3. Establishment of corresponding new banks and business thereof.—(1) On the commencement
of this Act, there shall be constituted such corresponding new banks as are specified in column 2 of the
First Schedule.
(2) The paid-up capital of every corresponding new bank constituted under sub-section (1) shall,
until any provision is made in this behalf in any scheme made under section 9, be equal to the paid-up
capital of the existing bank in relation to which it is the corresponding new bank.
1. Ins. by Act 37 of 1994, s. 10 (w.e.f. 15-7-1994).
2. Subs. by s. 11, ibid., for “TRANSFER OF THE UNDERTAKINGS OF EXISTING BANKS” (w.e.f. 15-7-1995).
3
1
[
2
[(2A) Subject to the provisions of this Act, the authorised capital of every corresponding new bank
shall be three thousand crores of rupees divided into three hundred crores of fully paid-up shares of ten
rupees each:
Provided that the corresponding new bank may reduce the nominal or face value of the shares, and
divide the authorised capital into such denomination as it may decide with the prior approval of the
Reserve Bank:
Provided further that the Central Government may in consultation with the Reserve Bank and by
notification in the Official Gazette increase or reduce the authorised capital as it deems fit so however that
the shares in all cases shall be fully paid-up shares.]
(2B) Notwithstanding anything contained in sub-section (2), the paid-up capital of every
corresponding new bank constituted under sub-section (1) may from time to time be increased by—
(a) such amounts as the Board of Directors of the corresponding new bank may, after consultation
with the Reserve Bank and with the previous sanction of the Central Government, transfer from the
reserve fund established by such bank to such paid-up capital;
(b) such amounts as the Central Government may, after consultation with the Reserve Bank,
contribute to such paid-up capital;
3
[(c) such amounts as the Board of Directors of the corresponding new bank may, after
consultation with the Reserve Bank and with the previous sanction of the Central Government, raise
by public issue 4
[or rights issue or by issue of bonus shares] or preferential allotment or private
placement, of equity shares or preference shares in accordance with the procedure as may be
prescribed, so, however, that the Central Government shall, at all times hold not less than fifty-one per
cent. of the paid-up capital consisting of equity shares of each corresponding new bank:
Provided that the issue of preference shares shall be in accordance with the guidelines framed by
the Reserve Bank specifying the class of preference shares, the extent of issue of each class of such
preference shares (whether perpetual or irredeemable or redeemable) and the terms and conditions
subject to which, each class of preference shares may be issued.
5
[(2BB) Notwithstanding anything contained in sub-section (2), the paid-up capital of a
corresponding new bank constituted under sub-section (1) may, from time to time and before any paid-up
capital is 6
[raised by public issue 4
[or rights issue or by issue of bonus shares] or preferential allotment or
private placement] under clause (c) of sub-section (2B), be reduced by—
(a) the Central Government, after consultation with the Reserve Bank, by cancelling any
paid-up capital which is lost, or is unrepresented by available assets;
(b) the Board of Directors, after consultation with the Reserve Bank and with the previous
sanction of the Central Government, by paying off any paid-up capital which is in excess of the
wants of the corresponding new banks:
Provided that in a case where such capital is lost, or is unrepresented by available assets because
of amalgamation of another corresponding new bank or a corresponding new bank as defined in
clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act,
1970 (5 of 1970) with the corresponding new bank, such reduction may be done, either prospectively
or retrospectively, but not from a date earlier than the date of such amalgamation.
(2BBA) (a) A corresponding new bank may, from time to time and after any paid-up capital has been
6
[raised by public issue 4
[or rights issue or by issue of bonus shares] or preferential allotment or private
placement] under clause (c) of sub-section (2B), by resolution passed at an annual general meeting of the
shareholders entitled to vote, voting in person, or, where proxies are allowed, by proxy, and the votes cast
1. Subs. by Act 37 of 1994, s. 12, for sub-sections (2A) and 3 (w.e.f. 15-7-1994).
2. Subs. by Act 4 of 2013, s. 16, for sub-section (2A) (w.e.f. 18-1-2013).
3. Subs. by Act 45 of 2006, s. 8, for clause (c) (w.e.f. 16-10-2006).
4. Ins. by Act 4 of 2013, s. 16 (w.e.f. 18-1-2013).
5. Ins. by Act 8 of 1995, s. 3 (w.e.f. 21-1-1995).
6. Subs. by Act 45 of 2006, s. 8, for “raised by public issue” (w.e.f. 16-10-2006).
4
in favour of the resolution are not less than three times the number of the votes, if any, cast against the
resolution by the shareholders so entitled and voting reduce its paid-up capital in any way.
(b) Without prejudice to the generality of the foregoing power, the paid-up capital may be reduced
by—
(i) extinguishing or reducing the liability on any of its shares in respect of share capital not
paid-up;
(ii) either with or without extinguishing or reducing liability on any of its paid-up shares,
cancelling any paid-up capital which is lost, or is unrepresented by available assets; or
(iii) either with or without extinguishing or reducing liability on any of its paid-up shares,
paying off any paid-up share capital which is in excess of the wants of the corresponding new
bank.
(2BBB) Notwithstanding anything contained in sub-section (2BB) or sub-section (2BBA), the paid-up
capital of a corresponding new bank shall not be reduced at any time so as to render it below twenty-five
per cent. of the paid-up capital of that bank as on the date of commencement of the Banking Companies
(Acquisition and Transfer of Undertakings) Amendment Act, 1995 (8 of 1995).]
(2C) The entire paid-up capital of a corresponding new bank, except the paid-up capital 1
[raised
from public by public issue 2
[or rights issue or by issue of bonus shares] or preferential allotment or
private placement] under clause (c) of sub-section (2B), shall stand vested in, and allotted to, the Central
Government.
(2D) The shares of every corresponding new bank not held by the Central Government shall be
freely transferable:
Provided that no individual or company resident outside India or any company incorporated under
any law not in force in India or any branch of such company, whether resident outside India or not, shall
at any time hold or acquire by transfer or otherwise shares of the corresponding new bank so that such
investment in aggregate exceeds the percentage, not being more than twenty per cent. of the paid-up
capital, as may be specified by the Central Government by notification in the Official Gazette.
Explanation.—For the purposes of this clause, “company” means any body corporate and includes a
firm or other association of individuals.
(2E) No shareholder of the corresponding new bank, other than the Central Government, shall be
entitled to exercise voting rights in respect of any shares held by him in excess of 3
[ten per cent.] of the
total voting rights of all the shareholders of the corresponding new bank.
4
[Provided that the shareholder holding any preference share capital in the corresponding new bank
shall, in respect of such capital, have a right to vote only on resolutions placed before such corresponding
new bank which directly affects the rights attached to his preference shares:
Provided further that 5
[no preference shareholder, other than the Central Government, shall be
entitled to exercise voting rights in respect of preference shares held by him in excess of ten per cent.] of
the total voting rights of all the shareholders holding preference share capital only.]
(2F) Every corresponding new bank shall keep at its head office a register, in one or more books, of
the shareholders (in this Act referred to as the register) and shall enter therein the following
particulars:—
(i) the names, addresses and occupations, if any, of the shareholders and a statement of the
shares held by each share-holder, distinguishing each share by its denoting number;
(ii) the date on which each person is so entered as a share holder;
(iii) the date on which any person ceases to be a share-holder; and
1. Subs. by Act 45 of 2006, s. 8, for “raised by public issue” (w.e.f. 16-10-2006).
2. Ins. by Act 4 of 2013, s. 16 (w.e.f. 18-1-2013).
3. Subs. by s. 16, ibid., for “one per cent.” (w.e.f. 18-1-2013).
4. Ins. by Act 45 of 2006, s. 8 (w.e.f. 16-10-2006).
5. Subs. by Act 4 of 2013, s. 16, for certain words (w.e.f. 18-1-2013).
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(iv) such other particulars as may be prescribed.
1
[Provided that nothing in this sub-section shall apply to shares held with a depository.]
(2G) Notwithstanding anything contained in sub-section (2F), it shall be lawful for every
corresponding new bank to keep the register in computer floppies or diskettes subject to such safeguards
as may be prescribed.
(3) Notwithstanding anything contained in the Indian Evidence Act, 1872 (1 of 1872), a copy of, or
extract from, the register, certified to be a true copy under the hand of an officer of the corresponding new
bank authorised in this behalf by it, shall, in all legal proceedings, be admissible in evidence.]
(4) Every corresponding new bank shall be a body corporate with perpetual succession and a
common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property,
and to contract, and may be and sued in its name.
(5) Every corresponding new bank shall carry on and transact the business of banking as defined in
clause (b) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), and may engage in 2
[one or
more of the other forms of business] specified in sub-section (1) of section 6 of that Act.
(6) Every corresponding new bank shall establish a reserve fund to which shall be transferred the
share premiums and the balance, if any, standing to the credit of the reserve fund of the existing bank in
relation to which it is the corresponding new bank, and such further sums, if any, as may be transferred in
accordance with the provisions of section 17 of the Banking Regulation Act, 1949 (10 of 1949).
3
[(7) (i) The corresponding new bank shall, if so required by the Reserve Bank, act as agent of the
Reserve Bank at all places in India where it has a branch, for—
(a) paying, receiving, collecting and remitting money, bullion and securities on behalf of any
Government in India; and
(b) undertaking and transacting any other business which the Reserve Bank may from time to
time entrust to it.
(ii) The terms and conditions on which any such agency business shall be carried on by the
corresponding new bank on behalf of the Reserve Bank shall be such as may be agreed upon.
(iii) If no agreement can be reached on any matter referred to in clause (ii), or if a dispute
arises between the corresponding new bank and the Reserve Bank as to the interpretation of any
agreement between them, the matter shall be referred to the Central Government and the decision
of the Central Government thereon shall be final.
(iv) The corresponding new bank may transact any business or perform any functions
entrusted to it under clause (i), by itself or through any agent approved by the Reserve Bank.]
4
[3A. Trust not to be entered on the register.—Notwithstanding anything contained in
sub-section (2F) of section 3, no notice of any trust, express, implied or constructive, shall be entered on
the register, or be receivable, by the corresponding new bank:]
5
[Provided that nothing in this section shall apply to a depository in respect of shares held by it as a
registered owner on behalf of the beneficial owners.]
6
[3B. Register of beneficial owners.—The register of benificial owners maintained by a depository
under section 11 of the Depositories Act, 1996 (22 of 1996), shall be deemed to be a register of
shareholders for the purposes of this act.
1. Ins. by Act 8 of 1997, s. 19 (w.e.f. 15-1-1997).
2. Subs. by Act 1 of 1984, s. 71, for “one or more forms of business” (w.e.f. 15-2-1984).
3. Ins. by s. 71, ibid. (w.e.f. 15-2-1984).
4. Ins. by Act 37 of 1994, s. 13 (w.e.f. 15-7-1994).
5. Ins. by Act 8 of 1997, s. 20 (w.e.f. 15-1-1997).
6. Ins. by s. 21, ibid. (w.e.f. 15-1-1997).
6
Explanation.—For the purposes of section 3, section 3A and this section , the expressions “benificial
owner”, “depository” and “registered owner” shall have the meanings respectively assigned to them in
clauses (a), (e) and (j) of sub-section (1) of section 2 of the Depositories Act, 1996.]
4. Undertakings of existing banks to vest in corresponding new banks.—On the commencement
of this Act, the undertaking of every existing bank shall be transferred to, and shall vest in, the
corresponding new bank.
5. General effect of vesting.—(1) The undertaking of each existing bank shall be deemed to include
all assets, rights, powers, authorities and privileges and all property, movable and immovable, cash
balances, reserve funds, investments and all other rights and interests in, or arising out of, such property
as were immediately before the commencement of this Act in the ownership, possession, power or control
of the existing bank in relation to the undertaking, whether within or without India, and all books of
accounts, registers, records and all other documents of whatever nature relating thereto and shall also be
deemed to include all borrowings, liabilities and obligations of whatever kind then subsisting of the
existing bank in relation to the undertaking.
(2) If, according to the laws of any country outside India, the provisions of this Act by themselves
are not effective to transfer or vest any asset or liability situated in that country which forms part of the
undertaking of an existing bank to, or in, the corresponding new bank, the affairs of the existing bank in
relation to such asset or liability shall, on and from the commencement of this Act, stand entrusted to the
chief executive officer for the time being of the corresponding new bank, and the chief executive officer
may exercise all powers and do all such acts and things as may be exercised or done by the existing bank
for the purpose of effectively transferring such assets and discharging such liabilities.
(3) The chief executive officer of the corresponding new bank shall, in exercise of the powers
conferred on him by sub-section (2), take all such steps as may be required by the laws of any such
country outside India for the purpose of effecting such transfer or vesting, and may either himself or
through any person authorised by him in this behalf realise any asset and discharge any liability of the
existing bank.
(4) Unless otherwise expressly provided by this Act, 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 commencement of this Act and to which the existing bank is a party or
which are in favour of the existing bank shall be of as full force and effect against or in favour of the
corresponding new bank, and may be enforced or acted upon as fully and effectually as if in the place of
the existing bank the corresponding new bank had been a party thereto or as if they had been issued in
favour of the corresponding new bank.
(5) If, immediately before the commencement of this Act, any suit, appeal or other proceeding of
whatever nature in relation to any business of the undertaking which has been transferred under section 4,
is pending by or against the existing 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 existing bank or of anything
contained in this Act but the suit, appeal or other proceeding may be continued, prosecuted and enforced
by or against the corresponding new bank.
(6) Nothing in this Act shall be construed as applying to the assets, rights, powers, authorities and
privileges and property, movable and immovable, cash balances and investments in any country outside
India (and other rights and interests in, or arising out of, such property) and borrowings, liabilities and
obligations of whatever kind subsisting immediately before the commencement of this Act, of any
existing bank operating in that country if, under the laws in force in that country, it is not permissible for a
banking company, owned or controlled by Government, to carry on the business of banking there.