Banking Regulation Act Most Important Sections [BR Act 1949]

The most important sections and descriptions of the Banking Regulation Act 1949 are explained in this article which is very important in the JAIIB exam. So if you want to clear the JAIIB exam then from that point of view Banking regulation act is very important.

Sec.5(b) Banking: Banking means the acceptance of deposits for the purpose of lending or investment, the deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order, or otherwise.

Sec.5(c) Banking Company: It means any company, which transacts the business of Banking in India.

Sec.8 Prohibition on Trading: No banking company shall directly or indirectly deal with the buying or selling of goods (every kind of movable property other than actionable claim), except in connection with the realization of security held by it.

Sec.9 Disposal of Non-Banking Assets: No bank shall hold any immovable property howsoever acquired (except for its own use) for any period exceeding 7 years. RBI may extend the period by 5 years where it is satisfied that such an extension would be in the interest

Sec.17(1) Reserve Fund: Stipulation that a bank must create a reserve fund equivalent to not less than 20% of profits out of the balance of profit of each year, before any dividend is declared (RBI has enhanced it to 25% of net profit w.e.f. 31st March 2001).

Sec.18 Cash Reserve: Every banking company, not being a scheduled bank shall maintain 3% of demand and time liabilities by way of cash reserve with itself or by way of balance in the current account with RBI.

Sec.20 Restriction on advances against own shares: No banking company shall grant loans/advances on the security of its own shares, since it shall amount to purchase of its own capital.

Sec.21(a) Rate of Interest charged by banks not to be subject to scrutiny by Courts: A transaction between the banking company and its debtor shall not be reopened by any court on the ground of excessive charging of rate of interest.

Sec.24 Maintenance of SLR: A banking company is required to maintain at the close of business on any day a certain percentage of its total demand and time liabilities in India in the form of cash, gold, and unencumbered approved securities. This is known as SLR. Minimum SLR 25% and Maximum 40% to be maintained. SLR is to be maintained with reference to Total Demand and Time Liabilities as of the last Friday of the second preceding fortnight.

Sec.45(y) Preservation of Bank Records: Central Govt. in consultation with RBI has the power to frame rules regarding the preservation of books, accounts, and other documents.

Sec.45 Z Returns of Paid Instruments to Customer: Guidelines for returning the paid instruments to the customer by keeping a true copy.

Sec.45 ZA Nomination: For nomination in Deposit accounts.

Sec.45 ZC Nomination: For nomination in Safe Custody accounts.

Sec.45 ZE Nomination: For nomination in Locker accounts