Banking Law

Ans:  Section  16: Power of central government to issue directions.  17. Power of Central Government to supercede the board. 15 G : penalty for insider trading . 15k and 15L:  Establishment and composition of Securities Appellate Tribunal.

Ans:  11 : Functions of the board. 11A: Board to regulate or issue of prospectus  11AA: Collective investment scheme  11B: power to issue directions  11C: Investigation  11D: Cease and desist proceedings. FBC PIC

Ans: Section 8 deals with vacancies not to invalidate the proceedings of the board and section 9 deals with officers and employees of the board. 

Ans: Section 6, section 7 and ssction 7A of SEBI ACT mentions about removal of members and meetings.  Section 6 of SEBI ACT mentions about the removal of members from office.  Section 7 of SEBI ACT mentions about the meetings.  Section 7A of SEBI ACT mentions about the members not to participate in meetings in certain cases. 

Ans:  Section 3 of SEBI act mentions about the establishment and incorporation of Board.  Section 4 of SEBI act mentions about the management of the board.  Section 5 of SEBI ACT mentions about the terms of office and conditions of service of chairman and members of the board.  

Ans: The Second chapter of SEBI Act, 1992 is Establishment of Securities and Exchange Board of India, 1992 and there are 8 Sections in chapter 2 i.e., establishment of securities and exchange board of india. 

Ans: Chapter 2 of SEBI act deals with the establishment of securities and exchange board of India. 

Ans: Following are the rates of Reserve Bank of India:  1. Repo Rate: 6.50 percent  2. Reverse Repo Rate : 3.35 3. Bank Rate: 6.75 4. Marginal Standing Facility Rate: 6.75 The current statutory liquidy ratio as of February 2021 is 18% .

Ans: Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country.

Ans: NDTL is to be taken of last Friday of second preceding fortnight. CRR and SLR ensures Liquidity and solvency of banks. Helps RBI to control inflation

Ans: Bank rate has two main purposes: 1. Discount rate : Banks gets bills of exchange and commercial papers rediscounted @bank rate from RBI. 2. Penal rate: In case of bank defaults on SLR and CRR, penalty is levied by RBI. Penalty: Bank rate + 3 % on First Day Bank rate + 5 % on subsequent days Initially Bank rate = Repo rate + 1 percent For example : Bill of exchange worth Rs 1 crore and cash date is after three months. Bill of exchange discounted @Bank rate

Ans: Cash Reserve Ratio:  Cash and equivalents No interest Low CRR @happy  banks Statutory Liquidity ratio: Banks will keep the amount with itself but in the form of cash, gold or government securities. It is an interest income. RBI maintains the Liquidity of bank through SLR.

Ans: Section 13 of RBI Act mentions about the meetings of the central board. The meetings of central board shall be convened by the Governor at least six times in each year and atleast once in each quarter. 

Ans: Section 12 mentions about the provisions of casual vacancies and absences. 

Ans: Section 11 lays down the provisions about the removal from and vacation of office .

Ans: As per Section 10 of RBI Act, 1934, a person can not be a director if  He is an employee of any organization.  He is lunatic or of unsound mind. If is an officer or an employee of any bank.

Ans: The difference between the primary market and Secondary market is as follows:  1. In Primary Market,  the transaction is between the company and investor.  2. In Secondary Market, the transaction is between the two investors.  3. In Primary market , the amount is directly transferred to company whereas in Secondary market, the money is transferred from one investor to another investor.   4. In Primary market, the price is decided by the company whereas in Secondary market the price of company is decided by supply and demand.  Methods of raising funds in Primary Market:  1. Public issue: IPO(Initial Public Offering) 2. Private placement (Selected investors) like venture capital, banks, mutual fund. 3. Right issue : Existing shareholders. Stock exchange is Secondary market.

Ans: The market in which securities like stocks, bonds, preferred shares ETF, etc are issued, purchased by investors, and subsequently transferred among investors is called the securities market. The capital market has two interdependent and inseparable segments, viz., the primary market and secondary market.

Ans: The market in which securities like  stocks, bonds, preferred shares are issued, purchased by investors, and subsequently transferred among investors is called the securities market. The securities market has two interdependent and inseparable segments, viz., the primary market and secondary market.

Ans: The management of Board is run by its members appointed by the central Government: (a) Chairman. (b) Two members from the Ministry of Finance of the Union. (c) One member from the Reserve Bank of India.   (d) five other members.

Ans: Securities and Exchange board of India act, 1992 comprises of 10 chapters and 91 sections.

Ans: The Reserve bank of India comprises of one governor who is highest designator and four deputy governors.  

Ans: The Reserve Bank of India comprises of 61 sections which were housed in five chapters and five schedules. Several Amendments were made to this act. The last amendment is Reserve Bank of India (Amendment) Act, 2010. At present,  there are 100 sections housed in Ten chapters. 

Ans: The RBI Act, 1934 and the Foreign Exchange Management Act, 1999 govern the foreign exchange reserves. The RBI acts as the custodian of the country’s foreign exchange reserves and manages exchange control.

Ans: Under Section 22 of the Reserve Bank of India Act, RBI has sole right to issue currency notes of various denominations except one rupee notes.

Ans: NDTL refers to the total demand and time liabilities (deposits) of the public that are held by the banks with other banks. Demand deposits consist of all liabilities, which the bank needs to pay on demand.

Ans: RBI Act,1934 comprises 61 sections and five schedules.

Ans: The Reserve bank of India is the Central bank of India and its headquarters is in Mumbai and it was established on 1st April, 1935 under RBI Act, 1934.  CV Deshmukh was the first Governor General of RBI of Independent India.  Reserve bank of India is also called Bank of Banks  or Banker's Bank.  The Reserve Bank of India was nationalised in 1949. The license to open the branches of Banks are provided by Reserve Bank of India. Under Banking Regulation Act,  1949:  Section 22: Licence granted by Reserve Bank of India.  Section 23: Permission to open branch at New Place.  Section 24: Gold and other Securities not less than 20 percent of total demand and time liabilities. The minimum Gold that remains with Reserve Bank of India is 115 Crores.  The accounting year of Reserve Bank of India is changed to April-March and earlier it was July-June.  Reserve Bank of India has the absolute right to issue paper currency in India except one rupee...

Ans:  1.  Chankakya wrote in Arthashashtra about merchant bankers who  received deposits and advanced loans through hundis. 2. Jain Scriptures: Two bankers who built famous Dilwara temples of Mount Abu in 1197 and 1247 A.D. 3. Bank of venice in Italy in 1157 to finance the monarch in wars: First bank

Ans: NIDHI: National Initiative for Development and Harnessing Innovations (NIDHI). NIDHI is a company.  Traditionally means treasure. Cultivating the habit of thrift.  Lending money for mutual benefit.  Nidhi : registered under Company act and controlled by RBI. Companies act, 2013: Section 406 and companies act,  1956, Section 620.

Ans : Section 22: Licence granted by Reserve Bank of India.  Section 23: Permission to open branch at New Place.  Section 24: Gold and other Securities not less than 20 percent of total demand and time liabilities. 

Ans: The CRR is a percentage of total deposits that banks must hold as cash with the central bank, while the SLR is a percentage of total deposits that banks must hold as liquid assets such as government securities.

Ans: It was passed into law in 1956. The RBI is required to retain a minimum reserve of an amount of about Rs 200 crores in foreign currencies, gold coins, and gold bullion under the Minimum Reserve System.

Ans: In Lease Financing, the ownership of an asset lies with the lessor. Lessee has the right to use the equipment and does not have the option to purchase.

Ans: Start up companies with a potential to grow need a certain amount of investment. Wealthy investors like to invest their capital in such businesses with a long-term growth perspective. This capital is known as venture capital and the investors are called venture capitalists.

Ans: Loan syndication is the process of multiple lenders coming together to fund a large loan requirement of a single borrower. This process is required when the loan amount is so large that a single lender cannot afford.  Credit Syndication means obtaining of loans using loan Syndication. 

Ans: Capital restructuring is a corporate operation aimed at changing the ratio of equity and debt in a firm's capital structure.  The debt-to-equity ratio (D/E ratio) shows how much debt a company has compared to its assets.

Ans: Citibank has transferred its ownership of consumer banking business to Axis Bank. 

Ans: Standard Chartered Bank owns Grindlays bank in India.

Ans: Following are the types of banking in India : 1. Central Bank 2. Commercial Banks a) Private Sector Banks b) Public Sector Banks c) Regional Rural Banks d) Foreign Banks 3. Co-operative Banks a) State Co-operative Banks b) Urban Co-operative Banks 4. Payments Banks 5. Scheduled Banks 6. Non-Scheduled Banks 7. Small Finance Banks Generally, Commercial Banks like Private Sector Banks and Public Sector Banks have Merchant Banking in India. Scheduled banks is a banking corporation whose minimum paid up capital is Rs. 5 lakhs and does not harm the interest of the depositors. Non-scheduled banks are the banks which do not comply with the rules specified by the Reserve Bank of India, or say the banks which do not come under the category of scheduled banks.

Ans: The banking system is considered almost as old as civilization and has existed in varied forms, and the banking system in India is no exception to that. Before we deep dive into the evolution of banking in India, let’s take a look at the banking scene in the world. Here’s a short video that captures the evolutionary process of banking, with a few pre-historic and mythological elements thrown in as a homage to our curious and imaginative ancestors. The banking system of a country upholds its economic development. Considering the economic condition of people, the need for financial services and the advancements in technology that followed, the banking sector in India has gone through major transformations over the past five centuries. There you must understand the different types of banking systems in India. It’s interesting to track the history of the banking system in India.   The history of banking in India can be broadly classified as: Pre-independence Phase (1770-...

Ans: A customer is a person who has an account with a bank or has a relationship with the banker even though he has no account with the bank. The question of whether a person is a customer of a bank is a matter of fact and an occasional or even regular encashment of a cheque, for example, is not sufficient to establish the relationship of banker and customer. The duration of the relationship is not of the essence. As a normal practice, banks make inquiries as to prospective customers to ensure that they are suitable persons with whom to enter into relations and the failure to do so is a factor in a subsequent claim against the bank for conversion of a cheque collected for the customer's account. Currently, the inquiries which a bank is required to undertake are very much determined by the money laundering regulations.  So, the person doing the banking business is called a banker and the person who is connected with the bank, either depositing his money or taking a loan from the ban...

Ans:  The Reserve Bank of India (RBI) takes its name from the Banking Regulation Act, 1949, formerly known as the Banking Companies Act, 1949. Regional rural banks, cooperative banks, Commercial banks, local area banks, non-banking financial companies and development financial institutions (DFIs) make up India’s financial system. In this article, we attempt to understand the role of RBI as a regulator and how it safeguards public trust in the national financial system. The aim of the Reserve Bank of India is to provide the best facilities to all banks of India. It settled with the National Payments Corporation of India for settling the payment system throughout the country.  Role of RBI The primary duty of the RBI is to implement monetary policy The Central Government’s Monetary Policy Committee (MPC), established under Section 45(B), determines the policy interest rate required to achieve the inflation target The RBI also conducts economic research to promote economic growth ...

Ans:  RBI controls the commercial banks through the following measures: (1)   RBI Fixes the Bank Rate and Repo Rate: Bank rate is the interest rate at which the RBI lends funds to other commercial banks in the country. It is also called the discount rate. In order to control the supply of currency in the economic system, RBI often uses the bank rate. On the other hand. Repo Rate is the rate at which commercial banks will borrow the funds from the RBI against the securities. In order to make credit dearer, RBI increases these rates. (2)    Variable Reserve Ratios: The commercial banks have to keep a certain proportion of their total assets in the form of liquid assets so that they are always in a position to honour the demand for withdrawal by their customers. Generally, the following two reserves are required to be maintained: (3)     Cash Reserve Ratio: CRR refers to the percentage of deposits of the commercial banks which they have to ma...

Ans: The banking system in India is regulated by the Reserve Bank of India (RBI), through the provisions of the Banking Regulation Act, 1949. Some important aspects of the regulations that govern banking in this country, as well as RBI circulars that relate to banking in India, will be explored below. Exposure limits  Lending to a single borrower is limited to 15% of the bank’s capital funds (tier 1 and tier 2 capital), which may be extended to 20% in the case of infrastructure projects. For group borrowers, lending is limited to 30% of the bank’s capital funds, with an option to extend it to 40% for infrastructure projects. The lending limits can be extended by a further 5% with the approval of the bank's board of directors. Lending includes both fund-based and non-fund-based exposure. Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)  Banks in India are required to keep a minimum of 4% of their net demand and time liabilities (NDTL) in the form of cash with t...

Ans: SEBI has enjoyed success as a regulator by pushing systematic reforms aggressively and successively. SEBI is credited for quick movement towards making the markets electronic and paperless by introducing T+5 rolling cycle from July 2001 and T+3 in April 2002 and further to T+2 in April 2003. The rolling cycle of T+2 means, Settlement is done in 2 days after Trade date. SEBI has been active in setting up the regulations as required under law. SEBI did away with physical certificates that were prone to postal delays, theft and forgery, apart from making the settlement process slow and cumbersome by passing Depositories Act, 1996. SEBI has also been instrumental in taking quick and effective steps in light of the global meltdown and the Satyam fiasco.[citation needed] In October 2011, it increased the extent and quantity of disclosures to be made by Indian corporate promoters.In light of the global meltdown, it liberalised the takeover code to facilitate investments by removing regul...

Ans: SEBI has three powers rolled into one body: quasi-legislative, quasi-judicial and quasi-executive. It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. Powers:  For the discharge of its functions efficiently, SEBI has been vested with the following powers:  to approve by−laws of Securities exchanges. to require the Securities exchange to amend their by−laws. inspect the books of accounts and call for periodical returns from recognised Securities exchanges. inspect the books of accounts of financial intermediaries. compel certain companies to list their shares in one or more Securities exchanges. registration of Brokers and sub-brokers.

Ans: The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as "to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected there with or incidental there to".

Ans: The Securities and Exchange Board of India (SEBI) is the regulatory body for securities and commodity market in India under the ownership of Ministry of Finance within the Government of India. It was established on 12 April 1988 as an executive body and was given statutory powers on 30 January 1992 through the SEBI Act, 1992. Keywords used:  Regulatory: serving or intended to regulate something. Statutory: required, permitted, or enacted by statute.

Ans: Reserve Bank Staff College, Chennai, Reserve Bank of India Academy, Mumbai, and Reserve Bank of India College of Agricultural Banking, Pune. The 3 training colleges of the Reserve Bank of India, train the officers of the Reserve Bank of India, and the banking industry.

Ans: On 8 November 2016, the Government of India announced the demonetisation of all ₹ 500 and ₹ 1,000 banknotes of the Mahatma Gandhi Series despite being warned by the Reserve Bank of India (RBI). The government claimed that the action would curtail the shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism. The Reserve Bank of India laid down a detailed procedure for the exchange of the demonetised banknotes with new ₹ 500 and ₹ 2,000 banknotes of the Mahatma Gandhi New Series and ₹ 100 banknotes of the preceding Mahatma Gandhi Series.

Ans: Following are the distinctive features of Reserve Bank of India :  1. The reserve bank of India is a note issuing authority.  2. It is a banker to the Government i.e., Central as well as of the states.  3. It is a banker's bank. 

Ans: Reserve Bank of India do not provide facilities to non scheduled banks like Scheduled banks.  These facilities are related to pay the bills, direct lending , facilities related to money transfer, etc.

Ans: The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in India. 1. Passed as the Banking Companies Act 1949, it came into force from 16 March 1949 and changed to Banking Regulation Act 1949 from 1 March 1966. It is applicable in Jammu and Kashmir from 1956. 2.  Initially, the law was applicable only to banking companies. But, in 1965 it was amended to make it applicable to cooperative banks and to introduce other changes. In 2020,  it was amended to bring the cooperative banks under the supervision of the Reserve Bank of India.

Ans: India's central bank is known as the Reserve Bank of India (RBI). Its role is to foster financial stability and regulate India's currency and credit. The core function of the RBI is to set the lending rate between banks. However, as the overseer of India's monetary policy, the bank performs several other functions that are important to the Indian economy. Issuer of Currency Although the government is the technical issuer of currency, the RBI actually distributes the notes and coins into the marketplace. It also takes in and destroys currency; in other words, as bills and coins wear out, the RBI ensures that fresh and clean currency is in the marketplace. A Bank to Banks Not only does the RBI set the lending rate between banks, it acts as a banker's bank. When banks need money, the RBI can lend money to them since it holds some of their reserves. In addition to supporting other banks, the RBI has the power to inspect and audit other banks. Government's Bank As t...

Ans- Powers and Functions of Reserve Bank of India under Banking Regulation Act, 1949 which was previously known as Banking Companies Act, 1949 :  As a matter of fact, it is true that the Reserve Bank of India has been playing a vital role regarding establishing the new banks, development of old banks and controlling of the existing banking companies in India right since its origin in 1935. It is to be noted that various measures have since been adopted by the Reserve Bank of India under the provisions of Regulation Act, 1949 which are as follows:- 1. Power to Maintain Reserve Fund- According to the provisions of S.17, Reserve Bank may by order in writing declare that provisions of Reserve Fund shall not apply to the banking company for such period as may be prescribed with order. The Banking company shall transfer each year not less than prescribed with order banking company shall transfer each year not less than 20% of its profits to the Reserve Fund. 2. Power to Mai...

Ans:  Section 58A of the Companies Act also empowers compaines to accept deposits form the public. The Central Government has power to regulate such deposits in consultation with the Reserve Bank of India. Such rules may prescribe for the limits upon which the manner in which and the terms and conditions on which deposits may be invited or accepted. Merely accepting such deposits by such companies shall not be deemed to carry the business of banking within the meaning of Section 5(b) of the Banking Regulation Act, 1949.   Keywords used:   Empower:  अधिकार देना

Ans: A central bank is a public institution that manages the currency of a country or group of countries and controls the money supply – literally, the amount of money in circulation. The main objective of many central banks is price stability. In some countries, central banks are also required by law to act in support of full employment.

Ans: Following are the functions of Merchant Banks in India :  Service Based Functions: 1. Project Counseling ( Project Identification,  Project Planning,  Getting Government Approvals,  Raising Finance, Project Implementation and Control ) 2.  Credit Syndication ( Arranging and processing of loans from financial institutions) 3.  Issue Management ( Covers management of shares, bonds and debentures) 4. Corporate and Capital Restructuring ( Help in mergers, acquisition and getting approvals ) 5. Corporate Counselling ( advisory services to the business firms ) 6. Portfolio Management ( managing the investments) 7. Help in lease finance Fund based functions: 1. Bill Discounting: arranges funds against discounted bills . 2.  Venture Capital: Financing of new projects that are highly risky. 3. Bought out deals : Raising finance through public issue. 4. Underwriting: Help in subscription of securities. 5. Corporate Advisory Services: Tax plan...

Ans: Securities and Exchange Board of India (SEBI) is the regulatory authority for merchant banking in India. Activities of merchant banks are regulated by the SEBI (Merchant Bankers) Regulations, 1992. Regulation of NBFC: Stockbroking, Merchant banking NBFCs are regulated by SEBI. RBI is the regulator of those NBFC which deals in lending, accepting deposits and financial leasing.

Ans: Functions of Merchant Banking in India : Merchant Bankers in India carry out following functions and services specifically : 1. Corporate Counseling and Project Counseling. 2. Pre-investment studies and Capital restructuring. 3. Credit Syndication 4. Issue Management and Underwriting 5. Portfolio Management and Working Capital Finance 6. Acceptance Credit and Bill Discounting 7. Mergers, Amalgamations and takeovers 8. Venture Capital 9. Lease Financing 10. Foreign Currency Finance and Fixed deposit broking 11. Mutual Funds 12. Project Appraisal Venture Capital: Start up companies with a potential to grow need a certain amount of investment. Wealthy investors like to invest their capital in such businesses with a long-term growth perspective. This capital is known as venture capital and the investors are called venture capitalists. Acceptance Credit:  A banker's acceptance is a type of credit in which a time draft is honored by a bank.  Lease Financing:  In Lease...

Ans: There are two types of services that are provided by Merchant Banker :  1 .  Banking Services: It helps businessmen to start business and helps to raise finance. 2.Consultancy Services: Under Consultancy services, the merchant banker provides Consultancy to its clients for financial services, marketing,  managerial and legal matters. Merchant banker act as intermediaries between the company and the investors and providing Banking and consultancy services to both investors and companies.  Merchant Banking was officially commenced into Indian Capital Market when Grindlays Bank received the license from reserve Bank in 1967. Grindlays Bank is now owned by Standard Chartered Bank. Citibank Setup its merchant banking division in India in 1970.  Indian Banks Started banking Services from 1972. State Bank of India started the merchant banking division in 1972. After that there were many banks which set up the merchant bank division such as ICICI Bank of India Ba...

Ans: A merchant bank is a financial institution providing capital/raising funds to the companies. A set of functions and services provided by the merchant banker and is termed as merchant banking. Merchant banking has two services: 1. Banking Services 2. Consultancy Services Pms:  A financial institution that provides capital to the companies or raise funds for the companies if already provided capital. A set of services and functions provided by merchant banker is termed as merchant banking.