Banking Regulation and Monetary Policy

It is to ensure that only those banks are continuing which were operating on sound lines and to prevent indiscriminate formation of banking companies.

Under Banking Regulation Act, 1949, 21(A), rate of interest charged by banking companies will not to be subject to scrutiny by courts. Notwithstanding anything con­tained in the Usurious Loans Act, 1918 (10 of 1918) or any other law relating to indebtedness in force in any state, a transaction between a banking company and its debtor shall not be re-opened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.

RBI fixes SLR (statutory liquidity ratio) from time to time – currently it is at 25%. RBI requires banks to maintain 25% of Net Demand and Time Liabilities (NDTL) which is to be maintained on daily basis by investment in cash (other than CRR) and unencumbered prescribed Central and State Government securities, treasury bills and Government Guaranteed Bonds. These securities are approved securities for SLR purposes under Section 24 of the Banking Regulation Act, 1949 and Indian Trust Act, 1882 and are issued under Public Debt Act, 1944.

A scheduled bank, in India, refers to a bank which is listed in the 2nd Schedule of the Reserve Bank of India Act, 1934. The further classification of scheduled banks is as follows: Scheduled commercial banks Nationalised banks State Bank of India and its associates Regional Rural Bank (RRBs) Foreign banks Other Indian private sector banks Scheduled cooperative banks Scheduled state cooperative banks Scheduled urban cooperative banks  

In November 1994, RBI constituted the Board for Financial Supervision (BFS) under RBI (BFS) Regulations, 1994 to give undivided attention to the prudential supervision and regulation of banks, financial institutions and non-bank financial institutions in an integrated manner.

Action under provisions of SARFAESI Act cannot be initiated by (RRB) Regional Rural Banks.

RBI's original share capital was divided into shares of 100 each fully paid, which were initially owned entirely by private shareholders. Following India's independence on 15 August, 1947, the RBI was nationalised on 1 January, 1949. Afterwards, majority of share capital in RBI was held by Central Government.

Section 36-A of BR Act deals with certain provisions of the act that do not apply to certain banking companies. Option 4 states the wrong and hence, it is the correct answer.

Section 42 in Reserve Bank of India Act, 1934 regarding cash reserves of scheduled banks to be kept with RBI. (1) Every bank included in the Second Schedule shall maintain with the Bank an average daily balance the amount of which shall not be less than such percent of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section. (2) The Bank may from time to time, having regard to the needs of securing the monetary stability in the country, notify in the Gazette of India.

According to Section 26 in Banking Regulation Act, 1949 return of unclaimed deposits states that 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 [in India] which have not been operated upon for ten years, 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.

Various forms/returns are given in the Banking Regulation (Co-operative Societies) Rules, 1966. All the mentioned returns, except quarterly return of NPA advances u/s 42 of RBI Act, are the various returns submitted to RBI. 

Notwithstanding anything to the contrary contained in Section 235 of the Companies Act, 1956 (1 of 1956)], 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 Reserve Bank shall supply to the banking company a copy of its report on such inspection. However, 35-A talks about the power of the Reserve Bank to give directions in the interest of public interest and banking policy. 

For banking companies (private banks), it is prepared as per part I of Schedule VI of Companies Act. At the expiration of each calendar year 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 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 that year or the period, as the case may be in the form set out in the Third Schedule or as near thereto as circumstances admit.

Section 22 in Banking Regulation Act,1949 states that no company shall carry on banking business in India, unless it holds a licence issued on that behalf by the Reserve Bank and any such licence may be issued subject to such condi­tions as the Reserve Bank may think fit to impose.

Section 7 in Banking Regulation Act,1949 states that no company, other than a banking company, shall use as part of its name (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. 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”. 

The guidelines for nature of records to be maintained by a bank under Prevention of Money Laundering Act, 2002 are issued by RBI and SEBI from time to time.