The document discusses the proposed amendments to the Banking Regulation Act of 1949 in India, which has not been amended in over 60 years. Some of the major changes proposed include: 1) Allowing new banking licenses to be issued and attracting more foreign investment in the banking sector. 2) Giving the Reserve Bank of India (RBI) more effective control over banks by increasing penalties, and more flexibility in managing liquidity and inflation. 3) Empowering the RBI to remove entire boards of directors if they are working against depositors' interests, and to inspect associated enterprises' accounts. However, an initial clause giving the RBI sole control over bank mergers and acquisitions

1. Mr.B.J.Ved

2. Gearing Up for Banking ReformsGearing Up for Banking Reforms
• BRA 1949 – Amendment after more than 60 years
• Bill Passed in lower house of Parliament - Yet to complete formal process
of enactment
• Why?:-
1) Indian Banks adhere to international best practices
2) Play on level playing field
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3. Major Remifications For Financial SectorMajor Remifications For Financial Sector
1) Paving way for issuance of new banking licenses
2) Attracting more foreign funds into banking sector
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4. It Encompasses
1) The Banking Regulation Act 1949
2) The Banking Companies (Acquisition & Transfer of Undertaking ) Act
1970
3) The Banking Companies (Acquisition & Transfer of Undertaking ) Act
1980
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5. ProvisionsProvisions
1) Mandatory requirement for obtaining approval from RBI of entities /
persons seeking to acquire share capital in a bank in excess of 5% to
ensure not only that control of banks is available to fit & proper person but
also that interest of banking industry & public is protected
2) Authorises RBI to halt transfers to proposed transferee & where transfer is
registered, not entitling transferee to exercise voting rights in any
company meeting
3) Simplifies the definition of “Approved Securities” to encompass those
securities issued by Central or State Govts. Or other securities as
specified by RBI
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6. Provisions (Contd…)Provisions (Contd…)
4) Provides RBI with more effective control of the industry by increasing
penalties to crores from thousands
5) Provides RBI with more flexibility in its efforts to mange liquidity and rein
in inflation via Cash Reserve Ratio (CRR)
6) Empowers RBI to grant banks adhoc exemptions from CRR provisions
7) Provides for aggregating funds in dormant accounts into single fund which
can be used to promote interest of depositors. Proposes establishment of
“Depositor Education and Awareness Fund” comprising funds from non-
operational accounts remained unclaimed for mote than -10- years.
However, depositors / customers can claim funds from banks even after
expiry of -10-years period
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7. Provisions (Contd…)Provisions (Contd…)
8) Under RBI Act 1949, RBI has power to remove a director or any other
officer of the banking company. Such power is inadequate if the entire
board of directors is working against the interest of depositors & banking
industry. Bill proposes to confer power to RBI to supercede those boards
for not more than -12- months during which Chairman, Managing Director
and other directors shall vacate the office from effective date with no
compensation from the date of termination.
9) RBI will have sufficient powers to inspect accounts and business of
associate enterprise that have significant influence in making financial or
policy decision.
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8. • However, in the original version of the bill, RBI sought through insertion of
a clause to retain control over matters relating to the amalgamation,
merger, reconstruction or acquisition of banks which would have otherwise
been determined by the Competion Act 2012. but in the face of stiff
opposition politically and in larger interest of other regulators, the proposed
clause was eventually dropped.
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