Important Provisions of Banking Regulation Act

a. Prohibition of Trading (Section 8) A Banking company cannot directly or

indirectly deal in the buying or selling or bartering of goods. However, it may

buy, sell or barter in connection with the bills of exchange received for

collection or negotiation.

b. Disposal of Non-banking Assets (Section-9)

 A banking company can only acquire immovable property for its own

use.

 Other immovable properties acquired must be disposed off within

seven years from the date of acquisition.

 However, in any particulars case, The Reserve Bank of India may

extend such period of seven years if it is satisfied , that such extension

would be in the interest of the depositors of the banking company

C. Statutory Reserve fund:-section 17 requires every banking company shall

create a reserve fund and transfer at least 25% of its profits to reserve

before any dividend is paid.

d.Cash Reserve Ratio (Sec. 18 )As per sec. 18 of Banking Reg. Act.1949,

every scheduled commercial bank in India is required to maintain:-

 a daily cash reserve balance to the extent of 4% of its total demand

and time liabilities in India as on last Friday of the-second preceding

fortnight shall submit to the Reserve Bank before the twentieth day

of every month return showing the amount so held on alternate

Friday during a month with particulars of its demand and time

liabilities in India on such Friday or if any such Friday is a Public holiday

under the negotiable Instrument Act at the close of business on the

preceding working day.

 As per sec. 42 of RBI Act. 1949, every Scheduled Bank in India shall

maintain with the Bank an average daily balance the amount of which

shall not be less than 4%of the total of the demand and time liabilities

in India of such bank as shown in the return referred to in Section 42

(2), which shall send to the bank at the close of business on each

Friday, but not later than seven days after the date to which it relates.

The aforesaid limit can be raised by RBI up to 15 %.

e.Statutory Liquidity Reserve (SLR) (Sec. 24 of Banking Reg. Act.

1949):Every banking company shall maintain in India in cash, gold or

unencumbered approved securities, valued at a price not exceeding the

current market price, an amount which shall not at the close of the business

on any day be less than 21.5% of the total of its demand and time liabilities

in India. This limit can be raised by RBI up to 40%.

f. Unclaimed Deposit: (Section-26)Every banking company is required to

submit a return in the prescribed form and manner to the reserve bank of

India at the end of the each calendar year of all accounts in India which

could not be operated for 10 years. This report is to be submitted within 30

days after the close of each calendar year.

g. Final Accounts (Sec. 29)- According to Section 29 of the Banking

Regulation Act, 1949, every banking company is required to prepare at end

of the accounting year (i.e. 31st March) a Balance Sheet and a Profit and

Loss Account in the Form A and 'Form B' respectively set out in the III

schedule or as near thereto as circumstances admit.