Commercial Banks in India are Governed by Which Act?

By Esha Dhawan|Updated : July 11th, 2022

It is common knowledge that the Indian banking system is regulated by the Reserve Bank of India or RBI. But do you know which act the commercial bank in India are governed by? The answer to this question is the Banking Regulation Act of the year 1949.

Answer:

The commercial bank in India are governed by the Banking Regulation Act, 1949.

The Banking Regulation Act is the legislation that regulates all the banking and financial firms in India. Furthermore, it is the RBI that gives the license of operation to the banks in India.

Provisions of the Banking Regulation Act

The Banking Regulation Act, 1949 lists the principal provisions such as:

  • Prohibition of Trading 
  • Non-Banking Assets 
  • Management 
  • Minimum Capital and Reserves 
  • Capital Structure 
  • Payment of Commission, Brokerage etc. 
  • Reserve Fund/Statutory Reserve 
  • Cash Reserve 
  • Liquidity Norms 
  • Restrictions on Loans and Advances 
  • Accounts and Audit

Summary:

Commercial Bank in India are Governed by Which Act?

The commercial bank in India are governed by the Banking Regulation Act of 1949. The Act lists down the principal provisions that must be followed by all banks and financial institutions in India.

 

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