Commercial Banks in India are Governed by Which Act?
By BYJU'S Exam Prep
Updated on: November 9th, 2023
Commercial banks in India are governed by the Banking Regulation Act of 1949. It is common knowledge that the Indian banking system is regulated by the Reserve Bank of India (RBI). A commercial bank is a type of financial institution that offers loans, CDs, savings accounts, overdraft protection, and other services to its clients. These organizations profit from the loans they make to people and the interest they charge.
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Act that Governs Commercial Banks in India
A commercial bank is a type of financial institution that accepts public deposits and grants borrowers loans for profit-making investments and consumption. The Banking Regulation Act is the legislation that regulates all the banking and financial firms in India.
Provisions of the Banking Regulation Act
Furthermore, it is the Reserve Bank of India that gives the license of operation to the banks in India. The Banking Regulation Act of 1949 lists the following principal provisions for financial institutions and firms in India:
- Prohibition of Trading
- Non-Banking Assets
- Management
- Minimum Capital and Reserves
- Capital Structure
- Payment of Commission, Brokerage
- Reserve Fund/Statutory Reserve
- Cash Reserve
- Liquidity Norms
- Restrictions on Loans and Advances
- Accounts and Audit
Summary:
Commercial Banks in India are governed by Which Act?
The 1949 Banking Regulation Act governs commercial banks in India. It is well known that the Reserve Bank of India (RBI), oversees the Indian banking system. A commercial bank is a kind of financial institution that provides its customers with loans, certificates of deposit (CDs), savings accounts, overdraft protection, and other services. Hence, commercial banks are a vital part of the Indian economy.
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