Bare Acts

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).
11
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).
12
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).
13
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).
14
(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).
15
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).
16
(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).
17
(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).
18
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).
19
(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 paidup 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).
20
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 shareholders 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).
21
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).
22
(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.]

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 subsection (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).
24
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).
25
(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).
26
(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).
27
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).
28
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 subsection (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).
29
(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).
30
(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 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.]

(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).
32
(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
[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 halfyear 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).
34
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).
35
(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).
36
(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).
37
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 subsection (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).
38
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).
39
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).
40
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).
41
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