Banking Regulation and Monetary Policy

In that case, the Supreme Court was dealing with the validity of the SARFAESI Act. The Court struck down Section 17(2) of the Act as ultra vires Article 14 of the Constitution of India. Thus, the complete statement is SARFAESI Act has been declared valid by Supreme Court but it struck down Section 17(2) of the Act, in the case of Mardia Chemicals vs Union of India and others, which provided for deposit of 75% of the amount due to the bank before approaching DRT.

SARFAESI Act, 2002 is applicable to housing finance companies whose names are notified by the Central Government.

The act allows taking the matter to high courts only in some matters related to the implementation of the act in Jammu & Kashmir. However, high courts have been entertaining writ petitions under Article 226 (Power to issue writs) of the Constitution of India. It is possible where non-performing assets are backed by securities charged to the bank by way of hypothecation or mortgage or assignment.

Prevention of Money Laundering Act, 2002 is an act of the Parliament of India that was enacted to prevent money-laundering and to provide for confiscation of property derived from money-laundering. It also prevents use of banking system for money laundering.

The forms prescribed by the Central Government for registration are as under: FORM I - For creation and modification of charge. FORM II - For particulars of satisfaction of charge. FORM III - For securitisation or reconstruction of financial assets. FORM IV - For satisfaction of securitisation or reconstruction of financial assets. Thus, all the transactions need registration.

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 Banking Regulation Act. 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.

Under sub-section (2) of section 11 of the BR Act, a foreign bank operating in India has to deposit and keep deposited with the Reserve Bank, an amount of Rs. 15 lac and if it has a place of business in Mumbai or Kolkata or both, Rs. 20 lac. The amount has to be kept in cash, unencumbered approved securities or partially in both. Statements (c) and (d) are not true. 

RBI had announced ‘Clean Note Policy’ in January 1999, for withdrawing soiled notes from circulation and pumping fresh notes into circulation u/s 35A BR Act. Also, RBI notified the Banking Ombudsman Scheme 2006 (on Dec 26, 2005) u/s 35A BR Act. KYC Guidelines were also introduced u/s 35A B R Act. Thus, only option 3 is correct.

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 made under this section, and the Central Government, if it is of opinion after considering the report that the affairs of the banking company are being conducted to the detriment of the interests of its depositors. Also, option 4 is not true as acquisitions often result in a number of social benefits. Thus, option 4 is the correct answer. 

The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in India.The Act provides a framework using which commercial banking in India is supervised and regulated. Thus, option 1 is the correct answer.

Companies like a Non-Banking Financial Company (NBFC) are the companies registered under the Companies Act, 1956 not BR Act. Subsidiary banks are defined in the State Bank of India (Subsidiary Banks) Act, 1959 and not Companies Act. Accepting deposits for safe custody falls under banking regulation act. Thus, only option 1 is correct.

Every director elected under 'election of new directors', shall hold office until the date up to which his predecessor would have held office, if the election had not been held. Thus, option 2 is the correct answer.

Section 26 of BR Act is about the ‘return of unclaimed deposits’. Thus, option 3 is the correct answer.

(a) In case of default in maintenance of CRR requirement on a daily basis, penal interest will be recovered 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. (b) If the shortfall continues on the succeeding day(s), penal interest will be recovered at the rate of five per cent per annum above the Bank Rate. (c) In cases of default in maintenance of CRR on average basis during a fortnight, penal interest will be recovered as envisaged in sub-section (3) of section 42 of Reserve Bank of India Act, 1934.

The Board of Financial Supervision (BFS) was constituted in November 1994 as a committee of the Central Board of Directors. Its objective is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. The RBI carries out its functions related to financial supervision under the guidance of BFS. The Board normally holds meeting every month. Thus, all the options are correct.