BANKING REGULATION ACT, 1949
I PRELIMINARY
1. Short title, extent and commencement 1
2. Application of other laws not barred 1
3. Act not to apply to certain co-operative societies 2
4. Power to suspend operation of Act 2
5. Interpretation 2
5A. Act to override memorandum, articles, etc. 10
PART II
BUSINESS OF BANKING COMPANIES
6. Forms of business in which banking companies may engage 10
7. Use of words “bank”, “banker”, “banking” or “banking company” 13
8. Prohibition of trading 14
9. Disposal of non-banking assets 15
10. Prohibition of employment of managing agents and restrictions on certain forms of employment 16
10A. Board of directors to include persons with professional or other experience 20
10B. Banking company to be managed by whole-time chairman 22 10BB. Power of Reserve Bank to appoint chairman of the Board of directors appointed on a whole time basis or a manging director of a banking company 25
31. Submission of returns 54
32. Copies of balance-sheets and accounts to be sent to Registrar 54
33. Display of audited balance-sheet by companies incorporated outside India 54
34. Accounting provisions of this Act not retrospective 55
34A. Production of documents of confidential nature 55
35. Inspection 56
35A. Power of the Reserve Bank to give directions 58
35AA. Power of Central Government to authorise Reserve Bank for issuing directions to banking companies to initiate insolvency resolution process 58
35AB. Power of Reserve Bank to issue directions in respect of stressed assets 59
35B. Amendments of provisions relating to appointments of managing directors, etc., to be subject to previous approval of the Reserve Bank 59
36. Further powers and functions of Reserve Bank 60
36A. Certain provisions of the Act not to apply to certain banking companies 62
PART IIA
CONTROL OVER MANAGEMENT
36AA. Power of Reserve Bank to remove managerial and other persons from office 62
36AB. Power of Reserve Bank to appoint additional directors 64
36AC. Part IIA to override other laws 65
PART IIAB
SUPERSESSION OF BOARD OF DIRECTORS OF BANKING COMPANY
36ACA. Supersession of Board of Directors in certain cases 65
PART IIB
PROHIBITION OF CERTAIN ACTIVITIES IN RELATION TO BANKING COMPANIES
36AD. Punishments for certain activities in relation to banking companies 66
PART IIC
ACQUISITION OF THE UNDERTAKINGS OF BANKING COMPANIES IN CERTAIN CASES
36AE. Power of Central Government to acquire undertakings of banking companies in certain cases 67
36AF. Power of the Central Government to make scheme 69
36AG. Compensation to be given to shareholders of the acquired bank 70
36AH. Constitution of the Tribunal 72
36AI. Tribunal to have powers of a civil court 72
36AJ. Procedure of the Tribunal 73
PART III
SUSPENSION OF BUSINESS AND WINDING UP OF BANKING COMPANIES
36B. High Court defined 73
37. Suspension of business 73
38. Winding up by High Court 74
38A. Court liquidator 75
39. Reserve Bank to be official liquidator 76
39A. Application of Companies Act to liquidators 76
40. Stay of proceedings 77
41. Preliminary report by official liquidator 77
41A. Notice to preferential claimants and secured and unsecured creditors 77
42. Power to dispense with meetings of creditors, etc. 78
43. Booked depositors’ credits to be deemed proved 78
43A. Preferential payments to depositors 79
44. Powers of High Court in voluntary winding up 81
44A. Procedure for amalgamation of banking companies 82
44B. Restriction on compromise or arrangement between banking company and creditors 83
45. Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstruction or amalgamation 84
PART IIIA
SPECIAL PROVISIONS FOR SPEEDY DISPOSAL OF WINDING UP PROCEEDINGS
45A. Part IIIA to override other laws 90
45B. Power of High Court to decide all claims in respect of banking companies 91
45C. Transfer of pending proceedings 91
45D. Settlement of list of debtors 92
45E. Special provisions to make calls on contributories 93
45F. Documents of banking company to be evidence 93
45G. Public examination of directors and auditors 94
45H. Special provisions for assessing damages against delinquent directors, etc. 95
45-I. Duty of directors and officers of banking company to assist in the realisation of property 95
45J. Special provisions for punishing offences in relation to banking companies being wound up 95
45K. [Omitted by the Banking Companies (Amendment) Act, 1959, w.e.f. 1-10-1959] 98
45L. Public examination of directors and auditors, etc., in respect of a banking company under schemes of arrangement 98
45M. Special provisions for banking companies working under schemes of arrangement at the commencement of the Amendment Act 99
45N. Appeals
45-O. Special period of limitation
45P. Reserve Bank to tender advice in winding up proceedings
45Q. Power to inspect
45R. Power to call for returns and information
45S. Chief Presidency Magistrate District Magistrate to assist official liquidator in taking charge of property of banking company being wound up
45T. Enforcement of orders and decisions of High Court
45U. Power of High Court to make rules 102
45V. References to directors, etc., shall be construed as including references to past directors, etc.
45W. Part II not to apply to banking companies being wound up
45X. Validation of certain proceedings
PART IIIB
PROVISIONS RELATING TO CERTAIN OPERATIONS OF BANKING COMPANIES
45Y. Power of Central Government to make rules for the preservation of records 103
45Z. Return of paid instruments to customers 103
45ZA. Nomination for payment of depositors’ money
45ZB. Notice of claims of other persons regarding deposits not receivable
45ZC. Nomination for return of articles kept in safe custody with banking company 105
45ZD. Notice of claims of other persons regarding articles not receivable
45ZE. Release of contents of safety lockers
45ZF. Notice of claims of other persons regarding safety lockers not receivable 106
45ZG. Priority of successive nominations
PART IV
MISCELLANEOUS
46. Penalties
46A. Chairman, Director, etc., to be public servants for the purposes of Chapter IX of the Indian Penal Code
47. Cognizance of offences
47A. Power of Reserve Bank to impose penalty
48. Application of fines
49. Special provisions for private banking companies
49A. Restriction on acceptance of deposits withdrawable by cheque
49B. Change of name by a banking company
49C. Alteration of memorandum of a banking company
50. Certain claims for compensation barred
51. Application of certain provisions to the State Bank of India and other notified banks
51A. Powers of reserve Bank not to apply to International Financial Services Centre
52. Power of Central Government to make rules
53. Power to exempt in certain cases
54. Protection of action taken under Act
55. Amendment of Act 2 of 1934
55A. Power to remove difficulties
APPLICATION OF THE ACT TO CO-OPERATIVE BANKS
56. Act to apply to co-operative societies subject to modifications 119
FIRST SCHEDULE: Amendments
SECOND SCHEDULE: [Repealed by the Repealing and Amending Act, 1957, w.e.f. 17-9-1957]
THIRD SCHEDULE: Form of Balance Sheet
FOURTH SCHEDULE: List of Debtors
FIFTH SCHEDULE: Principles of Compensation
BANKING REGULATION (COMPANIES) RULES, 1949
1. Short title, extent and commencement
2. Interpretation
2A. Application of rules to State Bank of India, subsidiary banks, corresponding new banks and Regional Rural Banks
3. Submission of returns
4. List of of cers
5. [Omitted by the Banking Regulations (Companies) Amendment Rules, 1985, w.e.f. 29-3-1985]
5A. Determination of the Directors who are to cease to hold of ce
6. Deposits
7. Withdrawals of deposits
8. Changes in deposits
9. Maturing of security deposits
10. Interest on deposits
10A. [Omitted by the Banking Regulations (Companies) Amendment Rules, 1975, w.e.f. 15-11-1975]
11. Licensing of banking companies
12. Opening of new places of business
13. List of of ces
13A. Return under sections 18 and 24
14. Publication of approved currencies and securities
14A. Return under sections 25 and 27
14B. Return under section 26
15. Manner of publication of accounts and balance sheet
15A.
15B. Manner of holding inquiries
16. Power to exempt in certain cases
FORM I : [Omitted by the Banking Regulation (Companies) Amendments Rules, 1985, w.e.f. 29-3-1985]
FORM II :
FORM III : Form of Application for a licence to commence Banking business by a company incorporated in India and desiring to commence banking business
FORM IV : Form of Application for a Licence to Carry on Banking Business by a Company Incorporated in India and in Existence on the Commencement of the Act
FORM V : Form of Application for a Licence to Commence/Carry on Banking Business in India by a Banking Company Incorporated outside India
FORM VI : Form of Application for Permission to Open a New Place of Business or Change The Location (Otherwise than Within the Same City, Town or Village) of an Existing Place of Business under section 23 of the Act
FORM VIII : Statement of Demand and Time Liabilities and Cash, Gold and Unencumbered Approved Securities for the Month of
FORM IX : Return of Unclaimed Deposit Accounts in India which have not been Operated upon for 10 Years or More as on the Date of the Return as on the 31st December
FORM X : Liabilities and Assets in India of Commercial Banks as on the last Friday of the Month ..... of 20......
BANKING COMPANIES (NOMINATION) RULES, 1985
1. Short title and commencement
2. Nomination in respect of deposits
3. Nomination in respect of articles in safe custody
4. Nomination in respect of safety lockers
FORM DA 1 : Nomination under section 45ZA of the Banking Regulation Act, 1949 and Rule 2(1) of the Banking Companies (Nomination) Rules, 1985 in Respect of Bank Deposits
FORM DA 2 : Cancellation of Nomination under section 45ZA of the Banking Regulation Act, 1949, and Rule 2(5) of the Banking Companies (Nomination) Rules, 1985, in Respect of Bank Deposits
FORM DA 3 : Variation of Nomination under section 45ZA of the Banking Regulation Act, 1949 and Rule 2(6) of the Banking Companies (Nomination) Rules, 1985, in Respect of Bank Deposits
FORM SC 1 : Nomination under section 45ZC of the Banking Regulation Act, 1949, and rule 3(1) of the Banking Companies (Nomination) Rules, 1985, in respect of Articles left in safe custody with banking company
FORM SC 2 : Cancellation of Nomination under section 45ZC of the Banking Regulation Act, 1949, and rule 3(4) of the Banking Companies (Nomination) Rules, 1985 in respect of articles left in safe custody with banking company
FORM SC 3 : Variation of Nomination under section 45ZC of the Banking Regulation Act, 1949, and rule 3(5) of the Banking Companies (Nomination) Rules, 1985, in respect of Articles left in safe custody with banking company
FORM SL 1 : Nomination under section 45ZE of the Banking Regulation Act, 1949, and rule 4(1) of the Banking Companies (Nomination) Rules, 1985, by sole hirer in respect of safety locker
FORM SL 1A : Nomination under section 45ZE of the Banking Regulation Act, 1949, and rule 4(2) of the Banking Companies (Nomination) Rules, 1985 by joint hirers in respect of safety locker 208
FORM SL 2 : Cancellation of Nomination under sections 45ZE and 52 of the Banking Regulation Act, 1949, and rule 4(5) of the Banking Companies (Nomination) Rules, 1985, in respect of safety locker
FORM SL 3 : Variation of Nomination under sections 45ZE and 52 of the Banking Regulation Act, 1949, and rule 4(6) of the Banking Companies (Nomination) Rules, 1985, by sole hirer in respect of safety locker
FORM SL 3A : Variation of Nomination under sections 45ZE and 52 of the Banking Regulation Act, 1949, and rule 4(7) of the Banking Companies (Nomination) Rules, 1985, by joint hirers in respect of safety locker
BANKING COMPANIES (PERIOD OF PRESERVATION OF RECORDS) RULES, 1985
Banking Companies (Period of Preservation of Records) Rules, 1985 210
BANKING REGULATION (CO-OPERATIVE SOCIETIES) RULES, 1966
1. Short title and commencement
2.
3.
4.
5. Form of statement of liabilities and
6. Licensing
7.
8.
9.
10. Manner of publication of
12. Banking Companies Rules, 1949, not to apply
FORM I :
FORM IIIA: Form of Application for a Licence to Commence Banking Business by a Co-operative Society Registered in India with the Object of Commencing Banking Business as a Primary Co-operative Bank
FORM IIIB : Form of Application for a Licence to Commence Banking Business by a Co-operative Society Registered in India with the Object of Commencing Banking Business as a Central Co-operative Bank
FORM IIIC : Form of Application for a Licence to Commence Banking Business by a Co-operative Society Registered in India with the Object of Commencing Banking Business as a State Co-operative Bank
FORM IV : Form of Application for a Licence to Carry on Banking Business by a Co-operative Society which was Carrying on Business as a Co-Operative Bank at the Commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), or by a Co-operative Bank which has Come into Existence as a result of the Division of any other Co-operative Society Carrying on Business as Co-operative Bank or the Amalgamation of Two or more Co-operative Societies Carrying on Banking Business or by a primary Credit Society which Becomes a Primary Co-operative Bank after Such Commencement
FORM V : Form of Application for permission to open a new Place of Business or change the Location (Otherwise than within the same City, Town or Village) of an existing place of Business under section 23 of the Act
FORM VI:
FORM VII:
FORM VIII : Return of Unclaimed Deposit Accounts in India Which have not been Operated upon for Ten Years or More as on the Date of the Return
FORM IX: Statement Showing the Assets and Liabilities in India as at the Clause of Business
CO-OPERATIVE BANKS (NOMINATION) RULES, 1985
3. Nomination in respect of articles in
4. Nomination in respect of safety locker
FORM DA 1 : Nomination under section 45ZA read with section 56 of the Banking Regulation Act, 1949 and rule 2(1) of the Co-operative Banks (Nomination) Rules, 1985 in respect of the bank deposits
FORM DA 2 : Cancellation of nomination under section 45ZA read with section 56 of the Banking Regulation Act, 1949 and Rule 2(5) of the Co-Operative Banks (Nomination) Rules, 1985
FORM DA 3 : Variation of nomination under section 45ZA read with section 56 of the Banking Regulation Act, 1949 and Rule 2(6) of the Co-Operative Banks (Nomination) Rules, 1985, in respect of the bank deposits 249
FORM SC 1 : Nomination under section 45ZC read with section 56 of the Banking Regulation Act, 1949 and rule 3(1) of the Co-Operative Banks (Nomination) Rules, 1985, in Respect of Articles Left in Safe Custody with Banking Company
FORM SC 2 : Cancellation of Nomination under section 45ZC read with section 56 of the Banking Regulation Act, 1949 and rule 3(4) of the Co-Operative Banks (Nomination) Rules, 1985 in respect of articles left in the Safe Custody with Banking Company 250
FORM SC 3 : Variation of nomination under section 45ZC read with section 56 of the Banking Regulation Act, 1949 and Rule 3(5) of the Co-Operative Banks (Nomination) Rules, 1985 in respect of articles left in the Safe Custody with Co-Operative Banks 251
FORM SL 1 : Nomination under section 45ZE read with section 56 of the Banking Regulation Act, 1949 and rule 4(1) of the Co-Operative Banks (Nomination) Rules, 1985, By sole hirer in respect of safety locker 251
FORM SL 1A : Nomination under section 45ZE read with section 56 of the Banking Regulation Act, 1949 and rule 4(2) of the Co-Operative Banks (Nomination) Rules, 1985 By joint hirers in respect of safety locker
FORM SL 2 : Cancellation of nomination under sections 45ZE and 52 read with section 56 of the Banking Regulation Act, 1949 and rule 4(5) of the Co-Operative Banks (Nomination) Rules, 1985 in Respect of Safety Locker
FORM SL 3 : Variation of nomination under sections 45ZE and 52 read with section 56 of the Banking Regulation Act, 1949 and rule 4(6) of Co-Operative Banks (Nomination) Rules, 1985 by sole hirer in respect of safety locker
252
252
253
FORM SL 3A : Variation of nomination under sections 45ZE and 52 read with section 56 of the Banking Regulation Act, 1949 and Rule 4(7) of the Co-Operative Banks (Nomination) Rules, 1985 by joint hirers in respect of safety locker 253
CO-OPERATIVE BANKS (PERIOD OF PRESERVATION OF RECORDS) RULES, 1985
Co-Operative Banks (Period of Preservation of Records) Rules, 1985 254
BANKING OMBUDSMAN SCHEME, 2006
CHAPTER I
PRELIMINARY
1. Short title, commencement, extent and application 257
2. Suspension of the scheme
3. De nitions
CHAPTER II
ESTABLISHMENT OF OFFICE OF BANKING OMBUDSMAN
4. Appointment & Tenure
5. Location of of ce and temporary headquarters
6. Secretariat
CHAPTER III
JURISDICTION, POWERS AND DUTIES OF BANKING OMBUDSMAN
7. Powers and Jurisdiction 259
CHAPTER IV
PROCEDURE FOR REDRESSAL OF GRIEVANCE
8. Grounds of complaint
9. Procedure for ling complaint
10. Power to call for information
11. Settlement of complaint by agreement
12. Award by the Banking Ombudsman
13. Rejection of the Complaint
14. Appeal before the appellate authority
15. Banks to display salient features of the scheme for common knowledge of public
CHAPTER V MISCELLANEOUS
16. Removal of Dif culties 267
17. Application of the Banking Ombudsman Schemes, 1995 and 2002 267
ANNEXURE A : Form of complaint (To be Lodged) with the Banking Ombudsman 268
ANNEXURE B : Address and Area of Operation of Banking Ombudsmen 270
Banking Regulation Act, 1949
[10 OF 1949]
[AS AMENDED BY BANKING LAWS (AMENDMENT) ACT, 2025]
An Act to consolidate and amend the law relating to banking 1[***].
WHEREAS it is expedient to consolidate and amend the law relating to banking 1[***]; It is hereby enacted as follows:—
PART I PRELIMINARY
Short title, extent and commencement.
1. (1) This Act may be called the Banking 2[Regulation] Act, 19493 4[(2) It extends to the whole of India 5[***].]
(3) It shall come into force on such date5a as the Central Government may, by notication in the Of cial Gazette, appoint in this behalf.
Application of other laws not barred.
2. The provisions of this Act shall be in addition to, and not, save as hereinafter expressly provided, in derogation of the 6[Companies Act, 1956 (1 of 1956)], and any other law for the time being in force.
1. Word “companies” omitted by the Banking Laws (Application to Co-operative Societies) Act, 1965, w.e.f. 1-3-1966.
2. Substituted for “Companies”, ibid.
3. Dated 10-3-1949.
This Act has been extended to Dadra and Nagar Haveli by Regulation 6 of 1963 (w.e.f. 1-71965) and to Goa, Daman and Diu by Regulation 11 of 1963.
Nothing in this Act (Except section 34A) shall apply to the Industrial Development Bank of India vide section 34 of the Industrial Development Bank of India Act, 1964 (18 of 1964).
4. Substituted by the Banking Companies (Amendment) Act, 1950, w.e.f. 18-3-1950.
5. Words “except the State of Jammu and Kashmir” omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956.
5a. Enforced with effect from 16-9-1949.
6. Substituted for “Indian Companies Act, 1913 (VII of 1913)” by the Banking Companies (Amendment) Act, 1956, w.e.f. 14-1-1957.
7[Act not to apply to certain co-operative societies.
3. Notwithstanding anything contained in the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981), this Act shall not apply to––
(a) a primary agricultural credit society; or
(b) a co-operative society whose primary object and principal business is providing of long-term nance for agricultural development, if such society does not use as part of its name, or in connection with its business, the words “bank”, “banker” or “banking” and does not act as drawee of cheques.]
Power to suspend operation of Act.
4. (1) The Central Government, if on a representation made by the Reserve Bank in this behalf it is satis ed that it is expedient so to do, may by noti cation in the Of cial Gazette suspend for such period, not exceeding sixty days, as may be speci ed in the noti cation, the operation of all or any of the provisions of this Act, either generally or in relation to any speci ed banking company.
(2) In a case of special emergency, the Governor of the Reserve Bank, or in his absence a Deputy Governor of the Reserve Bank nominated by him in this behalf may, by order in writing, exercise the powers of the Central Government under sub-section (1) so however that the period of suspension shall not exceed thirty days, and where the Governor or the Deputy Governor, as the case may be, does so, he shall report the matter to the Central Government forthwith, and the order shall, as soon as may be, be published in the Gazette of India.
(3) The Central Government may, by noti cation in the Of cial Gazette, extend from time to time the period of any suspension ordered under sub-section (1) or sub-section (2) for such period, not exceeding sixty days at any one time, as it thinks t so however that the total period does not exceed one year.
(4) A copy of any noti cation issued under sub-section (3) shall be laid on the table of 8[Parliament] as soon as may be after it is issued.
Interpretation.
5. 9[In this Act], unless there is anything repugnant in the subject or context,—
7. Substituted by the Banking Regulation (Amendment) Act, 2020, w.r.e.f. 26-6-2020. Prior to its substitution, section 3, as substituted by the Banking Companies (Amendment) Act, 1950, w.e.f. 18-3-1950 and the Banking Laws (Application to Co-operative Societies) Act, 1965, w.e.f. 1-3-1966, read as under:
“3. Act to apply to co-operative societies in certain cases.—Nothing in this Act shall apply to—
(a) a primary agricultural credit society;
(b) a co-operative land mortgage bank; and
(c) any other co-operative society, except in the manner and to the extent speci ed in Part V.”
8. Substituted for “the Dominion Legislature” by the Adaptation of Laws Order, 1950, w.e.f. 26-1-1950.
9. Substituted for “(1) In this Act” by the Banking Laws (Miscellaneous Provisions) Act, 1963, w.e.f. 1-2-1964.
10[(a) “approved securities” means the securities issued by the Central Government or any State Government or such other securities as may be speci ed by the Reserve Bank from time to time;]
(b) “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise;
(c) “banking company” means any company which transacts the business of banking 11[in India.]
Explanation.—Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of nancing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;
12[(ca) “banking policy” means any policy which is speci ed from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits and other resources of the bank and the need for equitable allocation and the ef cient use of these deposits and resources;]
13[(cc) “branch” or “branch of ce”, in relation to a banking company, means any branch or branch of ce, whether called a pay of ce or sub-pay of ce or by any other name, at which deposits are received, cheques cashed or moneys lent, and for the purposes of section 35 includes any place of business where any other form of business referred to in sub-section (1) of section 6 is transacted;]
14[(d) “company” means any company as de ned in section 3 of the Companies Act, 1956 (1 of 1956); and includes a foreign company within the meaning of section 591 of that Act;]
15[(da) “corresponding new bank” means a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);]
10. Substituted by the Banking Laws (Amendment) Act, 2012, w.e.f. 18-1-2013. Prior to its substitution, clause (a), as amended by the Banking Laws (Amendment) Act, 1983, w.e.f. 15-2-1984, read as under:
‘(a) “approved securities” means—
(i) securities in which a trustee may invest money under clause (a), clause (b), clause (bb), clause (c) or clause (d) of section 20 of the Indian Trusts Act, 1882 (2 of 1882); (ii) such of the securities authorised by the Central Government under clause (f) of section 20 of the Indian Trusts Act, 1882 (2 of 1882), as may be prescribed;’
11. Substituted for “in any State” by the Banking Companies (Amendment) Act, 1950, w.e.f. 18-3-1950.
12. Inserted by the Banking Laws (Amendment) Act, 1968, w.e.f. 1-2-1969.
13. Inserted by the Banking Companies (Amendment) Act, 1959, w.e.f. 1-10-1959.
14. Substituted, ibid.
15. Inserted by the Banking Laws (Amendment) Act, 1983, w.e.f. 15-2-1984.
(e) 16[***]
(f) “demand liabilities” means liabilities which must be met on demand, and “time liabilities” means liabilities which are not demand liabilities;
17[(ff) “Deposit Insurance Corporation” means the Deposit Insurance Corporation established under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961);]
18[(ffa) 19[***]
(ffb) “Exim Bank” means the Export-Import Bank of India established under section 3 of the Export-Import Bank of India Act, 1981 (28 of 1981);]
20[(ffc) “Reconstruction Bank” means the Industrial Recon struction Bank of India established under section 3 of the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984);]
21[(ffd) “National Housing Bank” means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987);]
(g) “gold” includes gold in the form of coin, whether legal tender or not, or in the form of bullion or ingot, whether re ned or not;
22[(gg) “managing agent” includes,—
(i) secretaries and treasurers, (ii) where the managing agent is a company, any director of such company, and any member thereof who holds substantial interest in such company,
(iii) where the managing agent is a rm, any partner of such rm;]
23[(h) “managing director”, in relation to a banking company, means a director who, by virtue of an agreement with the banking company or of a resolution passed by the banking company in general meeting or by its Board of directors or, by virtue of its memorandum or articles of association, is entrusted with the management of the whole, or substantially the whole of the affairs of the company, and includes a director occupying the position of a managing director, by whatever name called:]
24[Provided that the managing director shall exercise his powers subject to the superintendence, control and direction of the Board of directors;]
16. Omitted by the Banking Companies (Amendment) Act, 1953, w.e.f. 30-12-1953
17. Inserted by the Deposit Insurance Corporation Act, 1961, w.e.f. 1-1-1962.
18. Clauses ( ffa ) and ( ffb ) inserted by the Banking Laws (Amendment) Act, 1983, w.e.f. 15-2-1984.
19. Omitted by the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, w.e.f. 2-7-2004. Prior to its omission, clause (ffa) read as under: ‘(ffa) “Development Bank” means the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964);’
20. Inserted by the Industrial Reconstruction Bank of India Act, 1984, w.e.f. 20-3-1985.
21. Inserted by the National Housing Bank Act, 1987, w.e.f. 9-7-1988.
22. Inserted by the Banking Laws (Amendment) Act, 1968, w.e.f. 1-2-1969. Earlier clause (gg) was inserted by the Banking Companies (Amendment) Act, 1950, w.e.f. 18-3-1950 and later on clause (gg) was omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956.
23. Substituted by the Banking Companies (Amendment) Act, 1959, w.e.f. 1-10-1959.
24. Inserted by the Banking Laws (Amendment) Act, 1968, w.e.f. 1-2-1969.
25[(ha) “National Bank” means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);]
26[‘(hb) “National Bank for Financing Infrastructure and Development” means the Institution established under section 3 of the National Bank for Financing Infrastructure and Development Act, 2021;
(hc) “other development nancial institution” means a development nancial institution licensed under section 29 of the National Bank for Financing Infrastructure and Development Act, 2021’].
(i) 27[***]
(j) “Prescribed” means prescribed by rules made under this Act;
28[(ja) “regional rural bank” means a regional rural bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976);]
(k) 29[***]
30[(l) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);]
(m) 31[***]
(n) “Secured loan or advance” means a loan or advance made on the security of assets the market value of which is not at any time less than the amount of such loan or advance; and “unsecured loan or advance” means a loan or advance not so secured;
32[(ni) “Small Industries Bank” means the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989);]
33[(na) “small-scale industrial concern” means an industrial concern in which the investment in plant and machinery is not in excess of seven and a half lakhs of rupees or such higher amount, not exceeding twenty lakhs of rupees, as the Central Government may, by noti cation in the Of cial Gazette, specify in this behalf, having regard to the trends in industrial development and other relevant factors;]
34[(nb) “Sponsor Bank” has the meaning assigned to it in the Regional Rural Banks Act, 1976 (21 of 1976);
(nc) “State Bank of India” means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955);]
25. Inserted by the National Bank for Agriculture and Rural Development Act, 1981, w.e.f. 1-5-1982.
26. Inserted by the National Bank for Financing Infrastructure and Development Act, 2021, w.e.f. 19-4-2021.
27. Omitted by the Banking Companies (Amendment) Act, 1959, w.e.f. 1-10-1959.
28. Inserted by the National Bank for Agriculture and Rural Development Act, 1981, w.e.f. 1-5-1982.
29. Omitted by the Banking Companies (Amendment) Act, 1959, w.e.f. 1-10-1959.
30. Substituted by the Banking Laws (Amendment) Act, 1983, w.e.f. 15-2-1984.
31. Omitted by the Banking Companies (Amendment) Act, 1959, w.e.f. 1-10-1959.
32. Inserted by the Small Industries Development Bank of India Act, 1989, w.e.f. 7-3-1990.
33. Inserted by the Banking Laws (Amendment) Act, 1968, w.e.f. 1-2-1969.
34. Clauses ( nb ) and ( nc ) inserted by the Banking Laws (Amendment) Act, 1983, w.e.f. 15-2-1984.
S. 5 BANKING REGULATION ACT, 1949 6
35[36[(nd)] “subsidiary bank” has the meaning assigned to it in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);
36[(ne)] “substantial interest”,—
(i) in relation to a company, means the holding of a bene cial interest by an individual or his spouse or minor child, whether singly or taken together, in the shares thereof, the amount paid-up on which exceeds 36a[two crore rupees or such other amount as may be noti ed in the Of cial Gazette by the Central Government] or ten per cent of the paid-up capital of the company, whichever is less;
(ii) in relation to a rm, means the bene cial interest held therein by an individual or his spouse or minor child, whether singly or taken together, which represents more than ten per cent of the total capital subscribed by all the partners of the said rm;]
37[(o) all other words and expressions used herein but not de ned and de ned in the Companies Act, 1956 (1 of 1956), shall have the meanings respectively assigned to them in that Act.]
(2) 38[***]
COMMENTS
SECTION NOTES
5.1 De nition of “Banking” [Section 5(b)]
“Banking” means the accepting of deposits from the public, for the purpose of: Lending, or Investment,
These deposits must be: Repayable on demand, or Otherwise,
And withdrawable by any of the following methods: Cheque, Draft, Order, or Any other method.
5.2 De nition of “Banking Company” [Section 5(c)]
A “banking company” means:
Any company that transacts the business of banking in India.
35. Inserted by the Banking Laws (Amendment) Act, 1968, w.e.f. 1-2-1969.
36. Clauses (nb) and (nc) renumbered as clauses (nd) and (ne), respectively by the Banking Laws (Amendment) Act, 1983, w.e.f. 15-2-1984.
36a. Substituted for “ ve lakhs of rupees” by the Banking Laws (Amendment) Act, 2025, with effect from a date yet to be noti ed.
37. Inserted by the Banking Companies (Amendment) Act, 1959, w.e.f. 1-10-1959.
38. Sub-section (2) omitted by the Adaptation of Laws Order, 1950, w.e.f. 26-1-1950.
5.2-1 Explanation:
A company engaged in manufacturing goods or carrying on any trade, which: Accepts deposits of money from the public, Merely for the purpose of financing its business as a manufacturer or trader, shall not be considered to be transacting the business of banking, under this definition.
5.3 De nition of “Banking Policy” [Section 5(ca)] “Banking policy” refers to any policy:
Specified from time to time by the Reserve Bank of India (RBI), Created in the interest of the banking system, or In the interest of:
Monetary stability, or Sound economic growth.
The policy must have due regard to the following factors: The interests of depositors,
The volume of deposits and resources available to the bank, and The need for equitable allocation and the efficient use of these deposits and resources.
5.4 De nition of “Branch” or “Branch Of ce” [Section 5(cc)] “Branch” or “Branch Office”, in relation to a banking company, means:
Any branch or branch office,
Whether called a pay office, sub-pay office, or by any other name.
At such a branch or office, the following services are provided: Deposits are received, Cheques are cashed, or Moneys are lent.
For the purposes of section 35 (related to the place of business), this definition includes:
Any place of business where any other form of business referred to in section 6(1) is transacted.
5.5 De nition of “Managing Agent” [Section 5(gg)]
The term “managing agent” includes the following categories of persons: Secretaries and Treasurers.
Managing Agent as a Company: Where the managing agent is a company, the following persons are included:
Any director of the company, and
Any member of the company who holds a substantial interest in the company.
Managing Agent as a Firm: Where the managing agent is a firm, any partner of such a firm is included.
5.6 De nition of “Managing Director” [Section 5(h)]
In relation to a banking company, the term “managing director” means:
5.6-1 Entrusted with Management of the Company
A director who, by virtue of:
An agreement with the banking company, or
A resolution passed by the banking company (either in general meeting or by the Board of Directors),
Or by virtue of the memorandum or articles of association, Is entrusted with the management of:
The whole, or substantially the whole, of the affairs of the company.
5.6-2 Includes Any Director Occupying the Position
Includes a director who occupies the position of managing director, by whatever name called.
5.6-3 Powers of the Managing Director [Proviso]
The managing director shall exercise his powers subject to the superintendence, control, and direction of the Board of Directors.
5.7 De nition of “Secured Loan or Advance” and “Unsecured Loan or Advance” [Section 5(n)]
“Secured Loan or Advance”
“Secured loan or advance” means:
A loan or advance that is made on the security of assets, and The market value of those assets is at no time less than the amount of the loan or advance.
“Unsecured Loan or Advance”
“Unsecured loan or advance” refers to:
A loan or advance that is not secured by any assets.
5.8 De nition of “Small-Scale Industrial Concern” [Section 5(na)]
A “small-scale industrial concern” refers to an industrial concern where: The investment in plant and machinery does not exceed: Seven and a half lakhs of rupees, or
A higher amount, not exceeding twenty lakhs of rupees, as specified by the Central Government through a notification in the Official Gazette.
The specific amount is set by the Central Government, taking into account: Trends in industrial development, and Other relevant factors.
5.9 De nition of “Substantial Interest” [Section 5(ne)]
The term “substantial interest” is defined as follows:
5.9-1 In relation to a Company [Clause (i)]
“Substantial interest” means the holding of a beneficial interest in the shares of a company by:
An individual, or His spouse or minor child, Whether singly or taken together.
This beneficial interest arises when:
The amount paid-up on the shares exceeds:
` 2 crore, or
Such other amount as may be notified by the Central Government in the Official Gazette, Or
The holding represents more than 10% of the paid-up capital of the company,
Whichever is less.
5.9-2 In relation to a Firm [Clause (ii)]
“Substantial interest” means the beneficial interest held by:
An individual, or
His spouse or minor child,
Whether singly or taken together,
More than 10% of the total capital subscribed by all partners of the firm.
CASE LAWS
Co-operative Banks and SARFAESI Act – The Supreme Court upheld the applicability of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) to cooperative banks, clarifying that they fall under the definition of “banking company” in section 5(c) of the Banking Regulation Act, 1949. The Court ruled that cooperative banks registered under State laws and multiState cooperative societies under the Multi-State Cooperative Societies Act, 2002, are covered by the SARFAESI Act. This inclusion facilitates uniform recovery mechanisms for cooperative banks while preserving their regulatory alignment under the Banking Regulation Act. – Pandurang Ganpati Chougule v. Vishwasrao Patil Murgud Sahakari Bank Ltd. AIR 2020 SC 527.
Regulation of Banking Activities by Co-operative Banks – The Supreme Court considered whether provisions of the Gujarat Co-operative Societies Act, 1961, which restrict investment by co-operative banks to speci ed categories, con icted with the Banking Regulation Act, 1949. It held that section 71 of the Gujarat Act, assented to by the President under Article 254(2) of the Constitution, is not repugnant to the Banking Regulation Act but is supplemental to it. The Court ruled that co-operative banks in Gujarat are required to follow the restrictive norms under section 71 of the Gujarat Act for investment, as they align with the objective of safeguarding member interests without contradicting the Central legislation. – Mehsana District Central Co-operative Bank Ltd. v. State of Gujarat AIR 2004 SC 1576.
State Laws and Banking Field Occupancy – The Supreme Court upheld the constitutional validity of the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997. It ruled that the Tamil Nadu Act does not encroach upon the legislative eld reserved for Parliament under the Banking Regulation Act, 1949, or the Reserve Bank of India Act, 1934. In substance, the Tamil Nadu Act addresses the fraudulent activities of non-banking nancial establishments defrauding depositors and is focused on protecting depositors’ rights. It falls under the State List (Entries 1, 30, and 32 of List II, Seventh Schedule), and the doctrine of occupied eld or repugnancy does not apply. The Act was deemed a necessary legislative measure to protect depositors from exploitation. – K.K. Baskaran v. State AIR 2011 SC 1485.
