Banking Regulation Act: Restrictions and Licensing
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Questions and Answers

What is the focus of Section 20 of the Banking Regulation Act?

  • Licensing of banking companies
  • Restrictions on loans and advances (correct)
  • Power of Reserve Bank to control advances by banking companies
  • Maintenance of a percentage of assets

    • What is the purpose of Section 26A of the Banking Regulation Act?

  • Power to publish information
  • Establishment of Depositor Education and Awareness Fund (correct)
  • Maintenance of a percentage of assets
  • Return of unclaimed deposits

    • What is the focus of Part IIA of the Banking Regulation Act?

  • Supersession of Board of Directors of Banking Company
  • Licensing of banking companies
  • Control over Management (correct)
  • Prohibition of certain activities in relation to banking companies

    • What is the purpose of Section 34A of the Banking Regulation Act?

    <p>Production of documents of confidential nature</p> Signup and view all the answers

    What is the focus of Section 36 of the Banking Regulation Act?

    <p>Further powers and functions of Reserve Bank</p> Signup and view all the answers

    What is the purpose of Section 36ACA of the Banking Regulation Act?

    <p>Supersession of Board of Directors in certain cases</p> Signup and view all the answers

    What is the focus of Part IIAB of the Banking Regulation Act?

    <p>Supersession of Board of Directors of Banking Company</p> Signup and view all the answers

    What is the purpose of Section 36AD of the Banking Regulation Act?

    <p>Punishments for certain activities in relation to banking companies</p> Signup and view all the answers

    Who can resign from their office in a banking company?

    <p>Chairman of the Board of directors appointed on a whole-time basis or a managing director</p> Signup and view all the answers

    What happens to the chairman of the Board of directors whose term of office has ended?

    <p>They continue in office until their successor assumes office</p> Signup and view all the answers

    Under what condition can the Reserve Bank require a banking company to elect a new chairman of the Board of directors?

    <p>When the chairman is not a fit and proper person</p> Signup and view all the answers

    What is the relationship between the provisions of this Act and other laws?

    <p>This Act is in addition to other laws.</p> Signup and view all the answers

    What happens if a banking company fails to elect a suitable person as chairman within two months of receiving an order from the Reserve Bank?

    <p>The Reserve Bank appoints a new chairman</p> Signup and view all the answers

    Which type of societies are exempt from the provisions of this Act?

    <p>Co-operative societies that do not use banking-related words in their name or business.</p> Signup and view all the answers

    What is the period of office of a person appointed as chairman of the Board of directors by the Reserve Bank?

    <p>The residue of the period of office of the previous chairman</p> Signup and view all the answers

    Who has the power to approve the continuation of a chairman of the Board of directors in office?

    <p>The Reserve Bank</p> Signup and view all the answers

    Who has the power to suspend the operation of this Act?

    <p>The Central Government.</p> Signup and view all the answers

    What is the maximum period for which the operation of the Act can be suspended?

    <p>60 days.</p> Signup and view all the answers

    What is the condition for the removal of a chairman of the Board of directors by the Reserve Bank?

    <p>The chairman is not a fit and proper person</p> Signup and view all the answers

    What is the consequence of the Reserve Bank appointing a new chairman of the Board of directors?

    <p>The new chairman is deemed to have been duly elected</p> Signup and view all the answers

    Under what circumstances can the Governor of the Reserve Bank exercise the power to suspend the operation of the Act?

    <p>In case of a special emergency.</p> Signup and view all the answers

    What is the requirement for reporting in case of suspension of the operation of the Act by the Governor or Deputy Governor?

    <p>Report to the Central Government forthwith.</p> Signup and view all the answers

    What is the purpose of the Act, as mentioned in the Statement of Objects and Reasons?

    <p>The purpose is not mentioned.</p> Signup and view all the answers

    What is the publication requirement for the order of the Governor or Deputy Governor?

    <p>Publication in the Gazette of India.</p> Signup and view all the answers

    What is meant by 'approved securities' in the context of the Act?

    <p>Securities issued by the Central Government or any State Government</p> Signup and view all the answers

    What is the primary purpose of 'banking' as defined in the Act?

    <p>To accept deposits of money from the public</p> Signup and view all the answers

    What is a 'banking company' as per the Act?

    <p>A company that transacts the business of banking in India</p> Signup and view all the answers

    What is the primary objective of 'banking policy' as defined in the Act?

    <p>To promote sound economic growth and monetary stability</p> Signup and view all the answers

    What is a 'branch' or 'branch office' of a banking company as per the Act?

    <p>Any place of business where banking transactions are conducted</p> Signup and view all the answers

    What is a 'company' as defined in the Act?

    <p>A company as defined in section 3 of the Companies Act, 1956</p> Signup and view all the answers

    What is a 'corresponding new bank' as per the Act?

    <p>A bank that is constituted under the Banking Companies Act</p> Signup and view all the answers

    What is the exception to the definition of 'banking company' as per the Act?

    <p>A company that accepts deposits of money from the public merely for the purpose of financing its business</p> Signup and view all the answers

    What is the time frame within which the banking company or a person against whom an order of removal is made can appeal to the Central Government?

    <p>Thirty days from the date of communication</p> Signup and view all the answers

    What happens to the order made by the Reserve Bank under subsection 6 if it is not appealed to the Central Government?

    <p>It is final and cannot be questioned in any court</p> Signup and view all the answers

    Under what circumstances can the Reserve Bank permit a chairman of the Board of directors or managing director to undertake part-time honorary work?

    <p>If it is necessary in the public interest</p> Signup and view all the answers

    What happens if a person appointed on a whole-time basis as chairman of the Board of directors or managing director dies or resigns?

    <p>The banking company makes suitable arrangements for carrying out the duties with the approval of the Reserve Bank</p> Signup and view all the answers

    How long can the banking company make arrangements to carry out the duties of a chairman or managing director due to absence or incapacity?

    <p>For a total period of four months</p> Signup and view all the answers

    Who approves the arrangements made by the banking company to carry out the duties of a chairman or managing director?

    <p>The Reserve Bank</p> Signup and view all the answers

    What is the condition for the Reserve Bank to permit a chairman of the Board of directors or managing director to undertake part-time honorary work?

    <p>The work must not interfere with the duties of the chairman or managing director</p> Signup and view all the answers

    What is the consequence of not appealing to the Central Government within the specified time frame?

    <p>The order becomes final and binding</p> Signup and view all the answers

    Study Notes

    Restrictions on Banking Companies

    • Section 20: Restrictions on loans and advances
    • Section 20A: Restrictions on power to remit debts
    • Section 21: Power of Reserve Bank to control advances by banking companies
    • Section 21A: Rates of interest charged by banking companies not subject to scrutiny by courts
    • Section 22: Licensing of banking companies
    • Section 23: Restrictions on opening of new, and transfer of existing, places of business
    • Section 24: Maintenance of a percentage of assets
    • Section 25: Assets in India
    • Section 26: Return of unclaimed deposits
    • Section 26A: Establishment of Depositor Education and Awareness Fund

    Control Over Management

    • Section 36AA: Power of Reserve Bank to remove managerial and other persons from office
    • Section 36AB: Power of Reserve Bank to appoint additional directors
    • Section 36AC: Part IIA to override other laws

    Supersession of Board of Directors of Banking Company

    • Section 36ACA: Supersession of Board of Directors in certain cases

    Prohibition of Certain Activities in Relation to Banking Companies

    • Section 36AD: Punishments for certain activities in relation to banking companies

    General Provisions

    • Application of other laws not barred: The provisions of this Act are in addition to, and not in derogation of, the Companies Act, 1956, and any other law for the time being in force.
    • Act not to apply to certain co-operative societies: This Act does not apply to certain co-operative societies that do not use the words "bank", "banker", or "banking" and do not act as drawee of cheques.

    Power to Suspend Operation of Act

    • The Central Government, on a representation made by the Reserve Bank, may suspend the operation of all or any of the provisions of this Act for a period not exceeding 60 days.

    Interpretation

    • "Approved securities" means securities issued by the Central Government or any State Government or specified by the Reserve Bank.
    • "Banking" means the accepting of deposits of money from the public for lending or investment, repayable on demand or otherwise.
    • "Banking company" means a company that transacts the business of banking in India.
    • "Banking policy" means a policy specified by the Reserve Bank in the interest of the banking system, monetary stability, or sound economic growth.
    • "Branch" or "branch office" means a place of business where deposits are received, cheques are cashed, or money is lent.
    • "Company" means a company as defined in the Companies Act, 1956, and includes foreign companies.
    • "Corresponding new bank" means a bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, or 1980.

    Management of Banking Companies

    • A chairman of the Board of directors or a managing director of a banking company may resign by writing under their hand.
    • The Reserve Bank may require a banking company to elect or appoint a suitable person as the chairman or managing director if it is of the opinion that the person is not fit and proper to hold such office.
    • The Reserve Bank may remove a person from the office of chairman or managing director if the banking company fails to elect or appoint a suitable person within a period of two months.
    • The banking company and any person removed from office may appeal to the Central Government within 30 days, and the decision of the Central Government shall be final.

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    Description

    This quiz covers various provisions of the Banking Regulation Act, including restrictions on subsidiary companies, loans, and advances, as well as licensing and maintenance of assets. Test your knowledge of the Act's regulations.

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