BANKING REGULATIONS ACT, 1949

The Banking Regulations Act, is a legislation formulated in India, which was enacted on March 16, 1949. The Act provides a mechanism, which binds different commercial banks under its purview and provides RBI with the power to exercise control over them and regulate their working. It consists of about 55 sections. 

The main contention of the Act is to control and provide assistance to different banks, in exciting their business activities such as the opening of a new bank branch or maintenance of liquid assets etc. 

Section 6 of this Act plays a key role, since it determines and identifies the permitted businesses that can be performed by banks. Accordingly, they include:

1. Allowing the banks to act as government agents;
2. Providing or contracting loans for public as well as private institutions;
3. The management (which may include the selling and realisation) of any property, which comes into the possession of the organisation;
4. Dealing with matters such as acquisitions, maintenance, construction and other aspects concerning any property and;
5. Undertaking and executing various trusts, as and when necessary. 

Any bank, thus performing its business activities, should ensure that they fall under these criteria, and do not breach the permitted guidelines of the Act, as have been provided above.

As far as the features of the Act are concerned, these have been laid down under the different sections of the Act, ranging from section 8 to section 15. Section 8 provides for the prohibition of trading, such that a bank cannot enter into transactions directly or indirectly concerning the sale or purchase of goods. Section 9 states that where in a situation, the bank holds certain immovable property, howsoever it may have been acquired, should be disposed off within a period of seven years, and no more except where its for its own use. 

Section 10 talks about the management of the bank, such that at least one of the directors of the bank should be the Chairman of the Board of Directors of such bank.

Section 11(2) of the Act, regulates the banks and their initial working in India, wherein they cannot carry on their business in case they do not have the minimum required paid up capital and cash reserves, as required by the RBI. The payment of dividend by any bank, is regulated for and provided under section 15. 

The Banking Regulations Act, 1949 provides a good extent of power to the Reserve Bank of India in regulating other banks prevalent in India, and allows it formulate the necessary guidelines, which maybe bound by all banks keeping in mind these sections of the Act.