1

BANKING LAW

TOPIC – POWERS OF RBI UNDER THE BANKING

REGULATION ACT, 1949

SUBMITTED TO
MR. KARAN RAMANI
SUBMITTED BY
ASHTA SIDDHI NAGAR
A8121520030
BBALLB 8TH SEM
 2

TABLE OF CONTENT
1. ACKNOWLEDGEMENT………………………………………………..3

2. INTRODUCTION………………………………………………………..4
3. ESTABLISHMENT OF RESERVE BANK OF INDIA…………………4
4. POWERS OF RBI UNDER BANKING REGULATION ACT………….5
5. CONCLUSION ………………………………………………………...12
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ACKNOWLEDGEMENT
I extend my heartfelt gratitude to my esteemed teacher Mr. Karan Ramani for his invaluable guidance,
unwavering support, and expert mentorship throughout the completion of this assignment. His
dedication to imparting knowledge, insightful feedback, and encouragement has been instrumental in
enhancing my understanding of the subject matter. I am deeply appreciative of his commitment to
fostering intellectual growth and excellence among us students. It is through his mentorship that I
have been able to achieve the standards proficiency reflected in this assignment. Thank you sir, for
your profound impact on my learning and development.

Sincerely,
Ashta Siddhi Nagar (A8121520030)
BBALLB(H) 8TH sem.
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POWERS OF RESERVE BANK OF INDIA UNDER THE BANKING

REGULATIONS ACT, 1949

INTRODUCTION
The Reserve Bank of India (RBI) is India's central bank, established in 1935 under the Reserve Bank
of India Act. The RBI is responsible for formulating and implementing monetary policy to achieve
price stability and support economic growth. 1As the sole issuer of currency in India, the RBI manages
the country's monetary base, ensuring an adequate supply of currency notes and coins. The RBI
regulates and supervises banks and financial institutions to maintain the stability and integrity of the
financial system. Managing India's foreign exchange reserves, the RBI intervenes in the foreign
exchange market to stabilize the rupee and regulate capital flows. In addition to its regulatory
functions, the RBI promotes the development of financial markets, fosters financial inclusion, and
supports innovations in payment systems.
2
In accordance with the provisions of the RBI Act, 1934 the main functions of RBI are:

 operating monetary policy with the aim of maintaining economic stability and ensuring
adequate
 finances for developmental purposes;
 meeting the currency requirement of the public;
 promotion of an efficient financial system;
 foreign exchange reserve management; and
The preamble of the Act states that the purpose of the government is "to regulate the issuance of bank
notes and the retention of reserves in order to ensure monetary stability in India &, in general, to
benefit from the operation of the continent's currency or credit system."

ESTABLISHMENT OF RESERVE BANK OF INDIA

Before the RBI was established, India lacked a central banking organisation. The Imperial Bank of
India and the Currency Department were responsible for monetary policy during British colonial rule.
The RBI was established on April 1, 1935, under the Reserve Bank of India Act, 1934, 3in accordance
with the recommendations of the Hilton Young Commission. Sir Osborne Smith became the first
Governor of the RBI. During its early years, the RBI was primarily concerned with banking regulation
and supervision, currency issuance, and government financial operations. It also played an important
part in keeping the financial system stable during World War II.
In 1949, the RBI was nationalized, bringing it under state control and enhancing its role as India's
central bank. This move aimed to strengthen the RBI's independence and its ability to pursue
monetary policy objectives.

POWERS OF RBI UNDER BANKING REGULATION ACT

1
M. L. Tannan, Tannan’s Banking Law and Practice in India, 2005.
2
Preamble. Reserve Bank of India Act, 1934
3
CA Himanshu Vasa & CA Siddarth Gandotra, An Overview of Key Banking Regulations, Dec.2014
 5

1. Power of Reserve Bank of India to appoint Chairman of a Banking Company (section 10

bb)- 4Section 10bb provides power to reserve bank to appoint chairman of the board of directors
appointed on a whole-time basis or managing director of any banking company. It states:

a. Appointment in Vacancy: The Reserve Bank of India (RBI) has the authority to appoint
an eligible individual as the chairman of the Board of Directors or managing director of a
banking company if the position becomes vacant and the RBI believes that the vacancy
could harm the company's interests.
b. Eligibility Requirement: The appointed individual must meet the eligibility criteria
specified in sub-section (4) of section 10B.
c. Deemed Director: If the appointed person is not already a director of the banking
company, they are considered a director as long as they hold the office of the chairman of
the Board of Directors or managing director.
d. Whole-time Employment: The appointed chairman or managing director must be in the
whole-time employment of the banking company.
e. Term of Office: The RBI specifies the period of office, which cannot exceed three years.
Reappointment is possible, subject to other provisions of the Act.
f. Remuneration: The appointed chairman or managing director receives pay and
allowances determined by the RBI.
g. Removal from Office: Only the RBI has the authority to remove the appointed chairman
or managing director from office.
h. Application of Section 10B: Except for specific provisions outlined in this section, the
rules and regulations of section 10B apply to the appointed chairman or managing
director as they do to a regular chairman of the Board of Director.

2. Minimum paid-up capital and reserves to be deposited with RBI (section 11) :- 5Section 11 of
the act imposes that every banking company should deposit the prescribed minimum paid-up
capital and reserves with the RBI either in cash or in the form of unencumbered approved
securities , or partly in cash and partly in the form of such securities within prescribed time
prescribed in this section. It states:
Sec. 11 of the Banking Regulation Act, 1949, provides that no banking company shall
commence or carry on business in India, unless it has minimum paid-up capital and reserve of
such aggregate value as is noted below:
Foreign Banking Companies:
In case of banking company incorporated outside India, its paid-up capital and reserve shall
not be less than Rs. 15 lakhs and, if it has a place of business in Mumbai or Kolkata or in
both, Rs. 20 lakhs. It must deposit and keep with the R.B.I, either in Cash or in unencumbered
approved securities (i) the amount as required above, and (ii) after the expiry of each calendar
year, an amount equal to 20% of its profits for the year in respect of its Indian business.
Indian Banking Companies: In case of an Indian banking company, the sum of its paid-up
capital and reserves shall not be less than the amount stated below:
(i) If it has places of business in more than one State, Rs. 5 lakhs, and if any such place of
business is in Mumbai or Kolkata or in both, Rs. 10 lakhs.
(ii) If it has all its places of business in one State, none of which is in Mumbai or Kolkata, Rs.
1 lakh in respect of its principal place of business plus Rs. 10,000 in respect of each of its
other places of business in the same district in which it has its principal place of business plus
Rs. 25,000 in respect of each place of business elsewhere in the State. No such banking
company shall be required to have paid-up capital and reserves exceeding Rs. 5 lakhs and no

4
Section 10bb, Banking (Regulation) Act, 1949
5
Section 11, Banking (Regulation) Act, 1949
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such banking company which has only one place of business shall be required to have paid-up
capital and reserves exceeding Rs. 50,000.
In case of any such banking company which commences business for the first time after 16th
September 1962, the amount of its paid-up capital shall not be less than Rs. 5 lakhs
(iii) If it has all its places of business in one State, one or more of which are in Mumbai or
Kolkata, Rs. 5 lakhs plus Rs. 25,000 in respect of each place of business outside Mumbai or
Kolkata. No such banking company shall be required to have paid-up capital and reserve
excluding Rs. 10 lakhs.

3. Reserve Bank control over Banking companies (section 12 A) :-Under6 Sec. 12-A of the Act,
the RBI may, by order, require any banking company to call a general meeting of the shareholders
of the company within such time, not less than two months from the date of the order or within
such further time as RBI may allow in this behalf, to elect in accordance with the voting rights
permissible under this act fresh directors, and the banking company shall be bound to comply
with the order. It states:

a. Reserve Bank's Authority: The Reserve Bank of India (RBI) has the power to issue an order
mandating a banking company to convene a general meeting of its shareholders.
b. Purpose of the Meeting: The meeting is called for the purpose of electing new directors in
accordance with the provisions of the Act.
c. Timeline for the Meeting: The RBI specifies a minimum timeframe, not less than two
months from the date of the order, within which the general meeting must be convened. The
RBI may allow further time if deemed necessary.
d. Compliance: The banking company is legally obligated to comply with the RBI's order and
conduct the general meeting within the stipulated timeframe.
e. Term of Office for New Directors: Directors elected as a result of the meeting held under
this section hold office until the date when their predecessors' terms would have expired if the
election had not occurred.
f. Legal Validity of Election: Any election conducted in accordance with the provisions of this
section is considered valid and cannot be challenged in any court of law.

4. Power to maintain Cash Reserve ( section 18) : In regard to cash reserve, provision of Section
42(1) of RBI Act 1934, governs scheduled banks whereas non-scheduled banks are governed by
the provisions of Section 18 read with Section 56 of the Banking Regulations Act, 1949.
Under Sec. 18, every banking company (not being a Scheduled Bank) shall, if Indian, maintain in
India, by way of a cash reserve in Cash, with itself or in current account with the Reserve Bank or
the State Bank of India or any other bank notified by the Central Government in this behalf, a sum
equal to at least 3% of its time and demand liabilities in India.
The Reserve Bank has the power to regulate the percentage also between 3% and 15% (in case of
Scheduled Banks). Besides the above, they are to maintain a minimum of 25% of its total time
and demand liabilities in cash, gold or unencumbered approved securities. But every banking
company’s asset in India should not be less than 75% of its time and demand liabilities in India at
the close of last Friday of every quarter.

5. Power of the Reserve Bank of India to control advances by banking companies (section 21) :-
According to 7section 21 of the Act the RBI may determine the policy in relation to advances to
be followed by banking companies generally or by any banking company in particular, and when

6
Section 12 A, Banking (Regulation) Act, 1949
7
Section 21, Banking (Regulation) Act, 1949
 7

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
.
a. Policy Determination by RBI: The Reserve Bank of India (RBI) has the authority to
establish policies regarding advances to be followed by banking companies, either generally
or for specific institutions, if it deems necessary in the public interest, the interests of
depositors, or for banking policy reasons.
b. Directive Powers: The RBI can issue directions to banking companies regarding various
aspects related to advances, including:
 Permissible purposes for making advances.
 Required margins for secured advances.
 Maximum limits for advances or financial accommodations to any entity, considering the
banking company's capital, reserves, and deposits, among other factors.
 Maximum limits for guarantees provided by banking companies on behalf of entities.
 Interest rates and other terms and conditions for advances or guarantees.
c. Compliance Requirement: Banking companies are legally obligated to comply with any
directions issued by the RBI under this section, ensuring uniformity and adherence to
regulatory policies across the banking sector.
8
In Jameela Devi v. State Bank of Travancore, it has been held that the circulars issued by the RBI,
regulating the rates of interest chargeable on loan and the manner of charging the interests are
statutory circulars issued with the purpose of lending and are abiding on the banks.
9
Indian Bank, Tiruvannemalai y. V.A. Balasubramania Gurukul, it has been observed that the
provisions under Section 21 of the Act regarding regulation of rate of interest, advances given by
Nationalised Banks, are not inconsistent with the provisions of the Usurious Loans Act, 1918. It is
obligatory for all banks to follow circulars issued by the Reserve Bank of India relating to rate of
interest to be charged and charge of excess rate of interest as to hold to be void as unreasonable.

6. Licensing of banking companies (section 22):- As per Section 22 of the Act, no company shall
carry on banking business in India unless it holds a licence issued in that behalf by the RBI and
any such licence may be issued subject to such conditions as the RBI may think fit to impose
Licensing Requirement: Companies must obtain a license from the Reserve Bank of India to
conduct banking business in India, subject to conditions imposed by the RBI.

a. Application Process: Existing banking companies and those intending to commence

banking business must apply to the RBI for a license within specified timelines. Existing
companies can continue operations until informed otherwise by the RBI or until granted a
license.
b. Conditions for License: Before granting a license, the RBI ensures certain conditions are
met, including the company's ability to repay depositors, non-detrimental conduct of
affairs, suitability of management, adequate capital structure, and serving the public
interest.
c. License Cancellation: The RBI has the authority to cancel a license if the company
ceases banking operations, fails to comply with conditions, or if prescribed conditions are
not met. The RBI must provide an opportunity for rectification before cancellation.

8
1991 Bank J 427 (Kant) at p. 429 (Ker).
9
AIR 1982 Mad 296: 95 Mad LW 477.
 8

d. Appeal Process: Banking companies can appeal a license cancellation decision within
thirty days to the Central Government. The decision of the Central Government or the
RBI, depending on whether an appeal is made, is final.

10
In Sajjan Bank (P.) Ltd. v. Reserve Bank, it has been held that the provisions of Section 22 of
the Banking Regulation Act, 1949 prescribe only a system of licensing, having for its object the
regulation of the business of banking and does not violate fundamental right of any person to
carry on the business of banking. It was also laid down that the powers vested in the Reserve
Bank of India under Section 22 of the Banking Companies Act, 1949 are not vested with a mere
officer of the Reserve Bank.

11
In Shivabhai Zoverbhai Patel v. Reserve Bank of India,it has been laid down that the Reserve
Bank of India has full right to refuse or grant a licence and if a licence is refused on irrelevant
material, Court would not look into it. Refusal to grant licence does not mean stoppage of
business as other type of business like that of a money lender can be carried on.

7. Power of restrictions on opening of new and transfer of existing, places of business (section
23) : According section 23 of the Act , 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 without obtaining the prior permission of the RBI. It states :

a. Restrictions on Opening New Places of Business: Banking companies must obtain prior
permission from the Reserve Bank of India before opening new places of business in
India or changing the location of existing ones within India or abroad, with exceptions for
temporary openings for specific events.
b. Approval Process: Before granting permission, the Reserve Bank evaluates the financial
condition, management quality, capital structure, and earning prospects of the banking
company, ensuring that the public interest is served by the proposed action.
c. Imposition of Conditions: The Reserve Bank has the authority to grant permission
subject to conditions it deems appropriate, either generally or on a case-by-case basis.
d. Revocation of Permission: If a banking company fails to comply with the conditions
imposed under this section, the Reserve Bank can revoke the permission granted,
following due process and providing the company with an opportunity to present its case.
e. Application Procedure for Regional Rural Banks: Regional rural banks must apply for
permission through the National Bank, with the application forwarded to the Reserve
Bank for evaluation. Additionally, the regional rural bank must send an advance copy of
the application directly to the Reserve Bank

8. Establishment of Depositor Education and Awareness Fund (section 26 A) : The Reserve

Bank is mandated to establish a fund named the "Depositor Education and Awareness Fund"
under section 1226 A of the act. It states :

a. Sources of Funding: The Fund will receive amounts from accounts with banking
companies that have remained inactive for a period of ten years or from deposits or
amounts unclaimed for more than ten years. This must be credited within three months
from the expiry of the ten-year period.

10
Sajjan Bank (P.) Ltd. v. Reserve Bank of India, AIR 1961 Mad 8: 30 Com Cases 146: AIR 1961
Mad 8.
11
AIR 1986 Guj 19: 1986 Bank J 188.
12
Section 26 A, Banking (Regulation) Act, 1949
 9

b. Depositor's Rights: Depositors or claimants retain the right to claim their deposits or
unclaimed amounts even after the ten-year period. Banking companies are obligated to
repay such deposits or amounts upon request, with interest rates specified by the Reserve
Bank.
c. Refund Process: Banking companies can apply for a refund of the outstanding amounts
paid or allowed for operation under subsection (2) through a specified manner determined
by the authority or committee appointed under subsection (5).
d. Utilization of the Fund: The Fund is to be utilized for promoting depositors' interests and
other purposes necessary for their promotion, as specified by the Reserve Bank.
e. Administration of the Fund: The Reserve Bank will designate an authority or
committee, with appointed members, to administer the Fund. This entity will maintain
separate accounts and records related to the Fund in forms specified by the Reserve Bank.

9. Power of the Reserve Bank to give directions (Section 35 A) : It states:-

a. Authority of the Reserve Bank: The Reserve Bank of India (RBI) holds the power to
issue directions to banking companies, either generally or to specific entities, if it deems
necessary to safeguard public interest, banking policy, prevent detrimental conduct to
depositors' interests, or ensure proper management.
b. Scope of Directions: These directions may include measures to regulate the conduct of
banking affairs, prevent mismanagement, or address concerns related to depositors'
interests or broader banking policy objectives.
c. Compliance Obligation: Banking companies are legally bound to comply with the
directions issued by the Reserve Bank, whether they are issued to the entire banking
sector or to specific entities.
d. Modification or Cancellation: The Reserve Bank retains the authority to modify or
cancel any directions issued under this section, either based on representations made to it
or at its own discretion. Such modifications or cancellations may include the imposition
of conditions, subject to which the changes take effect.

In 13RBI v. Harisidh Cooperative Bank Ltd.it was held that the order passed by RBI superseding
the Board of Directors of a Co-operative Bank under Section 35A of the Banking Regulation Act
is purely an executive order and RBI should give hearing to the Board before taking such drastic
decision. However, in public interest and in emergent situation, order superseding a Board of Co-
operative Bank and appointing an administrator may be passed without giving the bank prior
hearing.
In the case of 14Nedumpilli Finance Co. Ltd. v. State of Kerala, the issue before the court was
whether non-banking financial companies (NBFCs) regulated by RBI could also be regulated by
State enactments such as the Kerala Money Lenders Act and the Gujarat Money Lenders Act. The
court held that the RBI Act takes a holistic approach to the business of banking, money lending,
and operation of the currency and credit system of the country. The entire life of an NBFC is
regulated and monitored by the RBI, and thus, the State of Kerala or any other State cannot step in
or regulate even those features of NBFCs on which the RBI Act is silent.

15
10. Further powers and functions of Reserve Bank (Section 36): It states:-

13
AIR 1988 Guj 107.
14
debtindia.wordpress.com/2023/05/07/landmark-judgments-on-banking-laws-supreme-court-of-india/
15
Section 36, Banking (Regulation) Act, 1949
 10

a. Cautionary and Advisory Powers: The Reserve Bank has the authority to caution or
prohibit banking companies from engaging in specific transactions and can provide general
advice to any banking company.
b. Assistance in Amalgamation Proposals: Upon request and subject to relevant provisions,
the Reserve Bank may assist in proposals for the amalgamation of banking companies,
serving as an intermediary or providing other forms of assistance.
c. Financial Assistance: The Reserve Bank can provide financial assistance to banking
companies through the grant of loans or advances as specified in the Reserve Bank of India
Act, 1934.
d. Directive Powers: In the interest of public welfare, banking policy, or the protection of the
banking company and its depositors, the Reserve Bank can issue written directives, including:
 Requiring the banking company to convene meetings to discuss relevant matters, involving
Reserve Bank officers if necessary.
 Deputizing Reserve Bank officers to observe and report on proceedings at company meetings.
 Appointing officers to monitor the conduct of the banking company's affairs and suggest
necessary management changes.
 Annual Reporting Obligation: The Reserve Bank is mandated to submit an annual report to
the Central Government detailing the trends and progress of banking activities in the country,
including suggestions for strengthening the banking sector.
e. Appointment of Staff: The Reserve Bank has the authority to appoint staff as deemed
necessary for scrutinizing returns, statements, and information provided by banking
companies under the Banking Regulation Act, as well as to ensure the efficient execution of
its functions under the Act.

11. Power of Reserve Bank to apply to Central Government for suspension of business by a
banking company (Sec 45): 16The Reserve Bank can apply to the Central Government for an
order of moratorium for a banking company if there is a good reason, which stays legal actions
against the company for a fixed period. It states:

a. Central Government's Authority: The Central Government, after reviewing the Reserve
Bank's application, can issue an order of moratorium, extending it if necessary, not
exceeding six months.
b. Restrictions During Moratorium: During the moratorium period, the banking company
cannot make payments to depositors, discharge liabilities, grant loans, or make
investments, unless otherwise directed by the Central Government.
c. Preparation of Reconstruction Scheme: If necessary, the Reserve Bank can prepare a
scheme for the reconstruction or amalgamation of the banking company for public
interest, depositor interest, proper management, or banking system stability.
d. Contents of Reconstruction Scheme: The reconstruction scheme can include provisions
related to the company's constitution, assets, liabilities, board of directors, changes in
memorandum/articles of association, continuation of legal actions, and reduction of
members' interests.
e. Employee Rights and Compensation: The scheme ensures the continuation of
employees' services with the same remuneration and benefits, with provisions for
compensation if they choose not to continue employment.
f. Scheme Drafting and Approval: The Reserve Bank sends the draft scheme to the
concerned parties for suggestions. After modifications, if any, the scheme is submitted to
the Central Government for approval, which becomes binding on all stakeholders.

16
Section 45, Banking (Regulation) Act, 1949
 11

g. Transfer of Assets and Liabilities: Upon scheme implementation, the assets and
liabilities of the banking company are transferred to the transferee bank.
h. Government Intervention for Difficulty: If any difficulty arises in implementing the
scheme, the Central Government can issue orders to address it.
i. Parliamentary Reporting: Copies of the scheme and any related orders are laid before
both Houses of Parliament.
j. Amalgamation Provisions: Provisions allow for amalgamation of multiple banking
companies under a single scheme, with the Central Government's approval.

12. Power of RBI on direction of High Court or central government to inspect books of account
of a company being wound up (Sec 45 q) : It states :

a. Direction for Inspection: The Reserve Bank must conduct an inspection of a banking
company undergoing winding up if directed by the Central Government or the High
Court.
b. Reporting to Authorities: Following the inspection, the Reserve Bank is required to
submit a report of its findings to both the Central Government and the High Court.
c. Action on Irregularities: If the Central Government identifies substantial irregularities
based on the Reserve Bank's report, it can inform the High Court, which may take
appropriate action.
d. High Court's Authority: Upon receiving the report or being informed of irregularities,
the High Court has the discretion to give necessary directions after considering the matter
and hearing from the Central Government.

13. Power of Reserve Bank to impose penalty (sec 47) : It states:

a. Penalties for Contraventions: The Reserve Bank has the authority to impose penalties
on banking companies for contraventions or defaults specified in section 46.
b. Types of Penalties:
i. For contraventions under subsection (3) of section 46, a penalty up to twenty lakh
rupees may be imposed, with an additional penalty of up to fifty thousand rupees
per day for continuing contraventions.
ii. For contraventions under subsection (3) of section 46, a penalty not exceeding
twice the amount of the deposits involved may be imposed.
iii. For contraventions under subsection (4) of section 46, a penalty up to one crore
rupees or twice the amount involved (whichever is more) may be imposed, with
additional daily penalties for continuing contraventions.

c. Notice and Opportunity to Be Heard: Before imposing a penalty, the Reserve Bank
must serve notice to the banking company, providing an opportunity to show cause and be
heard.
d. Exclusion from Court Complaints: No complaints can be filed against a banking
company in any court for contraventions for which penalties have been imposed by the
Reserve Bank under this section.
e. Payment of Penalties: Penalties imposed by the Reserve Bank must be paid within
fourteen days from the date of notice. Failure to pay may lead to enforcement through the
principal civil court.
f. Enforcement by Court: The principal civil court, upon direction by the Reserve Bank,
can enforce payment of penalties, issuing a certificate specifying the sum payable.
 12

g. Restriction on Proceedings: If a complaint has been filed against a banking company in

court for specified contraventions, no penalty proceedings can be initiated under this
section.

14. 17Other Powers of the Reserve Bank : Apart from what has been stated above, the Reserve Bank
has power under the Banking Regulation Act, 1949 to give necessary directions and orders to the
banks and these directions and/or orders are binding and final.

a. Suspension of provisions of this Act (Section 4): Under sub-section (1) of Section 4 of
the Act, the Reserve Bank may make representation to the Government of India to
suspend for a period up to sixty days any provision of this Act. In case of emergency, the
Governor of the Reserve Bank or in his absence the authorised Deputy Governor can take
similar action for a period up to thirty days and inform the Government.
b. Disposing of non-Banking Assets (Section 9): The Reserve Bank may extend the period
of seven years, allotted under Section 9 of the Act for disposing of non-banking assets by
the Banking Companies, up to a further period of five years in the interests of the
depositors
c. Foreign Subsidiary (Section 19): Under Section 19 of the Act, a banking company
wishing to form a subsidiary company for the purpose of carrying on business of banking
exclusively outside India has to obtain the Reserve Bank’s previous written permission.
d. Special Audits of Banks (Section 30): The Reserve Bank has the power to have special
audits of banks carried out whenever considered necessary under sub-section (1-B), (1-C)
and (2) of Section 30 of the Act.
e. Accounts and Balance Sheets (Section 31): Under Section 31 of the Act, Banking
Companies have to submit accounts and balance sheets to the Reserve Bank within three
months from the end of the calendar year. This period of three months may be extended
for a further period of three months by the Reserve Bank. The Reserve Bank may ask for
any additional information or statements in connection with the balance sheet and
accounts. Under Section 35-A of the Act, the Reserve Bank of India has power to give
directions to banking companies in the public interest, in the interest of banking policy; or
to prevent the affairs of any banking company being conducted in a manner detrimental to
the interests of the depositors or in a manner prejudicial to the interests of the banking
company: or to secure the proper management of any banking company generally.

CONCLUSION
In conclusion, the Reserve Bank of India (RBI) wields substantial powers under the Banking
Regulation Act, 1949, enabling it to regulate, supervise, and intervene in the operations of banks in
India. Through licensing, supervision, and enforcement mechanisms, the RBI ensures the stability,
integrity, and efficiency of the banking sector. Its authority extends to prescribing prudential norms,
controlling management, and resolving distressed banks, thereby safeguarding depositors' interests
and maintaining financial stability. Moreover, the RBI's role in promoting financial inclusion and
development underscores its commitment to fostering inclusive growth and socioeconomic progress.
Overall, the powers vested in the RBI by the Banking Regulation Act empower it to play a pivotal role
in shaping the trajectory of the banking industry and contributing to the resilience and prosperity of
the Indian economy.

17
M. L. Tannan, Tannan’s Banking Law and Practice in India, 2005.