Important Statutory and Regulation Provisions in Banking (Part - 1)

IMPORTANT STATUTORY & REGULATORY PROVISIONS

Specially for Upcoming Bank Exams

Banking Regulation Act, 1949: 

• Under Section 5(b) Banking is defined; 
• As per Section 24, SLR is to be maintained. In case of default on any alternate Friday or on the preceding working day if such Friday is a public holiday, penal interest 3%p.a over the Bank Rate shall be payable on the amount of shortfall for that day. If default continues in next succeeding alternate Friday or on the preceding working day incase such Friday is public holiday penal interest shall be 5% per annum over the Bank Rate for each such shortfall. 
• Under Section 17 every banking company embody in India is required to transfer each year to Reserve Fund a sum same to not less than 20% of profit before declaration of dividend. 
• Under Section 26 Return on unclaimed deposits for 10 years is required to be submitted. 
• SLR is to be maintained in the form of cash, gold and approved securities. 
• Under Section 35A, RBI has prohibited stapling of currency notes. 
• Under Section 45 (Z) Nomination facility has been granted for bank deposits. 
• Section 6(1) defines business a banking company may carry on. 
• Trading of goods by Banking Company is restricted under Section 8. 

Reserve Bank of India Act, 1934: 

• Section 20 authorize RBI to act as Banker to the Govt. 
• Scheduled Bank- As per Section 2(e) a Scheduled Bank is one whose name is included in the Second Schedule to RBI Act, 1934 on satisfaction of the conditions laid down in Section 42(6). 
• Section 29- Bank note shall be exempted from stamp duty under Indian Stamp Act. 
• Section 17(4) enables RBI to grant loans and advances to Scheduled Banks. 
• Section 22 gives right to issue Bank Notes. 
• Under Section 45B RBI collects credit information from all banking companies and furnishes consolidated credit information to any banking company. 
• Under Section 38 RBI is the sole authority to issue currency in the country except for one rupee note or coins (which is issued by Central Govt.). 
• Section 31 prohibits issue of notes payable to bearer by any person in India other than RBI. 
• Under Section 42(1) all scheduled banks are required to maintain CRR in the form of cash. 
• If the average daily balance during any fortnight is below the minimum prescribed CRR penal interest @3%p.a above Bank Rate is payable for that fortnight. If during the next succeeding fortnight the average balance is still below the minimum prescribed CRR, penal interest @5%p.a above Bank rate shall be payable in respect of that fortnight and each subsequent fortnight during which the default continues. 

National Bank for Agriculture and Rural Development Act, 1981: 

• Under Section 3 NABARD was established. 
• Provides refinance facilities for credit to agriculture, small and village and cottage industries. 
• As per Section 4, capital shall be Rs.100 crore which may be increased to Rs.5000 crore by Central Govt. in consultation with RBI. 
• Inspects RRBs and Co-operative Banks. 

Indian Stamp Act, 1989: 

As per Section 17 of Indian Stamp Act, 1989 all instruments/documents payable with duty and executed by any person in India shall be stamped before or at the time of execution. 

For other instruments stamp duty rates are prescribed by the respective State Govt. 

The Stamp Act extends to whole of India except J&K. 

In case of Usance Bills, arising out of authentic commercial or trade transaction, of not more than 3months Usance after date or sight drawn on or made by or in favor of a Commercial Bank/Co-operative Bank stamp duty is remitted. 

Stamp duty on Demand Promissory Note, bill of exchange payable otherwise than on money receipts, demand, proxies and transfer of shares comes under Central List. Powers to reduce or remit the duty on these instruments are vested with the Central Govt. 

Documents under Central list are not admissible in evidence if unstamped or under stamped and are nullified. 

Non-judicial stamps are of three kinds: 

Adhesive stamps- Adhesive stamps are those which are affixed by fixative. There are many varieties of fixative stamps such as revenue stamp, foreign bill stamp, share transfer stamp, notary stamp, consular stamp, insurance stamp, attorney stamp. These stamps are used for transaction. 

Embossed or Impressed stamps- Impressed stamps are Hindi papers (on which Hindis are to be drawn) or Non-judicial stamp papers (on which stamps are already printed). These are commonly used for execution of contract such as letter of continuity, hypothetical, mortgage deed, pledge & lien agreements, letter of guarantees, etc. 

Special adhesive stamps- These stamps are alternative for non-judicial stamp papers. It is convenient to use them in printed agreements. Special adhesive stamps are to be affixed and cancelled by proper officer notified under the stamp rules. 

Stamps are of three types- 

Judicial stamps- These are used in connection with court fees, filing suit and other judicial matters as per provisions of Court Fees Act. 

Non-judicial stamp- These are used as per provisions of Stamp Act for commercial transactions. Postage stamps- These are covered under India Post Office Act for postal charges.