In Which Year Was The Banking Regulation Act Passed
In this article we can understand In which year was the banking regulation act passed and 13 best objectives of BR Act. The Banking Act has been enacted with the aim of making the transactions of the banks more efficient and in the interest of the general public as well as for the progress of the country through the banking business. All banks in India operate under the Banking Regulation Act 1949. There are a total of 55 sections in this Act. Initially, the law was limited to banks only, but after 1965, it was extended to co-operative banks as well. This law regulates and supervise the operation of commercial banks in the country.
The purpose of the Banking Regulation Act is as follows:-
1. To protect the interests of the partners as the banks are joint or co-operative capital institutions.
2. The Act provides for safe keeping of deposits by the depositors and receipt of cash from the bank as required by the depositors.
3. The Act includes provisions for regulating transactions for the credit policy of the bank, such as the creditworthiness of the bank and the interest rate charged, etc. which will be conducive to the economic policy of the nation.
Objectives of Banking regulation Act –
1.Every bank has to issue a license to start a banking business.
2.The basic function of banking is taking deposits from the public, lending money. (Primary function)
3.Lockers, remittance, collection, agency business, foreign exchange etc. in secondary transactions of the bank. (Subsidery function)
4.Bank cannot buy or sell goods.
5.The bank can purchase a property for its own use. It is forbidden to take such property unless space is
required for banking business.
6.The bank cannot create a burden on your assets.
7.Liquidity
- Bank deposits and other liabilities are called time and demand liability (TDL).
- TDL is used for banking business i.e. lending and investing.
- But 100% of TDL cannot be used. The bank has to maintain liquidity as per the law.
- This liquidity has to be kept between cash reserve ratio (CRR) and statutory liquidity ratio (SLR).
8.The Reserve Bank has the power to issue orders regarding loans to be made by each bank as well as other banking transactions. ex. NPA criteria, priority sector loans, loans to directors etc.
9. Debts of any Director cannot be waived without the prior permission of the Reserve Bank.
10. Each bank is required to create a year-end balance sheet and profit and loss account as per the pattern laid down in the Reserve Bank Act.
11. In this Act, the Reserve Bank has the right to inspect every bank from time to time. The Reserve Bank has been implementing Off-site Surveillance System for urban cooperative banks in the last few years.
12. Under this Act, the Reserve Bank has fixed the returns to be sent to each bank after a certain period of time. These returns are as follows after 15 days, months, quarterly, half yearly and yearly. These returns have to be sent to the reserve bank.
13. Under the Banking Regulation Act, the Reserve Bank has introduced nomination rules for savings accounts and lockers.
See Also – How to Write a Letter to Bank Manager for Request a New ATM Card in 2022 and Advantage of ATM Card
Banking Regulation Act, 2020
1. The Banking Regulation Amendment Bill has been approved in the interest of the bank and the customers.
2. Under this Act, RBI will now control the co-operative banks in the country. The central government had decided to amend the Banking Regulation Act, 1949 to protect consumer deposits after the deteriorating financial condition of co-operative banks and scams were exposed. At present, 1482 urban and 58 multistate co-operative banks in the country will come under the control of RBI.
3. This Act gives the RBI the power to restructure or merge any bank.
4. The RBI may take over all rights by dismissing the board of directors of any multistate co-operative bank to protect the interests of the customers.
5. The decision to amend the Banking Regulation Act, 1949 is in the interest of the customers, because if a bank goes bankrupt, depositors up to Rs. 5 lakhs are completely safe.
6. In the Banking Regulation Act 1949, the limit was up to Rs 1 lakh but in the new amended law, the limit has been increased to Rs 5 lakh.
7. Customers will get only Rs. 5 lakhs regardless of the amount deposited in RBI’s DICGC (Deposit Insurance and Credit Guarantee Corporation). The corporation is responsible for paying the sinking money to the account holder.
See Also – How to transfer money from my mind to my bank account and 9 amazing things about mind power.
The Banking Regulation Act 1949 provides: –
1.Licensing of Banks –
The Banking Regulation Act 1949 empowers the Reserve Bank of India to issue licenses to all banks to start banking business. No bank can start a business without a license.
2. Depositor Education and Awareness Fund –
As per the Banking Regulation Act, 1949, the Reserve Bank has the power to raise Depositor Education and Awareness Fund. According to this provision, if there is no transaction or turnover in any bank account in India for 10 years, or an unclaimed deposit, it is credited to the fund (Depositor Education and Awareness Fund) within the next 3 months after 10 years. These funds are used from time to time for the benefit of the depositors. However, if the account holder arrives after 10 years and the deposit is required, the bank is responsible for repaying the deposit and the banks have the right to recover the amount from the fund.
3. Regulating Bank Loans –
This Act has given RBI a special right and made it more efficient. Therefore, loan disbursement, banking business procedures can be regulated. The RBI has been empowered to appoint directors and officers so that the operations of the bank run smoothly.
4. Regulation of Foreign and Private Banks-
The Act provides that both foreign and private banks are required to abide by the rules relating to capital of banks, legal cash fund licence , investment policies and procedures. These provisions have been made to prevent foreign banks from diverting their funds abroad.
5. Easy and Simple Method of Bank Dissolution-
This Act provides for closure of banks if it is not possible for them to continue their business.