PUBLIC SECTOR BANKS AND CO-OPERATIVE BANKS | LRAB NOTES 2024

JAIIB LRAB NOTES ON PUBLIC SECTOR BANKS AND CO-OPERATIVE BANKS FOR JAIIB 2024 EXAMS 

STATE BANK & ITS SUBSIDIARIES 

Establishment of State Bank: SBI was established under the State of Bank of India Act 1955, Section 3 to take over the undertaking of the Imperial Bank so that it can carry on the business of Banking and other businesses as per the act.

Business of State Bank: State Bank of India may, as per the Banking Regulation Act’s section 5(b) & 6(1), carry on the banking business and other specified businesses respectively.

Account and Audit: SBI has to close its books and accounts every year on 31st March or such other date which might be prescribed by the central government and RBI. Its balance sheet and profit and loss account along with the report of the details and a report by the central board on the bank’s working and activities will be made for the year-end. 

Audit may also be conducted by any person who is duly qualified to be the auditor of the company as per section 141 of the Companies Act 2013. 

Subsidiary Bank: As per section 18 of the act, shares of subsidiary banks can be freely transferred. Section 47 empowers the State Bank of India to inspect its subsidiary banks.

Rule and Regulation: Under Section 62 of the act, the central government has the power to make rules to fulfill the purpose of the Act. The State Bank of India is also the power to make regulations as per section 63 after getting the approval of the Reserve Bank of India to fulfill the purposes of the act. 

JAIIB SYLLABUS PRIORITY 

REGIONAL RURAL BANKS

Regional rural banks are public sector Institutions which are based regionally and are rural oriented and engaged in the commercial banking business. 

It was in 1975 that the first Regional Rural Bank was set up under the regional rural bank ordinance, 1975 which was afterwards replaced by the RRB act 1976. 

Establishment of RRBs: As per the section 3 of the act, central government is authorized to establish RRBs by issuing notification in its official gazette at the request of a sponsor Bank. The share of the government and the sponsor bank will be: 

• Central government – 50% 
• State government – 15% 
• Sponsor Bank(s) – 35%

Business of Regional Rural Banks: These banks mainly transact in the business of Banking which has been defined in the Section 5(b) of the Banking Regulation Act and any other business which has been permitted as per the section 6(1) of that act. 

Account and Audit: The audit of the bank will be duly conducted by any person who is qualified to act as the auditor of the companies under section 141 of the Companies Act 2013. The auditors of the bank will be appointed after getting the central government’s approval. 

PPB & LRAB RELATED LINKS:

NATIONALISED BANKS

The Bank Nationalisation Act 1970 & Banking companies (Acquisition and Transfer of Undertaking) Act 1980 had transferred the business of the undertaking of existing private banks to the corresponding new banks which are popularly known as Nationalised banks.

Directors: It will either be nominated by the central government or be elected by the shareholders who will elect the directors of these Nationalised banks. 

The nomination of directors will be as per the following conditions: 

• Whole time directors < or = 4 
• Directors who will be nominated by central government < or = 6 
• Official director = 1 
• Representative of workmen employees = 1 
• Representative of bank officers = 1 
• Direct processing necessary expertise and experience (regulation or supervision of commercial bank) = 1

Additional Director: Reserve Bank of India has the power of one or more additional directors on the board of Nationalised Bank.  

Account and Audit: Similar to the audit of other banks, the audit of Nationalised banks will be conducted by the person who is duly qualified to act as the auditor of the company as per the section 141 of the Companies Act 2013. The auditors will be appointed after getting the approval of the Central Bank. 

 Scheme of Management: As per section 9 of the banking Companies Act 1970 and section 9 of the banking Companies Act 1980, the central government has exercised its power and has framed  2 schemes for nationalised banks:

• Nationalised Banks (Management & Miscellaneous Provisions) Scheme, 1970
• Nationalised Banks (Management & Miscellaneous Provisions) Scheme, 1980

Paid-up Capital – In the beginning, the whole of the paid-up capital of Nationalised banks was held by the central government. Although recently, some of these banks have made a public issue of shares , the central government holds the majority of shares of these banks. The shares which are held by the central government are free to transfer.

The Banking Companies (Acquisition and Transfer of Undertakings): All the sectors working in the public sector are governed by the respective acts and rules, regulations or schemes which have been made under their acts. 

In addition to these laws and provisions, these banks are also governed by the provisions of Banking Regulation Act as provided in section 41 of the banking Regulation Act. 

In fact, they also have to abide by the provisions of the Bank of India Act.

LRAB RELATED LINKS:

CO – OPERATIVE BANKS

Applicability of BR Act: The banks which operate in more than one State, actually registered under the Multi State co-operative societies act. In addition to their provisions, cooperative Banks are also regulated by the Banking Regulation Act with certain modifications as per the Section 56 of that Act. 

The Act got its applicability to co-operative societies by the Banking laws (Application to Co-operative Societies) Act, 1965. For this very purpose, it means a State co-operative bank, Central co-operative bank & a primary co-operative bank.

Paid-up Capital and Reserve: As per the section 11, the minimum paid up share capital and Reserves which are required to commence or carry on the business of Banking by a Cooperative Bank must be = or > Rs.1,00,000.00

Restriction on Loan & Advance: Banking Regulation Act’s section 20 put some restrictions on loans and advances which can be given by a Cooperative Bank. These restrictions are given below: 

• Cooperative banks cannot provide loans and advances against their own shares. 
• Cooperative banks cannot provide loans or advances to any of its directors 
• We cannot provide unsecured loans and advances to the entities in which the chairman of the bank is acting as managing agent.

Liquid Assets: Provided in section 24(1) of the Banking Regulation Act that every Cooperative Bank requires liquid assets. Licensing of Co-operative banks: Section 22 of the Banking Regulation Act provides that every Cooperative Bank society needs to get a license from the Bank of India.

Inspection: The provisions relating to inspection under section 35 are applicable to the cooperative banks but with minor modifications.