Understanding the Banking Companies

Banks play an important role in the economy of India. These acts provide the idea of regulations to the banks, which banks follow to recapitalize their income and facilitate growth. Banking Companies (Acquisition and Transfer of Undertakings) Act is one example of such an act. Different strategies and terms described under this Act help different banks to facilitate development and expansion. However, the key role of this Act in the constitution of India is that it provides an idea of settlement of undertakings. Along with this, it also depicts the financial position of any bank and its sub-branches. 

Banking Companies Act, 1980 

The banking companies Act demonstrates that the undertakings of any bank should be transferred to another bank or its sub-branches. The main banks under this Act are called “existing banks .”Along with this, the sub-branches of existing banks are called the “corresponding banks .”The central government of India launched the banking companies Act in 1980. The main aim of the Act is to facilitate the best policy formation in banks to acquire a good financial position in the market. All the policies written in this act help banks recapitalize income and capital. The banking companies act consists of a total of 21 sections. 

Sections of Banking Companies Act, 1980 

The banking companies act plays a major role in different operations of banks, for instance, recapitalizing the income. This Act’s strategies, principles, and policies are written under 21 sections. These sections ensure the good financial position of the existing banks and their corresponding banks. Let’s learn about each section separately. 

Section 1: Title and commencement 

This section describes the title of this Act. Under section 1, the title of this Act is “Banking Companies 

(Acquisition and Transfer of Undertakings) Act, 1980″. 

It shall be deemed to have come into force on the 15th day of April 1980.

Section 2: Definition of different terms

In this section, the definitions of different terms are described. These terms include, 

• Banking company 
• Corresponding new bank 
• Custodian 
• Existing bank 
• Prescribed 
• Schedule

Section 3: Establishment of Corresponding New Banks

According to this section, the corresponding bank should be registered under schedule 1.

Section 4: Undertakings Should be Transferred

According to this section, the undertakings of the existing bank should be transferred to the corresponding new banks. 

Section 5: Vesting Effect 

This section describes the general effects of vesting. It means it describes the effect of transferring the undertakings from existing banks to the corresponding banks. 

Section 6: Compensation Payment

According to this, every existing bank must give a compensation amount to the central government of India. This compensation amount is given in return to facilitate the transfer of the undertaking. 

Section 7: Head Office

The Head Office of the corresponding banks should be located near the central government. 

Section 8: Guidance to Corresponding Banks by the Central Government

According to this section, the central government will give all the management guidelines of corresponding banks. It helps the bank to recapitalize its income. 

Section 9: Central Government Power 

This section describes the powers of the central government to make schemes on the existing banks and corresponding banks. 

Section 10: Closing of Accounts 

Every corresponding bank has to close all its accounts on 31st December every year. The Central government checks the reports for the whole year. 

Section 11: Corresponding Bank Status 

Every corresponding bank is an Indian company and does not include any foreign trade. 

Section 12: Chairman Authority 

The chairman of corresponding banks can remove any custodian from work. 

Section 13: Obligations as to Fidelity and Secrecy

Every corresponding new bank should observe the practices and usages of customary practices among bankers.

Section 14: Custodian Working

Every custodian of existing or corresponding banks works as a public servant. 

Section 15: Custodian Defects 

Mistakes and defects of some custodians should be neglected. Their proceedings and appointment remain valid. 

Section 16: Indemnity 

According to this section, all the individuals belonging to the bank, whether custodian or central government, are responsible for all its losses. They all have to bear a certain part of the Loss. 

Section 17: Reference 

Any reference or contract made by the existing bank will transfer to the corresponding banks. 

Section 18: Dissolution 

Any law which is related to the winding-up should not be implemented in the corresponding banks. 

Section 19: Power of Policy Formation 

The board of directors has the authority to facilitate policy formation within the banks. They design to recapitalize the income of banks.

Section 20: Amendment 

This section describes the certain regulations of existing banks to recapitalize the overall income of the year. 

Section 21: Savings 

This section demonstrates the minimum savings required for any bank. 

Existing and Corresponding Banks 

Let’s look at some existing banks and their corresponding banks. 

Conclusion 

Banking companies act, 1980 plays a vital role in policy formation and attaining the good financial positions of banks. All its policies and principles are designed to facilitate the growth and expansion of the existing banks and their corresponding banks. In the Indian constitution, there are 21 sections written under this act. All these sections describe the different domains of any bank. These sections also provide guidelines on how the banks can recapitalize their income and regulate their functioning so that banks achieve good financial growth and position in the market.