Banking Regulation Act, 1949

(1) This Act may be called the Banking Regulation Act, 1949. (2) It extends to the whole of India (3) It shall come into force on such date5 as the Central Government may, by notification in the Official Gazette, appoint in this behalf.

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

certain cases Nothing in this Act shall apply to- (a) a primary agricultural credit society; (b) a co-operative land mortgage bank; and (c) any other co-operative society, except in the manner and to the extent specified in Part V.] Comment: Section 3 of the Banking Regulation Act specifically lays down that except in the manner and to the extent specified in Part V of the said Act none of the other provisions of the said Act are applicable to C0-operative Societies. AIR 1977 Kerala 36

(1) The Central Government, if on a representation made by the Reserve Bank in this behalf it is satisfied that it is expedient so to do, may by notification in the Official Gazette, suspend for such period, not exceeding sixty days, as may be specified in the notification, the operation of all or any of the provisions of this Act, either generally or in relation to any specified banking company. (2) In a case of special emergency, the Governor of the Reserve Bank, or in his absence a Deputy Governor of the Reserve Bank nominated by him in this behalf may, by order in writing, exercise the powers of the Central Government under sub-section (1) so however that the period of suspension shall not exceed thirty days, and where the Governor or the Deputy Governor, as the case may be, does so, he shall report the matter to the Central Government forthwith, and the order shall, as soon as may be, be published in the Gazette of India. (3) The Central Government may, by notification in the Official Gazette, extend from time to time the period of any suspension ordered under sub-section (1) or sub-section (2) for such period, not exceeding sixty days at any one time, as it thinks fit so however that the total period does not exceed one year. (4). A copy of any notification issued under sub-section (3) shall be laid on the table of 8[Parliament] as soon as may be after it is issued.

In this Act], unless there is anything repugnant in the subject or context,- (a) "approved securities" means- (i) securities in which a trustee may invest money under clause (a), clause (b), clause (bb), clause (c) or clause (d) of section 20 of the Indian Trust Act, 1882 (2 of 1882); (ii) such of the securities authorized by the Central Government under clause (f) of section 20 of the Indian Trust Act, 1882 (2 of 1882), as may be prescribed]; (b) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. (c) "banking company" means any company which transacts the business of banking 11[in India ]; Explanation: Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause; (ca) "banking policy" means any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits and other resources of the bank and the need for equitable allocation and the efficient use of these deposits and resources;] (CC) "branch" or "branch office", in relation to a banking company, means any branch or branch office, whether called a pay office or sub-pay office or by any other name, at which deposits are received, cheques cashed or moneys lent, and for the purposes of section 35 includes any place of business where any other form of business referred to in sub-section (1) of section 6 is transacted;] (d) "company" means any company as defined in section 3 of the Companies Act, 1956 (1 of 1956); and includes a foreign company within the meaning of section 591 of that Act;] (da) "corresponding new bank" means a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);] (f) "demand liabilities" means liabilities which must be met on demand, and "time liabilities" means liabilities which are not demand liabilities; (ff) "Deposit Insurance Corporation" means the Deposit Insurance Corporation established under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961);] (ffa) "Development Bank" means the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964); (ffb) "Exim Bank" means Export-Import Bank of India established under section 3 of the Export-Import Bank of India Act, 1981 (28 of 1981);] (ffc) "Reconstruction Bank" means the Industrial Reconstruction Bank of India established under section 3 of the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984);] (ffd) "National Housing Bank" means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987;] (g) "gold" includes gold in the form of coin, whether legal tender or not, or in the form of bullion or ingot, whether refined or not; (gg) "managing agent" includes- (i) secretaries and treasurers, (ii) where the managing agent is a company, any director of such company, and any member thereof who holds substantial interest in such company, (iii) where the managing agent is a firm, any partner of such firm;] (h) "managing director", in relation to a banking company, means a Director who, by virtue of agreement with the banking company or of a resolution passed by the banking company in general meeting or by its Board of Directors or, by virtue of its memorandum or articles of association, is entrusted with the management of the whole, or substantially the whole of the affairs of the company, and includes a Director occupying the position of a Managing Director, by whatever name called:] PROVIDED that the Managing Director shall exercise his powers subject to the superintendence, control and direction of the Board of Directors; (ha) "National Bank" means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981); (i) [* * *1 (j) "prescribed" means prescribed by rules made under this Act; (ja) "regional rural bank" means a regional rural bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976);] (k) [* * *] (l) "Reserve Bank" means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);] (m) 24[* * *] (n) "secured loan or advances" means a loan or advance made on the security of assets the market value of which is not at any time less than the amount of such loan or advance; and "unsecured loan or advance" means a loan or advance not so secured; (ni) "Small Industries Bank" means the Small Industries Development Bank of India established under s. 3 of the Small Industries Development Bank of India Act, 1989;] (na) "small-scale industrial concern" means an industrial concern in which the investment in plant and machinery is not in excess of seven and a half lakh of rupees or such higher amount, not exceeding twenty lakhs of rupees, as the Central Government may, by notification in the Official Gazette, specify in this behalf, having regard to the trends in industrial development and other relevant factors;] (nb) "Sponsor Bank" has the meaning assigned to it in the Regional Rural Banks Act, 1976 (21 of 1976); (nc) "State Bank of India" means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955);] (nd)] "subsidiary bank" has the meaning assigned to it in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); [(ne)] "substantial interest:- (i) in relation to a company, means the holding of a beneficial interest by an individual or his spouse or minor child, whether singly or taken together in the shares thereof, the amount paid-up on which exceeds five lakhs of rupees or ten per cent of the paid-up capital of the company, whichever is less; (ii) in relation to a firm, means the beneficial interest held therein by an individual or his spouse or minor child, whether singly or taken together, which represents more than ten per cent of the total capital subscribed by all the partners of the said firm; [(o) all other words and expressions used herein but not defined and defined in the Companies Act, 1956 (1 of 1956), shall have the meanings respectively assigned to them in that Act.] (2) [* * *]

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; and drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hundies, promissory notes, coupons, drafts, bill of lading, railway receipts, warrants, debentures, certificates, scrips and other instruments, and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, travelers' 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, scrips or other forms of securities on behalf of constituents or others; the negotiating of loan and advances; the receiving of all kinds of bonds, scrips 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 30[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, guaranteeing, 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 realizing 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 pension and allowances and making payments towards insurance; subscribing to or guaranteeing moneys for charitable or benevolent object 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 purpose 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) 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) No company other than a banking company shall use as part of its name 15[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).]

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 realization 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) of sub-section (1) of section 6: 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 movable property, other than actionable claims, stock, shares, money, bullion and specie and all instruments referred to in clause (a) of sub-section (1) of section 6.

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: 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 interests of the depositors of the banking company.

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: 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- (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) 9[whose term of office as a person managing the company is] for a period exceeding five years at any one time: 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 form the date on which it is to come into force: 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 a persons 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) of 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. (3)[***] (4)[***] (5)[***] (6) Any decision or order of the Reserve Bank made under this section shall be final for all purposes.]

and reserves (1) Notwithstanding anything contained in [section 149 of the Companies Act, 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 11[in India], and no other banking company shall, after the commencement of this Act, commence or carry on business 11[in India], unless it complies with such of the requirements of this section as are applicable to it.] [(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) [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 40[***] 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.] [(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.] (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 lakh of rupees, and if any such place or places of business is or are situated in the city of Bombay or Calcutta or both, ten lakhs of rupees; (ii) if it has all its places of business in one State none of which is situated in the city of Bombay or Calcutta, one lakh of rupees in respect of its principal place of business, plus ten thousand rupees in respect of each of its other places of business, situated in the same district in which it has its principal place of business, plus twenty-five thousand rupees in respect of each place of business situated elsewhere in the State otherwise than in the same district: PROVIDED that no banking company to which this clause applies shall be required to have paid-up capital and reserves exceeding an aggregate 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: [PROVIDED FURTHERthat 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, 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 42[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 43[*subsection (2) by any banking company incorporated 44[outside India] shall, in the event of the company ceasing for any reason to carry on banking business 11 [in India], be an asset of the company on which the claims of all the creditors of the company 11[in India] shall be a first charge. (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.

capital and authorized 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 authorized 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; (ii) that the capital of the company consists of ordinary shares only or of ordinary shares or equity shares and such preferential shares as may have been issued prior to the 1st day of July, 1944: PROVIDED that nothing contained in this sub-section shall apply to any banking company incorporated before the 15th day of January, 1937. (2) No person holding shares in a banking company shall, in respect of any shares held by him, exercise voting rights 28[on poll] 45[in excess of 46[ten per cent]] of the total voting rights of all the shareholders of the banking company. (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 shares 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.]

discount, etc., on sale of shares Notwithstanding anything to the contrary contained in [sections 76 and 79 of the Companies Act, 1956 (1 of 1956)1, 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 paid-up value of the said shares.

No banking company shall create any charge upon any unpaid capital of the company, and any such charge shall be invalid.

[(1)] No banking company shall pay any dividend on its shares until all its capitalized expenses (including preliminary expenses, organization 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. [(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 capitalized 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.]

[(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 share-holders of that banking company. (2) If immediately before 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 shareholders 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 shareholders of the banking 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.] (3) Nothing in sub-section (1) shall apply to, or in relation to, any Director appointed by the Reserve Bank.]

(1) Every banking company incorporated in India shall create a reserve fund and 50[* **] 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. (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 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.

(1) Every banking company, not being a scheduled bank, shall maintain in India by way of cash reserve with itself or by way of balance in a current account with the Reserve Bank or by way of net balance in current accounts or in one or more of the aforesaid ways, a sum equivalent to at least three per cent of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight 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 Friday 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 or from the Development Bank or from the Exim Bank 52[or from the Reconstruction Bank] 19[or from the National Housing Bank] or from the National Bank 82[or from the Small Industries Bank] by the banking company; (iii) in the case of a Regional Rural Bank, also any loan taken by such bank from its sponsor bank; (b) "fortnight" shall means 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, means the excess, if any, of the aggregate of the credit balance 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 purpose of computation of liabilities, the aggregate of the liabilities of 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 reduced by the aggregate of the liabilities of all such banks and institutions to the banking company; (e) the expression "Co-operative Bank" shall have the meaning assigned to it in clause (cci) of section 56. (2) The Reserve Bank may, for the purpose 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 transaction 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.]

companies (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 clause (a) to (o) of sub-section (1) of section 6, is permissible for a banking company to undertake, or (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 purpose 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 under 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 pledge, 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) 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 15[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 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 on 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) "loan 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 realized, 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.]

by banking companies (1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest 86[or in the interests of depositors] 12[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 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 particulars, 9[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 to 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.] (3) Every banking company shall be bound to comply with any directions given to it under this section.

(1) Save as hereinafter provided, no company shall carry on banking business in India unless it holds a license issued in that behalf by the Reserve Bank and any such license 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 11 [in India], shall apply in writing to the Reserve Bank for a license 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 license in pursuance of 55[this section] or is by notice in writing informed by the Reserve Bank that a license cannot be granted to it: PROVIDED FURTHER that the Reserve Bank shall not give a notice as aforesaid to be a banking company in existence on the commencement of this Act before the expiry of the three years referred to in sub-section (1) of section 11 or of such further period as the Reserve Bank may under that sub-section think fit to allow. (3) Before granting any license under this section, the Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise that 56[***] the following conditions are fulfilled, namely:- (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; (c) that the general character of the proposed management of the company will not be prejudicial to the public interest of its present or future 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 license 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 license 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 fulfillment 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.] (3A) Before granting any license 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.] (4) The Reserve Bank may cancel a license 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) 15 [and sub-section (3A)] is not fulfilled: PROVIDED that before canceling a license 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 fulfill 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, and opportunity of taking the necessary steps for complying with or fulfilling such condition. (5) Any banking company aggrieved by the decision of the Reserve Bank canceling a license 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.

transfer of existing, places of business (1) Without obtaining the prior permissions 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. 57[(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.]

(1) After the expiry of two years from the commencement of this Act, every banking company shall maintain [in India] in cash, gold or unencumbered approved securities, valued at a price not exceeding the current market price, an amount which shall not at the close of business on any day be less than 20 per cent of the total of its [demand and time liabilities] [in India]. Explanation: For the purposes of this section, "unencumbered approved securities" of a banking company shall include its approved securities lodged with another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of.] (2) In computing the amount for the purposes of sub-section (1), the deposit required under sub-section (2) of section 11 to be made with the Reserve Bank by a banking company incorporated outside India and any balances maintained in India by a banking company in current account with the Reserve Bank or the State Bank of India or with any other bank which may be notified in this behalf by the Central Government, including in the case of a scheduled bank the balance required under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), to be so maintained, shall be deemed to be cash maintained in India.] (2A) (a) Notwithstanding anything contained in sub-section (1) or in sub-section(2), after the expiry of two years from the commencement of the Banking Companies (Amendment) Act, 1962 (36 of 1962):- (i) 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 (ii) every other banking company, in addition to the cash reserve which it is required to maintain under section 18, 106[shall maintain in India- (A) in cash, or (B) in gold valued at a price not exceeding the current market price or in unencumbered approved securities valued at a price determined in accordance with such one or more of, or combination, of the following methods of valuation, namely, valuation with reference to cost price, market price, book value or face value, as may be specified by the Reserve Bank from time to time, an amount which shall not, at the close of business on any day, be less than twenty-five per cent or such other percentage not exceeding forty per cent as the Reserve Bank may, from time to time, by notification in the Official Gazette, specify, of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight; (b) in computing the amount for the purposes of clause (a)- (i) the deposit required under sub-section (2) of section 11 to be made with the Reserve Bank by a banking company incorporated outside India; (ii) any cash or balances maintained in India by a banking company other than a scheduled bank with itself or with the Reserve Bank or by way of net balance in current account in excess of the cash or balance or net balance required to be maintained under section 18; (iii) any balance maintained by a scheduled bank with the Reserve Bank in excess for the balance required to be maintained by it under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (iv) the net balance in current accounts maintained in India by a scheduled bank; (v) any balance maintained by a Regional Rural Bank in call or fixed deposit with its sponsor bank, shall be deemed to be cash maintained in India . Explanation: For the purposes of clause (a) of this sub-section, the market price of an approved security shall be the price as on the date of the issue of the notification or as on any earlier or later date as may be notified from time to time by the Reserve Bank in respect of any class or classes of securities. (2B) The Reserve Bank may, by notification in the Official Gazette, vary the percentage referred to in sub-section (2A) in respect of a Regional Rural Bank (3) For the purposes 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 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 clause (a) of 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 on 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 clause (a) of 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. (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 willfully 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 clause (a) of 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).

(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:] 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:- (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 all or any of the said bills or securities are held outside India; (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;, (C) "quarter" means the period of three months ending on the last day of March, June, September or December.

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 113[in India] which have not been operated upon for ten years 114[* * *]: 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: PROVIDED FURTHER that every Regional Rural Bank shall also furnish a copy of the said return to the National Bank.

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 102[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. (2) The Reserve Bank may at any time direct a banking company to furnish it within such time as may be specified by the Reserve Bank, with such statements and information relating to the business or affairs of the banking company (including any business or affairs with which such banking company is concerned) as the Reserve Bank may consider necessary or expedient to obtain for the purposes of this Act, and without prejudice to the generality of the foregoing power may call for information every half-year regarding 104[the investments of a banking company and the classification of its advances in respect of industry, commerce and agriculture].] (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 the Regional Rural Banks.]

The Reserve Bank or the National Bank, or both, if they consider it in the public interest so to do, may publish any information obtained by them under this Act in such consolidated form as they think fit.

(1) At the expiration of each calendar years 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 in India], in respect of all business transacted by it, and every banking company incorporated outside India], in respect of all business transacted through its branches 102[in India], shall prepare with reference to that year or period, as the case may be,] a balance-sheet and profit and loss account as on the last working day of 120[the 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: 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 [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 [outside India ] by the Manager or Agent of the principal office of the company 122[in India ]. (3) Notwithstanding that the balance-sheet of a banking company is under subsection (1) required to be prepared in a form other than the form 123[set out in Part I of Schedule VI to the Companies Act, 1956 (1 of 1956)1, 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. (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. Explanation: In sub-section (3A), "year" means the year or, as the case may be, the period referred to in sub-section (1). (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 ) 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.] (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 interests of the banking company or its depositors so to do, 128[it may at any time by order direct that the 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, 129[the special audit] specified in the order made by the Reserve Bank shall be borne by the banking company.] (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 of Auditors of companies by 130[section 227 of the Companies Act, 1956 (1 of 1956)] 131[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 102[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 officers of the company have been found adequate for the purposes of his audit; (d) whether the profit and loss account shows a true balance 132[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 shareholders of the company.

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 furnishes 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: PROVIDED FURTHER that a Regional Rural Bank shall furnish such returns also to the National Bank.]

be sent to Registrar [(1) Where a banking company in any year furnished its accounts and balance-sheet in accordance with the provisions of section 31, it shall at the same time send to the Register 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 Auditors' 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 required 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.

companies incorporated outside India Every banking company, incorporated 119[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 branch office 102[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.

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.

(1) Notwithstanding anything to the contrary contained in [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. [(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 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 140[or employee] of the banking company to produce to any officer making an inspection under sub-section (1) 134[or a scrutiny under sub-section (1A)1 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) [or a scrutiny under sub-section (1A)] may examine on oath any Director or other officer [or employee] of the banking company in relation to its business, and may administer any 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 [or scrutiny] made under this section, and the Central Government, if it is of opinion after considering the report that the affairs of the 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. 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 purposes of carrying on the business of banking exclusively outside India ; and (b) all its branches whether situated in India or outside India .] 110[(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.]

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 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) [(d) at any time, if it satisfied that in the public interest or in the interest of 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 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 the 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 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 officers 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 (2) The Reserve Bank shall make an annual report of 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.

(1) The High Court] may on the application of a banking company which is temporarily unable to meet its obligations make an order (a copy of which it shall cause to be forwarded to the Reserve Bank) staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it shall think fit and proper, and may from time to time extend the period so however that the total period of moratorium shall not exceed six months. (2) No such application shall be maintainable unless it is accompanied by a report of the Reserve Bank indicating that in the opinion of the Reserve Bank the banking company will be able to pay its debts if the application is granted: PROVIDED that the 163[High Court] may, for sufficient reasons, grant relief under this section even if the application is not accompanied by such report, and where such relief is grated, the 163[High Court] shall call for a report from the Reserve Bank on the affairs of the banking company;, on receipt of which it may either rescind any order already passed or pass such further orders thereon as may be just and proper in the circumstances. (3) When an application is made under sub-section (1), the High Court may appoint a special officer who shall forthwith take into his custody or under his control all the assets, books, documents, effects and actionable claims to which the banking company is or appears to be entitled and shall also exercise such other powers as the High Court may deem fit to confer on him, having regard to the interests of the depositors of the banking company.] (4) Where the Reserve Bank is satisfied that the affairs of a banking company in respect of which an order under sub-section (1) has been made, are being conducted in manner detrimental to the interests of the depositors, it may make an application to the High Court for the winding up of the company, and where any such application is made, the High Court shall not make any order extending the period for which the commencement or continuance of all actions and proceedings against the company were stayed under that sub-section.]

(1) Notwithstanding anything contained in section 391, section 392, section 433 and section 583 of the Companies Act, 1956 (1 of 1956), but without prejudice to its powers under sub-section (1) of section 37 of this Act, the High Court shall order the winding up of a banking company- (a) if the banking company is unable to pay its debts; or (b) if an application for its winding up has been made by the Reserve Bank under section 37 or this section. (2) The Reserve Bank shall make an application under this section for the winding up of a banking company it is directed so to do by an order under clause(b) of sub-section (4) of section 35. (3) The Reserve Bank may make an application under this section for the winding up of a banking company- (a) if the banking company- (i) has failed to comply with the requirements specified in section 11; or (ii) has by reason of the provisions of section 22become disentitled to carry on banking business in India ; or (iii) has been prohibited from receiving fresh deposits by an order under clause (a) of sub-section (4) of section 35 or under clause (b) of sub-section (3A) or section 42 of the Reserve Bank of India, Act, 1934 (2 of 1934); or (iv) having failed to comply with any requirement of this Act other than the requirements laid down in section 11, has continued such failure, or, having contravened any provision of this Act has continued such contravention beyond such period or periods as may be specified in that behalf by the Reserve Bank from time to time, after notice in writing of such failure or contravention has been conveyed to the banking company; or (b) if in the opinion of the Reserve Bank- (i) a compromise or arrangement. Sanctioned by a court in respect of the banking company cannot be worked satisfactorily with or without modifications; or (ii) the returns, statements or information furnished to it under or in pursuance of the provisions of this Act disclose that the banking company is unable to pay its debts; or (iii) the continuance of the banking company is prejudicial to the interest of its depositors. (4) Without prejudice to the provisions contained in section 434 of the Companies Act, 1956 (1 of 1956), a banking company shall be deemed to be unable to pay its debts if it has refused to meet any lawful demand made at any of its offices or branches within two working days, if such demand is made at a place where there is an office, branch or agency of the Reserve Bank, or within five working days, if such demand is made elsewhere, and if the Reserve Bank certifies in writing that the banking company is unable to pay its debts. (5) A copy of every application made by the Reserve Bank under sub-section (1) shall be sent by the Reserve Bank to the Registrar.]

(1) Notwithstanding anything contained in section 38A of this Act or in section 448 or section 449 of the Companies Act, 1956 (1 of 1956), where in any proceeding for the winding up by the High Court of a banking company, an application is made by the Reserve Bank in this behalf, the Reserve Bank, the State Bank of India or any other bank notified by the Central Government in this behalf or any individual as stated in such application shall be appointed as the official liquidator of the banking company in such proceeding and the liquidator, if any, functioning in such proceeding shall vacate office upon such appointment. (2) Subject to such directions as may be made by the High Court, the remuneration of the official liquidator appointed under this section, the cost and expenses of his establishment and the cost and expenses of the winding up shall be met out of the assets of the banking company which is being wound up, and notwithstanding anything to the contrary contained in any other law for the time being in force, no fees shall be payable to the Central Government, out of the assets of the banking company.]

Notwithstanding anything to the contrary contained in 202[section 466 of the Companies Act, 1956 (1 of 1956)1, the 203[High Court] shall not make any order staying the proceedings in relation to the winding up of a banking company, unless the 203[High Court] is satisfied that an arrangement has been made whereby the company can pay its depositors in full as their claims accrue.

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

creditors, etc. Notwithstanding anything to the contrary contained in 205[section 460] of the Companies Act, 1956 (1 of 1956), the 203[High Court] may, in the proceedings for winding up a banking company, dispense with any meeting of creditors or contributories [* * *] if it considers that no object will be secured thereby sufficient to justify the delay and expense.

proved In any proceeding for the winding up of a banking company, every depositor of the banking company shall be deemed to have filed his claim for the amount shown in the books of the banking company as standing to his credit and, notwithstanding anything to the contrary contained in 208[section 474 of the Companies Act, 1956 (1 of 1956)1, the High Court shall presume such claims to have been proved, unless the official liquidator shows that there is reason for doubting its correctness.

up (1) Notwithstanding anything to the contrary contained in section 484 of the Companies Act, 1956 (1 of 1956), no banking company may be voluntarily wound up unless the Reserve Bank certifies in writing that the company is able to pay in full all its debts to its creditors as they accrue. (2) The High Court, may, in any case where a banking company is being wound up voluntarily, make an order that the voluntary winding up shall continue, but subject to the supervision of the court. (3) Without prejudice to the provisions contained in sections 441 and 521 of the Companies Act, 1956 (1 of 1956), the High Court may of its own motion and shall on the application of the Reserve Bank, order the winding up of a banking company by the High Court in any of the following cases, namely: (a) where the banking company is being wound up voluntarily and at any stage during the voluntary winding up proceedings the company is not able to meet its debts as they accrue; or (b) where the banking company is being wound up voluntarily or is being wound up subject to the supervision of the court and the High Court is satisfied that the voluntary winding up or winding up subject to the supervision of the court cannot be continued without detriment to the interests of the depositors.]

Government for suspension of business by a banking company and to prepare scheme of reconstitution or amalgamation (1) Notwithstanding anything contained in the foregoing provisions of this Part or in any other law or [any agreement or other instrument], for the time being in force, where it appears to the Reserve Bank that there is good reason so to do, the Reserve Bank may apply to the Central Government for an order of moratorium in respect of 229[a banking company]. (2) The Central Government, after considering the application made by the Reserve Bank under sub-section (1), may make an order of moratorium staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it thinks fit and proper and may from time to time extend the period so however that the total period of moratorium shall not exceed six months. (3) Except as otherwise provided by any directions given by the Central Government in the order made by it under subsection (2) or at any time thereafter, the banking company shall not during the period of moratorium make any payment to any depositors or discharge any liabilities or obligations to any other creditors. 228[(4) During the period of moratorium, if the Reserve Bank is satisfied that: (a) in the public interest; or (b) in the interests of the depositors; or (c) in order to secure the proper management of the banking company; or (d) in the interest of the banking system of the country as a whole, it is necessary so to do, the Reserve Bank may prepare a scheme- (i) for the reconstruction of the banking company, or (ii)for the amalgamation of the banking company with any other banking institution (in this section referred to as "the transferee bank") (5) The scheme aforesaid may contain provision for all or any of the following matters, namely: (a) the constitution, name and registered office, the capital, assets, powers, rights, interests, authorities and privileges, the liabilities, duties and obligations of the banking company on its reconstruction or, as the case may be, of the transferee bank; (b) in the case of amalgamation of the banking company, the transfer to the transferee bank of the business, properties, assets and liabilities of the banking company on such terms and conditions as may be specified in the scheme; (c) any change in the Board of Directors, or the appointment of a new Board of Directors, of the banking company on its reconstruction or, as the case may be, of the transferee bank and the authority by whom, the manner in which, the other terms and conditions on which, such change or appointment shall be made and in the case of appointment of a new Board of Directors or of any Director, the period for which such appointment shall be made; (d) the alteration of the memorandum and articles of association of the banking company on its reconstruction or, as the case may be of the transferee bank for the purpose of altering the capital thereof or for such other purpose as may be necessary to give effect to the reconstruction or amalgamation; (e) subject to the provisions of the scheme, the continuation by or against the banking company on its reconstruction or, as the case maybe, the transferee bank, of any actions or proceedings pending against the banking company immediately before the date of the order of moratorium; (f) the reduction of the interest or rights which the members, depositors and other creditors have in or against the banking company before its reconstruction or amalgamation to such extent as the Reserve Bank considers necessary in the public interest or in the interests of the members, depositors and other creditors or for the maintenance of the business of the banking company; (g) the payment in cash or otherwise to depositors and other creditors in full satisfaction of their claim- (i) in respect of their interest or right in or against the banking company before its reconstruction or amalgamation; or (ii) where their interest or rights aforesaid in or against the banking company has or have been reduced under clause (f), in respect of such interest or rights as so reduced; (h) the allotment to the members of the banking company for shares held by them therein before its reconstruction or amalgamation [whether their interest in such shares has been reduced under clause (f) or not], of shares in the banking company on its reconstruction or, as the case may be, in the transferee bank and where any members claim payment in cash and not allotment of shares, or where it is not possible to allot shares to any members, the, payment in cash to those members in full satisfaction of their claim- (i) in respect of their interest in shares in the banking company before its reconstruction or amalgamation; or (ii) where such interest has been reduced under clause (f) in respect of their interest in shares as so reduced; (i) the continuance of the services of all the employees of the banking company (excepting such of them as not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947) are specifically mentioned in the scheme) in the banking company itself on its reconstruction or, as the case may be, in the transferee bank at the same remuneration and on the same terms and conditions of service, which they were getting or, as the case may be, by which they were being governed, immediately before the date of the order of moratorium: PROVIDED that the scheme shall contain a provision that:- (i) the banking company shall pay or grant not later than the expiry of the period of three years from the date on which the scheme is sanctioned by the Central Government, to the said employee the same remuneration and the same terms and conditions of service 229[as are, at the time of such payment or grant, applicable] to employees of corresponding rank or status of a comparable banking company to be determined for this purpose by the Reserve Bank (whose determination in this respect shall be final); (ii) the transferee bank shall pay or grant not later than the expiry of the aforesaid period of three years, to the said employees the same remuneration and the same terms and conditions of service [as are, at the time of such payment or grant, applicable] to the other employees of corresponding rank or status of the transferee bank subject to the qualifications and experience of the said employees being the same as or equivalent to those of such other employees of the transferee bank: PROVIDED FURTHER that if in any case under clause (ii) of the first proviso any doubt or difference arises as to whether the qualification and experience of any of the said employees are the same as or equivalent to the qualifications and experience of the other employees of corresponding rank or status of the transferee bank, 230[the doubt or difference shall be referred, before the expiry of a period of three years from the date of the payment or grant mentioned in that clause ], to the Reserve Bank whose decision thereon shall be final; (j) notwithstanding anything contained in clause (i) where any of the employees of the banking company not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947) are specifically mentioned in the scheme under clause (i), or where any employees of the banking company have by notice in writing given to the banking company or, as the case may be, the transferee bank at any time before the expiry of one month next following the date on which the scheme is sanctioned by the Central Government, intimated their intention of not becoming employees of the banking company on its reconstruction or, as the case may be, of the transferee bank, the payment to such employees of compensation, if any, to which they are entitled under the Industrial Disputes Act, 1947, and such pension, gratuity, provident fund and other retirement benefits ordinarily admissible to them under the rules or authorizations of the banking company immediately before the date of the order of moratorium; (k) any other terms and conditions for the reconstruction or amalgamation of the banking company; (l) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out. (6)(a) A copy of the scheme prepared by the Reserve Bank shall be sent in draft to the banking company and also to the transferee bank and any other banking company concerned in the amalgamation, for suggestions and objections, if any, within such period as the Reserve Bank may specify for this purpose; (b) the Reserve Bank may make such modifications, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the banking company and also from the transferee bank, and any other banking company concerned in the amalgamation and from any members, depositors or other creditors of each of those companies and the transferee bank. (7) The scheme shall thereafter be placed before the Central Government for its sanction and the Central Government may sanction the scheme without any modifications or with such modifications as it may consider necessary; and the scheme as sanctioned by the Central Government shall come into force on such date as the Central Government may specify in this behalf: PROVIDED that different dates may be specified for different provisions of the scheme. [(7A) The sanction accorded by the Central Government under sub-section (7), whether before or after the commencement of section 21 of the Banking Law (Miscellaneous Provisions) Act, 1963 (55 of 1963), shall be conclusive evidence that all the requirements of this section relating to reconstruction, or, as the case may be, amalgamation have been complied with and a copy of the sanctioned scheme certified in writing by an officer of the Central Government to be a true copy thereof, shall, in all legal proceedings (whether in appeal or otherwise and whether instituted before or after commencement of the said section 21), be admitted as evidence to the same extent as the original scheme.] (8) On and from the date of coming into operation of the scheme or any provision thereof, the scheme or such provision shall be binding on the banking company or, as the case may be, on the transferee bank and any other banking company concerned in the amalgamation and also on all the members, depositors and other creditors and employees of each of those companies and of the transferee bank, and on any other person having any right or liability in relation to any of those companies or the transferee bank 231[including the trustees or other persons managing, or connected in any other manner with, any provident fund or other fund maintained by any of those companies or the transferee bank.] (9) 232[On and from the date of the coming into operation of, or as the case may be, the date specified in this behalf in the scheme], the properties and assets of the banking company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vest in, and the liabilities of the banking company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and become the liabilities of, the transferee bank. (10) If any difficulty arises in giving effect to the provisions of the scheme, the Central Government may by order do anything not inconsistent with such provision which appears to it necessary or expedient for the purpose of removing the difficulty. (11) Copies of the scheme or of any order made under sub-section(10) shall be laid before both Houses of Parliament, as soon as may be, after the scheme has been sanctioned by the Central Government, or, as the case may be, the order has been made. (12) Where the scheme is a scheme for amalgamation of the banking company, any business acquired by the transferee bank under the scheme or under any provision thereof shall, after the coming into operation of the scheme or such provision, be carried on by the transferee bank in accordance with the law governing the transferee bank, subject to such modifications in that law or such exemptions of the transferee bank from the operation of any provisions thereof as the Central Government on the recommendation of the Reserve Bank may, by notification in the Official Gazette, make for the purpose of giving full effect to the scheme: PROVIDED that no such modification or exemption shall be made so as to have effect for a period of more than seven years from the date of the acquisition of such business. (13) Nothing in this section shall be deemed to prevent the amalgamation with a banking institution by a single scheme of several banking companies in respect of each of which an order of moratorium has been made under this section. (14) The provisions of this section and of any scheme made under it shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force. (15) In this section, "banking institution" means any banking company and includes the State Bank of India or 231[a subsidiary bank or a corresponding new bank.]] [Explanation: Reference in this section to the terms and conditions of service as applicable to an employee shall not be construed as extending to the rank and status of such employee.]

(1) Whoever in any return, balance-sheet or other document 202[or on any information required or furnished] by or under or for the purpose of any provision of this Act, willfully makes a statement which is false in any material particular, knowing it to be false, or willfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine. (2) If any person fails to produce any book, account or other documents or to furnish any statement or information which under sub-section (2) of section 35 it is his duty to produce or furnish, or to answer any question relating to the business of a banking company which he is asked by 250[an officer making inspection or scrutiny under that section] he shall be punishable with fine which may extend to 251[two thousand rupees] in respect of each offence, and if he persists in such refusal, to further fine which may extend to 252[one hundred rupees] for every day during which the offence continues. (3) If any deposits are received by a banking company in contravention of an order under clause (a) of sub-section (4) of section 35, every Director or other officer of the banking company, unless he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent it, shall be deemed to be guilty of such contravention and shall be punishable with a fine which may extend to twice the amount of the deposits so received. 253[(4) If any other provision of this Act is contravened or if any default in made in,- (i) complying with any requirement of this Act or of any order, rule or direction made or condition imposed thereunder, or (ii) carrying out ' the terms of, or the obligation under, a scheme sanctioned under sub-section (7) of section 45, by any person, such person shall be punishable with fine which may extend to 254[fifty thousand rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where a contravention or default is a continuing one, with a further fine which may extend to two thousand and five hundred rupees for every day, during which the contravention or default continues. (5) Where a contravention or default has been committed by a company, every person who at the time the contravention or default was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention of default and shall be liable to be proceeded against and punished accordingly: PROVIDED that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act if he proves that the contravention or default was committed without his knowledge or that he exercised all due diligence to prevent the contravention or default. (6) Notwithstanding anything contained in sub-section (5), where a contravention or default has been committed by a company, and it is proved that the same was committed with the consent or connivance of, or is attributable to any gross negligence on the part of, any Director, Manager, Secretary or other Officer of the company, such Director, Manager, Secretary or other Officer shall also be deemed to be guilty of that contravention or default and shall be liable to be proceeded against and punished accordingly. Explanation: For the purposes of this section,- (a) "company" means any body corporate and includes a firm or other association of individuals; and (b) "Director", in relation to a firm, means a partner in the firm.]

No court shall take cognizance of any offence punishable under 216[sub-section (5) of section 36AA or] section 46 except upon complaint in writing made by an officer of 256[the Reserve Bank or, as the case may be, the National Bank], generally or specially authorized in writing in this behalf by 255[the Reserve Bank or, as the case may be, the National Bank], and 257[no court other than that of a Metropolitan or a Judicial Magistrate of the first class or any court superior thereto] shall try any such offence.

A court imposing any fine under this Act may direct that the whole or any part thereof shall be applied in or towards payment of the costs of the proceedings, or in or towards the rewarding of the person on whose information the fine is recovered.

companies The exemptions whether express or implied, in favor of a private company in 260[sections 90, 165, 182, 204 and 255, clauses (a) and (b) of sub-section (1) of section 293 and sections 300,388A and 416 of the Companies Act, 1956 (1 of 1956)1, shall not operate in favor of a private company which is a banking company.

No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred by reason of the operation of any of the provisions 202[contained in sections, 10, 12A, 16, 35A, 35B, 262[36, 43A and 45] or by reason of the compliance by a banking company with any order or direction given to it under this Act.]

State Bank of India and other notified banks (1) Without prejudice to the provisions of the State Bank of India Act, 1955 (23 of 1955), or any other enactment, the provisions of section 10, 13 to 15, 17 253[19 to 21A, 23 to 28, 29 (excluding sub-section (3)] 265[sub-sections (1B), (1C), and (2) of section 30], 31, 34,35,35A, 36 [excluding clause (d) of sub-section (1)], 45Y to 45ZF, 46 to 48],50,52 and 53 shall also apply, so far as maybe, to and in relation to the State Bank of India 253[or any corresponding new bank or a Regional Rural Bank or any subsidiary bank] as they apply to and in relation to banking companies: PROVIDED that,- (a) nothing contained in clause (c) of sub-section (1) of section 10 shall apply to the Chairman of the State Bank of India or to a 267[Managing Director] of any subsidiary bank in so far as the said clause precludes him from being a Director of, or holding an office in, any institution approved by the Reserve Bank; 253[(b) nothing contained in sub-clause (iii) of clause (b) of sub-section (1) of section 20 shall apply to any bank referred to in sub-section (1), insofar as the said sub-clause (iii) of clause (b) precludes that bank from entering into any commitment for granting any loan or advance to or on behalf of a company (not being a government company) in which not less than forty per cent of the paid-up capital is held (whether singly or taken together) by the Central Government or the Reserve Bank or a corporation owned by that bank; and (c) nothing contained in section 46 or in section 47A shall apply to- (i) an officer of the Central Government or the Reserve Bank nominated or appointed as Director of the State Bank of India or any corresponding new bank or a Regional Rural Bank or any subsidiary bank or a banking company; or (ii) an officer of the State of India or a corresponding new bank or a Regional Rural Bank or a subsidiary bank nominated or appointed as Director of any of the said banks (not being the bank of which he is an officer) or of a banking company.] (2) References to a banking company in any rules or direction relating to any provisions of this Act referred to in sub-section (1) shall, except where such rule or direction provides otherwise, be construed as referring also to the State Bank of India, a corresponding new bank, a Regional Rural Bank and a subsidiary bank.]

(1) The Central Government may, after consultation with the Reserve Bank, make rules to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act and all such rules shall be published in the Official Gazette. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for the details to be included in the returns required by this Act and the manner in which such return shall be submitted 269[and the form in which the official liquidator may file lists of debtors to the Court having jurisdiction under Part III or Part IIIA and the particulars which such lists may contain and any other matter which has to be, or may be, prescribed]. (4) The Central Government may, by rules made under this section, annul, alter or add to, all or any of the provisions of the Fourth Schedule.] (5) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rules or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.]

The Central Government may, on the recommendation of the Reserve Bank, by notification in the Official Gazette, that any or all of the provisions of this Act shall not apply to any banking company or institution or to any class of banking companies either generally or for such period as may be specified.

(1) No suit or other legal proceedings shall lie against the Central Government, the Reserve Bank or any officer for anything which is in good faith done or intended to be done in pursuance of this Act. (2) Save as otherwise expressly provided by or under this Act, no suit or other legal proceedings shall lie against the Central Government, the Reserve Bank or any officer for any damage caused or likely to be caused by anything in good faith done or intended to be done in pursuance of this Act.

The Reserve Bank of India Act, 1934 shall be amended in the manner specified in the fourth column of the First Schedule, and the amendments to section 18 thereof as specified in the said Schedule shall be deemed to have had effect on and from the 20th day of September, 1947.

subject to modifications The provisions of this Act, as in force for the time being, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to the following modifications, namely,- (a) throughout this Act, unless the context otherwise requires- (i) references to a "banking company" or "the company" or "such company" shall be construed as references to a Co-operative Bank, (ii) reference to "commencement of this Act" shall be construed as reference to commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965); (b) in section 2, the words and figures "the Companies Act, 1956 (1 of 1956), and" shall be omitted; (c) in section 5- 273[(1) after clause (cc), the following clauses shall be inserted, namely,- (cci) "Co-operative Bank" means a State Co-operative Bank, a Central Co-operative Bank and a primary Co-operative Bank; (ccii) "co-operative credit society" means a co-operative society, the primary object of which is to provide financial accommodation to its members and includes a co-operative land mortgage bank; (cciii) "Director", in relation to a co-operative society, includes a member of any committee or body for the time being vested with the management of the affairs of that society; (cciv) "primary agricultural credit society" means a co-operative society- (1) the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of crops); and (2) the bye-laws of which do not permit admission of any other co-operative society as a member: PROVIDED that this sub-clause shall not apply to the admission of a Co-operative Bank as a member by reason of such Co-operative Bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose; (ccv) "primary Co-operative Bank means a co-operative society, other than a primary agricultural credit society- (1) the primary object or principal business of which is the transaction of banking business; (2) the paid-up share capital and reserves of which are less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member: PROVIDED that this sub-clause shall not apply to the admission of a Co-operative Bank as a member by reason of such co-operative Bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose; (ccvi) "primary credit society" means a co-operative society, other than a primary agricultural credit society- (1) the primary object or principal business of which is the transaction of banking business; (2) the paid up share capital and reserves of which are less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member: PROVIDED that this sub-clause clause shall not apply to the admission of a Co-operative Bank as a member by reason of such Co-operative Bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose. Explanation: If any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final; (ccvii) "Central Co-operative Bank", "co-operative society", "primary rural credit society" and "State Co-operative Bank" shall have the meanings respectively assigned to them in the National Bank for Agricultural and Rural Development Act, 1981 (61 of 1981)]; (ii) clauses (ff) (h) and (hb) shall be omitted;] (d) for section 5A, the following section shall be substituted, namely:- "5A. Act to override bye-laws, etc.- (1) The provisions of 253[this Act] shall have effect, notwithstanding anything to the contrary contained in the bye-laws of a co-operative society, or in any agreement executed by it, or in any resolution passed by it in general meeting, or by its Board of Directors or other body entrusted with the management of its affairs, whether the same be registered, executed or passed, as the case may be, before or after the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965). (2) Any provision contained in the bye-laws, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of 274[this Act], become or be void, as the case may be."; (e) in section 6, in sub-section (1)- (i) in clause (b), the words "but excluding the business of a Managing Agent or Secretary and Treasurer of a company" shall be omitted; (ii) in clause (d), after the word "company", the words "co-operative society" shall be inserted; (iii) in clause (m) after the word "company", the words "or co-operative society" shall be inserted; 253[(f) for section 7, the following section shall be substituted namely :- 7. Use of words "bank" "banker” or "banking" (1) No co-operative society other than a Co-operative Bank shall use as part of its name or in connection with its business any of the words "bank", "banker", or "banking", and no co-operative society shall carry on the business of banking in India unless it uses as part of its name at least one of such words. (2) Nothing in this section shall apply to- (a) a primary credit society, or (b) a co-operative society formed for the protection of the mutual interest of Co-operative Banks or co-operative land mortgage banks, or (c) any co-operative society, not being a primary credit society, formed by the employees of- (i) a banking company or the State Bank of India or a corresponding new bank or a subsidiary bank of such banking company, State Bank of India or a corresponding new bank, or (ii) a Co-operative Bank or a primary credit society or a co-operative land mortgage bank, in so far as the words "bank", "banker”, or "banking" appear as part of the name of the employer bank, or as the case may be, of the bank, whose subsidiary the employer bank is.] (fi) in section 8, for the proviso, the following proviso shall be substituted, namely,- "PROVIDED that this section shall not apply- (a) to any such business as aforesaid which was in the course of being transacted on the commencement of clause (iii) of section 42 of the Banking Laws (Amendment) Act, 1983 (1 of 1984), so, however, that the said business shall be completed before the expiry of one year from such commencement; or (b) to any business as is specified in pursuance of clause (o) of sub-section (1) of section 6;"; (fii) in section 9, for the second proviso, the following provisos shall be substituted, namely:- "PROVIDED FURTHER that in the case of a primary credit society which becomes a primary Co-operative Bank after the commencement of clause (iii) of section 42 of the Banking Laws (Amendment) Act, 1983 (1 of 1984), the period of seven years shall commence from the day it so becomes a primary Co-operative Bank: PROVIDED ALSO that the Reserve Bank may, in any particular case, extend the aforesaid period of seven years by such period as it may consider necessary where it is satisfied that such extension would be in the interests of the depositors of the Co-operative Bank."]; (g)Sections 10, 10A,10B, LOBB, 10C1 and 10D1 shall be omitted; (h) for section 11, the following section shall be substituted, namely,- 11. Requirement as to minimum paid-up capital and reserves-(1) Notwithstanding any law relating to co-operative societies for the time being in force, no Co-operative Bank shall commence or carry on the business of banking in India unless the aggregate value of its paid-up capital and reserves is not less than one lakh of rupees: PROVIDED that nothing in this sub-section shall apply to- (a) any such bank which is carrying on such business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of three years from such commencement; or (b) to a primary credit society which becomes a primary Co-operative Bank after such commencement, for a period of two years from the date it so becomes a Primary Co-operative Bank or for such further period not exceeding one year as the Reserve Bank, having regard to the interests of the depositors of the Primary Co-operative Bank, may think fit in any particular case to allow. (2) For the purposes of this section, "value" means the real or exchangeable value and not the nominal value which may be shown in the books of the Co-operative Bank concerned (3) If any dispute arises in computing the aggregate value of the paid-up capital and reserves of any such Co-operative Bank, a determination thereof by the Reserve Bank shall be final for the purpose of this section.' (i) sections 12,12A, 13 and 15 to 17 shall be omitted; (j) for section 18, the following section shall be substituted, namely,- "18. Cash reserve- (1) Every Co-operative Bank, not being a State Co-operative Bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934) (hereinafter referred to as a "Scheduled State Co-operative Bank"), shall maintain in India by way of such reserve with itself or by way of balance in a current account with the Reserve Bank or the State Co-operative Bank of the State concerned or by way of net balance in current account, or, in the case of a Primary Co-operative Bank, with the Central Co-operative Bank of the district concerned, or in one or more of the aforesaid ways, a sum equivalent to at least three per cent of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight and shall submit to the Reserve Bank before the fifteenth 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 Co-operative Bank; (ii) any advance taken from a State Government, the Reserve. Bank, the Development Bank, the Exim Bank 276[the Reconstruction Bank], 277[the National Housing Bank], the National Bank 278[the Small Industries Bank] or from the National Co-operative Development Corporation established under section 3 of the National Co-operative Development Corporation Act, 1962 (26 of 1962) by the Co-operative Bank; (iii) in the case of a State or Central Co-operative Bank, also any deposit of money with it representing the reserve fund or any part thereof maintained with it by any other co-operative society within its area of operation, and in the case of a Central Co-operative Bank, also an advance taken by it from the State Co-operative Bank of the State concerned; (iv) in the case of a Primary Co-operative Bank, also any advance taken by it from the State Co-operative Bank of the State concerned or the Central Co-operative Bank of the district concerned; (v) in the case of any Co-operative Bank, which has granted an advance against any balance maintained with it, such balance to the extent of the amount outstanding in respect of such advance; and (vi) in the case of any Co-operative Bank, the amount of any advance or other credit arrangement drawn and availed of against approved securities; (b) "fortnight" shall mean the period from Saturday to the second following Friday, both days inclusive; (c) "net balance in current accounts" shall, in relation to a Co-operative Bank, mean the excess, if any, of the aggregate of the credit balances in current account maintained by that Co-operative Bank with the State Bank of India or a subsidiary bank or a corresponding new bank, over the aggregate of the credit-balances in current accounts held by the said banks with such Co-operative Bank; (d) for the purpose of computation of liabilities, the aggregate of the liabilities of a Co-operative Bank to the State Bank of India, a subsidiary bank, a corresponding new bank, a Regional Rural Bank, a banking company or any other financial institution notified by the Central Government in this behalf shall be reduced by the aggregate of the liabilities of all such banks and institutions to the Co-operative Bank; (e) any cash with a Co-operative Bank or any balance held by a Co-operative Bank with another bank, shall not, to the extent such cash or such balance represents the balance in, or investment of, Agricultural Credit Stabilization Fund of such Co-operative Bank, be deemed to be cash maintained in India.(2) The Reserve Bank may, for the purposes of this section and section 24, specify from time to time, with reference to any transaction or class of ,transactions, that such transaction or transactions shall be regarded as liability in India of a Co-operative Bank, and, ' if any question arises as to whether any transaction or class of transactions shall be regarded for the purposes of this section and section 24, as liability in India of a Co -operative Bank, the decision of the Reserve Bank thereon shall be final."]; (k) for section 19, the following section shall be substituted, namely, "19. Restriction on holding shares in other co-operative societies-No Co-operative Bank shall hold shares in any other co-operative society except to such extent and subject to such conditions as the Reserve Bank may specify in that behalf: PROVIDED that nothing contained in this section shall apply to:- (i) shares acquired through funds provided by the State Government for that purpose; (ii) in the case of a Central Co-operative Bank, the holding of shares in the State Co-operative Bank to which it is affiliated; (iii) in the case of a primary Co-operative Bank, the holding of shares in the Central Co-operative Bank to which it is affiliated or in the State Co-operative Bank of the State in which it is registered: PROVIDED FURTHER that where any shares are held by a Co-operative Bank in contravention of this section at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), the Co-operative Bank shall without delay report the matter to the Reserve Bank and shall, notwithstanding anything contained in this section, be entitled to hold the shares for such period and on such conditions as the Reserve Bank may specify".; (1) for section 20 of the principal Act, the following section shall be substituted, namely- "20. Restrictions on loans and advances-No Co-operative Bank shall- (a) make any loans or advances on the security of its own shares; or (b) grant unsecured loans or advances: (i) to any of its Directors; or (ii) to firms or private companies in which any of its Directors is interested as Partner or Managing Agent or Guarantor or to individuals in cases where any of its Directors is a guarantor; or (iii) to any company in which the Chairman of the Board of Directors of the Co-operative Bank (where the appointment of a Chairman is for a fixed term) is interested as its Managing Agent, or where there is no Managing Agent, as its Chairman or Managing Director: PROVIDED that nothing in clause (b) shall apply to the grant of unsecured loans or advances- (a) made by a Co-operative Bank- (i) against bills for supplies or services made or rendered to government or bills of exchange arising out of bona fide commercial or trade transactions, or (ii) in respect whereof trust-receipts are furnished to the Co-operative Bank; (b) made by a Primary Co-operative Bank to any of its Directors or to any other person within such limits and on such terms and conditions as may be approved by the Reserve Bank in this behalf. (2) Every Co-operative Bank shall, before the close of the month succeeding that to which the return relates, submit to the Reserves Bank a return in the prescribed form and manner showing all unsecured loans and advances granted by it to companies in cases [other than those in which the Co-operative Bank is prohibited under sub-section (1) to make unsecured loans and advances] in which any of its Directors is interested as Director or Managing Agent or Guarantor. (3) If, on examination of any return submitted under sub-section (2), it appears to the Reserve Bank that any loans or advances referred to in that sub-section are being granted to the detriment of the interests of the depositors of the Co-operative Bank, the Reserve Bank may, by order in writing, prohibit the Co-operative Bank from granting any such further loans or advances or impose such restrictions on the grant thereof as it thinks fit, and may by like order direct the Co-operative Bank to secure repayment of such loans or advances within such time as may be specified in the order."]; (m) in section 20A, in sub-section (1).- (i) the words and figures "Notwithstanding anything to the contrary contained in section 293 of the Companies Act, 1956 (1 of 1956)" shall be omitted; (ii) in clause (a), for the words "any of its Directors" the words" any of its past or present directors" shall be substituted.] (n) in section 21, in sub-section (2), in clause (c) and (d), for the words "any one company, firm, association of persons or individual", the words "any one party" shall be substituted; (o) in section 22:- (i) for sub-sections (1) and (2), the following sub-sections shall be substituted, namely,- "(1) Save as hereinafter provided, no co-operative society shall carry on banking business in India unless:- (a) it is a primary credit society, or (b) it is a Co-operative Bank and holds a license issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fit to impose: PROVIDED that nothing in this sub-section shall apply to a co-operative society, not being a primary credit society or a Co-operative Bank carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of one year from such commencement. (2) Every co-operative society carrying on business as Co-operative Bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), shall before the expiry of three months from such commencement, every Co-operative Bank which comes into existence as a result of the division of any other co-operative society carrying on business as a Co-operative Bank, or the amalgamation of two or more co-operative societies carrying on banking business shall, before the expiry of three months from its so coming into existence, every primary credit society which becomes a Primary Co-operative Bank after such commencement shall before the expiry of three months from the date on which it so becomes a Primary Co-operative Bank and every co-operative society other than a primary credit society shall before commencing banking business in India, apply in writing to the Reserve Bank for a license under this section: PROVIDED that nothing in clause (b) of sub-section (1) shall be deemed to prohibit,- (i) a co-operative society carrying on business as a Co-operative Bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965); or (ii) a Co-operative Bank which has come into existence as a result of the division of any other co-operative societies carrying on business as a Co-operative Bank, or the amalgamation of two or more co-operative societies carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), or at any time thereafter; or (iii) a primary credit society which becomes a Primary Co-operative Bank after such commencement, from carrying on banking business until it is granted a license in pursuance of this section or is, by a notice in writing notified by the Reserve Bank that the license cannot be granted to it.] 253[(ii) sub-section (3A) shall be omitted; (iii) in sub-section (4),in clause (iii), the words, brackets, figures and letters "and sub- section (3A)" shall be omitted;] (p) 273[in section 23- (i) for sub-section (1), the following sub-section shall be substituted, namely- "(1) Without obtaining the prior permission of the Reserve Bank, no Co-operative Bank shall open a new place of business or change otherwise than within the same city, town or village, the location of an existing place of business: PROVIDED that nothing in this sub-section shall apply to- (a) 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 Co-operative Bank 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; (b) the 280[opening or changing the location of branches] by a Central Co-operative Bank within the area of its operation."; 253[(ii) after sub-section (4), the following sub-section shall be inserted, namely,- "(4A) Any Co-operative Bank other than a Primary Co-operative Bank requiring the permission of the Reserve Bank under this section shall forward its application to the Reserve Bank though the National Bank which shall give its comments on the merits of the application and send it to the Reserve Bank: PROVIDED that the Co-operative Bank shall also send an advance copy of the application directly to the Reserve Bank."]; 275[(q) in section 24:- (i) in sub-section (1), the words "After the expiry of two years from the commencement of this Act", shall be omitted; (ii) for sub-sections (2) and (2A), the following sub-section shall be substituted, namely: - "(2) In computing the amount for the purposes of sub-section (1),- (a) any balances maintained in India by a Co-operative Bank in current account with the Reserve Bank or by way of net balance in current accounts, and in the case of a Scheduled State Co-opera6ve Bank, also the balance required under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), to be so maintained; (b) any balances maintained by a Central Co-operative Bank with the State Co-operative Bank of the State concerned, and (c) any balances maintained by a Primary Co-operative Bank with Central Co-operative Bank of the district concerned or with the State Co-operative Bank of the State concerned, shall be deemed to be cash maintained in India. (2A) (a) Notwithstanding anything contained in sub-section (1) or in sub-section (2), after the expiry of two years from the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), or of such further period not exceeding one year as the Reserve Bank having regard to the interests of the Co-operative Bank concerned, may think fit in any particular case to allow- (i) a Scheduled State Co-operative Bank, in addition to the cash reserve which it is required to maintain under section 18, shall maintain in India, in cash, or in gold valued at a price not exceeding the current market price or in unencumbered approved securities valued at a price determined in accordance with such one or more of, or combination of, the following methods of valuation, namely, valuation with reference to cost price, market price, book value or face value as may be specified by the Reserve Bank from time to time, an amount which shall not, at the close of business on any day, be less than twenty-five per cent or such other percentage not exceeding forty per cent as the Reserve Bank may, from time to time, by notification in the Official Gazette, specify, of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight. (b) In computing the amount for the purpose of clause (a), the following shall be deemed to be cash maintained in India namely,- (i) any balance maintained by a Scheduled State Co-operative Bank with the Reserve Bank in excess of the balance required to be maintained by it under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (ii) any cash or balances maintained in India by a Co-operative Bank, other than a Scheduled State Co-operative Bank, with itself or with the State Co-operative Bank of the State concerned, or in current account with the Reserve Bank or by way of net balance in current accounts and, in the case of a Primary Co-operative Bank also any balances maintained with the Central Co-operative Bank of the district concerned, in excess of the aggregate of the cash or balances required to be maintained under section 18; (iii) any net balance in current accounts. Explanation: For the purposes of this sub-section- (a) approved securities, or a portion thereof, representing investment of monies of Agricultural Credit Stabilization Fund to a Co-operative Bank shall not be deemed to be unencumbered approved securities; (b) in case a Co-operative Bank has taken an advance against any balance maintained with the State Co-operative Bank of the State concerned or with the Central Co-operative Bank of the district concerned, such balance to the extent to which it has been drawn against or availed of shall not be deemed to be cash maintained in India; (c) for the purpose of clause (a), the market price of an approved security shall be the price as on the date of the issue of the notification or as on any earlier or later date, as may be notified from time to time by the Reserve Bank in respect of any class or classes of securities; (iii) in sub-section (3), for the proviso, the following proviso shall be substituted, namely- "PROVIDED that every Co-operative Bank, other than a Primary Co-operative Bank, shall also furnish within the said period, a copy of the said return to the National Bank."; (iv) in sub-section (6), in clause (a), for the words "fourteen days", the words "thirty days" shall be substituted.]; (qq) after section 24, the following section shall be inserted, namely,- "24. Power to exempt-Without prejudice to the provisions of Section 53, the Reserve Bank may, by notification in the Official Gazette declare that, for such period and subject to such conditions as may be specified in such notification the whole or any part of the provisions of section 18 or section 24, as may be specified therein, shall not apply to any Co-operative Bank or class of Co-operative Banks, with reference to all or any of the offices of such Co-operative Bank or banks, or with reference to the whole or any part of the assets and liabilities of such Co-operative Bank or banks."]; (r) Section 25 shall be omitted; (ri) in the second proviso to section 26, for the expression "Regional Rural Bank", the expression "Co-operative Bank, other than a primary Co-operative Bank shall be substituted; (rii) in section 27, for sub-section (3), the following sub-section shall be substituted, namely,- "(3) Every Co-operative Bank, other than a Primary Co-operative Bank shall submit a copy of the return which it submits to the Reserve Bank, under sub-section (1) also to the National Bank and the powers exercisable by the Reserve Bank under sub-section (2) may also be exercised by the National Bank in relation to Co-operative Banks, other than Primary Co-operative Bank."]; (s) for sections 29 and 30, the following section shall be substituted, namely, "29. Accounts and balance-sheet-(1) At the expiration of each year ending with the 30th day of June or at the expiration of a period of twelve months ending with such date as the Central Government may, by notification in the Official Gazette, specify in this behalf, every Co-operative Bank, in respect of all business transacted by it, shall prepare with reference to that. year 283[for the period] a balance-sheet and profit and loss account as on the last working day of the year 283[or the period] in the Forms set out in the Third Schedule or as near thereto as circumstances admit: 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 by the manager or the principal officer of the bank and where there are more than three Directors of the bank, by at least three of those Directors, or where there are not more than three Directors, by all the Directors. (3) The Central Government, after giving not less than three months 'notice of its intention so to do by a notification in the Official Gazette, may from time to time by a like notification amend the Forms set out in the Third Schedule."; (t) in section 31,- (i) for words "within three months" and "of three months", the words "within six months" and "of six months" shall, respectively, be substituted; (ii) for the second proviso, the following proviso shall be substituted namely: "PROVIDED FURTHER that a Co-operative Bank, other than a Primary Co-operative Bank shall furnish such returns also to the National Bank."]; (u) Sections 32 to 34 shall be omitted; (v) in section 34A, sub-section (3) shall be omitted; (w) in section 35,- (i) in sub-section (1), (a) for the words and figures, "section 235 of the Companies Act, 1956 (1 of 1956)", the words "any law relating to co-operative societies for the time being in force" shall be substituted; (b) the following proviso shall be inserted at the end, namely,- "PROVIDED that the Reserve Bank may, if it considers it necessary or expendient so to do, cause an inspection to be made of a Primary Co-operative Bank under this sub-section by one or more officers of a State Co-operative Bank in the State in which such primary co-operative Bank is registered."]; (ii) in sub-section (4), clause (b) shall be omitted; (iii) after sub-section (4), the following sub-section shall be inserted, namely- "(4A) Without prejudice to the provisions of sub-section (4), the Reserve Bank may, if it considers it necessary or expedient so to do supply a copy of the report on any inspection or scrutiny to the State Co-operative Bank and the Registrar of Co-operative Societies of the State in which the bank which has been inspected or whose affairs have been scrutinized is registered."]; (IV) in sub-section (6), for the expression "Regional Rural Banks" and "Regional Rural Bank", wherever they occur, the expressions "Co-operative Banks other than primary Co-operative Banks”. and "Co-operative Bank other than a primary Co-operative Bank" shall, respectively be substituted]; (V)] the Explanation shall be omitted; (x) in section 35A, in sub-section (1), in clause (c), for the words "any banking company", the words "the banking business of any Co-operative Bank" shall be substituted; (y) section 35B shall be omitted; (z) in section 36 in sub-section (1):- (a) clause (b) shall be omitted; (b) for clause (d), the following clause shall be substituted, namely,- "(d) at any time if it is satisfied that for the reorganization or expansion of co-`perative credit on sound lines it is necessary so to do, by an order in writing and on such terms and conditions as may be specified therein- (i) depute one or more of its officers to watch the proceedings at any meeting of the Board of Directors of the Co-operative Bank or of any other body constituted by it and require the Co-operative Bank to give an opportunity to the officer so deputed to be heard at such meeting and to offer such advice on such matters as the officer may consider necessary or proper for the reorganization and expansion of co-operative credit on sound lines, and also require such officer to send a report of such proceedings to the Reserve Bank; (ii) appoint one or more of its officers to observe the manner in which the affairs of the Co-operative Bank or its offices or branches are being conducted and make a report thereon;"]; (za) in section 36A- (i) for sub-section (1), the following sub-section shall be substituted, namely,- "(1) The provisions of section 11, section 18 and section 24 shall not apply to a Co-operative Bank which has been refused a license under section 22 or whose license has been cancelled under that section or which is or has been prohibited or precluded from accepting deposits by virtue of any order made under this Act or of any alteration made in its bye-laws."; (ii) after sub-section (2), the following sub-section shall be inserted, namely,- "(3) Subject to the provisions of sub-sections (1) and (2), a co-operative society carrying on business as a Primary Co-operative Bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), or a co-operative society which becomes a Primary Co-operative Bank after such commencement shall, notwithstanding that it does not at any time thereafter satisfy the requirements of the definition of Primary Co-operative Bank in clause (ccv) of section 5], continue to be a Primary Co-operative Bank within the meaning of this Act, and may, with the approval of the Reserve Bank and subject to such terms and conditions as the Reserve Bank may specify in that behalf continue to carry on the business of banking."; (zaa) in section 36AD, sub-section (3) shall be omitted;] (zb) Part IIA 258[Part II, Part III, except sub-sections (1), (2) and (3) of section 45, and Part IIIA except section 45W shall be omitted; (zc) in section 46- (i) in sub-section (4), the word "or" occurring at the end of clause (i) and clause (ii) shall be omitted; (ii) in clause (a) of the Explanation, after the words "includes a", the words "co-operative society" shall be inserted;] (zd) in section 47, the words, brackets, figures and letters "sub-section (5) of section 36AA or" shall be omitted; (ze) section 49 shall be omitted; (zf) in section 49A, for the proviso, the following proviso shall be substituted, namely,- "PROVIDED that nothing contained in this section shall apply to,- (a) a primary credit society; (b) any other co-operative society accepting such deposits at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of one year from the date of such commencement; and (c) any savings bank scheme run by the government." ; (zg) sections 49B and 49C shall be omitted; (zh) in section 50, the figures and letters "10, 12A, 16", "35B", and "43A" shall be omitted; (zi) section 51 shall be omitted; (zj) in section 52- (i) in sub-section(2), the words, figures and letter, "and the form in which the official liquidator may file lists of debtors to the court having jurisdiction under Part III or Part IIIA and the particulars which such lists may contain" shall be omitted; (ii) sub-section (4) shall be omitted; 289[(zji) in section 54, after the expression "Reserve Bank", where it occurs, the expression "or the National Bank" shall be inserted.;] (zk) for section 55 and the First Schedule, the following section shall be substituted, namely:- "55. Act 18 of 1891 and Act 46 of 1949 to apply in relation to Co-operative Banks— (1) The Bankers" Books Evidence Act, 1891 shall apply in relation to a Co-operative Bank as it applies in relation to a bank as defined in section 2 of that Act. (2) The Banking Companies (Legal Practitioner's Client's Accounts) Act, 1949 shall apply in relation to a Co-operative Bank as it applies in relation to a banking company as defined in section 2 of that Act."; (zl) For Schedule III and Schedule IV, the following Schedule shall be substituted, namely: