 
winding up order has been made  3***, be prima facie evidence of the truth of all matters purporting to 
be therein recorded. 

45G. Public examination of directors and auditors.—(1) Where an order has been made for the 
winding up of a banking company, the official liquidator shall submit a report whether in his opinion 
any loss has been caused to the banking company since its formation by any act or omission (whether or 
not a fraud has been committed by such act or omission) of any person in the promotion or formation of 
the banking company or of any director or auditor of the banking company. 

(2) If, on consideration of the report submitted under sub-section (1), the High Court is of opinion 
that any person who has taken part in the promotion or formation of the banking company or has been a 
director or an auditor of the banking company should be publicly examined, it shall hold a public sitting 
on a date to be appointed for that purpose and direct that such person, director or auditor shall attend 
thereat and shall be publicly examined as to the promotion or formation or the conduct of the business 
of the banking company, or as to his conduct and dealings, in so far as they relate to the affairs of the 
banking company: 

Provided that no such person shall be publicly examined unless he has been given an opportunity to 

show cause why he should not be so examined. 

(3) The official liquidator shall take part in the examination and for that purpose may, if specially 
authorised by the High Court in that behalf, employ such legal assistance as may be sanctioned by the 
High Court. 

(4) Any creditor or contributory may also take part in the examination either personally or by any 

person entitled to appear before the High Court.  

(5) The High Court may put such questions to the person examined as it thinks fit. 

(6) The person examined shall be examined on oath and shall answer all such questions as the High 

Court may put or allow to be put to him. 

(7) A person ordered to be examined under this section may, at his own cost, employ any person 
entitled to appear before the High Court who shall be at liberty to put to him such questions as the  High 
Court may deem just for the purpose of enabling him to explain or qualify any answer given by him: 

Provided  that  if  he  is,  in  the  opinion  of  the  High  Court,  exculpated  from  any  charges  made  or 

suggested against him, the High Court may allow him such costs in its discretion as it may deem fit.  

(8) Notes of the examination shall be taken down in writing, and shall be read over to or by, and 

signed  by,  the  person  examined  and  may  thereafter  be  used  in  evidence  against  him  in  any             

1. Subs. by Act 55 of 1963, s. 22, for “proceedings by or against the banking company” (w.e.f. 1-2-1964). 
2. Ins. by  s. 22, ibid. (w.e.f. 1-2-1964). 
3. The words, brackets and figures “before the commencement of the Banking Companies (Amendment) Act, 1953” omitted 

by s. 22, ibid. (w.e.f. 1-2-1964). 

62 

 
                                                      
proceeding, civil or criminal, and shall be open to the inspection of any creditor or contributory at all 
reasonable times. 

(9) Where on such examination, the High Court is of opinion (whether a fraud has been committed 

or not)— 

(a) that a person, who has been a director of the banking company, is not fit to be a director of a 

company, or 

(b) that a person, who has been an auditor of the banking company or a partner of a firm acting 
as such auditor, is not fit to act as an auditor of a company or to be a partner of a firm acting as such 
auditor,  

the  High  Court  may  make  an  order  that  person  shall  not,  without  the  leave  of  the  High  Court,  be  a 
director of, or in any way, whether directly or indirectly, be concerned or take part in the management 
of any company or, as the case may be, act as an auditor of, or be a partner of a firm acting as auditors 
of, any company for such period not exceeding five years as may be specified in the order. 

45H. Special provisions for assessing damages against delinquent directors, etc.—(1) Where an 
application  is  made  to  the  High  Court  under  1[section  543  of  the  Companies  Act,  1956  (1  of  1956)] 
against any promoter, director, manager, liquidator or officer of a banking company for repayment or 
restoration  of  any  money  or  property  and  the  applicant  makes  out  a  prima  facie  case  against  such 
person,  the  High  Court  shall  make  an  order  against  such  person  to  repay  and  restore  the  money  or 
property unless he proves that he is not liable to make the repayment or restoration either wholly or in 
part:  

Provided that where such an order is made jointly against two or more such persons, they  shall be 

jointly and severally liable to make the repayment or restoration of the money or property. 

(2) Where an application is made to the High Court under 1[section 543 of the Companies Act, 1956 
(1 of 1956)] and the High Court has reason to believe that a property belongs to any promoter, director, 
manager, liquidator or officer of the banking company, whether the property stands in the name of such 
person  or  any  other  person  as  an  ostensible  owner,  then  the  High  Court  may,  at  any  time,  whether 
before or after making an order under sub-section (1), direct the attachment of such property, or such 
portion thereof, as it thinks fit and the property so attached shall remain subject to attachment unless the 
ostensible  owner  can  prove  to  the  satisfaction  of  the  High  Court  that  he  is  the  real  owner  and  the 
provisions of the Code of Civil Procedure, 1908 (5 of 1908) relating to attachment of property shall, as 
far as may be, apply to such attachment. 

45-I.  Duty  of  directors  and  officers  of  banking  company  to  assist  in  the  realisation  of 
property.—Every director or other officer of a banking company which is being wound up shall give 
such assistance to the official liquidator as he may reasonably require in connection with the realisation 
and distribution of the property of the banking company. 

45J. Special provisions for punishing offences in relation to banking companies being wound 
up.—(1) The High Court may, if it thinks fit, take cognizance of and try in a summary way any offence 
alleged to have been committed by any person who has taken part in the promotion or formation of the 
banking company which is being wound up or by any director, manager or officer thereof: 

Provided  that  the  offence  is  one  punishable  under  this  Act  or  under  the  2[Companies  Act,  1956             

(1 of 1956)]. 

1.  Subs.  by  Act  95  of  1956,  s.  14  and  the  Schedule,  for  “section  235  of  the  Indian  Companies  Act,  1913  (7  of  1913)”                 

(w.e.f. 14-1-1957). 

2.  Subs. by s. 14 and the Schedule, ibid., for “Indian Companies Act, 1913 (7 of 1913)” (w.e.f. 14-1-1957). 

63 

 
                                                      
(2) When trying any such offence as aforesaid, the High Court may also try any other offence not 
referred  to  in  sub-section  (1)  which  is  an  offence  with  which  the  accused  may,  under  the  1[Code  of 
Criminal Procedure 1973 (2 of 1974)] be charged at the same trial. 

(3) In any case tried summarily under sub-section (1), the High Court— 

 (a) need not summon any witness, if it is satisfied that the evidence of such witness will not be 

material; 

(b)  shall  not  be  bound  to  adjourn  a  trial  for  any  purpose  unless  such  adjournment  is,  in  the 

opinion of the High Court, necessary in the interests of justice; 

(c)  shall,  before  passing  any  sentence,  record  judgment  embodying  the  substance  of  the 
evidence and also the particulars specified in section 263 of the 1[Code of Criminal Procedure, 1973 
(2 of 1974)] so far as that section may be applicable, 

 and  nothing  contained  in  sub-section  (2)  of  section  262  of  the  1[Code  of  Criminal  Procedure,  1973             
(2 of 1974)] shall apply to any such trial. 

(4) All offences in relation to winding up alleged to have been committed by any person specified 
in sub-section (1) which are punishable under this Act or under the 1[Companies Act, 1956 (1 of 1956)] 
and which are not tried in a summary way under sub-section (1) shall, notwithstanding anything to the 
contrary contained in that Act or the  1[Code of Criminal Procedure, 1973 (2 of 1974)] or in any other 
law for the time being in force, be taken cognizance of and tried by a Judge of the High Court other 
than  the  Judge  for  the  time  being  dealing  with  the  proceedings  for  the  winding  up  of  the  banking 
company. 

(5) Notwithstanding anything to the contrary contained in the  1[Code of Criminal Procedure, 1973 
(2 of 1974)], the High Court may take cognizance of any offence under this section without the accused 
being committed to it for trial 2***. 

45K.  [Power  of  High  Court  to  enforce  schemes  of  arrangements,  etc.]  Omitted  by  the  Banking 

Companies (Amendment) Act, 1959 (33 of 1959), s. 31 (w.e.f. 1-10-1959). 

45L.  Public  examination  of  directors  and  auditors,  etc.,  in  respect  of  a  banking  company 
under  schemes  of  arrangement.—(1)  Where  an  application  for  sanctioning  a  compromise  or 
arrangement in respect of a banking company is made under 3[section 391 of the Companies Act, 1956 
(1  of  1956)]  or  where  such  sanction  has  been  given  and  the  High  Court  is  of  opinion,  whether  on  a 
report  of  the  Reserve  Bank  or  otherwise,  that  any  person  who  has  taken  part  in  the  promotion  or 
formation of the banking company or has been a director or auditor of the banking company should be 
publicly  examined,  it  may  direct  such  examination  of  such  person  and  the  provisions  of  section  45G 
shall,  as  far  as  may  be,  apply  to the  banking  company  as  they  apply  to  a  banking  company  which  is 
being wound up. 

(2)  Where  a  compromise  or  arrangement  is  sanctioned  under  3[section  391  of  the  Companies             

Act, 1956 (1 of 1956)] in respect of a banking company, the provisions of 4[section 543 of the said Act] 
and of section 45H of this Act shall, as far as may be, apply to the banking company as they apply to a 
banking company which is being wound up as if the order sanctioning the compromise or arrangement 
were an order for the winding up of the banking company.  

1. Subs. by Act 1 of 1984, s. 35, for “Code of Criminal Procedure, 1898 (5 of 1898)” (w.e.f. 15-2-1984). 
2.  The words “and all such trials shall be without the aid of a jury” omitted by s. 35, ibid. (w.e.f.15-2-1984). 
3.  Subs.  by  Act  95  of  1956,  s.  14  and  the  Schedule,  for  “section  153  of  the  Indian  Companies  Act,  1913  (7  of  1913)”                

(w.e.f. 14-1-1957).  

4.  Subs. by s. 14 and the Schedule, ibid., for “section 235of the said Act” (w.e.f. 14-1-1957). 

64 

 
                                                      
 
1[(3)  Where  2[a  scheme  of  reconstruction  or  amalgamation  of  a  banking  company]  has  been 
sanctioned by the Central Government under section 45 and the Central Government is of opinion that 
any  person  who  has  taken part  in the promotion  or formation  of  the  banking  company  or  has  been a 
director or auditor of the banking company should be publicly examined, that Government may apply to 
the  High  Court  for  the  examination  of  such  person  and  if  on  such  examination  the  High  Court  finds 
(whether a fraud has been committed or not) that person is not fit to be a director of a company or to act 
as an auditor of a company or to be a partner of a firm acting as such auditors, the Central Government 
shall  make  an  order  that  that  person  shall  not,  without  the  leave  of  the  Central  Government,  be  a 
director of, or in any way, whether directly or indirectly, be concerned or take part in the management 
of any company or, as the case may be, act as an auditor of, or be a partner of a firm acting as auditors 
of, any company for such period not exceeding five years as may be specified in the order. 

(4)  Where  2[a  scheme  of  reconstruction  or  amalgamation  of  a  banking  company]  has  been 
sanctioned by the Central Government under section 45, the provisions of section 543 of the Companies 
Act,  1956  (1  of  1956),  and  of  section  45H  of  this  Act  shall,  as  far  as  may  be,  apply  to  the  banking 
company as they apply to a banking company which is being wound up as if the order sanctioning the 
scheme of reconstruction or amalgamation as the case may be, were an order for the winding up of the 
banking company; and any reference in the said section 543 to the application of the official liquidator 
shall be construed as a reference to the application of the Central Government.] 

45M. Special provisions for banking companies working under schemes of arrangement at the 
commencement  of  the  Amendment  Act.—Where  any  compromise  or  arrangement  sanctioned  in 
respect of a banking company under  3[section 391 of the Companies Act, 1956 (1 of 1956),] is being 
worked  at  the  commencement  of  the  Banking  Companies  (Amendment)  Act,  1953  (52  of  1953),  the 
High Court may, if it so thinks fit on the application of such banking company,— 

(a) excuse any delay in carrying out any of the provisions of the compromise or arrangement; or  

(b) allow the banking company to settle the list of its debtors in accordance with the provisions of 
section 45D and in such a case, the provisions of the said section shall, as far as may be, apply to the 
banking  company  as  they  apply  to  a  banking  company  which  is  being  wound  up  as  if  the  order 
sanctioning the compromise or arrangement were an order for the winding up of the banking company. 

45N.  Appeals.—(1)  An  appeal  shall  lie  from  any  order  or  decision  of  the  High  Court  in  a  civil 
proceeding  under  this  Act  when  the  amount  or  value  of  the  subject-matter  of  the  claim  exceeds  five 
thousand rupees. 

(2) The High Court may by rules provide for an appeal against any order made under section 45J 

and the conditions subject to which any such appeal would lie. 

(3)  Subject  to the  provisions  of  sub-section (1) and sub-section (2)  and notwithstanding  anything 
contained in any other law for the time being in force, every order or decision of the High Court shall 
be final and binding for all purposes as between the banking company on the one hand, and all persons 
who  are  parties  thereto  and  all persons claiming  through  or  under them  or  any  of  them,  on  the  other 
hand. 

45-O. Special period of limitation.—(1) Notwithstanding anything to the contrary contained in the 

Indian  Limitation  Act,  1908  (9  of  1908)  or  in  any  other  law  for  the  time  being  in  force,  in              

1. Ins. by Act 37 of 1960, s. 7 (w.e.f. 19-9-1960). 
2.  Subs.  by  Act  7  of  1961,  s.  5,  for  “a  scheme  of  reconstruction  of  a  banking  company  or  its  amalgamation  with  another 

banking company” (w.e.f. 24-3-1961). 

3.  Subs.  by  Act  95  of  1956,  s.  14  and  the  Schedule,  for  “section  153  of  the  Indian  Companies  Act,  1913  (7  of  1913)”                

(w.e.f. 14-1-1957). 

65 

 
                                                      
computing the period of limitation prescribed for a suit or application by a banking company which is 
being  wound  up,  the  period  commencing  from  the  date  of  the  presentation  of  the  petition  for  the 
winding up of the banking company shall be excluded. 

(2)  Notwithstanding  anything  to  the  contrary  contained  in  the  Indian  Limitation  Act,  1908  (9  of 
1908) or 1[section 543 of the Companies Act, 1956 (1 of 1956)] or in any other law for the time being in 
force, there shall be no period of limitation for the recovery of arrears of calls from any director of a 
banking company which is being wound up or for the enforcement by the banking company against any 
of its directors of any claim based on a contract, express or implies; and in respect of all other claims by 
the banking company against its directors, the period of limitation shall be twelve years from the date of 
the  accrual  of  such  claims  2[or  five  years  from  the  date  of  the  first  appointment  of  the  liquidator, 
whichever is longer]. 

(3) The provisions of this section, in so far as they relate to banking companies being wound up, 
shall  also  apply  to  a  banking  company  in  respect  of  which  a  petition  for  the  winding  up  has  been 
presented before the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953). 

45P.  Reserve Bank to tender advice in winding up proceedings.—Where in any proceeding for 
the  winding  up  of  a  banking  company  in  which  any  person  other  than  the  Reserve  Bank  has  been 
appointed as the official liquidator and the High Court has directed the official liquidator to obtain the 
advice of the Reserve Bank on any matter (which it is hereby empowered to do), it shall be lawful for 
the Reserve Bank to examine the record of any such proceeding and tender such advice on the matter as 
it may think fit. 

45Q. Power to  inspect.—(1) The  Reserve  Bank  shall,  on  being  directed so  to do  by  the  Central 
Government or by the High Court, cause an inspection to be made by one or more of its officers of a 
banking company which is being wound up and its books and accounts. 

(2) On such inspection, the Reserve Bank shall submit its report to the Central Government and the 

High Court. 

(3) If the Central Government, on consideration of the report of the Reserve Bank, is of opinion that 
there has been a substantial irregularity in the winding up proceedings, it may bring such irregularity to 
the notice of the High Court for such action as the High Court may think fit. 

(4) On receipt of the report of the Reserve Bank under sub-section (2) or on any irregularity being 
brought to its notice by the Central Government under sub-section (3), the High Court may, if it deems 
fit,  after  giving  notice  to  and  hearing  the  Central  Government  in  regard  to  the  report,  give  such 
directions as it may consider necessary. 

45R.  Power  to  call  for  returns  and  information.—The  Reserve  Bank  may,  at  any  time  by  a 
notice in writing, require the liquidator of a banking company to furnish it, within such time as may be 
specified  in  the  notice  or  such  further  time  as  the  Reserve  Bank  may  allow,  any  statement  or 
information relating to or connected with the winding up of the banking company; and it shall be the 
duty of every liquidator to comply with such requirements. 

Explanation.—For the purposes of this section and section 45Q, a banking company working under 
a compromise or arrangement but prohibited from receiving fresh deposits, shall, as far as may be, be 
deemed to be a banking company which is being wound up. 

45S. Chief Presidency Magistrate and District Magistrate to assist official liquidator in taking 
charge  of  property  of  banking  company  being  wound  up.—(1)  For  the  purpose  of  enabling  the 
official  liquidator  or  the special officer  appointed  under sub-section (3)  of  section  37 to take into  his 
custody  or  under  his  control,  all  property,  effects  and  actionable  claims 
banking  company  3***  is  or  appears  to  be  entitled,  the  official  liquidator  or  the  special  officer,                                                 

to  which  a                              

1.  Subs.  by  Act  95  of  1956,  s.  14  and  the  Schedule,  for  “section  235  of  the  Indian  Companies  Act,  1913  (7  of  1913)”              

(w.e.f. 14-1-1957). 

2. Ins. by Act 33 of 1959, s. 32 (w.e.f. 1-10-1959). 
3. The words “, which has been ordered to be wound up” omitted by Act 55 of 1963, s. 23 (w.e.f. 1-2-1964). 

66 

 
                                                      
as  the  case  may  be,  may  request  in  writing  the  1[Chief  Metropolitan  Magistrate  or  the  Chief Judicial 
Magistrate],  within  whose  jurisdiction  any  property,  books  of  account  or  other  documents  of  such 
banking company may be situate or be found, to take possession thereof, and the 1[Chief Metropolitan 
Magistrate or the Chief Judicial Magistrate], as the case may be, shall, on such request being made to 
him,— 

2[(a) take possession of such property, books of accounts or other documents, and (b) forward them 

to the official liquidator or the special officer]. 

3[(2)  Where  any  such  property  and  effects  are  in  the  possession  of  the  1[Chief  Metropolitan 
Magistrate or the Chief Judicial Magistrate], as the case may be, such Magistrate shall, on request in 
writing being made to him by the official liquidator or the special officer referred to in sub-section (1), 
sell such property and effects and forward the net proceeds of the sale to the official liquidator or the 
special officer: 

Provided that such sale shall, as far as practicable, be effected by public auction. 
(3)  For  the  purpose  of  securing  compliance  with  the  provisions  of  sub-section  (1),  the  1[Chief 
Metropolitan Magistrate or the Chief Judicial Magistrate], may take or cause to be taken such steps and 
use or cause to be used such force as may, in his opinion, be necessary. 

(4)  No  act  of  the  1[Chief  Metropolitan  Magistrate  or  the  Chief  Judicial  Magistrate]  done  in 

pursuance of this section shall be called in question in any court or before any autority.] 

45T.  Enforcement  of  orders  and  decisions  of  High  Court.—(1)  All  orders  made  in  any  civil 
proceeding by a High Court may be enforced in the same manner in which decrees of such court made 
in any suit pending therein may be enforced. 

(2)  Notwithstanding  anything  to  the  contrary  contained  in  the  Code  of  Civil  Procedure,  1908              

(5 of 1908), a liquidator may apply for the execution of a decree by a court other than the one which 
made it on production of a certificate granted under sub-section (6) of section 45D and on his certifying 
to  such  other  court  in  writing  the  amount  remaining  due  or  relief  remaining  unenforced  under  the 
decree.  

(3) Without prejudice to the provisions of sub-section (1) or sub-section (2), any amount found due 
to  the  banking  company  by  an  order  or  decision  of  the  High  Court  may,  with  the  leave  of  the  High 
Court,  be  recovered  4[by  the  liquidator  in  the  same  manner  as  an  arrear  of  land  revenue  and  for  the 
purpose  of  such  recovery  the  liquidator  may  forward  to  the  Collector  within  whose  jurisdiction  the 
property of the person against whom any order or decision of the High Court has been made is situate, a 
certificate under his signature specifying the amount so due and the person by whom it is payable].  

5[(4) On receipt of a certificate under sub-section (3), the Collector shall proceed to recover from 

such person the amount specified therein as if it were an arrear of land revenue: 

Provided that without prejudice to any other powers of the Collector, he shall, for the purposes of 

recovering  the  said  amount,  have  all  the  powers,  which,  under  the  Code  of  Civil  Procedure,  1908            
(5 of 1908), a civil court has for the purpose of the recovery of an amount due under a decree.] 

45U. Power of High Court to make rules.—The High Court may make rules consistent with this 

Act and the rules made under section 52 prescribing— 

(a) the manner in which inquiries and proceedings under Part III or Part IIIA may be held; 

(b) the offences which may be tried summarily; 

(c) the authority to which, and the conditions subject to which, appeals may be preferred and 

the manner in which such appeals may be filed and heard; 

1. Subs. by Act 1 of 1984, s. 36, for “Chief Presidency Magistrate or the District Magistrate” (w.e.f.15-2-1984). 
2 Subs. by Act 55 of 1963, s. 23, for certain words (w.e.f. 1-2-1964). 
3. Subs. by s. 23, ibid., for sub-section (2) (w.e.f. 1-2-1964). 
4. Subs. s. 24, ibid., for “in the same manner as an arrear of land revenue” (w.e.f. 1-2- 1964). 
5.  Ins. by s. 24, ibid. (w.e.f. 1-2-1964). 

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(d)  any  other  matter  for  which  provision  has  to  be  made  for  enabling  the  High  Court  to 

effectively exercise its functions under this Act. 

45V. References to directors, etc., shall be construed as including references to past directors, 
etc.—For  the  removal  of  doubts  it  is  hereby  declared  that  any  reference  in  this  Part  to  a  director, 
manager, liquidator, officer or auditor of a banking company shall be construed as including a reference 
to any past or present director, manager, liquidator, officer or auditor of the banking company.  

45W. Part II not to apply to banking companies being wound up.—Nothing contained in Part II 

shall apply to a banking company which is being wound up. 

45X. Validation of certain proceedings.—Notwithstanding anything contained in section 45B or 
any other provision of this Part or in section 11 of the Banking Companies (Amendment) Act, 1950 (20 
of 1950), no proceeding held, judgment delivered or decree or order made before the commencement of 
the Banking Companies (Amendment) Act, 1953 (52 of 1953), by any court other than the High Court 
in respect of any matter over which the High Court has jurisdiction under this Act shall be invalid or be 
deemed ever to have been invalid merely by reason of the fact that such proceeding, judgment, decree 
or order was held, delivered or made by a court other than the High Court.] 

1[PART IIIB 

PROVISIONS RELATING TO CERTAIN OPERATIONS OF BANKING COMPANIES 

45Y.  Power  of  Central  Government  to  make  rules  for  the  preservation  of  records.—The 
Central Government may, after consultation with the Reserve Bank and by notification in the Official 
Gazette, make rules specifying the periods for which— 

(a) a banking company shall preserve its books, accounts and other documents; and 

(b) a banking company shall preserve and keep with itself different instruments paid by it. 

45Z. Return of paid instruments to customers.—(1) Where a banking company is required by its 
customer  to  return  to  him  a  paid  instrument  before  the  expiry  of  the  period  specified  by  rules  made 
under  section  45Y,  the  banking  company  shall  not  return  the  instrument  except  after  making  and 
keeping in its possession a true copy of all relevant parts of such instrument, such copy being made by a 
mechanical or other process which in itself ensures the accuracy of the copy. 

(2) The banking company  shall be entitled to recover from the customer the cost of making such 

copies of the instrument. 

Explanation.—In  this  section,  “customer”  includes  a  Government  department  and  a  corporation 

incorporated by or under any law. 

45ZA. Nomination for payment of depositors' money.—(1) Where a deposit is held by a banking 
company to the credit of one or more persons, the depositor or, as the case may be, all the depositors 
together, may nominate, in the prescribed manner, 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 banking 
company. 

(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 in 
the  prescribed  manner  purports  to  confer  on  any  person  the  right  to  receive  the  amount  of  deposit           
from the banking company, 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 prescribed manner. 

1. Ins. by Act 1 of 1984, s. 37 (w.e.f. 29-3-1985). 

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(3)  Where  the  nominee  is  a  minor,  it  shall  be  lawful  for  the  depositor  making  the  nomination  to 
appoint in the prescribed manner any person to receive the amount of deposit in the event of his death 
during the minority of the nominee. 

(4) Payment by a banking company in accordance with the provisions of this section shall constitute 

a full discharge to the banking company of its liability in respect of the deposit: 

Provided that nothing contained in this sub-section shall effect the right or claim which any person 

may have against the person to whom any payment is made under this section. 

45ZB. Notice of claims of other persons regarding deposits not receivable.—No notice of the 
claim  of  any  person,  other  than  the  person  or  persons  in  whose  name  a  deposit  is  held  by  a  banking 
company, shall be receivable by the banking company, nor shall the banking company 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 banking company, the banking company shall 
take due note of such decree, order, certificate or other authority. 

45ZC.  Nomination  for  return  of  articles  kept  in  safe  custody  with  banking  company.—(1) 
Where  any  person  leaves  any  article  in  safe  custody  with  a  banking  company,  such  person  may 
nominate, in the prescribed manner, one person to whom, in the event of the death of the person leaving 
the article in safe custody, such article may be returned by the banking company. 

(2)  Where  the  nominee  is  a  minor,  it  shall  be  lawful  for  the  person  making  the  nomination  to 
appoint in the prescribed manner any person to receive the article deposited in the event of his death 
during the minority of the nominee. 

(3) The banking company shall, before returning any articles under this section to the nominee or 
the person appointed under Sub-section (2), prepare, in such manner as may be directed by the Reserve 
Bank  from  time  to  time,  an  inventory  of  the  said  articles  which  shall  be  signed  by  such  nominee  or 
person and shall deliver a copy of the inventory so prepared to such nominee or person.  

(4)  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 article, where a nomination made in 
the prescribed manner purports to confer on any person the right to receive the article from the banking 
company,  the  nominee  shall,  on  the  death  of  the  person  leaving  the  article  in  safe  custody,  become 
entitled to the return of the article to the exclusion of all other persons, unless the nomination is varied 
or cancelled in the prescribed manner: 

Provided that nothing contained in this section shall affect the right or claim which any person may 

have against the person to whom the article is returned in pursuance of this sub-section. 

45ZD.  Notice  of  claims  of  other  persons  regarding  articles  not  receivable.—No  notice  of  the 
claim of any person, other than the person or persons in whose name any article is held by a banking 
company in safe custody, shall be receivable by the banking company, nor shall the banking company 
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 article is produced before a banking company, the banking company shall 
take due note of such decree, order, certificate or other authority. 

45ZE. Release contents of safety Release of lockers.—(1) Where an individual is the sole hirer of 
a  locker  from  a  banking  company,  whether  such  locker  is  located  in  the  safe  deposit  vault  of  such 
banking  company  or  elsewhere,  such  individual  may  nominate  one  person  to  whom,  in  the  event  of            
the death of such individual, the banking company may give access to the locker and liberty to remove 
the contents of the locker. 

(2)  Where  any  such  locker  is  hired  from  a  banking  company  by  two  or  more  individuals jointly, 
and, under the contract of hire, the locker is to be operated under the joint signatures of two or more of 

69 

 
such hirers, such hirers may nominate one or more persons to whom, in the event of the death of such 
joint hirer or hirers, the banking company may give, jointly with the surviving joint hirer or joint hirers, 
as the case may be, access to the locker and liberty to remove the contents of such locker. 

(3)  Every  nomination  under  sub-section  (1)  or  sub-section  (2)  shall  be  made  in  the  prescribed 

manner. 

(4) The banking company shall, before permitting the removal of the contents of any locker by any 
nominee  or  jointly  by  any  nominee  and  survivors  as  aforesaid,  prepare,  in  such  manner  as  may  be 
directed by the Reserve Bank from time to time, an inventory of the contents of the locker which shall 
be  signed by  such  nominee  or jointly  by  such  nominee  and survivors and  shall  deliver  a  copy  of  the 
inventory so prepared to such nominee or nominee and survivors. 

(5)  On the  removal  of  the contents  of  any  locker  by any  nominee  or jointly  by  any  nominee  and 
survivors as aforesaid, the liability of the banking company in relation to the contents of the locker shall 
stand discharged. 

(6)  No  suit,  prosecution  or  other  legal  proceeding  shall  lie  against  a  banking  company  for  any 
damage  caused  or  likely  to  be  caused,  for  allowing  access  to  any  locker,  and  liberty  to  remove  the 
contents of such locker, in pursuance of the provisions of sub-section (1) or sub-section (2), as the case 
may be. 

45ZF. Notice of claims of other persons regarding safety lockers not receivable.—No notice of 
the claim of any person, other than hirer or hirers of a locker, shall be receivable by a banking company 
nor shall the banking company 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 the locker or its contents is produced before the banking company, the banking 
company shall take due note of such decree, order, certificate or other authority.] 

PART IV 

MISCELLANEOUS 

46. Penalties.—(1) Whoever in any return, balance-sheet or other document 1[or in any information 
required  or furnished]  by or  under  or for  the  purposes  of any  provision  of  this  Act,  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 2[or with fine, which may extend to one crore rupees or with both]. 

(2) If any person fails to produce any book, account or other document or to furnish any statement 
or  information  which  under  sub-section  (2)  of  section  35  it  is  his  duty  to  produce  or  furnish,  or  to 
answer any question relating to the business of a banking company which he is asked by  3[an officer 
making  an  inspection  or  scrutiny  under  that  section],  he  shall  be  punishable  with  a  fine  which  may 
extend to 4[twenty lakh rupees] in respect of each offence, and if he persists in such refusal, to a further 
fine which may extend to 5[fifty thousand rupees] for every day during which the offence continues. 

(3) If any deposits are received by a banking company in contravention of an order under clause (a) 
of  sub-section  (4)  of  section  35,  every  director  or  other  officer  of  the  banking  company,  unless  he 
proves that the contravention took place without his knowledge or that he exercised all due diligence to 

1. Subs. by Act 95 of 1956, s. 9, for “required” (w.e.f. 14-1-1957). 
2. Subs. by Act 4 of 2013, s. 11, for “and shall also be liable to fine” (w.e.f. 18-1-2013). 
3. Subs. by Act 1 of 1984,  s. 38, for “an officer making an inspection under that section” (w.e.f. 15-2-1984). 
4. Subs. by Act 4 of 2013, s. 11, for “two thousand rupees” (w.e.f. 18-1-2013). 
5. Subs. by s. 11, ibid., for “one hundred rupees” (w.e.f. 18-1-2013). 

70 

 
                                                      
prevent it, shall be deemed to be guilty of such contravention and shall be punishable with a fine which 
may extend to twice the amount of the deposits so received. 

1[(4) If any other provision of this Act is contravened or if any default is made in— 

(i)  complying  with  any  requirement  of  this  Act  or  of  any  order,  rule  or  direction  made  or 

condition imposed thereunder, or 

(ii)  carrying  out  the  terms  of,  or  the  obligations  under,  a  scheme  sanctioned  under                         

sub-section (7) of section 45,  

by any person, such person shall be punishable with fine which may extend to  2[3[one crore rupees] or 
twice  the  amount  involved  in  such  contravention  or  default  where  such  amount  is  quantifiable, 
whichever is more, and where a contravention or default is a continuing one, with a further fine which 
may extend to 4[one lakh rupees]] for every day, during which the contravention or default continues.] 

5[(5) Where a contravention or default has been committed by a company, every person who, at the 
time  the  contravention  or  default  was  committed,  was  in  charge  of,  and  was  responsible  to,  the 
company for the conduct of the business of the company, as well as the company, shall be deemed to be 
guilty  of  the  contravention  or  default  and  shall  be  liable  to  be  proceeded  against  and  punished 
accordingly: 

Provided  that  nothing  contained  in  this  sub-section  shall  render  any  such  person  liable  to  any 
punishment provided in this Act if he proves that the contravention or default was committed without 
his knowledge or that he exercised all due diligence to prevent the contravention or default. 

(6)  Notwithstanding  anything  contained  in  sub-section  (5),  where  a  contravention  or  default  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 gross negligence on the part of, any director, manager, secretary 
or other officer of the company, such director manager, secretary or other officer shall also be deemed 
to  be  guilty  of that  contravention or  default  and  shall  be  liable  to  be  proceeded against  and  punished 
accordingly. 

Explanation.—For the purposes of this section,— 

(a)  “company”  means  any  body  corporate  and  includes  a  firm  or  other  association  of 

individuals; and 

(b) “director”, in relation to a firm, means a partner in the firm.]  

6[46A. Chairman, director, etc., to be public servants for the purposes of Chapter IX of the 
Indian  Penal  Code.—7[Every  chairman  who  is  appointed  on  a  whole-time  basis,  managing  director, 
director, auditor], liquidator, manager and any other employee of a banking company shall be deemed 
to be a public servant for the purposes of Chapter IX of the Indian Penal Code (45 of 1860).] 

47.  Cognizance  of  offences.—No  Court  shall  take  cognizance  of  any  offence  punishable  under 
8[sub-section (5) of section 36AA or] section 46 except upon complaint in writing made by an officer  
of  

1. Subs. by Act 1 of 1984, s. 38, for sub-section (4) (w.e.f. 15-2-1984). 
2. Subs. by Act 20 of 1994, s. 8, for certain words (w.e.f. 31-1-1994). 
3.  Subs. by Act 4 of 2013, s. 11, for “fifty thousand rupees” (w.e.f. 18-1-2013). 
4. Subs. by s. 11, ibid., for “two thousand and five hundred rupees” (w.e.f. 18-1-2013). 
5. Subs. by Act 55 of 1963, s. 25, for sub-section (4) (w.e.f. 1-2-1964). 
6. Ins. by Act 95 of 1956, s. 10 (w.e.f. 14-1-1957). 
7. Subs. by Act 20 of 1994, s. 9, for “Every chairman, director, auditor” (w.e.f. 31-1-1994). 
8. Ins. by Act 55 of 1963, s. 26 (w.e.f. 1-2-1964). 

71 

 
 
                                                      
1[the  Reserve  Bank  or,  as  the  case  may  be,  the  National  Bank]  generally  or  specially  authorized  in 
writing in this behalf by 2[the Reserve Bank or, as the case may be, the National Bank], and  2[no court 
other  than  that  of  a  Metropolitan  Magistrate  or  a  Judicial  Magistrate  of  the  first  class  or  any  court 
superior thereto] shall try any such offence. 

3[47A.  Power  of  Reserve Bank  to impose  penalty.—(1)  Notwithstanding  anything  contained  in 
section 46, if a contravention or default of the nature referred to in  4[sub-section (2) or sub-section (3) 
or sub-section (4)] of section 46, as the case may be, is made by a banking company, then, the Reserve 
Bank may impose on such banking company— 

5[(a) where the contravention or default is of the nature referred to in sub-section (3) of section 46, 
a  penalty  not  exceeding  twenty  lakh  rupees in respect  of  each  offence if the contravention or  default 
persists, a further penalty not exceeding fifty thousand rupees for everyday, after the first day, during 
which the contravention or deafult continues; 

(b) where the contravention is of the nature referred to in sub-section (3) of section 46, a penalty not 

exceeding twice the amount of the deposits in respect of which such contravention was made; 

(c) where the contravention or default is of the nature referred to in sub-section (4) of section 46, a 
penalty not exceeding one crore rupees or twice the amount involved in such contravention or default 
where  such  amount  is  quantifiable,  whichever  is  more,  and  where  such  contravention  or  default  is  a 
continuing one, a further penalty which may extend to one lakh rupees for everyday, after the first day, 
during which the contravention or default continues.] 

6[(2) For the purpose of adjudging the penalty under sub-section (1), the Reserve Bank shall serve 
notice  on  the  banking  company  requiring  it  to  show  cause  why  the  amount  specified  in  the  notice 
should not be imposed and a reasonable opportunity of being heard shall also be given to such banking 
company.] 

 (4) No complaint shall be filed against any banking company in any court of law in respect of any 
contravention or default in respect of which any penalty has been imposed by the Reserve Bank under 
this section. 

(5) Any penalty imposed by the Reserve Bank under this section shall be payable within a period of 
fourteen  days  from  the  date  on  which  notice  issued  by  the  Reserve  Bank  demanding  payment  of  the 
sum is served on the banking company and in the event of failure of the banking 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 of the banking company is situated; or, in the case of 
a banking company incorporated outside India, where its principal place of business in India is situated:  
Provided  that  no such  direction  shall  be  made  except  on  an  application  made  to  the  court  by  the 

Reserve Bank or any officer authorised by that Bank in this behalf. 

(6) The court which makes a direction under sub-section (5) shall issue a certificate specifying the 
sum  payable  by  the  banking  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. 

(7) Where any complaint has been filed against any banking company in any court in respect of the 
contravention or default of the nature referred to in sub-section (3) or, as the case may be, sub- section 
(4) of section 46, then, no proceedings for the imposition of any penalty on the banking company shall 
be taken under this section.] 

48. Application of fines.—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, or in or towards 
the rewarding of the person on whose information the fine is recovered. 

1. Subs. by Act 61 of 1981, s. 61 and Sch. II, for “the Reserve Bank” (w.e.f. 12-7-1984). 
2. Subs. by Act 1 of 1984 s. 39, for certain words (w.e.f. 15-2-1984). 
3. Ins. by Act 58 of 1968, s. 17 (w.e.f. 1-2-1969). 
4. Subs. by Act 4 of 2013, s. 12, for “sub-section (3) or sub-section (4)” (w.e.f. 18-1-2013). 
5. Subs. by s. 12, ibid., for sub-clauses (a) and (b) (w.e.f. 18-1-2013). 
6.  Subs. by Act 20 of 1994, s. 10, for sub-sections (2) and (3) (w.e.f. 31-1-1994). 

72 

 
                                                      
49.  Special  provisions  for  private  banking  companies.—The  exemptions,  whether  express  or 
implied, in favour of a private company in 1[sections 90, 165, 182, 204 and 255, clauses (a) and (b) of 
sub-section  (1)  of  section  293  and  sections  300,  388A  and  416  of  the  Companies  Act,  1956                      
(1 of 1956)], shall not operate in favour of a private company which is a banking company. 

2[49A. Restriction on acceptance of deposits withdrawable by cheque.—No person other than a 
banking company, the Reserve Bank, the State Bank of India or any other 3[banking institution, firm or 
other person notified by the Central Government in this behalf on the recommendation of the Reserve 
Bank] shall accept from the public deposits of money withdrawable by cheque: 

Provided that nothing contained in this section shall apply to any savings bank scheme run by the 

Government. 

49B. Change of name by a banking company.—Notwithstanding anything contained in section 
21 of the Companies Act, 1956 (1 of 1956), the Central Government shall not signify its approval to the 
change  of  name  of  any  banking  company  unless  the  Reserve  Bank  certifies  in  writing  that  it  has  no 
objection to such change. 

49C. Alteration of memorandum of a banking company.—Notwithstanding anything contained 
in  the  Companies  Act,  1956  (1  of  1956),  no  application  for  the  confirmation  of  the  alteration  of  the 
memorandum of a banking company shall be maintainable unless the Reserve Bank certifies that there 
is no objection to such alteration.] 

50.  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  4[contained in  sections  10,  12A,  16,  35A,  35B,  5[36,  43A  and  45] or  by  reason  of the 
compliance by a banking company with any order or direction given to it under this Act]. 

6[51.  Application  on  of  certain  provisions  to  the  State  Bank  of  India  and  other  notified 
banks.—7[(1)] Without prejudice to the provisions of the State Bank of India Act, 1955 (23 of 1955), or 
any other enactment, the provisions of sections 10, 13 to 15, 17,  8[19 to 21A, 23 to 28, 29 [excluding 
sub-section  (3)],  9[29A]  10[sub-sections  (1B),  (1C)  and  (2)  of  section  30,  31],  34,  35,  35A,  11[35AA, 
35AB,] 36 [excluding clause (d) of sub-section (1)], 45Y to 45ZF, 46 to 48] 50, 52 and 53 shall also 
apply, so far as may be, to and in relation to the State Bank of India  12[or any corresponding new bank 
or  a  Regional  Rural  Bank  or  any  subsidiary  bank]  as  they  apply  to  and  in  relation  to  banking 
companies:  

13[Provided that— 

(a) nothing contained in clause (c) of sub-section (1) of section 10 shall apply to the chairman 
of the State Bank of India or to a 14[managing director] of any subsidiary bank in so far as the said 
clause precludes him from being a director of, or holding an office in, any institution approved by 
the Reserve Bank; 

1. The words, figures and letters “sections 17, 77, 83B, 86H, 91B and 91D and sub-section (5) of section 144 of the Indian 
Companies Act, 1913 (7 of 1913)” have successively been amended by Act 95 of 1956, s. 11, Act 33 of 1959, s. 34 and Act 
55 of 1963, s. 27 to read as above.  

2. Ins. by Act 33 of 1959, s. 35 (w.e.f. 1-10-1959). 
3. Subs. by Act 55 of 1963, s. 28, for certain words (w.e.f. 1-2-1964). 
4. Subs. by Act 95 of 1956, s. 12, for certain words (w.e.f. 14-1-1957). 
5. Subs. by Act 37 of 1960, s. 8, for “and 36” (w.e.f. 19-9-1960). 
6. Subs. by Act 79 of 1956, s. 43 and the Second Schedule, for section 51 (w.e.f. 22-10-1956). 
7. Section 51 renumbered as sub-section (1) thereof by Act 1 of 1984, s. 40 (w.e.f. 15-2-1984). 
8. Subs. by s. 40, ibid., for certain words (w.e.f. 15-2-1984).   
9. Ins. by Act 4 of 2013, s. 13 (w.e.f. 18-1-2013). 
10. Subs. by Act 66 of 1988, s. 10, for “31” (w.e.f. 30-12-1988).   
11. Ins. by Act 30 of 2017, s. 3, (w.e.f. 4-5-2017). 
12. Subs. by Act 1 of 1984, s. 40, for certain words (w.e.f. 15-2-1984). 
13.  Subs. by Act 38 of 1959, s. 64 and the Third Schedule, for the former proviso (w.e.f. 10-9-1959). 
14. Subs. by Act 1 of 1984, s. 40, for “general manager” (w.e.f. 15-2-1984). 

73 

 
 
 
                                                      
1[(b)  nothing  contained  in  sub-clause  (iii)  of  clause  (b)  of  sub-section  (1)  of  section  20  shall 
apply  to  any  bank  referred  to  in  sub-section  (1),  insofar  as  the  said  sub-clause  (iii)  of  clause  (b) 
precludes that bank from entering into any commitment for granting any loan or advance to or on 
behalf of a company (not being a Government company) in which not less than forty per cent. of 
the  paid-up  capital  is  held  (whether  singly  or  taken  together)  by  the  Central  Government  or  the 
Reserve Bank or a corporation owned by that bank; and 

(c) nothing contained in section 46 or in section 47A shall apply to,— 

(i) an officer of the Central Government or the Reserve Bank, nominated or appointed as 
director of the State Bank of India or any corresponding new bank or a Regional Rural Bank or 
any subsidiary bank or a company; or 

(ii) an officer of the State Bank of India or a corresponding new bank or a Regional Rural 
Bank  or  a  subsidiary  bank  nominated  or  appointed  as  director  of  any  of  the  said  banks  (not 
being the bank of which he is an officer) or of a banking company.] 
2* 

*  

* 

* 

* 

3[(2) References to a banking company in any rule or direction relating to any provision of this Act 
referred to in sub-section (1) shall, except where such rule or direction provides otherwise, be construed 
as referring also to the State Bank of India, a corresponding new bank, a Regional Rural Bank and a 
subsidiary bank.] 

4[51A.  Powers  of  Reserve  Bank  not  to  apply  to  International  Financial  Services  Centre.—
Notwithstanding anything contained in any other law for the time being in force, the powers exercisable 
by the Reserve Bank under this Act,— 

(a) shall not extend to an International Financial Services Centre set up under sub-section (1) of 

section 18 of the Special Economic Zones Act, 2005 (28 of 2005); 

(b)  shall  be  exercisable  by  the  International  Financial  Services  Centres  Authority  established 
under  sub-section  (1)  of  section  4  of  the  International  Financial  Services  Centres  Authority  Act, 
2019, 

in  so  far  as  regulation  of  financial  products,  financial  services  and  financial  institutions  that  are 
permitted in the International Financial Services Centres are concerned.] 

52.  Power  of  Central  Government  to  make  rules.—(1)  The  Central  Government  may,  after 
consultation  with  the  Reserve  Bank,  make  rules  to  provide  for  all  matters  for  which  provision  is 
necessary or expedient for the purpose of giving effect to the provisions of this Act and all such rules 
shall be published in the Official Gazette. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 
provide for the details to be included in the returns required by this Act and the manner in which such 
returns shall be submitted 5[and the form in which the official liquidator may file lists of debtors to the 
Court  having jurisdiction under  Part  III  or  Part  IIIA  and  the  particulars  which such lists  may  contain 
and any other matter which has to be, or may be, prescribed]. 

6* 
7[(4) The Central Government may by rules made under this section annul, alter or add to, all or any 

* 

* 

* 

* 

of the provisions of the Fourth Schedule.] 

8[(5) Every rule made by the Central Government under this Act shall be laid, as soon as may be 
after it is made, before each House of Parliament, while it is in session, for a total period of thirty days 
which may be comprised in one session or in two or more successive sessions, and if, before the expiry 
of the session immediately following the session or the successive sessions aforesaid both Houses agree 

1. Subs. by Act 1 of 1984, s. 40, for clauses (b) and (c) (w.e.f. 15-2-1984). 
2. Explanation omitted by Act 58 of 1968, s. 18 (w.e.f. 1-2-1969). 
3.  Ins. by Act 1 of 1984, s. 40 (w.e.f. 15-2-1984). 
7. Ins. by Act 50 of 2019, s. 33 and the Second Schedule (w.e.f. 1-10-2020). 
4. Added by Act 52 of 1953, s. 11 (w.e.f. 30-12-1953). 
5. Omitted by Act 1 of 1984, s. 41 (w.e.f. 15-2-1984).   
6. Ins. by Act 52 of 1953, s. 11 (w.e.f. 30-12-1953). 
7. Ins. by Act 1 of 1984, s. 41 (w.e.f. 15-2-1984). 

74 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
in making any modification in the rule or both Houses agree that the rule should not be made, the rule 
shall  thereafter  have  effect  only  in  such  modified  form  or  be  of  no  effect,  as  the  case  may  be;  so, 
however, that any such modification or annulment shall be without prejudice to the validity of anything 
previously done under that rule.]  

53.  Power  to  exempt  in  certain  cases.—1[(1)]  The  Central  Government  may,  on  the 
recommendation of the Reserve Bank, declare, by notification in the Official Gazette, that any or all of 
the  provisions  of  this  Act  shall  not  apply  to  any  2[banking  company  or  institution  or  to  any  class  of 
banking companies 3***] either generally or for such period as may be specified. 

4[(2)  5[A  copy  of  every  notification  proposed  to  be  issued  under  sub-section  (1)  relating  to  any 
banking company or institution or any class of banking companies or any branch of a banking company 
or an institution, as the case may be, functioning or located in any Special Economic Zone established 
under the Special Economic Zones Act, 2005 (28 of 2005) shall be laid in draft 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 disapproving the issue 
of the notification or both Houses agree in making any modification in the notification, the notification 
shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed 
upon by both the Houses.] 

54.  Protection  of  action  taken  under  Act.—(1)  No  suit  or  other  legal  proceeding  shall  be  lie 
against the Central Government, the Reserve Bank or any officer for anything which is in good faith 
done or intended to be done in pursuance of this Act. 

(2)  Save  as  otherwise  expressly  provided  by  or  under  this  Act,  no  suit  or  other  legal  proceeding 
shall  lie  against  the  Central  Government,  the  Reserve  Bank  or  any  officer  for  any  damage  caused  or 
likely to be caused by anything in good faith done or intended to be done in pursuance of this Act. 

 55. Amendment of Act 2 of 1934.—The Reserve Bank of India Act, 1934 (2 of 1934), shall be 
amended  in  the  manner  specified  in the fourth  column  of  the  First  Schedule,  and  the  amendments  to 
section 18 thereof as specified in the said Schedule shall be deemed to have had effect on and from the 
20th day of September, 1947. 

6[55A. Power to remove difficulties.—If any difficulty arises in giving effect to the provisions of 
this  Act,  the  Central  Government  may,  by  order,  as  occasion  requires,  do  anything  (not  inconsistent 
with  the  provisions  of  this  Act)  which  appears  to  it  to  be  necessary  for  the  purpose  of  removing  the 
difficulty: 

Provided that no such power shall be exercised after the expiry of a period of three years from the 

commencement of section 20 of the Banking Laws (Amendment) Act, 1968 (58 of 1968).] 

7[PART V 
APPLICATION OF THE ACT TO CO-OPERATIVE BANKS 

56. Act to apply to co-operative societies subject to modifications.—8[Notwithstanding anything 
contained in any other law for the time being in force, the provisions of this Act], shall apply to, or in 
relation to, co-operative societies as they apply to, or in relation to, banking companies subject to the 
following modifications, namely:— 

(a) throughout this Act, unless the context otherwise requires,— 

1. Section 53 renumbered as sub-section (1) thereof by Act 28 of 2005, s. 57 and the Third Schedule. 
2. Subs by s. 57 and Third Schedule, ibid., for “banking company or institution or to any class of banking companies”. 
3.  The  words  “or  any  of  their  branches  functioning  or  located  in any  Special  Economic  Zone  established under  the  Special 

Economic Zones Act, 2005 (28 of 2005)” omitted by Act 17 of 2007, s. 3 (w.e.f. 23-1-2007). 

4. Ins. by Act 28 of 2005, s. 57 and the Third Schedule. 
5.  Subs. by Act 17 of 2007, s. 3, for “A copy of every notification proposed to be issued under sub-section (1), shall be laid in 

draft before each house of Parliament” (w.e.f. 23-1-2007). 

6. Ins. by Act 58 of 1968, s. 20 (w.e.f. 1-2-1969). 
7. Ins. by Act 23 of 1965, s. 14 (w.e.f. 1-3-1966). 
8. Subs. by Act 39 of 2020, s. 4, for certain words (w.e.f. 1-4-2021). 

75 

 
                                                      
(i)  references  to  a  “banking  company”  or  “the  company”  or  “such  company”  shall  be 

construed as references to a co-operative bank, 

(ii)  references  to  “commencement  of  this  Act”  shall  be  construed  as  references  to 

commencement  of  the  Banking  Laws  (Application  to  Co-operative  Societies)  Act,  1965                  
(23 of 1965); 

1[(iii)  references  to  “memorandum  of  association”  or  “articles  of  association”  shall  be 

construed as references to bye-laws; 

(iv) references to the provisions of the Companies Act, 1956 (1 of 1956), except in Part III 
and Part IIIA, shall be construed as references to the  corresponding provisions, if any, of the 
law under which a co-operative bank is registered; 

(v) references to “Registrar” or “Registrar of Companies” shall be construed as references 
to “Central Registrar” or “Registrar of Co-operative Societies”, as the case may be, under the 
law under which a co-operative bank is registered;] 

(b)  in  section  2,  the  words  and  figures  “the  Companies  Act,  1956  (1  of  1956),  and”  shall  be 

omitted; 

(c) in section 5,— 

2[(i) after clause (cc), the following clauses shall be inserted namely:— 

(cci) “co-operative bank” means a state co-operative bank, a central co-operative bank 

and a primary co-operative bank; 

(ccii) “co-operative credit society” means a co-operative society, the primary object of 
which  is  to  provide  financial  accommodation  to  its  members  and  includes  a  co-operative 
land mortgage bank; 

3[(cciia)  “co-operative  society”  means  a  society  registered  or  deemed  to  have  been 

registered  under  any  Central  Act  for  the  time  being  in  force  relating  to  the  multi-State             
co-operative  societies,  or any  other  Central or  State law  relating  to  co-operative  societies 
for the time being in force;] 

(cciii)  “director”,  in  relation  to  a  co-operative  society,  includes  a  member  of  any 
committee  or  body  for  the  time  being  vested  with  the  management  of  the  affairs  of  that 
society; 

2[(cciiia)  “multi-State  co-operative  bank”  means  a  multi-State  co-operative  society 

which is a primary co-operative bank; 

(cciiib)  “multi-State  co-operative  society”  means  a  multi-State  co-operative  society 
registered as such under any Central Act for the time being in force relating to the multi-
State  co-operative  societies  but  does  not  include  a  national  co-operative  society  and  a 
federal co-operative;] 

(cciv) “primary agricultural credit society” means a co-operative society,— 

(1)  the  primary  object  or  principal  business  of  which  is  to  provide  financial 
accommodation  to  its  members  for  agricultural  purposes  or  for  purposes  connected 
with agricultural activities (including the marketing of crops); and 

(2)  the  bye-laws  of  which  do  not  permit  admission  of  any  other  co-operative 

society as a member: 

1. Ins. by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 
2. Subs. by Act 61 of 1981, s. 61 and the Second Schedule, for sub-clause (i) (w.e.f. 1-5-1982). 
3.  Ins. by Act 24 of 2004, s. 2 (w.e.f. 1-3-1966). 

76 

 
                                                      
 
Provided  that  this  sub-clause  shall  not  apply  to  the  admission  of  a  co-operative 
bank as a member by reason of such co-operative bank subscribing to the share capital 
of  such  co-operative  society  out  of  funds  provided  by  the  State  Government  for  the 
purpose;  

(ccv) “primary co-operative bank” means a co-operative society, other than a primary 

agricultural credit society,— 

(1) the primary object or principal business of which is the transaction of banking 

business;  

(2)  the  paid-up  share  capital  and  reserves  of  which  are  not  less  than  one  lakh  of 

rupees; and 

(3)  the  bye-laws  of  which  do  not  permit  admission  of  any  other  co-operative 

society as a member: 

Provided  that  this  sub-clause  shall  not  apply  to  the  admission  of  a  co-operative 
bank as a member by reason of such co-operative bank subscribing to the share capital 
of  such  co-operative  society  out  of  funds  provided  by  the  State  Government  for  the 
purpose; 

(ccvi)  “primary  credit  society”  means  a  co-operative  society,  other  than  a  primary 

agricultural credit society,— 

(1) the primary object or principal business of which is the transaction of banking 

business; 

(2) the paid-up share capital and reserves of which are less than one lakh of rupees; 

and 

(3)  the  bye-laws  of  which  do  not  permit  admission  of  any  other  co-operative 

society as a member: 

Provided  that  this  sub-clause  shall  not  apply  to  the  admission  of  a  co-operative 
bank as a member by reason of such co-operative bank subscribing to the share capital 
of  such  co-operative  society  out  of  funds  provided  by  the  State  Government  for  the 
purpose. 

Explanation.—If any dispute arises as to the primary object or principal business of 
any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination 
thereof by the Reserve Bank shall be final; 

(ccvii)  “central  co-operative  bank”,  1***  “primary  rural  credit  society”  and  “state             

co-operative bank” shall have the meanings respectively assigned to them in the National 
Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);]  

2[(ii) clauses (ff), (h) and (nb) shall be omitted;] 

3* 

* 

* 

(e) in section 6, in sub-section (1),— 

4* 

* 

* 

* 

* 

* 

* 

* 

* 

(ii)  in  clause  (d),  after  the  word  “company”,  the  words  “co-operative  society,”  shall  be 

inserted; 

1. The words “co-operative society,” omitted by Act 24 of 2004, s. 2  (w.e.f. 1-3-1966). 
2. Subs. by Act 1 of 1984, s. 42, for sub-clause (ii) (w.e.f. 15-2-1984). 
3. Clause (d) omitted by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 
4. Sub-clause (i) omitted by s. 4, ibid. (w.e.f. 1-4-2021). 

77 

 
 
 
 
 
 
 
 
 
 
 
                                                      
1* 

* 

* 

* 

* 

2[(f) for section 7, the following section shall be substituted, namely:— 

 “7. Use of words “bank”, “banker” or “banking”.—(1) No co-operative society other than 
a co-operative bank shall use as part of its name or in connection with its business any of the 
words “bank”, “banker” or “banking”, and no co-operative society shall carry on the business 
of banking in India unless it uses as part of its name at least one of such words. 

(2) Nothing in this section shall apply to— 

(a) a primary credit society, or 

(b)  a  co-operative  society  formed  for  the  protection  of  the  mutual  interest  of  co-

operative banks or 3***, or 

(c)  any  co-operative  society,  not  being  a  primary  credit  society,  formed  by  the 

employees of— 

 (i) a banking company or the State Bank of India or a corresponding new bank or a 
subsidiary bank of such banking company, State Bank of India or a corresponding new 
bank, or 

(ii) a co-operative bank or a primary credit society or a 3***, 

insofar as the word “bank”, “banker” or “banking” appears as part of the name of the employer 
bank, or as the case may be, of the bank, whose subsidiary the employer bank is.”];  

4* 

* 

* 

* 

* 

* 

(h) for section 11, the following section shall be substituted, namely:— 

“11. Requirement as to minimum paid-up capital and reserves.—(1) Notwithstanding any 
law  relating  to  co-operative  societies  for  the  time  being  in  force,  no  co-operative  bank  shall 
commence or carry on the business of banking in India unless the aggregate value of its paid-up 
capital and reserves is not less than one lakh of rupees: 

Provided that nothing in this sub-section shall apply to— 

(a)  any  such  bank  which  is  carrying  on  such  business  at  the  commencement  of  the 
Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period 
of three years from such commencement; or 

(b) to a primary credit society which becomes a primary co-operative bank after such 
commencement,  for  a  period  of  two  years  from  the  date  it  so  becomes  a  primary  co- 
operative  bank  or  for  such  further  period  not  exceeding  one  year  as  the  Reserve  Bank, 
having regard to the interests of the depositors of the primary co-operative bank, may think 
fit in any particular case to allow. 

(2) For the purposes of this section, “value” means the real of exchangeable value and not 

the nominal value which may be shown in the books of the co-operative bank concerned. 

(3)  If  any  dispute  arises  in  computing  the  aggregate  value  of  the  paid-up  capital  and 
reserves of any such co-operative bank, a determination thereof by the Reserve Bank shall be 
final for the purposes of this section.'; 
5[(i) for section 12, the following section shall be substituted, namely:--  

“12. Issue and regulation of paid-up share capital and securities by co-operative banks.--- 

1. Sub-clause (iii) omitted by Act 39 of 2020, s. 4 (w.e.f 1-4-2021). 
2. Subs. by Act 1 of 1984, s. 42, for clause (f) (w.e.f. 15-2-1984). 
3. The words “or co-operative land mortgage bank” omitted by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 
4. Clause (fi), (fii) and (g) omitted by s. 4, ibid. (w.e.f. 1-4-2021). 
5. Subs. by s. 4, ibid., for clause (i) (w.e.f. 1-4-2021). 

78 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
(1) A co-operative bank may, with the prior approval of the Reserve Bank, issue, by way 

of public issue or private placement,-- 

(i) equity  shares  or  preference  shares  or  special shares,  on  face  value  or  at premium; 

and 

(ii)  unsecured  debentures  or  bonds  or  other  like  securities  with  initial  or  original 

maturity of not less than ten years,  

to  any  member  of  such  co-operative  bank  or  any  other  person  residing  within  its  area  of 
operation,  subject  to  such  conditions  and  ceiling,  limit  or  restriction  on  its  issue  or 
subscription or transfer, as may be specified by the Reserve Bank in this behalf. 

(2) Save as otherwise provided in this Act,-- 

(i) no person shall be entitled to demand payment towards surrender of shares issued 

to him by a co-operative bank; and 

(ii) a co-operative bank shall not withdraw or reduce its share capital, except to the 
extent and subject to such conditions as the Reserve Bank may specify in this behalf.”;’;] 

1[(j) for section 18, the following section shall be substituted:— 

“18. Cash reserve.—(1) Every co-operative bank, not being  2[a  co-operative bank] for the 
time  being  included  in  the  Second  Schedule  to  the  Reserve  Bank  of  India  Act,  1934 
3[(hereinafter referred to as a “scheduled State Co-operative Bank”)], shall maintain in India by 
way of cash reserve with itself or by way of balance in a current account with the Reserve Bank 
or  the  State  Co-operative  Bank  of  the  State  concerned  or  by  way  of  net  balance  in  current 
accounts, or, in the case of a primary co-operative bank, with the central co-operative bank of 
the district concerned, or in one or more of the aforesaid ways, a sum equivalent to  4[such per 
cent.] of the total of its demand and time liabilities in India, as on the last Friday of the second 
preceding fortnight  5[as the Reserve Bank may specify, by notification in the official Gazette, 
from time to time having regard to the needs for securing the monetary stability in the country] 
and shall submit to the Reserve Bank before the fifteenth day of every month a return showing 
the amount so held on alternate Friday during a month with particulars of its demand and time 
liabilities  in  India  on  such  Fridays  or  if  any  such  Friday  is  a  public  holiday  under  the 
Negotiable  Instruments  Act,  1881  (26  of  1881),  at  the  close  of  business  on  the  preceding 
working day. 

Explanation.—In this section and in section 24— 

(a) “liabilities in India” shall not include— 

(i)  the  paid-up  capital  or  the  reserves  or  any  credit  balance  in  the  profit  and  loss 

account of the co-operative bank; 

(ii) any advance taken from a State Government, the Reserve Bank, 6*** the Exim 
Bank,  7[the  Reconstruction  Bank],  8[the  National  Housing  Bank]],  the  National  Bank  
9[, the Small Industries Bank,] or from the National Co-operative Development  

1. Subs. by Act 1 of 1984, s. 42, for clause (j) (w.e.f. 29-3-1985). 
2. Subs. by Act 4 of 2013, s. 14, for “State Co-operative Bank” (w.e.f. 18-1-2013) 
3. Subs. by s. 14, ibid., for “(hereinafter referred to as a “scheduled State Co-operative Bank)”. (w.e.f. 18-1-2013). 
4. Subs. by s. 14, ibid., for “at least three per cent.” (w.e.f. 18-1-2013). 
5. Ins. by s. 14, ibid. (w.e.f. 18-1-2013). 
6. The words “the Development Bank” omitted by s. 14, ibid. (w.e.f. 18-1-2013). 
7. Ins. by Act 62 of 1984, s. 71 and the Third Schedule (w.e.f. 20-3-1985). 
8. Ins. by Act 53 of 1987, s. 56 and the Second Schedule (w.e.f. 9-7-1988). 
9. Ins. by Act 39 of 1989, s. 53 and the Second Schedule (w.e.f. 7-3-1990). 

79 

 
 
                                                      
Corporation  established  under  section  3  of  the  National  Co-operative  Development 
Corporation Act, 1962 (26 of 1962) by the co-operative bank; 

(iii) in the case of a State or central co-operative bank, also any deposit of money 
with it representing the reserve fund or any part thereof maintained with it by any other 
co-operative  society  within  its  area  of  operation,  and  in  the  case  of  a  central  co-
operative  bank,  also  an  advance  taken  by  it  from  the  State  co-operative  bank  of  the 
State concerned; 

(iv) in the case of a primary co-operative bank, also any advance taken by it from 
the 1[co-operative bank] of the State concerned or the central co-operative bank of the 
district concerned; 

(v) in the case of any 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; and 

(vi) in the case of any co-operative bank, the amount of any advance or other credit 

arrangement drawn and availed of against approved securities; 

(b) “fortnight”  shall  mean the period from  Saturday  to  the  second  following  Friday,  both 

days inclusive; 

(c)  “net  balance  in  current  accounts”  shall,  in  relation  to  a  co-operative  bank,  mean  the 
excess,  if  any,  of the  aggregate  of  the  credit  balances  in  current  account  maintained  by  that           
co-operative bank with the State Bank of India or a subsidiary bank or  2[a corresponding new 
bank or IDBI Bank Ltd.], over the aggregate of the credit balances in current accounts held by 
the said banks with such co-operative bank; 

(d)  for  the  purpose  of  computation  of  liabilities,  the  aggregate  of  the  liabilities  of  a                  

co-operative bank to the State Bank of India, a subsidiary bank, a corresponding new bank, a 
Regional  Rural  Bank,  a  banking  company  or  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 co-operative bank; 

(e)  any  cash  with  a  co-operative  bank  or  any  balance  held  by  a  co-operative  bank  with 
another bank, shall not, to the extend such cash or such balances represents the balance in, or 
investment of, Agricultural Credit Stabilisation Fund of such co-operative bank, be deemed to 
be cash maintained in India. 

3[(1A) If the balance held by co-operative bank referred to in sub-clause (cci) of clause (c) of 
section 56 of the Banking Regulation Act, 1949, at the close of business on any day is below the 
minimum  specified  under  sub-section  (1),  such  co-operative  bank  shall,  without  prejudice  to  the 
provisions  of  any  other  law  for  the  time  being  in  force,  be  liable  to  pay  to  the  Reserve  Bank,  in 
respect of that day, penal interest at a rate of three per cent. above the bank rate on the amount by 
which such balance falls short of the specified minimum, and if the shortfall continues further, the 
penal interest so charged shall be increased to a rate of five per cent. above the bank rate in respect 
of each subsequent day during which the default continues. 

(1B) Notwithstanding anything contained in this section, if the Reserve Bank is satisfied, on an 
application in writing by the defaulting co-operatrive bank, that such defaulting co-operative bank 
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. 

1. Subs. by Act 4  of 2013, s. 14, for “State Co-operative Bank” (w.e.f. 18-1-2013). 
2. Subs. by s. 14, ibid., for “a corresponding new bank” (w.e.f. 18-1-2013). 
3. Ins. by s. 14, ibid. (w.e.f. 18-1-2013). 

80 

 
                                                      
(1C)  The  Reserve  Bank  may,  for  such  period  and  subject  to  such  conditions  as  may  be 
specified, grant to any co-operative bank such exemptions from the provisions of this section as it 
thinks fit with reference to all or any of its officers or with reference to the whole or any part of its 
assets and liabilities.] 

(2) The Reserve Bank may, for the purposes of this section and section 24, specify from time to 
time, with reference to any transaction or class of transactions, that such transaction or transactions 
shall  be  regarded  as  liability  in  India  of  a  co-operative  bank,  and,  if  any  question  arises  as  to 
whether any transaction or class of transactions shall be regarded for the purposes of this section 
and section 24, as liability in India of a co-operative bank, the decision of the Reserve Bank thereon 
shall be final.] 

(k) for section 19, the following section shall be substituted, namely:— 

 “19. Restriction on holding shares in other co-operative societies.—No co-operative bank 
shall  hold  shares  in  any  other  co-operative  society  except  to  such  extent  and  subject  to  such 
conditions as the Reserve Bank may specify in that behalf: 

Provided that nothing contained in this section shall apply to— 

(i) Shares acquired through funds provided by the State Government for that purpose; 

(ii)  in  the  case  of  a  central  co-operative  bank,  the  holding  of  shares  in  the  State  co-

operative bank to which it is affiliated; 

(iii) in the case of a primary co-operative bank, the holding of shares in the central co-
operative  bank  to  which  it  is  affiliated  or  in  the  State  co-operative  bank  of  the  State  in 
which it is registered: 

Provided further that where any shares are held by a co-operative bank in contravention 
of  this  section  at  the  commencement  of  the  Banking  Laws  (Application  to  Co-operative 
Societies)  Act,  1965  (23  of  1965)  the  co-operative  bank  shall  without  delay  report  the 
matter to the Reserve Bank and shall, notwithstanding anything contained in this section, be 
entitled to hold the shares for such period and on such conditions as the Reserve Bank may 
specify.”; 

1* 

* 

* 

* 

* 

2[(m) in section 20A, in sub-section (1),— 

(i)  the  words  and  figures  “Notwithstanding  anything  to  the  contrary  contained  in  section 

293 of the Companies Act, 1956 (1 of 1956),” shall be omitted; 

(ii) in clause (a), for the words “any of its directors” the words “any of its past or present 

directors” shall be substituted;] 

1* 

* 

* 

* 

* 

(o) in section 22,— 

(i) for sub-sections (1) and (2), the following sub-sections shall be substituted, namely:— 

“(1)  Save  as  hereinafter  provided,  no  co-operative  society  shall  carry  on  banking 

business in India unless— 

3* 

* 

* 

* 

* 

1. Clause (l), (n) omitted by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 
2. Subs. by Act 1 of 1984, s. 42 (w.e.f. 15-2-1984). 
3. Omitted by Act 4 of 2013, s. 14 (w.e.f. 18-1-2013). 

81 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
(b) it is a co-operative bank and holds a licence issued in that behalf by the Reserve 

Bank, subject to such conditions, if any, as the Reserve Bank may deem fit to impose: 

Provided that nothing in this sub-section shall apply to a co-operative society, not being 
a  primary  credit  society  or  a  co-operative  bank  carrying  on  banking  business  at  the 
commencement  of  the  Banking  Laws  (Application  to  Co-operative  Societies)  Act,  1965  
(23 of 1965), for a period of one year from such commencement. 

1[Provided further that nothing in this sub-section shall apply to a primary credit society 
carrying  on  banking  business  on  or  before  the  commencement  of  the  Banking  Laws 
(Amendment)  Act,  2012,  for  a  period  of  one  year  or  for  such  further  period  not            
exceeding three years, as the Reserve Bank may, after recording the reasons in writing for 
so doing, extend.] 

2[(2)  Every  co-operative  society  carrying  on  business  as  a  co-  operative  bank  at  the 
commencement  of  the  Banking  Laws  (Application  to  Co-operative  Societies)  Act,  1965,  
(23 of 1965) shall before the expiry of three months from such commencement, every co-
operative  bank  which  comes  into  existence  as  a  result  of  the  division  of  any  other  co-
operative society carrying on business as a co-operative bank, or the amalgamation of two 
or  more  co-operative  societies  carrying  on  banking  business  shall,  before  the  expiry  of 
three months from its so coming into existence,  3[every primary credit society which  had 
become a primary co-operative bank on or before the commencement of the Banking Laws 
(Amendment) Act, 2012 (4 of 2013), shall before the expiry of three months from the date 
on which it had become a primary co-operative bank] and every co-operative society  4*** 
shall before commencing  banking business in India, apply in writing to the Reserve Bank 
for a licence under this section:  

Provided that nothing in clause (b) of sub-section (1) shall be deemed to prohibit— 

 (i)  a  co-operative  society  carrying  on  business  as  a  co-operative  bank  at  the 
commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 
(23 of 1965); or 

(ii) a co-operative bank which has come into existence as a result of the division of 
any  other  co-operative  society  carrying  on  business  as  a  co-operative  bank,  or  the 
amalgamation  of  two  or  more  co-operative  societies  carrying  on  banking  business  at 
the commencement of the Banking Laws (Application to Co-operative Societies) Act, 
1965 (23 of 1965) or at any time 5[thereafter];  

6* 

* 

* 

* 

* 

  from carrying on banking business until it is granted a licence in pursuance of this section 
or is, by a notice in writing, notified by the Reserve Bank that the licence cannot be granted 
to it.]  

7[(ii) sub-section (3A) shall be omitted; 

 (iii)  in  sub-section  (4),  in  clause  (iii),  the  words,  brackets,  figure  and  letter  “and                      

sub-section (3A)” shall be omitted;]  

1. Ins. by Act 4 of 2013, s. 14 (w.e.f. 18-1-2013). 
2. Subs. by Act 1 of 1984, s. 42, for sub-section (2) (w.e.f. 15-2-1984). 

  3.  Subs.  by  Act  4  of  2013,  s.  14,  for  “every  primary  credit  society  which  becomes  a  primary  co-operative  bank  after  such 
commencement shall before the expiry of three months from the date on which it so becomes a primary co-operative bank” 
(w.e.f. 18-1-2013). 

4. The words “other than a primary credit society” omitted by s. 14, ibid. (w.e.f. 18-1-2013). 
5. Subs. by s. 14, ibid., for “thereafter; or”  (w.e.f. 18-1-2013). 
6. Clause (iii) omitted by s. 14, ibid. (w.e.f. 18-1-2013). 
7. Subs. by Act 1 of 1984, s. 42, for sub-clause (ii) (w.e.f. 15-2-1984). 

82 

 
 
 
 
 
 
 
                                                      
1[22A. Validation of licences granted by Reserve Bank to multi-State co-operative societies.—
Notwithstanding  anything  contained  in  any  law  or,  judgment  delivered  or  decree  or  order  of  any 
court made,— 

(a)  No  licence,  granted  to  a  multi-State  co-operative  society  by  the  Reserve  Bank  under 
section  22,  which  was  subsisting  on  the  date  of  commencement  of  the  Banking  Regulation 
(Amendment)  and  Miscellaneous  Provisions  Act,  2004  (24  of  2004),  shall  be  invalid  or  be 
deemed ever to have been invalid merely by the reason of such judgment, decree or order; 

(b) Every licence, granted to a multi-State co-operative society by the Reserve Bank under 

section  22,  which  was  subsisting  on 
Regulation (Amendment) and Miscellaneous Provisions Act, 2004 (24 of 2004), shall be valid 
and be deemed always to have been validly granted in accordance with law; 

the  date  of  commencement  of 

the  Banking                    

(c) A multi-State co-operative society whose application for grant of licence for carrying on 
banking  business  was  pending  with  the  Reserve  Bank  on  the  date  of  commencement  of  the 
Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 (24 of 2004) shall 
be eligible to carry on banking business until it is granted a licence in pursuance of section 22 
or is, by a notice in writing notified by the Reserve Bank that the licence cannot be granted to 
it;] 

2* 

3[(q) in section 24,— 

4* 

5* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

(iii)  in  sub-section  (3),  for  the  proviso,  the  following  proviso  shall  be  substituted, 

namely:— 

“Provided that every co-operative bank, other than a primary co-operative bank, shall 

also furnish within the said period, a copy of the said return to the National Bank.”; 

5* 

* 

* 

* 

* 

*  

6[(qq) after section 24, the following section shall be inserted, namely:— 

 “24A. Power to exempt.—Without prejudice to the provisions of section 53, the Reserve 
Bank may, by notification in the Official Gazette, declare that, for such period and subject to 
such  conditions  as  may  be  specified  in  such  notification  the  whole  or  any  specified  therein, 
shall not apply to any co- operative bank or class of co-operative banks, with reference to all or 
any of the offices of such co-operative bank or banks, or with reference to the whole or any part 
of the assets and liabilities of such co-operative bank or banks]; 

7* 

* 

* 

* 

* 

(rii)  in  section  27,  for  sub-section  (3),  the  following  sub-section  shall  be  substituted, 

namely:— 

“(3) Every co-operative bank, other than a primary co- operative bank, shall submit a 
copy of the return which it submits to the Reserve Bank, under sub-section (1) also to the 
National Bank and the powers exercisable by the Reserve Bank under sub-section (2) may 

1. Ins. by Act 24 of 2004, s. 2 (w.e.f. 24-9-2004). 
2. Clause (p) omitted by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 
3.  Subs. by Act 1 of 1984, s. 42, for clause (g) (w.e.f. 29-3-1985). 
4. Omitted by Act 4 of 2013, s. 14 (w.e.f. 18-1-2013). 
5. Subs. by Act 39 of 2020, s. 4,for sub-clause (ii) and (iv) (w.e.f. 1-4-2021). 
6. Ins. by Act 1 of 1984, s. 42 (w.e.f. 15-2-1984). 
7. Clauses (r), (ria) omitted by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 

83 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
also be exercised by the National Bank in relation to co-operative banks, other than primary 
co-operative banks.” 

(s) for 1[section 29], the following section shall be substituted, namely:— 

“29. Accounts and balance-sheet.—(1) At the expiration of each year ending with the 
30th day of June 2[or at the expiration of a period of twelve months ending with such date 
as  the  Central  Government  may,  by  notification  in  the  Official  Gazette,  specify  in  this 
behalf,]  every  co-operative  bank,  in  respect  of  all  business  transacted  by  it,  shall  prepare 
with reference to that year 1[or the period] a balance-sheet and profit and loss account as on 
the last working day of the year 1[or the period] in the Forms set out in the Third Schedule 
or as near thereto as circumstances admit. 

 (2) The balance-sheet and profit and loss account shall be signed by the manager or the 
principal officer of the bank and where there are more than three directors of the bank, by at 
least  three  of those  directors,  or  where  there  are  not more  than  three  directors, by  all  the 
directors. 

(3)  The  Central  Government,  after  giving  not  less  than  three  months'  notice  of  its 
intention so to do by a notification in the Official Gazette, may from time to time by a like 
notification amend the Forms set out in the Third Schedule:] 

3[Provided that with a view to facilitating the transition from one period of accounting 
to  another  period  of  accounting  under  this  sub-section,  the  Central  Government  may,  by 
order published in the Official Gazette, make such provisions as it considers necessary or 
expedient for the preparation of, or for other matters relating to, the balance-sheet or profit 
and loss account in respect of the concerned year or period, as the case may be.]  

4* 

5[(t) in section 31,— 

6* 

* 

* 

* 

* 

*  

* 

* 

* 

(ii) for the second proviso, the following proviso shall be substituted, namely:— 

“Provided further that a co-operative bank, other than a primary co-operative bank shall 

furnish such returns also to the National Bank”;] 

7* 

7* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

(w) in section 35,— 

(i) in sub-section (1),—  

(a) for the words and figures “section 235 of the Companies Act, 1956 (1 of 1956),” the 
words  “any  law  relating  to  co-operative  societies  for  the  time  being  in  force”  shall  be 
substituted; 

8[(b) the following proviso shall be inserted at the end, namely:— 

1. Subs. by Act 4 of 2013,  s. 14, for “sections 29 and 30” (w.e.f. 18-1-2013). 
2. Ins. by Act 54 of 1991, s.2 (w.e.f. 20-12-1991). 
3. The proviso ins.  by Act 54 of 1991, s. 2. 
4. Clause (sa) omitted  by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 
5. Subs. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 12-7-1982). 
6. Clause (i) omitted by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 
7. Clause (u), (v) omitted by s. 4, ibid. (w.e.f. 1-4-2021). 
8. Subs. by Act 1 of 1984, s. 42, for item (b) (w.e.f. 15-2-1984). 

84 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
“Provided that the Reserve Bank may, if it considers it necessary or expedient so to 

do,  cause  an  inspection  to  be  made  of  a  primary  co-operative  bank  under  this                
sub-section by one or more officers of a State co-operative bank in the State in which 
such primary co-operative bank is registered.”]; 

(ii) in sub-section (4), clause (b) shall be omitted; 

1[(iii) after sub-section (4), the following sub-section shall be inserted, namely:— 

“(4A) Without prejudice to the provisions of sub-section (4), the Reserve Bank may, if it 
considers it necessary or expedient so to do supply a copy of the report on any inspection or 
scrutiny to the State co-operative bank and the Registrar of co-operative societies of the State in 
which the bank which has been inspected or whose affairs have been scrutinised is registered.”] 

2[(iv)]  in  sub-section  (6),  for  the  expressions  “regional  rural  banks”  and  “regional  rural 
bank”,  wherever  they  occur,  the  expressions  “co-operative  banks  other  than  primary  co-
operative  banks”  and  “co-operative  bank  other  than  a  primary  co-operative  bank”  shall, 
respectively be substituted.] 

3[(v)] the Explanation shall be omitted; 

4* 

4* 

4* 

4* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

5[(zaa)  after  section  36AA  of  the  principal  Act,  the  following  sections  shall  be  inserted, 

namely:— 

“36AAA.—Supersession  of  Board  of  directors  of  a  6[co-operative  bank].—(1) Where  the 
Reserve  Bank  is  satisfied  that  in  the  public  interest  or  for  preventing  the  affairs  of  a  6[co-
operative bank] being conducted in a manner detrimental to the interest of the depositors or of 
the 6[co-operative bank] or for securing the proper management of the 6[co-operative bank], it is 
necessary  so  to  do,  the  Reserve  Bank  may,  for  reasons  to  be  recorded  in  writing,  by  order, 
supersede the Board of directors of such  6[co-operative bank] for a period not exceeding five 
years as may be specified in the order, which may be extended from time to time, so, however, 
that total period shall not exceed five years. 

7[Provided  that  in  the  case  of  a  co-operative  bank  registered  with  the  Registrar  of  Co-
operative Societies of a State, the Reserve Bank shall issue such order in consultation with the 
concerned State Government seeking its comments, if any, within such period as the Reserve 
Bank may specify.”;] 

(2) The Reserve Bank may, on supersession of the Board of directors of the  6[co-operative 

bank] under sub-section (1) appoint an Administrator for such period as it may determine. 

(3)  The  Reserve  Bank  may  issue  such  directions  to  the  Administrator  as  it  may  deem 

appropriate and the Administrator shall be bound to follow such directions. 

1. Ins. by Act 1 of 1984, s. 42 (w.e.f. 15-2-1984).  
2. Sub-clause (iii) renumbered as sub-clause (iv) by s. 42, ibid. (w.e.f. 15-2-1984). 
3. Sub-clause (iv) renumbered as sub-clause (v) by s. 42, ibid. (w.e.f. 15-2-1984). 
4. Clause (x), (y), (z) and (za) omitted by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 
5. Subs. by Act 24 of 2004, s. 2, for clause (zaa)  (w.e.f. 24-9-2004). 
6. Subs. by Act 39 of 2020, s. 4, for “multi-State co-operative bank” (w.e.f. 1-4-2021). 
7.The proviso ins. by s. 4, ibid. (w.e.f. 1-4-2021). 

85 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
(4)  Upon  making  the  order  of  supersession  of  the  Board  of  directors  of  a  6[co-operative 

bank],— 

(a)  The  chairman,  managing  director  and  other  directors  as  from  the  date  of                   

supersession of the Board shall vacate their offices as such; 

(b) All the powers, functions and duties which may, by or under the provisions of the 
Multi-State Co-operative Societies Act, 2002 (39 of 2002) or this Act or any other law for 
the  time  being  in  force,  be  exercised  and  discharged  by  or  on  behalf  of  the  Board  of 
directors  of  such  a  1[co-operative  bank]  or  by  a  resolution  passed  in  general  meeting  of 
such  co-operative  bank,  shall,  until  the  Board  of  directors  of  such  co-operative  bank  is 
reconstituted, be exercised and discharged by the Administrator appointed by the Reserve 
Bank under sub-section (2): 

Provided that the power exercised by the Administrator shall be valid notwithstanding 
that such power is exercisable by a resolution passed in the general meeting of such multi-
State co-operative bank. 

(5) (a) The Reserve Bank may constitute a committee of three or more persons who have 
experience in law, finance, banking, administration or accountancy to assist the Administrator 
in discharge of his duties. 

(b) The committee shall meet at such times and places and observe such rules of procedure 

as may be specified by the Reserve Bank. 

(6)  The  salary  and  allowances  to  the  Administrator  and  the  members  of  the  committee 
constituted by the Reserve Bank shall be such as may be specified by the Reserve Bank and be 
payable by the concerned 1[co-operative bank]. 

(7) On and before expiration of period of supersession of the Board of directors as specified 
in  the  order  issued  under  sub-section  (1),  the  Administrator  of  the  1[co-operative  bank]  shall 
call the general meeting of the society to elect new directors. 

(8) Notwithstanding anything contained in any other law or in any contract, or bye-laws of 
a  1[co-operative  bank],  no  person  shall  be  entitled  to  claim  any  compensation  for  the  loss  or 
termination of his office. 

(9) The Administrator appointed under sub-section (2) shall vacate office immediately after 

the Board of directors of the multi-State co-operative society has been constituted. 

2[(10) The provisions of section 36ACA shall not apply to a co-operative bank.] 

3* 

* 

* 

* 

* 

36AAC.—  Reimbursement  to  Deposit  Insurance  Corporation  by  liquidator  or  transferee 
bank.—Where  a  multi-State  co-operative  bank,  being  an  insured  bank  within  the  meaning  of 
the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (47 of 1961), is wound up 
and the Deposit Insurance Corporation has become liable to the depositors of the insured bank 
under  sub-section  (1)  or  sub-section  (2)  of  section  16  of  that  Act,  the  Deposit  Insurance 
Corporation shall be reimbursed by the liquidator or such other person in the circumstances, to 
the extent and in the manner provided in section 21 of that Act. 

(zab) In section 36AD, sub-section (3) shall be omitted;’; 

4[(zb) Part IIC shall be omitted;] 

1. Subs. by Act 39 of 2020, s. 4, for “multi-State co-operative bank” (w.e.f. 1-4-2021). 
2. Ins. by s. 4, ibid. (w.e.f. 1-4-2021). 
3. Section 36AAB omitted by s. 4, ibid. (w.e.f. 1-4-2021). 
4. Subs. by s. 4, ibid., for clause (zb) (w.e.f. 1-4-2021). 

86 

 
 
 
 
 
 
 
 
                                                      
1[(zc) in section 46,— 

2* 

* 

* 

* 

* 

(ii) in clause (a) of the Explanation, after the words “includes a”, the words “co-operative 

society” shall be inserted;] 

3* 

* 

(ze) section 49 shall be omitted; 

3* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

4[(zg)  in section 49B, references to “Central Government” shall be construed as references to 
“Central  Registrar”  or  “Registrar  of  Co-operative  Societies”,  as  the  case  may  be,  under  the  law 
under which a co-operative bank is registered;’;] 

5* 

* 

* 

* 

* 

* 

(zi) section 51 shall be omitted; 

6[(zj) after section 53, the following section shall be inserted, namely:-- 

“53A.  Powers  to  exempt  co-operative  banks  in  certain  cases.—Notwithstanding 
anything contained in any other provisions of this Act, the Reserve Bank may, from time to 
time, on being satisfied that it is necessary so to do, declare, by notification in the Official 
Gazette, that the provisions of item (iii) of clause (b) of sub-section (1) and sub-section (2), 
of section 10, clause (a) of sub-section (2) of section 10A, sub-section (1A) of section 10B 
and clause (b) of sub-section (1) of section 35B of this Act shall not apply to a co-operative 
bank or class of co-operative banks, either generally or for such period as may be specified 
therein,  subject  to  such  conditions,  limitations  or  restrictions  as  it  may  think  fit  to 
impose.”;’;] 

7[(zji) in section 54, after the expression “Reserve Bank”, wherever it occurs, the expression “or 

the National Bank” shall be inserted.] 

(zk) for section 55 and the First Schedule, the following section shall be substituted, namely:— 

“55.  Act  18  of  1891  and Act  46  of 1949 to  apply  in  relation to  co-operative  banks.—(1) 
The Bankers’ Books Evidence Act, 1891(18 of 1891)  shall apply in relation to a co-operative 
bank as it applies in relation to a bank as defined in section 2 of that Act. 

(2) The Banking Companies (Legal Practitioners' Clients' Accounts) Act, 1949 ( shall apply 
in relation to a co-operative bank as it applies in relation to a banking company as defined in 
section 2 of that Act.”; 

1. Subs. by Act 1 of 1984, s. 42, for clause (zc) (w.e.f. 15-2-1984). 
2. Clause (i) omitted by Act 39 of 2020, s. 4 (w.e.f. 1-4-2021). 
3. clauses (zd) and (zf) omitted by s. 4, ibid. (w.e.f. 1-4-2021). 
4. Subs. by s. 4, ibid., for clause (zg) (w.e.f. 1-4-2021). 
5. Clause (zh) omitted by s. 4, ibid. (w.e.f. 1-4-2021). 
6. Subs. by s. 4, ibid., for clause (zj) (w.e.f. 1-4-2021). 
7. Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 1-5-1982). 

87 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
(zl)  for  the  Third  Schedule  and  the  Fourth  Schedule,  the  following  Schedule  shall  be 

substituted, namely:— 

“THE THIRD SCHEDULE 

 (see section 29) 

FORM A 

FORM OF BALANCE-SHEET 

CAPITAL AND LIABILITIES 

PROPERTY AND ASSETS 

1. CAPITAL: 
(i) Authorised Capital 
……Shares of Rs…….each 
…….Shares of Rs. Each 
(ii) Subscribed Capital  
................Shares of Rs.........................each 
....................Shares of Rs.........................each 
....................................................................... 
(iii) Amount called up  
On.......Shares at Rs.................each 
less called unpaid 
On.........Shares at Rs................. 
each less called unpaid of (iii) above, held by  
(a) Individuals ............... 
(b) Co-operative institutions ............... 
(c) State Government............... 
2. RESERVE FUND AND OTHER 

RESERVES:  
(i) Statutory Reserve 
(ii) Agricultural (Credit Stabilization Fund) 
(iii) Building Fund 
(iv) Dividend Equalization Fund 
(v) Special Bad Debts Reserve 
(vi) Bad and Doubtful Debts Reserve 
(vii) Investment Depreciation Reserve 
(viii) Other Funds and Reserves (to be specified)  
3. PRINCIPAL/SUBSIDIARY STATE 
PARTNERSHIP FUND ACCOUNT: 

 For share capital of: 
(i) Central co-operative banks 
(ii) Primary agricultural credit societies........... 
(iii) Other societies.............................. 
4. DEPOSITS AND OTHER ACCOUNTS 
 (i) Fixed deposits* 

(a) Individuals** 
(b) Central co-operative banks 
(c) Other societies 
(ii) Savings Bank Deposits 
(a) Individuals** 
(b) Central co-operative banks 
(c) Other societies............. 

Rs. P. Rs.P 

Rs. P. Rs. P. 

1. CASH: 
In  hand  with  Reserve  Bank              
1[  National  Bank]  State  Bank  of 
India,  State  Co-operative  Bank 
and Central Co-operative Bank 
2.  BALANCES  WITH  OTHER 

BANKS  
(i) Current deposits 
(ii) Savings bank deposits  
(iii) Fixed deposits 

3.  MONEY  AT  CALL  AND 

SHORT NOTICE 
4. INVESTMENTS 
In  Central 
(i) 

Government 
book value) 

and  State 
(at 

securities 

Face value Rs. ............... 
Market value Rs. ............... 
(ii) Other Trustee securities 
co-operative 
in 
 (iii)  Shares 
institutions other than in item (5) 
below.................... 
(iv)  Other  investments  (to  be 
specified) .................... 
5. INVESTMENT OUT OF 

THE PRINCIPAL 
/SUBSIDIARY STATE 
PARTNERSHIP FUNDS: 

In shares of: 
(i) Central co-operative banks 
(ii)  Primary  agricultural  credit 

societies 

(iii) Other societies 
6. ADVANCES† : 
(i) Short-term loans, cash credits, 
overdrafts and bills discounted 
Of which secured against: 

(a)  Government 

and 

other 

approved securities 

(b)  Other  tangible  securities@  of 
the  advances,  amount  due 
from individuals 

Of the advances, amount overdue 
Considered  bad  and  doubtful  of 
recovery 
(ii) Medium-term loans  

1. Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 1-5-1982). 

88 

 
 
 
                                                      
Of which secured against: 

PROPERTY AND ASSETS 

(a)  Government 

and 

other 

approved securities 

(b) Other tangible securities@  

Of  the  advances,  amount  due 
from individuals †.................... 

Rs. P. Rs.P 

the 

Of 
overdue:...................................... 

advances, 

amount 

Considered  bad  and  doubtful  of 
recovery.................................... 

(iii) long-term loans  

Of which secured against: 

(a) government and other approved 

securities 

(b) other tangible securities@ 

Of  the  advances,  amount  due 
from individuals..................... 

 Of  the  advances,  amount  over 
due:  

Considered bad and doubtful of 
recovery 

7. INTEREST RECEIVABLE:  

Of which overdue 

Considered  bad  and  doubtful  of 
recovery 

8.  BILLS  RECEIVABLE  BEING 
BILLS  FOR  COLLECTION 
AS per contra 

9. BRANCH ADJUSTMENTS  

10. 

PREMISES 
DEPRECIATION 

LESS 

111. FURNITURE AND FIXTURES 
LESS DEPRECIATION 

12.  OTHER  ASSETS 

(to  be 

specified) 

CAPITAL AND LIABILITIES 

Rs.P. Rs. P 

(iii) Current deposits 

(a) Individuals** 

(b) Central co-operative banks 

(c) Other societies 

(iv) Money at call and short notice 

5. BORROWINGS†: 

(i)  From 
1[the 
co-operative bank:  

the  Reserve  Bank  of 
National 

India                
Bank]/State/Central                 

(a)  Short-term  loans,  cash  credits  and 

overdrafts  

Of which secured against: 

(A)  Government  and  other  approved 

securities 

(B) Other tangible securities@ 

(b)  Medium-term  loans  of  which  secured 

against: 

(A)  Government  and  other  approved 

securities 

(B) Other tangible securities@ 

(c) Long-term loans 

Of which secured against: 

(A)  Government  and  other  approved 

securities 

(B) Other tangible securities@ 

(ii) From the State Bank of India 

(a)  Short-term 
overdrafts  

loans,  cash  credits  and 

Of which secured against: 

(A)  Government  and  other  approved 

securities 

(B) Other tangible securities@ 

(b)  Medium-term  loans  Of  which  secured 

1. Ins. by Act 61 of 1981, s. 61 and the Second Schedule (w.e.f. 1-5-1982). 

89 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
 
against 

(A)  Government  and  other  approved 

securities 

(B) Other tangible securities@ 

(c)  Long-term  loans  Of  which  secured 

against: 

(A)  Government  and  other  approved 
securities 
(B) Other tangible securities@ 

13.  NON-BANKING  ASSETS 
ACQUIRED 
IN 
SATISFACTION  OF  CLAIMS 
(stating mode of valuation) 

14. PROFIT AND LOSS  

90 

 
 
 
CAPITAL AND LIABILITIES 

PROPERTY AND ASSETS 

(iii) From the State Government 
(a) Short-term loans  
Of which secured against 

(A) Government and other approved 

securities 

(B) Other tangible securities@ 

(b) Medium-term loans 
Of which secured against: 

(A) Government and other approved 

securities 

(B) Other tangible securities@ 

(c) Long-term loans 
 Of which secured against: 

(A) Government and other approved 

securities 

(B) Other tangible securities@ 
(iv) Loan from other sources (source and 
security to be specified) 
6.BILLS FOR COLLECTION BEING BILLS 

RECEIVABLE As 
 per contra  

7. BRANCH ADJUSTMENTS 
8. OVERDUE INTEREST RESERVE 
9. INTEREST PAYABLE  
10. OTHER LIABILITIES 
(i) Bills payable 
(ii) Unclaimed dividends 
(iii) Suspense. . . . . .. 
(iv) Sundries . . . . . .. 

11. PROFIT AND LOSS 

Profit as per last balance-sheet 
Less appropriations 
Add profit for the year brought from the 
Profit and Loss Account 

Total . . . . . . . . 

CONTINGENT LIABILITIES 

(i) Outstanding liabilities for guarantees 

issued 
(ii) Others  

Rs. P. Rs.P 

Rs. P. Rs.P 

Total . . . . . . . 
. 

Total. . . . . .. 

NOTES 

*“Fixed  deposits”  will  include  reserve  fund  deposits  of  societies,  employees  provident  fund  deposits,  staff  security 

deposits, recurring deposits, cash certificates, etc. 

** Under the item “individuals” deposits from institutions other than cooperative banks and societies may be included. 

†  “Borrowings”  and  “Advances”.—Short-term  loans  will  be  for  periods up  to  15  months,  medium-term  loans  from  15 

months to 5 years and long-term loans over 5 years. 

@  “other  tangible  security”  will  include  borrowings  against  gold  and  gold  ornaments,  repledge  of  goods,  mortgage  of 

land, etc. 

91 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General  Instructions.—  The  corresponding  figures  (to  the  nearest  rupees,  if  so  desired)  for  the  year  immediately 

preceding the year to which the balance-sheet relates should be shown in separate columns. 

FORM B 

FORM OF PROFIT AND LOSS ACCOUNT 

Profit and loss account for the year ended ________ 

       EXPENDITURE 

INCOME 

1. Interest on deposits, borrowings, etc.   . .  . 

1. Interest and discount.  .    .  . 

Rs. P. Rs. P. 

Rs.P. Rs.P. 

2.  Salaries  and  allowances  and  provident 
fund.   .      .      .   .      .         .   .          .     .    

3.  Directors’  and  local  committee  members’ 
fees and allowances.      .      .   .      .         .   
.           

4. Rent, taxes, insurance, lighting, etc. .      .       

2.  Commission,  exchange  and 
brokerage .  .  .   .  .   .   .   .   . 

3. Subsidies and donations.   .  .  

4.  Income  from  non-banking 
assets  and  profit  from  sale  of 
or dealing with such assets.  . 

5. law charges.      .      .   .      .         .   .           

5. Other receipts.  .  .   .   .   .   .    

6. Postage, telegrams and telephone Charges 

6. Loss (if any).  .  .   .   .  .  .   .    

7. Auditor’s fees .      .      .   .      .         .   .           

8. Depreciation on and repairs to property  

9. Stationery, printing and advertisement, etc.  

10.  Loss  from  sale  of  or  dealing  with               

non-banking assets. .      .      .   .      .         .    

11. Other expenditure .      .      .   .      .         .    

12. Balance of profit .      .      .   .      .         .    

Total . . . . . . .  

Total. . . . . . . .  

General Instructions.— The corresponding figures (to the nearest rupee, if so desired) for the year 
immediately preceding the year to which the profit and loss account relates should be shown in separate 
columns.”. 

92 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THE FIRST SCHEDULE 

(See section 55) 

AMENDMENTS 

Amendments 

4 

(1) In section 17, to clause (15A), the following shall be added, namely :— 

“and under the Banking Companies Act, 1949 (4 of 1949)”. 

(2)  (a)  Section  18  shall  be  renumbered  as  sub-  section  (1)  of  that  section  and  in                      
sub-section (1),  as so renumbered,— 

Year  No. 

Short title 

1 

2 

3 

1934  2 

The  Reserve 
of 
Bank 
India  Act, 
1934 

(i)  in  clause  (3)  after  the  words  “of  that  section”,  the  following  words  shall  be  added, 

namely:— 

“or when the loan or advance, is made to banking company as defined in the Banking 
Companies Act, 1949 (4 of 1949), against such other form of security as the Bank may 
consider sufficient”; 

(ii)  for  the  words  “under  this  section”  wherever  the  occur,  the  words  “under  this  sub- 

section” shall be substituted; 

(b) after sub-section (1) as so renumbered, the following sub-section shall be inserted, 

namely:— 

“(2) Where a banking company to which a loan or advance has been made under the 
provisions of clause (3) of sub-section (1) is wound up, any sums due to the Bank in 
respect of such loan or advance, shall subject only to the claims, if any, of any other 
banking  company  in  respect  of  any  prior  loan  or  advance  made  by  such  banking 
company against any security, be a first charge on the assets of the banking company.” 

(3)  In  section  42,  for  sub-section  (6)  the  following  sub-section  shall  be  substituted, 

namely:— 

“(6)  The  bank  shall,  save  as  hereinafter  provided,  by  notification  in  the  Gazette  of 

India,— 

(a) direct the inclusion in the Second Schedule of any bank not already so included 

which carries on the business of banking in any Province of India and which— 

(i) has a paid-up capital and reserves of an aggregate value of not less than five 

lakhs of rupees, and 

(ii)  satisfies  the  Bank  that  its  affairs  are  not  being  conducted  in  a  manner 

detrimental to the interests of its depositors; and 

(iii) is a company as defined in clause (2) of section 2 of the Indian Companies 
Act, 1913 (7 of 1913) or a corporation or a company incorporated by or under any 
law in force in any place outside the Provinces of India; 

(b) direct the exclusion from that Schedule of any scheduled bank— 

(i) the aggregate value of whose paid-up capital and reserves becomes at any time 

less than five lakhs of rupees, or 

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

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

93 

 
  
 
 
 
Year  No. 

Short title 

1 

2 

3 

Amendments 

4 

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

(c) alter the description is that Schedule whenever any scheduled bank changes its 

name. 

Explanation.—In  this  sub-section  the  expression  ‘value’  means  the  real  or 
exchangeable value and not the nominal value which may be shown in the books of 
the 163 bank concerned; and if any dispute arises in computing the aggregate value of 
the paid up capital and reserves of a bank, a determination thereof by the Bank shall 
be final for the purposes of this sub-section. 

THE  SECOND  SCHEDULE.—[Repeals]  Rep.  by  the  Repealing  and  Amending  Act,  1957                
(36 of 1957), s. 52 and  the First Schedule (w.e.f. 17-9-1957). 

THE THIRD SCHEDULE 

(See section 29) 

1[FORM A 

FORM OF BALANCE SHEET 

Balance Sheet of ____________________(here enter name of the Banking Company) 

Balance Sheet as on 31st March _________________________(Year) 

Capital and Liabilities 

Schedule 

As on 31-3- 

As on 31-3- 

(current year) 

(previous year) 

(000's omitted) 

Capital 

Reserves and surplus 

Deposits  

Borrowings  

Other liabilities and provisions 

 TOTAL: 

1 

2 

3 

4 

5 

___________ 

___________ 

1. Subs. by S.O. 240 (E), dated 26th March, 1992 (w.e.f. 26-3-1992). 

94 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                      
Capital and Liabilities 

Schedule 

As on 31-3- 

As on 31-3- 

(current year) 

(previous year) 

ASSETS 

Cash  and  Balances  with  Reserve  Bank  of 
India 

Balances with Banks and money at call and 
short notice 

Investments 

Advances 

Fixed Assets 

Other Assets 

TOTAL: 

Contingent liabilities 

Bill for collection 

6 

7 

8 

9 

10 

11 

12 

SCHEDULE I—CAPITAL 

As on 31-3___    As on 31-3____ 

(current year)  (previous year) 

I. FOR NATIOINALISED BANKS 

Capital (Fully owned by Central Government) 

II. FOR BANKS INCORPORATED OUTSIDE INDIA 

Capital 

(i) (The amount brought in by banks by way of 

Start-up capital as prescribed by RBI should be 
 shown under this head) 

(ii) Amount of deposit kept with the RBI 

under Section 11(2) of the Banking Regulation Act, 1949.               

TOTAL: 
III.  FOR OTHER BANKS 

Authorised Capital (Shares of Rs..... each) 

Issued Capital (Shares of Rs..... each) 

Subscribed Capital (Shares of Rs..... each) 

Called-up Capital (Shares of Rs..... each) 

Less : Calls unpaid 

Add : Forfeited shares 

95 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SCHEDULE 2—RESERVES AND SURPLUS 

As on 31-3__    As on 31-3__ 

(current year) (previous year) 

I. Statutory Reserves 

Opening Balance 

Additions during the year 

Deductions during the year  

II. Capital Reserves 

Opening Balance 

Additions during the year 

Deductions during the year 

III. Share premium 

Opening Balance 

Additions during the year 

Deductions during the year 

IV. Revenue and other Reserves 

Opening Balance 

Additions during the year 

Deductions during the year 

V. Balance of Profit and Loss Account 

TOTAL :  (I, II, III, IV and V)                                                     ____________ ____________ 

____________ ____________ 

SCHEDULE 3—DEPOSITS 

As on 31-3__ As on 31-3__ 

(current year) (previous year) 

A. I. Demand Deposits 

(i) From Banks 

(ii) From others 

II. Savings Bank Deposits 

III. Term Deposits 

(i) From Banks 

(ii) From others  

TOTAL : (I, II, III)                                                                         ____________ ____________ 

B. (i) Deposits of branches in India 

____________ ____________ 

    (ii) Deposits of branches outside India                                             ________ ____________                                                  
TOTAL  

                                                                       _________ ___________ 

96 

 
 
 
 
SCHEDULE 4—BORROWINGS 

As on 31-3__ As on 31-3__ 

(current year) (previous year) 

I. Borrowing in India 

(i) Reserve Bank of India 

(ii) Other Banks 

(iii) Other institutions and agencies 

II. Borrowings outside India  

TOTAL : (I and II) 

Secured borrowings included in I and II above—Rs. 

____________ ____________ 

 ___________ ____________  

SCHEDULE 5 —OTHER LIABILITIES AND PROVISIONS 

As on 31-3__  As on31-3__ 

(current year) (previous year) 

I. Bills payable 

II. Inter-office adjustments  

(net) 

III. Interests accrued 

IV. Others (Including provisions) 

TOTAL :  

____________ ____________  

____________ ____________ 

SCHEDULE 6—CASH AND BALANCES WITH RESERVE BANK OF INDIA 

I. Cash in hand (Including foreign currency notes) 

II. Balance with Reserve Bank of India 

(i) in Current Account 

(ii) in other Accounts  

TOAL : (I and II)  

As on 31-3__ As on 31-3__ 

(current year) (previous year) 

____________ ____________ 

____________ ____________ 

SCHEDULE 7—BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE 

As on 31-3__ As on 31-3__ 

(current year) (previous year) 

I. In India 

(i) Balances with banks 

(a) In Current Accounts 

97 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(b) In Other Deposit Accounts 

(ii) Money at call and short notice 

(a) With banks 

(b) With other institutions 

TOTAL : (I and II)   

II. Outside India 

(i) in Current Accounts 

(ii) in Other Deposit Accounts 

(iii) Money at call and short notice 

____________ ____________  

____________ ____________ 

TOTAL : (I, II and III)                                                      ____________ ____________ 

____________ ____________  

____________ ____________  

GRAND TOTAL : (I and II)                                                         ____________ ____________ 

SCHEDULE 8—INVESTMENTS 

                                                                                                               As on 31-3__ As on 31-3__  

(current year) (previous year) 

I. Investments in India in 

(i) Government Securities 

(ii) Other approved securities 

(iii) Shares 

(iv) Debentures and Bonds 

(v) Subsidiaries and/or joint ventures 

(vi) Others (to be specified) 

TOTAL :                                                                            ____________ ____________  

 ____________ ____________  

II. Investments outside India in 

(i) Government securities (Including local authorities) 

(ii) Subsidiaries and/or joint ventures abroad 

(iii) Other investments (to be specified) 

Total :                                                                                                                             ____________ 

GRAND TOTAL :  (I and II) 

                                                                            ____________  

____________ 

____________ 

98 

 
 
 
 
 
 
 
                                                                                                               As on 31-3__ As on 31-3__  

SCHEDULE 9—ADVANCES 

current year) (previous year) 

A. (i) Bills purchased and discounted 

    (ii) Cash credits, overdrafts and loans repayable on demand 

    (iii) Term loans  

____________ ____________ 

____________ ____________ 

 ____________ ____________ 

 ____________ ____________ 

____________ ____________  

____________ ____________  

TOTAL :                   

B. (i) Secured by tangible assets 

    (ii) Covered by Bank/Government Guarantees 

   (iii) Unsecured 

TOTAL : 

C. I. Advances in India 

(i) Priority sectors 

(ii) Public sector 

(iii) Banks 

(iv) Others 

TOTAL  : 

II. Advances Outside India 

(i) Due from banks 

(ii) Due from others 

(a) Bills purchased and discounted 

(b) Syndicated loans 

(c) Others 

TOTAL :                                                                                ________    ___________ 

 ____________ ____________ 

GRAND TOTAL :  (C.I. & C.II) 

 ____________ ____________ 

____________ ____________ 

SCHEDULE 10—FIXED ASSETS 

As on 31-3__  As on 31-3__  

(current year) (previous year) 

I. Premises 

At cost as on 31st March of the preceding year 

99 

 
 
 
 
 
 
 
Additions during the year Deductions during the year 

Depreciation to date 

II. Other Fixed Assets (including furniture and fixtures) 

At cost as on 31st March of the preceding year 

Additions during the year 

Deductions during the year 

Depreciation to date 

TOTAL : (I and II) 

 ____________ ____________  

____________ ____________ 

SCHEDULE 11—OTHER ASSETS  

As on 31-3__ As on 31-3__ 

(current year) (previous year)  

I. Inter-office adjustment (net) 

II. Interest accrued 

III. Tax paid in advance/tax deducted at source 

IV. Stationery and stamps 

V. Non-banking assets acquired in satisfaction of claims 

VI. Others* 

TOTAL :  

 ____________ ____________ 

____________ ____________ 

*In  case  there  is  any  unadjusted  balance  of  loss  the  same  may  be  shown  under  this  item  with 

appropriate foot-note. 

SCHEDULE 12—CONTINGENT AVAIBILITIES 

As on 31-3__ As on 31-3__ 

(current year) (previous year) 

I. Claims against the bank not acknowledged as debts 

II. Liability for partly paid investments 

III. Liability on account of outstanding forward exchange contracts 

IV. Guarantees given on behalf of constituents 

(a) In India 

(b) Outside India 

V. Acceptances, endorsements and other obligations 

VI. Other items for which the bank is contingently Liable 

TOTAL :  

 ____________ ____________  

____________ ____________ 

100 

 
 
 
 
 
 
FORM OR PROFIT AND LOSS ACCOUT FOR THE YEAR ENDED ON 31ST MARCH (YEAR) 

FORM B 

(000’s omitted) 

Schedule No.

Year ended 31-3_ 

Year ended 31-3_ 

(current year) 

(previous year)  

13 

14 

15 

16 

I. INCOME 

Interest earned 

Other Income 

TOTAL : 

II. EXPENDITURE  

      Interest expended 

Operating expenses  

Provisions and contingencies 

TOTAL : 

III. PROFIT/LOSS 

Net Profit/Loss (-) for the year 

Profit/Loss (-) brought forward  

TOTAL : 

IV. APPROPRIATIONS 

Transfer to statutory reserves 

Transfer to other reserves 

Transfer to Government/proposed dividend 

Balance carried over to balance sheet 

TOTAL : 

SCHEDULE 13—INTEREST EARNED 

Year ended on  Year ended on 

                                                                                                                       31-3__                  31-3__ 

(current year) (previous year) 

 I. Interest/discount on advance/bills 

II. Income on investments 

101 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
III. Interest on balances with Reserve Bank of India and other inter-bank funds 

IV. Others 

TOTAL : 

______________ ______________ 

 ______________ ______________ 

SCHEDULE 14—OTHER INCOME 

Year ended on Year ended on  

                                                                                                                             31-3__         31-3___ 

 (current year)  (previous year)  

I. Commission, exchange and brokerage 

II. Profit on sale of investments 

Less : Loss on sale of investments 

III. Profit on revaluation of investments 

Less : Loss on revaluation of investments 

IV. Profit on sale of land, buildings and other assets 

Less : Loss on sale of land, buildings and other assets 

V. Profit on exchange transactions 

Less : Loss on exchange transactions 

VI. Income earned by way of dividends etc. 

from subsidiaries/companies and/or  

joint ventures abroad/in India 

VII. Miscellaneous Income 

TOTAL :                                                                                 ______________ ______________ 

______________ ______________ 

NOTE : Under items II to V loss figures may be shown in brackets. 

SCHEDULE 15—INTEREST EXPENDED 

Year ended on     Year ended on  

31-3__   

31-3__ 

(current year)        (previous year) 

I. Interest on deposits 

II. Interest on Reserve Bank of India/ Inter-back borrowings 

III. Others 

TOTAL : 

______________ ______________ 

______________ ______________ 

102 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SCHEDULE 16—OPERATING EXPENSES 

Year ended on   Year ended on 

 31-3.........         31-3.................  

(current year)   (previous year) 

I. 
Payments to and provisions for employees 
II. 
Rent, taxes and lighting 
III. 
Printing and stationery 
IV.  Advertisement and publicity 
V.  Depreciation on Bank's property 
VI.  Director's fees, allowances and expenses 
VII.  Auditors' fees and expenses (Including branch auditors) 
VIII. 
Law charges 
IX. 
Postages. Telegrams, Telephones, etc. 
X. 
Repairs and maintenance 
XI. 
Insurance 
XII.  Other expenditure 

TOTAL : 

____________ ____________ 

______________ __________ 

103 

 
 
 
 
 
 
 
 
 
 
1[THE FOURTH SCHEDULE 

[See section 45D(2)] 

LIST OF DEBTORS 

1. The official liquidator shall from time to time submit list of debtors to the High Court, each list 

being verified by an affidavit. 

2. Every such list shall contain the following particulars:— 

(a) names and addresses of the debtors; 

(b) amount of debt due to the banking company by each debtor; 

(c) rate of interest, if any, and the date up to which such interest has been calculated in the case 

of each debtor; 

(d) description of papers, writings, and documents, if any, relating to each debt; 

(e) relief or reliefs claimed against each debtor. 

3.  (a)  In  every  such  list,  the  official  liquidator  shall  distinguish  between  the  debts  for  which  the 
banking company holds and security other than a personal security and the debts for which no security 
or only a personal security is given; 

(b) In the case of secured debts, particulars of the securities claimed by the banking company, and 
whenever  possible  their  estimated  value,  and  the  names  and  addresses  of  person  or  persons,  if  any, 
having an interest in the securities or the right of redemption therein; 

(c) In case the debt is guaranteed by any person or persons, the name and address of the guarantor 
or  guarantors  with  particulars  as  to  the  extent  to  which  the  debt  is  guaranteed  and  description  of 
documents, papers or writings in support of such guarantee. 

4. If the debtor is adjudged insolvent either before or after he has been included in any such list, but 
before such list is settled, the name and address of the assignee or the receiver of his estate, as the case 
may be, should be stated in, or added to, the list. 

5. If the original debtor dies either before or after he has been included in any such list, but before 
such  list  is  settled,  there  shall  be  substituted  in  his  place  the  names  and  addresses  of  his  legal 
representatives as far as the official liquidator is able to ascertain.] 

1 Ins. by Act 52 of 1953, s. 12 (w.e.f. 30-12-1953). 

104 

 
 
 
 
 
 
 
 
 
 
 
 
                                                      
1[THE FIFTH SCHEDULE 

(See section 36AG) 

PRINCIPLES OF COMPENSATION 

1. The compensation to be given under section 36AG shall be an amount equal to the value of the 
assets  of  the  acquired  bank  as  on  the  day  immediately  before  the  appointed  day,  computed  in 
accordance  with  the  provisions  of  Part  I  of  this  Schedule  less  the  total  amount  of  liabilities  thereof 
computed in accordance with the provisions of Part II of this Schedule. 

Part I.—Assets 

For the purposes of this Part “assets” means the total of the following:—  

(a)  the  amount  of  cash  in  hand  and  with  the  Reserve  Bank  and  the  State  Bank  of  India 

(including foreign currency notes which shall be converted at the market rate of exchange); 

(b) the amount of balances with any bank, whether on deposit or current account, and money at 

call and short notice, balance held outside India being converted at the market rate of exchange:  

Provided that any balance which are not realisable in full shall be deemed to be debts and valued 

accordingly:— 

(c)  the  market  value,  as  on  the  day  immediately  before  the  appointed  day,  of  any  securities, 

shares debentures, bonds and other investments, held by the bank concerned. 

Explanation.—For the purposes of this clause,— 

(i) securities of the Central and State Governments [other than the securities specified in sub-
clauses  (ii)  and  (iii)  of  this  Explanation]  maturing  for  redemption,  within  five  years  from  the 
appointed day shall be valued at the face value or the market value, whichever is higher; 

(ii) securities of the Central Government, such as Post Office Certificates and Treasury Savings 
Deposit Certificates and any other securities or certificates issued or to be issued under the Small 
Savings Scheme of the Central Government, shall be valued at their face value or the encashable 
value of the market value, as on the day immediately before the appointed day, whichever is higher;  

(iii) where the market value of any Government security such as the zamindari abolition bonds 

or  other  similar  security  in  respect  of  which  the  principal  is  payable  in  instalment,  is  not                      
ascertainable or is, for any reason, not considered as reflecting the fair value thereof or as otherwise 
appropriate,  the  security  shall  be  valued  at  such  an  amount  as  is  considered  reasonable  having 
regard  to  the  instalments  of  principal  and  interest  remaining  to  be  paid,  the  period  during  which 
such  instalments  are  payable,  the  yield  of  any  security,  issued  by  the  Government  to  which  the 
security  pertains  and  having  the  same  or  approximately  the  same  maturity,  and  other  relevant 
factors; 

(iv) where the market value of any security, share, debenture, bond or other investment is not 
considered  reasonable  by  reason  of  its  having  been  affected  by  abnormal  factors,  the  investment 
may be valued on the basis of its average market value over any reasonable period; 

(v) where the market value of any security, share, debenture, bond or other investment is not 
ascertainable, only such value, if any, shall be taken into account as is considered reasonable having 
regard to the financial position of the issuing concern, the dividend paid by it during the preceding 
five years and other relevant factors; 

(d)  the  amount  of  advances  (including  loans,  cash,  credits,  overdrafts,  bills  purchased  and 
discounted),  and  other  debts,  whether  secured  or  unsecured,  to  the  extent  to  which  they  are 
reasonably considered recoverable, having regard to the value of the security, if any, the operations 

1 Ins. by Act 58 of 1968, s. 22 (w.e.f. 1-2-1969). 

105 

 
                                                      
on the account, the reported worth and respectability of the borrower, the prospects of realisation 
and other relevant considerations; 

(e) the value of any land or buildings; 

(f) the total amount of premia paid, in respect of all leasehold properties, reduced in the case of 
each such premium by an amount which bears to such premium the same proportion as the expired 
term of the lease in respect of which such premium shall have been paid bears to the total term of 
the lease;  

(g)  the  written  down  value  as  per  books,  or  the  realisable  value,  as  may  be  considered 

reasonable, of all furniture, fixture and fittings; 

(h) the market or realisable value, as may be a appropriate, of the other assets appearing on the 
books  of  the  bank,  no  value  being  allowed  for  capitalised  expenses,  such  as  share  selling 
commission, organisational expenses and brokerage, losses incurred and similar other items. 

Part II.—Liabilities 

For the purpose of the Part “liabilities” means the total amount of all outside liabilities existing on 
the appointed day, and all contingent liabilities which the Central Government or the transferee bank 
may reasonably be expected to be required to be out of its own resources on or after the appointed day 
and where the acquired bank is a banking company incorporated outside India, includes the liabilities of 
the offices and branches in India of the acquired bank to its offices and branches outside India. 

2. If the acquired bank is not incorporated in India, the assets or, as the case may be, the liabilities 
of the bank shall be, for the purposes of Part 1 and Part 11, and subject to the other provisions therein, 
the assets and liabilities of the offices of the bank situated in India. 

COMPENSATION PAYABLE TO SHAREHOLDERS 

3.  Every  shareholder  of  the  acquired  bank  to  whom  the  compensation  is  payable,  shall  be  given 
such  amount  as  compensation,  as  bears  to  the  total  compensation,  calculated  in  accordance  with  the 
provisions of paragraph 1, the same proportion as the amount of paid-up capital of the shares held by 
the shareholder bears to the total-up capital of the acquired bank. 

CERTAIN DIVIDENDS NOT TO BE TAKEN INTO ACCOUNT 

4.  No  separate  compensation  shall  be  payable  for  any  profits  or  any  dividends  in  respect  of  any 
period immediately preceding the appointed day, for which, in the ordinary course, profits would have 
been transferred or dividend declared after the appointed day.] 

106 

 
