Law of Banking

Introduction
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 Law of Banking

notione
Law :- law is Collection of Rules
and Regulations which regulates te
the Society and human behaviour.

Fra
a L
en
 Law of Banking
Branch of Law
Law relating with Banking Sector 10
=

10
F2 Bank
Deposit income Loan

=>
12 14
Intrest
=>

Depositors ② 4 est
Borrowers
 The Institution of Banking is of a great
Institutions
⬇ Bank public importance and playing
predominant role in the economy of every
Deal
country in the world.
⬇
•Financial
•Monetary No economy in the world can functions
•Economic and there can be no economic growth
⬇ and development without the
Basically deals with Money Institution of Banking

Any person individuals or firm Or company who which transact banking business

Banker :- Banking Means:-

A Banker is one who carries on Carrying on Buisness with 💰 Money
banking business.
(पैसे से यापार करना)
A person who owns or has an
important job in a bank

Banking is considered to be the

“Backbone of a Nation’s Economy”.
The functions of the banks in India:
Acceptance of deposits from the public
1.Provide demand withdrawal facility
2.Lending facility
3.Transfer of funds
4.Issue of drafts
5.Provide customers with locker facilities
6.Dealing with foreign exchange
The Nature and Development of Banking) Law of Banking BANKER AND CUSTOMER
History of Banking system in India. Banker: Meaning and Definition
Different kinds of banks and financial organisation. Customer : Meaning and Definition
Reserve Bank of India or Central Bank of India Letter of credit Relation between Banker and Customer..
Nationalisation of Bank 1.General Relationship
Passbook 2. Special relationship
Statement of account 3.Banker Rights
4.Obligation of Banker

Deposit Loan

Depositors Borrowers
History of Banking System in India
Banca Monte dei Paschi di Siena also known as
BMPS, is the oldest surviving bank in the world
 History of Banking System in India

Depositors Deposit Loan Borrowers

The Institution of Banking was prevalent as early 2000BC in India during the vedic period in those days moneylenders
used to carry on business with people by accepting the safe deposit and also lend money to needy people

Moneylenders
A person whose business is lending
money to others who pay interest
The institution of banking was prevalent as early as 2000 B.C. in India during Vedic period.

In those days, merchants used to carry on business with people by accepting safe deposits and also to lend
money to needy people.

The Greek temples were used as depositories for people's surplus funds and were used as lending centers
for lending at higher rates of interest against gold and silver, which had been left for safe custody.

In India, during Vedic period, the ancient Hindu scriptures relate to the money lending transactions. Later,
during the Smrity period, banking business was carried on by the people of Vaish community by accepting
deposits and granting advances.

During the Buddhist period, money lending business was well spread. Buddha and Mahavir considered
money lending a sin and denounced it.

During the Muslim period, money lending business in India was declined due to the strict Quoranic
Injunction
The Banking sector development can be divided into three phases:
Phase I: The Early Phase which lasted from 1770 to 1969

Phase II: The Nationalisation Phase which lasted from 1969 to 1991

Phase III: The Liberalisation or the Banking Sector Reforms Phase which began in 1991 and
continues to flourish till date
In the medieval period, the first bank known as “Bank of Venice” was established in Italy in 1157
Goldsmith story
In England, the first modern bank known as “Bank of England” was establ.shed in the year 1694

The first modern bank known as “The Hindustan Bank” was established at
Calcutta in 1770

The Banking System in India began with the establishment of the Bank of
Hindustan in 1770 but it stopped operating by 1832.

The General Bank of India (1786-1791)

Bank of Bengal Established in Calcutta 1806

Formerly: Bank of Calcutta(1809

Name Change to Bengal )
Bank of Bengal (1806) Bank of Bombay (1840)

Bank of Madras (1843)

 Non – Presidential Bank

1865 :-Bank of Allahabad

Oudh Commercial Bank (1881-1958) First Bank – take care by Indian

Not 100% stake of indian

First Indian Bank

Punjab National Bank (1894)
100% stake of indian
The swadeshi movement
inspired the Indian business
•Bank of India (est. 1906), community to form banks of
•Canara Bank (est. 1906) their own from 1906 to 1911
•Bank of Baroda (est. 1908),
•Central Bank of India (est. 1911).
 World War I started 1914
World War II End 1918

Withdrawal ⬆
Deposit ⬇

500 – 600 so many Bank were Closed

Bank of Bengal, Bank of Madras, and Bank of Bombay

established by The East India Company. They together
amalgamated and formed the Imperial Bank.

•The Imperial Bank of India came into existence

on 27 January 1921
Situation of Presidency bank :- Worst •Headquarters:- Bombay
•Nationalization into State Bank of India in 1955
1929 The Great Depression (Started in USA)

Effect the Whole World

Withdrawal ⬆
Deposit ⬇
Bank Cash ⬇

So many Bank were Closed

Why?
Problem?
Reason Behind This
Govt. 🤔
 Main Reason:- Bank was not maintain minimum cash

Regulates:- No Organisation

In 1934 The Great Depression End

1934 In india :- Bank – Regulates – Act

RBI Act 1934

The Reserve Bank of India was set up on the basis of

the recommendations of the Hilton Young Commission

RBI Foundation:- 1935

India Independent 1947

 It started functioning from April 1st 1935
it was Nationalised with effect from Jan 1 1949 it took over the
functions of issuing currency from the Government of India

Banks were nationalised under the Banking Regulation Act, 1949.

Whereas, the Reserve Bank of India was nationalised in 1949.

Nationalised bank:- where the ownership and management of bank is taken

over by the government is called nationalisation of bank and the bank are
known as nationalised bank

In 1949, the Banking Regulation Act was enacted, Its main functions are:-
which empowered the Reserve Bank of India (RBI) •It issue currency notes
to regulate, control, and inspect the banks in India. •It Act as banker to the government
•It Act as banker to the bank and lends the bank as the last resort
The Banking Regulation Act also provided that no •It is a custodian of foreign exchange reserve
new bank or branch of an existing bank could be •issue license to bank operate in india.
opened without a license from the RBI, and no two •It control regulate the credit credited by the commercial bank
banks could have common directors.
In 1955 Imperial Bank of India :- Nationalised (SBI)

In 1969 14 Bank - Nationalised

These were the banks whose national deposits were more than 50 crores.
Given below is the list of these 14 Banks nationalised in 1969:

1.Allahabad Bank(indian Bank)

2.Bank of India
3.Bank of Baroda
4.Bank of Maharashtra
5.Central Bank of India
6.Canara Bank
7.Dena Bank(Bank of Baroda)
8.Indian Overseas Bank
9.Indian Bank
10.Punjab National Bank
11.Syndicate Bank(Canara Bank)
12.Union Bank of India
13.United Bank (PNB)
14.UCO Bank
In the year 1980, another 6 banks were nationalised, taking the number to 20 banks.
1.Andhra Bank(Union Bank of India)
2.Corporation Bank(union bank of India)
3.New Bank of India(PNB)
4.Oriental Bank of Comm.(PNB)
5.Punjab & Sind Bank
6.Vijaya Bank (Bank of Baroda)

Apart from the above mentioned 20 banks, there were seven subsidiaries
of SBI which were nationalised in 1959:
1.State Bank of Patiala
2.State Bank of Hyderabad
3.State Bank of Bikaner & Jaipur
4.State Bank of Mysore
5.State Bank of Travancore
6.State Bank of Saurashtra
7.State Bank of Indore
All these banks were later merged with the State Bank of India in 2017,

except for the State Bank of Saurashtra, which merged in 2008 and State Bank of Indore, which
merged in 2010.
 Liberalisation, Privatisation, Globalisation in the 1990s
Govt :- Chances to Private Bank
,Govt Push - Private

So That :- Govt :- Form Committee

1-ICICI
2-HDFC
3-UTI(Axis)
4-IDBI
5-Indus ind
6-DCB
7-Times Bank (HDFC)
8-Global Trust Bank(O.B.C)
9-Bank of Punjab(Centurion
Bank)
10-Centurio Bank (HDFC)

10 Private Bank get license

Liberalisation, Privatisation, Globalisation in the
1990s
Narasimham Committee Report II – 1998
In the early 1990s, the then government
embarked on a policy of liberalisation, licensing a
small number of private banks.

These came to be known as New Generation

tech-savvy banks, and included Global Trust Bank
(the first of such new generation banks to be set
up),

which later amalgamated with Oriental Bank of

Commerce, IndusInd Bank, UTI Bank (since
renamed Axis Bank), ICICI Bank and HDFC Bank.
This move, along with the rapid growth in the
economy of India, revitalised the banking sector
in India, which has seen rapid growth with strong
contribution from all the three sectors of banks,
namely, government banks, private banks and
foreign banks. Yes Bank
Kotak Mahindra Bank
 2013
Bimal Jalan Committee 2013

These Bank gets License

IDFC BANK
BANDHAN BANK

Former Governor of Reserve Bank of India

 23 September 2013, Committee on Comprehensive Financial Services for Small Businesses
and Low Income Households, headed by Nachiket Mor, was formed by the RBI.
On 7 January 2014, the Nachiket Mor committee submitted its final report.
Among its various recommendations, it recommended the formation of a new category of
bank called payments bank.
On 17 July 2014, the RBI released the draft guidelines for payment banks, seeking
comments for interested entities and the general public.
On 27 November, RBI released the final guidelines for payment banks. [8]

Payments banks is an Indian new model of banks conceptualised by the Reserve Bank of India (RBI)

These banks can accept a restricted deposit, which is currently limited to ₹200,000 per customer and may be increased
further.
These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such
banks.

Payments banks can issue ATM cards or debit cards and provide online or mobile banking. Bharti Airtel set up India ’s
first payments bank, Airtel Payments Bank.
 India Post Payments Bank (IPPB) is a division of India Post and a payments
bank from India operated by the India Post. Opened in 2018, the bank had
acquired about 4.0 crore customers by December 2020.

On 19 August 2015, the India Post received licence to run a payments bank from
the Reserve Bank of India. On 17 August 2016, it was registered as a public limited
government company for setting up a payments bank.[1] IPPB is operating with
the Department of Posts under Ministry of Communications

List of Payments Banks (PB)

1 Airtel Payments Bank Ltd
2 India Post Payments Bank Ltd
3 FINO Payments Bank Ltd
4 Paytm Payments Bank Ltd
5 Jio Payments Bank Ltd
6 NSDL Payments Bank Limited
Kinds of Bank
Legislative framework for the Banking Law in India

•1. Reserve Bank of India Act, 1934

•2. Banking Regulation Act, 1949
•3. Prevention of Money Laundering Act, 2002 (“PMLA”)
• Role of the Banks
•4. Foreign Exchange Management Act, 1999
•5. Limitation Act, 1963
•6. Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“DRT Act”)
•7. Lok Adalats under Legal Services Authority Act
•8. SARFAESI Act, 2002
• Features of the SARFAESI Amendment Act in 2016
•9. Lenders Liability Act
•10. Banking Ombudsman
•11. The Consumer Protection Act, 1986
•12. Bankers’ Book Evidence Act, 1891
•13. Negotiable instruments act 1881
List of Private Sector Banks in India
Sr. No Name of the Bank
1 Axis Bank Ltd.
2 Bandhan Bank Ltd.
3 CSB Bank Limited
4 City Union Bank Ltd.
5 DCB Bank Ltd.
6 Dhanlaxmi Bank Ltd.
7 Federal Bank Ltd.
8 HDFC Bank Ltd
9 ICICI Bank Ltd.
10 IndusInd Bank Ltd
11 IDFC FIRST Bank Limited
12 Jammu & Kashmir Bank Ltd.
13 Karnataka Bank Ltd.
14 Karur Vysya Bank Ltd.
15 Kotak Mahindra Bank Ltd
16 Lakshmi Vilas Bank Ltd.
17 Nainital bank Ltd.
18 RBL Bank Ltd.
19 South Indian Bank Ltd.
20 Tamilnad Mercantile Bank Ltd.
21 YES Bank Ltd.
22 IDBI Bank Limited
Tap on Bank
Get list of Bank operating in India ⬇
List of Public Sector Banks in India
Sr. No Name of the Bank
1 Bank of Baroda
2 Bank of India
3 Bank of Maharashtra
4 Canara Bank
5 Central Bank of India
6 Indian Bank
7 Indian Overseas Bank
8 Punjab & Sind Bank
9 Punjab National Bank
10 State Bank of India
11 UCO Bank
12 Union Bank of India
List of Payments Banks (PB)
1 Airtel Payments Bank Ltd
2 India Post Payments Bank Ltd
3 FINO Payments Bank Ltd
4 Paytm Payments Bank Ltd
5 Jio Payments Bank Ltd
6 NSDL Payments Bank Limited