Lawgist19Restriction on nature of subsidiary companies
1 [(1) A banking company shall not form any subsidiary company except a subsidiary company formed for one or more of the following purposes, namely:--
(a) the undertaking of any business which, under clauses (a) to (o) of sub-section (1) of section 6, is permissible for a banking company to undertake, or
(b) with the previous permission in writing of the Reserve Bank, the carrying on of the business of banking exclusively outside India, or
(c) the undertaking of such other business, which the Reserve Bank may, with the prior approval of the Central Government, consider to be conducive to the spread of banking in India or to be otherwise useful or necessary in the public interest.
Explanation.--For the purposes of section 8, a banking company shall not be deemed, by reason of its forming or having a subsidiary company, to be engaged indirectly in the business carried on by such subsidiary company.]
(2) Save as provided in sub-section (1), no banking company shall hold shares in any company, whether as pledgee, mortgagee or absolute owner, of an amount exceeding thirty per cent. of the paid-up share capital of that company or thirty per cent. of its own paid-up share capital and reserves, whichever is less:
Provided that any banking company which is on the date of the commencement of this Act holding any shares in contravention of the provisions of this sub-section shall not be liable to any penalty therefor if it reports the matter without delay to the Reserve Bank and if it brings its holding of shares into conformity with the said provisions within such period, not exceeding two years, as the Reserve Bank may think fit to allow.
(3) Save as provided in sub-section (1) and notwithstanding anything contained in sub-section (2), a banking company shall not, after the expiry of one year from the date of the commencement of this Act, hold shares, whether as pledgee, mortgagee or absolute owner, in any company in the management of which any managing director or manager of the banking company is in any manner concerned or interested.
2[(4) Save as provided in clause (c) of sub-section (1), a banking company may form a subsidiary company to carry on the business of credit information in accordance with the Credit Information Companies (Regulation) Act, 2005 (30 of 2005).]
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1. Subs. by Act 1 of 1984, s. 22, for sub-section (1) (w.e.f. 15-2-1984).
2. Ins. by Act 30 of 2005, s. 34 and the Schedule (w.e.f. 14-12-2006).
- 6 Form of business in which banking companies may engage
- 7 Use of words "bank", "banker", "banking" or "banking company"
- 8 Prohibition of trading
- 9 Disposal of non-banking assets
- 10 Prohibition of employment of managing agents and restrictions on certain forms of employment
- 10A Board of directors to include persons with professional or other experience
- 10B Banking company to be managed by whole time chairman
- 10BB Power of Reserve Bank to appoint chairman of the Board of directors appointed on a whole-time basis or a managing director of a banking company
- 10C Chairman and certain directors not to be required to hold qualification shares
- 10D Provisions of sections 10A and 10B to override all other laws, contracts, etc
- 11 Requirement as to minimum paid-up capital and reserves
- 12 Regulation of paid-up capital, subscribed capital and authorised capital and voting rights of shareholders
- 12A Election of new directors
- 12B Regulation of acquisition of shares or voting rights
- 13 Restriction on commission, brokerage, discount, etc., on sale of shares
- 14 Prohibition of charge on unpaid capital
- 14A Prohibition of floating charge on assets
- 15 Restrictions as to payment of dividend
- 16 Prohibition of common directors
- 17 Reserve Fund
- 18 Cash reserve
- 19 Restriction on nature of subsidiary companies
- 20 Restrictions on loans and advances
- 20A Restrictions on power to remit debts
- 21 Power of Reserve Bank to control advances by banking companies
- 21A Rates of interest charged by banking companies not to be subject to scrutiny by courts
- 22 Licensing of banking companies
- 23 Restrictions on opening of new, and transfer of existing, places of business
- 24 Maintenance of a percentage of assets
- 25 Assets in India
- 26 Return of unclaimed deposits
- 26A Establishment of Depositor Education and Awareness Fund
- 27 Monthly returns and power to call for other returns and information
- 28 Power to publish information
- 29 Accounts and balance-sheet
- 29A Power in respect of associate enterprises
- 30 Audit
- 31 Submission of returns
- 32 Copies of balance-sheets and accounts to be sent to registrar
- 33 Display of audited balance-sheet by companies incorporated outside India
- 34 Accounting provision of this Act not retrospective
- 34A Production of documents of confidential nature
- 35 Inspection
- 35A Power of the Reserve Bank to give directions
- 35AA Power of the Central Government to authorize Reserve Bank for issuing directions to banking companies to initiate insolvency resolution process
- 35AB Power of Reserve Bank to issue directions in respect of stressed assets
- 35B Amendments of provisions relating to appointments of managing directors, etc., to be subject to previous approval of the Reserve Bank
- 36 Further powers and functions of Reserve Bank
- 36A Certain provisions of the Act not to apply to certain banking companies
