Need to review and recast legislations in banking sector:RBI

Tags: RBI, Banking
Absence of a uniform law governing various lenders has led to an uneven playing field, necessitating the need to review and recast the legislations governing the banking sector, says the Reserve Bank.

Speaking at the 'Financial Planning Congress 2011' here RBI Deputy Governor Anand Sinha said each of the statutes was crafted in a contemporaneous setting, reflecting the needs and concerns of the time.

"Since the origins of the banks have been historically different, they continue to be governed by the respective statutes as well as other general laws... However, the fact that different banks are governed by different laws has resulted in an uneven playing field which needs to be addressed," he said.

The senior RBI official's recent speech here was released by the apex bank today in its website.

"A single, harmonised and uniform legislation applicable to all banks will provide transparency, comprehensiveness and clarity and provide ease of regulation and supervision to the RBI... There is also a need to sort out the conflicts and overlaps between the primary laws governing the banking sector and other applicable laws," Sinha said.

Banks are regulated and supervised under the Banking Regulation Act, 1949. Public sector banks like the State Bank of India (SBI), SBI's subsidiary banks and the nationalised banks, which are constituted under different statutes, are governed by their respective statutes.

The provisions relating to the ownership and management of banking companies as contained in the Banking Regulation Act are not applicable to the public sector banks, he said.

Similarly, cooperative banks are constituted by the respective state Cooperative Societies Acts and other legislations.

Regarding the issue of management of banks, Sinha said RBI currently does not have the power to supersede the Board of Directors of a banking company and amendments for conferring such a power has been proposed in the Banking Laws Amendment Bill, 2011, which is now before Parliament.

"RBI should have the power to direct, by order, at any time that persons who are not fit and proper to hold equity or voting power in contravention of... Provisions, shall not have voting power. The 2011 Bill proposes to confer such power on RBI. This will help prevent unscrupulous persons from exercising control over banks," Sinha said.

He said RBI should have the discretion to determine the level and intensity of regulation and supervision depending upon the risk to the system from entities like cooperative societies.


  • Modi must clearly say that preservation of cows is not about manslaughter

    Instead of in-fighting between hindus and muslims, India should fight poverty and maintain its values of diversity and tolerance, as advised by Presid


Stay informed on our latest news!


Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs


Urs Schoettli

America lacks will to contain China

Recently both the Chinese leader Xi Jinping and Indian prime ...

Zehra Naqvi

Exercise gets creative juices flowing

Ever known that feeling of being sluggish and drowsy, of ...

Bubbles Sabharwal

You are what you believe yourself to be

The Gita says a man is what his shraddha is. ...


William D. Green

Chairman & CEO, Accenture