RBI & BANKING REGULATION ACT, 1949

• Banking [Sec 5(b)] : Banking means accepting, for the purpose of

lending or investment, of deposits of money from the public, repayable
on demand or otherwise, and withdrawable by cheque, draft, order or
otherwise.
• Banking Company [Sec 5(c)] : “Banking Company” means any company
which transacts the business of banking in India.
• Forms and Business in which Banking Company may engage [Sec. 6]:
• Forms of Business Allowed for a Banking Company [Sec. 6(1)]
• Other Business Prohibited [Sec. 6(2)]
 RBI AND BANKING REGULATION ACT, 1949

Prohibition Of Trading By Banking Companies [Sec 8.] – Should not

engage in buying, selling or bartering of goods for self or others.
• Exception – Not on business specified by CG in Sec. 6

Disposal Of Non Banking Assets [Sec 9.] – Immovable property can

be hold max for 7 years. Extension – By RBI max upto 5 years

• Exception - If for own use above rules not applicable.

Board Of Directors To Include Persons With Professional Or Other

Experience [sec. 10(A)]

• 51% or more directors to be specialized in certain specified areas [Sec. 10A(1)]

• Min. 2 directors to be specialized in certain specific areas[Sec. 10A(2)]
• Reconstitution Of Board if requirements not fulfilled[Sec. 10A(3)]
• Retirement of Directors by lots to ensure reconstitution[Sec. 10A(4)]
 Reserve Fund [Sec. 17]:

• Manner of creation of Reserve Fund –

• Transfer of Profit from P/l Acc to Reserve Fund
• Amount of Transfer:
• Min 25% of Net Profits – Commercial Banks
in India
RBI & BANKING • Min 25% of profits- before declaring dividend
for others.
REGULATION
ACT, 1949
Cash Reserve [Sec. 18]:

• Time Limit & Amount of Cash Reserve [Sec.

18(1)]
• Penal Interest payable for failure to maintain cash
reserve [Sec. 18(1A)(1B) & (1C)]
• Includes: when interest is payable, ROI, Waiver
of Interest and Exemption
 Power of EBI to control Advances By Banking
Companies [Sec. 21]:
• Formulation Of Policy By RBI in relation to advances [Sec. 21(1)]
• Directions by RBI to banking companies [Sec. 21(2)]
• Binding Effect of Directions of RBI[Sec. 21(3)]

Rate Of Interest Charged By Banking Companies Not

To Be Subject To Scrutiny By Courts [Sec. 21A]
RBI & BANKING
REGULATION Accounts and Balance Sheet [Sec. 29]
ACT, 1949

Audit [Sec. 30]

Submission Of Returns [Sec. 31] :

• Time Period and Manner
• Extension
 Copies Of Balance Sheets and Accounts
To Be Sent To Registrar [Sec. 32]

Inspection [Sec. 35]

• Order by RBI [Sec. 35(1)]

• Duties of Directors, Officers and Employees [Sec.
35(2)]
RBI & BANKING • Examination On Oath [Sec. 35(3)]
REGULATION • Report On Inspection To Be Furnished to CG [Sec.
ACT, 1949 35(4)]
• Action By CG [Sec. 35(4)]

Power of RBI To Give Directions [Sec.

35A]
• Purpose of Direction[Sec. 35A(1)]
• Modification or Cancellation of Direction [Sec.
35A(2)]
 Power Of CG to Authorize RBI For Issuing
Directions To Banking Companies To Initiate
Insolvency Resolution Process [Sec. 35AA]

Power Of RBI To Issue Directions In respect

Of Stressed Assets [Sec.35AB]
RBI & BANKING
REGULATION
Amendments Of Provisions Relating To
ACT., 1949 Appointments Of MD, ETC. To Be Subject To
Previous Approval Of RBI [Sec. 35B]

Power Of RBI To Remove Managerial And

Other Persons From Office[Sec. 36AA]
 RBI & BANKING REGULATION ACT, 1949

Power Of RBI TO Appoint Additional Directors [Sec. 36AB]:

• Appointment at the Discretion Of RBI[Sec. 36AB(1)]
• Terms and Conditions of appointment of additional directors[Sec. 36AB(2)]
• Additional Director Not To Be Counted In Total Number Of Directors [Sec. 36AB(3)].
Power Of CG To Acquire Undertakings Of Banking Companies In Certain Cases [Sec.
36AE]
• Condition For Acquisition Of Any Undertaking Of A Banking Company [Sec. 36AE(1)]
• No acquisition unless opportunity to show cause given [Provision to Sec. 36AE(1)]
• Vesting Of Undertaking in CG[Sec. 36AE(2)]
• Meaning Of Undertaking[Sec. 36AE(3)]
• Vesting Of Undertaking In Company[Sec. 36AE(4)]
• Effect On Rights and Liabilities [Sec. 36AE(5)]
• Effect On Agreements[Sec. 36AE(6)]
• Continuation Of Suits and Other Proceedings[Sec. 36AE(7)]
 RBI & BANKING REGULATION ACT, 1949

• Compensation To Be Given To Shareholders To The Acquired Bank:

• Compensation To Whom, And Amount Of Compensation[Sec.
36AG(1)]
• Determination Of Compensation By CG[Sec. 36AG(3)]
• Request To The CG For Re-Determination Of Compensation[Sec.
36AG(4)]
• DUTY Of CG To Refer the Matter To Tribunal[Sec. 36AG(5)]
• Compensation To Be Final and Binding On All Parties[Sec. 36AG(6)].
 NEGOTIABLE INSTRUMENTS (NI) (SEC 13)

Negotiable instrument means a promissory

notes or bills of exchange or cheque payable
either to order or to the bearer.
 Freely transferable from one person to another

Transferable infinitum
ESSENTIALS OF A
NEGOTIABLE
HDC gets a good title to negotiable instrument
INSTRUMENTS even though the title of transferor is defective

A negotiable instrument many name more than

one payee jointly or alternatively
 Made, accepted and endorsed for
consideration
Bearing a date was made or drawn
on such date
Accepted bill was accepted within a
PRESUMPTIONS reasonable date
Duly stamped

Holder of a NI is a HDC
 Promissory note

KINDS OF Bills of exchange

NEGOTIABLE
INSTRUMENTS

Cheque
 PROMISSORY NOTE

• A Promissory note is an instrument in writing containing

an unconditional undertaking signed by maker to pay a
certain sum of money only to a certain person, or the
order of a certain person or, the bearer of the instrument
 ESSENTIALS OF PROMISSORY NOTE

In writing
Express promise to pay
Definite and unconditional promise
Signed by maker
Promise to pay a certain sum
Promise to pay money only
Stamped
BILLS OF EXCHANG (BOE) (SEC 5)

• BOE is an instrument in writing

containing an unconditional order
signed by the maker directing a
certain person to pay a certain sum
of money only to a certain person;
or the order of a certain person ot
the bearer of the instruments
 ESSENTIALS OF BOE

Definite and
Express promise
In writing unconditional Signed by maker
to pay
promise

Drawer , Drawee
Promise to pay a Promise to pay
Stamped and Payee must
certain sum money only
be certain
CHEQUE

• A “cheque” is a bill of exchange

drawn on a specified banker and
not expressed to be payable
otherwise than on demand and it
includes the electronic image of a
truncated cheque and a cheque
in the electronic form.
 KINDS OF CROSSING

General Specific

Not negotiable A/c Payee

 • Endorsement means signing on the
face or bank or on a slip of paper
ENDORSEMENT
(SEC15) annexed to NI by the holder of NI
for the purpose such negotiable
instrument
 Special Endorsement

General Endorsement
KINDS OF Restrictive Endorsement
ENDORSEMENT

Partial Endorsement

Conditional Endorsement
 BANKERS DUTIES

1.KEEP RECORDS 2. ADVISE 3. GATHER 4. DISBURSE 5. ENFORCING

CLIENTS FINANCIAL FUNDS SECURITY
INFORMATION
 DISHOUNOUR OF CHEQUES

• Dishounour Of Cheque For Insufficiency, etc,. Of Funds In The Accounts [Sec.

138]
• Presumption In Favor Of Holder [Sec. 139]
• Defense which may not be allowed in any prosecution under Sec. 138 [ Sec. 140]
• Offences By Companies [ Sec. 141]
• Cognizance Of Offence [Sec. 142]
• Validation For Transfer Of Pending Cases [Sec. 142A]
• Power Of Court To Try Cases Summarily [Sec. 143]
• Offences To Be Compoundable [Sec. 147]
SARFAESI ACT,2002
 It stands for Securitization and
Reconstruction of Financial Assets
and Enforcement of Security
Interest Act, 2002

INTRODUCTION
The SARFAESI Act, 2002
empowers Banks / Financial
Institutions to recover their non-
performing assets without the
intervention of the Court
 OBJECTIVE OF SARFAESI ACT 2002

• Expeditious recovery of non-performing assets (NPAs)

of the banks and FIs.

• To allow banks and financial institutions to

auction properties (residential and commercial)
when borrowers fail to repay their loans.
 WHEN DO PROPERTIES FALL
UNDER THIS ACT?

• When a loan is defaulted and certain conditions are not

met, banks declare the loan as NPA and AUCTION it.

• The provisions of this Act are applicable only for NPA loans
with outstanding above Rs 1.00 lac. NPA loan accounts where
the amount is less than 20% of the principal and interest are
not eligible to be dealt with under this Act.
 WHAT THE ACT SAYS:

• The Act empowers the Bank

• To issue demand notice to the defaulting borrower andguarantor,
calling upon them to discharge their dues in full within 60 days
from the date of the notice
• To give notice to any person who has acquired any of thesecured
assets from the borrower to surrender the same to the Bank
• To ask any debtor of the borrower to pay any sum due orbecoming
due to the borrower.
•The borrowers can at any time before the sale is concluded, remit the
dues and avoid loosing the security.

•In case any unhealthy/illegal act is done by theAuthorised Officer, he

will be liable for penal consequences.

•The borrowers will be entitled to get compensation for such acts.

•For redressing the grievances, the borrowers can approach firstly the DRT
and thereafter the DRAT in appeal. The limitation period is 45 days and 30
days respectively
 ALTERNATIVE MECHANISMS TO RECOVER
NON – PERFORMING ASSETS [NPA]

• The Act provides three alternative methods for recovery of non-

performing assets, namely:

• Securitization
• AssetReconstruction
• Enforcement of Security without theintervention of the Court
This act makes provisions for two main methods of recovery of the NPAs as
follows:

•Securitisation: the process of issuing marketable securities, backed by a pool of

existing assets such as auto or home loans. After an asset is converted into a
marketable security, it is sold. A securitization company or reconstruction company
may raise funds from only the QIB (Qualified Institutional Buyers) by forming
schemes for acquiring financial assets.

•Asset Reconstruction: Enacting SARFAESI Act has given birth to the Asset
Reconstruction Companies in India. It can be done by either proper management of
the business of the borrower, or by taking over it or by selling a part or whole of the
business or by rescheduling of payment of debts payable by the borrower
enforcement of security interest in accordance with the provisions of this Act.
Where any dispute relating to securitisation or reconstruction or non-
payment of any amount, arises amongst any of the parties:

Such dispute shall be settled by conciliation or arbitration as provided in

the Arbitration and Conciliation Act, 1996 (26 of 1996), as if the parties to
the dispute have consented in writing for determination of such dispute by
conciliation or arbitration and the provisions of that Act shall apply
accordingly.
Provisions of this Act not to apply in certain cases:

 Any security interest for securing repayment of any financial asset not
exceeding one lakh rupees.

 Any security interest created in agricultural land.

 Any case in which the amount due is less than twenty per cent of the principal
amount.

 The SARFAESI Act is not applicable to NBFCs, however it is

applicable to PFIs.
 The high level of NPAs has led to lower interest income and loan loss
provisioning requirements which reduced the profitability of the banks.

 The Act is intended to strengthen Banks and FIs to recover NPAs faster.

 The Act empowers banks and FIs to seize charged assets without Court’s
intervention and sell them off.
 ESSENTIAL ELEMENTS OF INSURANCE
CONTRACT

OFFER & CONSIDERATION LEGAL CAPACITY CONSENSUS “AD LEGALITY OF

ACCEPTANCE TO CONTRACT IDEM” OBJECT
OR COMPETENCY
 INSURANCE REGULATORY AND
DEVELOPMENT AUTHORITY
• IRDA is the statutory, independent and apex body that
governs and supervise the Insurance Industry in India.
• IRDA is a ten member body consists of one chairman , five full
time members and four part time members.
• Its headquarters is in Hyderabad.
 ROLES

• To promote the interest and rights of policy holders.

• To promote and ensure the growth of Insurance Industry.
• To ensure speedy settlement of genuine claims and to prevent frauds and
malpractices
• To bring transparency and orderly conduct of in financial markets dealing
with insurance.
 FUNCTIONS

• Issues registration certificates.

• Supervises insurance rates and terms of insurance terms.
• Regulates investments of funds by companies.
• Provides licenses to insurance intermediaries.
• Ensures maintenance of solvency margin by companies.
• Specifies conditions for financial reports .
PRINCIPLES OF
INSURANCE-
1.Insurable Interest
The principle of insurable interest states that the person
getting insured must have insurable interest in the object of
insurance.
2. Indemnity-
Indemnity means security, protection and compensation
given against damage, loss or injury.
3. Causa Proxima-
Principle of Causa Proxima means when a loss is
caused by more than one causes, the proximate or the
nearest or the closest cause should be taken into
consideration to decide the liability of the insurer.
4. Mitigation of Loss-
insured must always try his level best to minimize the
loss of his insured property, in case of uncertain
events like a fire outbreak or blast, etc.
5. Subrogation-
According to the principle of subrogation, when the insured
is compensated for the losses due to damage to his insured
property, then the ownership right of such property shifts to
the insurer.
6. Contribution-
According to this principle, the insured can claim the
compensation only to the extent of actual loss either from all
insurers or from any one insurer.
7.Reinsurance-
Reinsurance is also known as insurance for insurers or stop-
loss insurance.
8.Double Insurance-
Double insurance is a type of insurance where the same
subject matter is insured more than once. In such cases the
same subject is insured, but with different insurers.
 1) Commercial 2) Directors and
general liability Officers liability
(CGL) policy insurance

STANDARD CLAUSES 3) Professional

4) Cyber risk
indemnity
OF LIABILITY insurance
insurance
INSURANCE

5) Trade credit
insurance:
 Valuation Clause

Warehouse to Warehouse Cause

STANDARD CLAUSES Memorandum Clause

OF MARINE
INSURANCE

Touch and Stay Clause

Sue and Labour Clause

 STANDARD CLAUSES OF FIRE
INSURANCE

AGREED BANK DESIGNATION OF CONTRACT PRICE

CLAUSE PROPERTY CLAUSE INSURANCE CLAUSE
TRADING OF
SECURITIES

LAW AND REGULATIONS

SECURITIES
 India ranks seventh with
a market capital of $2.1
trillion.

INDIAN SECURITY
MARKET Types of Security Markets in
India are –
• Primary Market
• Secondary Market
• Derivative Market
 REGULATORS

• The absence of conditions of perfect competition in the securities

market makes the role of regulator extremely important.
• The responsibility for regulating the securities market is shared by
–
 Department of Economic Affairs (DEA)
 Ministry of Company Affairs (MCA)
 Reserve Bank of India (RBI)
The Securities and Exchange Board of India (SEBI)
 REGULATORY FRAMEWORK

• The five main Acts governing the securities markets are –

The SEBI Act, 1992
The Companies Act, 1956
The Securities Contracts (Regulation) Act, 1956
The Depositories Act, 1996
Prevention of Money Laundering Act, 2002
 SECURITIES
CONTRACTS
(REGULATION)
ACT, 1956
 The Depositories Act, 1996

The Act has made the securities of all public limited

companies freely transferable, restricting the company’s right
to use discretion in effecting the transfer of securities, and
the transfer deed and other procedural requirements under
the Companies Act have been dispensed with.
THE COMPANIES ACT,
1956
 M A R K E T R E G U L AT I O N
B Y C O M PA N I E S A C T, 1 9 5 6
 THE
SECURITIES
AND
EXCHANGE
BOARD OF
INDIA (SEBI)
 • SEBI was set up with the main purpose of keeping a
check on malpractices and protect the interest of
investors.
• It was set up to meet the needs of three groups.
1. Issuers:
PURPOSE For issuers it provides a market place in which they
can raise finance fairly and easily.
AND ROLE
2. Investors:
OF SEBI
For investors it provides protection and supply of
accurate and correct information.
3. Intermediaries:
For intermediaries it provides a competitive
professional market.
 OBJECTIVES

• The primary objective of SEBI is to promote healthy and orderly

growth -of the securities market and secure investor protection.
• The objectives of SEBI are as follows:
Regulation of Stock Exchange
Protection to the Investors
Checking the insider Trading
Control over Brokers
 Powers relating to
stock exchanges &
intermediaries Power to impose
Power to initiate monetary penalties
actions in
functions assigned

POWERS
OF SEBI

Power to regulate
Powers under
insider trading
Securities
Contracts Act Power to regulate
business of stock
exchanges
 FUNCTIONS
Under Section 11 of the SEBI Act , there are mainly two types of functions. They are;
1. Regulatory Functions
Regulating stock exchanges and any other securities markets.
Registering and regulating intermediaries
Promoting and regulating self-regulatory organizations
Prohibiting insider trading
Regulating substantial acquisition of share and take over of companies.
Levying fees or other charges for carrying out the purpose of this section.
2. Developmental Functions
Promoting investor’s education
Training of intermediaries
Conducting research and publishing information useful to all market participants.
Promotion of fair practices
Promotion of self regulatory organizations
THANK YOU