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RESERVE BANK OF INDIA ACT

Ministry of Law and Justice

Act nº 2 of 1934


  • Chapter 1
  • Chapter 2. Incorporation, Capital, Management and Business
  • Chapter 3
  • Chapter 3A. Collection and Furnishing of Credit Information
  • Chapter 3B. Provisions Relating to Non-Banking Institutions Receiving Deposits and Financial Institutions
  • Chapter 3C. Prohibition of Acceptance of Deposits by Unincorporated Bodies
  • Chapter 3D. Regulation of Transactions in Derivatives, Money Market Instruments, Securities, Etc.
  • Chapter 4
  • Chapter 5. Penalties
  • Schedules
  • Amending Acts
  • Act nº 2 of 1934

Preamble

THE RESERVE BANK OF INDIA ACT, 1934

[Act, No. 2 of 1934]1

[6th March, 1934]

PREAMBLE

An Act to Constitute a Reserve Bank of India

whereas it is expedient to constitute a Reserve Bank for India to regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in 2 [India] and generally to operate the currency and credit system of the country to its advantage;

And whereas in the present disorganisation of the monetary systems of the world it is not possible to determine what will be suitable as a permanent basis for the Indian monetary system;

But whereas it is expedient to make temporary provision on the basis of the existing monetary system, and to leave the question of the monetary standard best suited to India to be considered when the international monetary position has become sufficiently clear and stable to make it possible to frame permanent measures;

It is hereby enacted as follows:-

1. For Statement of Objects and Reasons, see Gazette of India, 1933, Pt. V, p. 160; and for Report of Select Committee, see Gazette of India, 1933. Pt. V, pp. 197-207.

For the functioning of the Reserve Bank in or in relation to Burma, after the separation of that country from India, see the India and Burna (Burma Monetary Arrangements) Order, 1937.

This Act was extended to Berar by Act 4 of 1941; to Goa, Daman and Diu by Regulation 6 of 1962; to Dadra and Nagar Haveli by Regulation 6 of 1963, section 2 and Schedule 1 (w.e.f. 1-7-1965); to the whole of the Union Territory of Lakshadweep by Regulation 8 of 1965, section 3 and Schedule; to the State of Sikkim: vide Notification No. S.O. 208 (E), dated 16th May, 1975, Extraordinary, Pt. II, Section 3 (ii), p. 1213 and came into force in Sikkim (w.e.f. 14-8-1976); vide Notification No. S.O. 547 (E), dated 13th August, 1976.

This Act has been supplemented by Act 28 of 1964.

2. Substituted by the A.O. 1948, for 'British India'.


Chapter 1

Section 1. Short title, extent and commencement

(1) This Act may be called the Reserve Bank of India Act, 1934.

1 [(2) It extends to the whole of India 2 [3 [***]].]

(3) This section shall come into force at once, and the remaining provisions of this Act shall come into force on such date or dates4 as the 5 [Central Government] may, by notification in the Gazette of India, appoint.

1. Substituted by the A.O. 1950, for sub-section (2).

2. Substituted by Act 32 of 1951, section 3, for "Part Bstates".

3. The words "Except the State of Jammu and Kashmir" omitted by Act 62 of 1956, section 2 and Schedule (w.e.f. 1-11-1956).

4. Sections 2 to 1947, 50 to 52, 55 to 58 and 61 were brought into force on 1st January, 1935, see Gazette of India, 1934, Pt. I, p. 1369, and the other sections on 1st April, 1935, see Gazette of India, 1935, Pt. I, p. 538.

5. Substituted by the India and Burma (Burma Monetary Arrangements) Order, 1937, for "Governor-General in Council".


Section 2. Definitions

In this Act, unless there is anything repugnant in the subject or context,-

1 [***]

2 [(aii)] "the Bank" means the Reserve Bank of India constituted by this Act;

3 [(aiii)] "Bank for International Settlements" means by body corporate established with the said name under the law of Switzerland in pursuance of an agreement dated the 20th January, 1930, signed at the Hague;]

(b) "the Central Board" means the Central Board of Directors of the Bank;

4 [***]

5 [6 [(bvi)] "Deposit Insertedurance Corporation" means the Deposit Insertedurance Corporation established under section 3 of the Deposit Insertedurance Corporation Act, 1961 (47 of 1961);]

7 [8 [***]

9 [***]

10 [(bviiia)] "Exim Bank" means the Export-Import Bank of India established under the Export-Import Bank of India Act, 1981;]

11 [(bix) "foreign currency" and "foreign exchange' have the meanings respectively assigned to them in the Foreign Exchange Regulation Act, 1973(46 of 1973);

(c) "Industrial Finance Corporation" means the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948 (15 of 1948);]

3 [(ca) "International Development Association" means the "Association" referred to in the International Development Association (Status, Immunities and Privileges) Act, 1960 (32 of 1960);

(cb) "International Finance Corporation" means the "Corporation" referred to in the International Finance Corporation (Status, Immunities and Privileges) Act, 1958 (42 of 1958);

(cc) "International Monetary Fund" and "International Bank for Reconstruction and Development" means respectively the "International Fund" and the "International Bank", referred to in the International Monetary Fund and Bank Act, 1945;]

12 [ccc) "National Bank" means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);]

13 [cccc) "National Housing Bank" means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987;]

14 [***]

15 [(cv) "Reconstruction Bank" means the Industrial Reconstruction Bank of India established under section 3 of the Industrial Reconstruction Bank of India Act, 1984;]

(d) "rupee coin" means 16 [***] rupees which are legal tender 17 [in 18 [India]] under the provisions of the Indian Coinage Act, 1906 (3 of 1906);

19 [***]

(e) "scheduled bank" means a bank included in the Second Schedule;

20 [(el) "Small Industries Bank" means the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989;

21 [(ea) "Sponsor Bank" means a Sponsor Bank as defined in the Regional Rural Banks Act, 1976;]

22 [23 [(eb)] "State Bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955);]

24 [***]

25 [(fi)"State Financial Corporation" means any State Financial Corporation established under the State Financial Corporations Act, 1951 (63 of 1951);]

26 [(g) "Unit Trust" means the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963);]

12 [(h) "agricultural operations", "central co-operative bank", "co-operative society", "crops", "marketing of corps", "pisciculture", "regional rural bank" and "State co-operative bank" shall have the meanings respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981;

(i) "co-operative bank", "co-operative credit society", "director", "primary agricultural credit society", "primary co-operative bank" and "primary credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949).]

1. Clauses (a) and (ai) omitted by Act 61 of 1981, section 61 and Schedule II (w.e.f. 1-5-1966). Earlier clauses (a) and (aa) were re-lettered as clauses (ai) and (aii) respectively and before clause (ai) so re-lettered clause (a) was Inserted by Act 23 of 1965, section 2 (w.e.f. 1-3-1966).

2. Clause (aa) re-lettered as clause (aii) by Act 23 of 1965, section 2 (w.e.f. 1-34966).

3. Inserted by Act 51 of 1974, section 2 (w.e.f. 13-12-1974).

4. Clauses (bi), (bii), (biii), (biv) and (bv) omitted by Act 61 of 1981, section 61 and Schedule II (w.e.f. 1-5-1982) Earlier clauses (bi), (bii), (biii), (biv) and (bv) were Substituted by Act 23 of 1965, section 2, for clause (bb) (w.e.f. 1-5-1966).

5. Clause (bbb) Inserted by Act 47 of 1961, section 51 and Schedule IT (w.e.f. 1-1-1962).

6. Clauses (bbb) re-lettered as clause (bvi) by Act 23 of 1965, section 2 (w.e.f. 1-3-1966).

7. Clause (bbbb) Inserted by Act 18 of 1964, section 38 and Schedule II (w.e.f. 1-7-1964).

8. Clause (bbbb) re-lettered as clause '(bvii) "Development Bank" means the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964); by Act 23 of 1965, section 2 (w.e.f. 1-3-1966) and omitted by Act 53 of 2003, section 12 and Schedule, Pt. I.

9. Clause (bviii) Inserted by Act 23 of 1965, section 2 (w.e.f. 1-3-1966) and omitted by Act 61 of 1981, section 61 and Schedule II (w.e.f. 12-7-1982).

10. Ins by Act 28 of 1981, section 40 and Schedule II (w.e.f. 1-1.-1982).

11. Substituted by Act 24 of 1978, section 3, for clause (c) (w.e.f. 21-7-1978).

12. Inserted by Act 61 of 1981, section 61 and Schedule II (w.e.f. 1-5-1982).

13. Inserted by Act 53 of 1987, section 56 and the Second Schedule (w.e.f. 9-7-1988).

14. Clauses (ci), (cia), (cii), (ciii), (civ) and (cv) omitted by Act 61 of 1981, section 61 and Schedule II (w.e.f. 1-5-1982). Earlier clauses (ci), (cii), (ciii), (civ) were Inserted by Act 23 of 1965, section 2 (w.e.f. 1-3-1966) and clause (cia) Inserted by Act 51 of 1974, section 2 (w.e.f. 13-12-1974) and clause (cv) Inserted by Act 21 of 1976, section 33 (w.r.e.f. 26-9-1975).

15. Inserted by Act 62 of 1984, section 71 and Schedule III (w.e.f. 20-3-1985).

16. The word "silver" omitted by Act 62 of 1948, section 7 and Schedule (w.e.f. 1-1-1949).

17. Inserted by the India and Burma (Burma Monetary Arrangements) Order, 1937.

18. Substituted by Act 32 of 1951, section 2, for "the States" (w.e.f. 1-11-1951),

19. The word "and" omitted by the India and Burma (Burma Monetary Arrangements) Order, 1937.

20. Inserted by Act 39 of 1989, sec 57 and Schedule II.

21. Inserted by Act, 21 of 1976, section 33 (w.r.e.f. 26-9-1975).

22. Clause (ee) Inserted by Act 23 of 1955, section 52 and Schedule III (w.e.f. 1-7-1955). Earlier clause (ee) was Inserted by the A.O. 1950 and was omitted by Act 32 of 1951, section 4 (w.e.f. 1-11-1951).

23. Clause (ei) re-lettered as clause (eb) by Act 21 of 1976, section 33 (w.e.f. 26-9-1975).

24. Clause (f) omitted by Act 61 of 1981, section 61 and Schedule II (w.e.f. 1-5-1982). Earlier clauses (f) to (k) were Inserted by the India and Burma Monetary Arrangement Order, 1937 and were omitted by Act 11 of 1947, section 2 (w.e.f. 1-4-1947).

25. Inserted by Act 24 of 1978, section 3 (w.e.f. 21-7-1978).

26. Inserted by Act 52 of 1963, section 44 and Schedule II (w.e.f. 1-2-1964). Earlier clause (g) was Inserted by Act 32 of 1951, section 4 (w.e.f. 1-11-1951) and was omitted by Act 62 of 1956, section 2 and Schedule (w.e.f. 1-11-1951).


Chapter 2
Incorporation, Capital, Management and Business

1. Substituted by Act 62 of 1948, section 7 and Schedule, for "SHARE CAPITAL" (w.e.f. 1-1-1949).


Section 3. Establishment and incorporation of Reserve Bank

(1) A bank to be called the Reserve Bank of India shall be constituted for the purposes of taking over the management of the currency from the1[Central Government] and of carrying on the business of banking in accordance with the provisions of this Act.

(2) The Bank shall be a body corporate by the name of the Reserve Bank of India, having perpetual succession and a common seal, and shall by the said name sue and be sued.

1. Substituted by the India and Burma (Burma Monetary Arrangements) Order, 1937, for "Governor-General in Council".


Section 4. Capital of the Bank

1[4. Capital of the Bank

The capital of the Bank shall be five crores of rupees.]

1. Substituted by Act 62 of 1948, section 7 and Schedule, for section 4 (w.e.f. 1-1-1949).


Section 5. Increase and reduction of share capital (Repealed)

[ Rep. by Act 62 0/1948, section 7 and Schedule (w.e.f. 1-1-1949).]

Section 6. Offices, branches and agencies

The Bank shall, as soonas may be, establish offices in Bombay, Calcutta, 1 [Delhi and Madras]2 [***] and may establish branches or agencies in any other place inIndia 3 [***] or, with the previous sanction of the 4 [CentralGovernment] elsewhere,

1.Substituted by Act 11 of 1947, section 5, for "Delhi, Madras andRangoon"(w.e.f. 1-4-1947).

2.The words "and a branch in London " omitted by Act 24 of 1955, section3 (w.e.f. 8-5-1955).

3.The words "or Burma" Inserted by the India and Burma (Burma MonetaryArrangements) Order, 1937 and omitted by Act 11 of 1947, section 5 (w.e.f.1-4-1947).

4.Substituted by the India and Burma (Burma Monetary Arrangements) Order, 1937,for "Governor-General in Council".


Section 7. Management

1 [7.Management

(1) The CentralGovernment may from time to time give such directions to the Bank as it may,after consultation with the Governor of the Bank, consider necessary in thepublic interest.

(2) Subject to any suchdirections, the general superintendence and direction of the affairs andbusiness of the Bank shall be entrusted to a Central Board of Directors whichmay exercise all powers and do all acts and things which may be exercised ordone by the Bank.

2 [(3)Save as otherwise provided in regulations made by the Central Board, theGovernor and in his absence the Deputy Governor nominated by him in his behalf,shall also have powers of general superintendence and direction of the affairsand the business of the Bank, and may exercise all powers and do all acts andthings which may be exercised or done by the Bank.]]

1.Substituted by Act 62 of 1948, section 7 and Schedule, for section 7 (w.e.f.1-1-1949).

2.Substituted by Act 32 of 1951, section 5, for sub-section (3) (w.r.e.f.1-1-1949).


Section 8. Composition of the Central Board, and term of office of Directors

1 [(1)TheCentral Board shall consist of the following Directors, namely:-

(a) a Governor and 2 [notmore than four] Deputy Governors to be appointed by the Central Government;

(b) four Directors tobe nominated by the Central Government, one from each of the four Local Boardsas constituted by section 9;

(c) 3 [ten]Directors to be nominated by the Central Government; and

(d) one Governmentofficial to be nominated by the Central Government.]

(2) The Governor andDeputy Governors shall devote their whole time to the affairs of the Bank, andshall receive such salaries and allowances as may be determined by the CentralBoard, with the approval of the 4 [Central Government]:

5 [Providedthat the Central Board may, if in its opinion it is necessary in the publicinterest so to do, permit the Governor or a Deputy Governor to undertake, at therequest of the Central Government or any State Government, such part-timehonorary work, whether related to the purposes of this Act or not, as is notlikely to interfere with his duties as Governor or Deputy Governor, as the casemay be:]

6 [Providedfurther that the Central Government may, in consultation with the Bank, appointa Deputy Governor as the Chairman of the National Bank, on such terms andconditions as that Government may specify.]

(3) A Deputy Governorand the Director nominated under clause (d) of subsection (1) may attend anymeeting of the Central Board and take part in its deliberations but shall not beentitled to vote:

7 [Providedthat when the Governor is, for any reason, unable to attend any such meeting, aDeputy Governor authorised by him in this behalf in writing may vote for him atthat meeting.]

(4) The Governor and aDeputy Governor shall hold office for such term not exceeding five years as the 4 [CentralGovernment] may fix when appointing them, and shall be eligible forre-appointment.

8 [ADirector nominated under clause (c) of sub-section (1) shall 9 [***]hold office for a period of four years 10 [and thereafter until hissuccessor shall have been nominated].]

A Director nominatedunder clause (d) of sub-section (1) shall hold office during the pleasure of the4 [Central Government.]

(5) No act orproceeding of the Board shall be questioned on the ground merely of theexistence of any vacancy in, or any defect in the constitution of, the Board.

11 [12 [***]

(7) A retiring Directorshall be eligible for re-nomination.]

1.Substituted by Act, 62 of 1948, section 7 and Schedule, for sub-section (1)(w.e.f. 1-1-1949).

2.Substituted by Act, 18 of 1964, section 38 and Schedule, II, for"three" (w.e.f. 1-7-1964).

3.Substituted by Act 18 of 1964, section 38 and Schedule II, for "six"(w.e.f. 1-7-1964).

4.Substituted by the India and Burma (Burma Monetary Arrangements) Order, 1937,for "Governor-General in Council".

5.Inserted by Act 35 of 1962, section 2 (w.e.f. 15-9-1962).

6.Inserted by Act 61 of 1981, section 61 and Schedule II (w.e.f. 1-5-1982).

7.Substituted by Act 54 of 1953, section 2, for the proviso (w.e.f. 30-12-1953).

8.Substituted by Act 62 of 1948, section 7 and Schedule for the second paragraph(w.e.f. 1-1-1949).

9.The words, "subject to the provisions of sub-section (6)" omitted byAct 18 of 1964, section 38 and Schedule II (w.e.f. 1-7-1964).

10.Inserted by Act 51 of 1974, section 4 (w.e.f. 13-12-1974).

11.Inserted by Act 62 of 1948, section 7 and Schedule (w.e.f. 1-1-1949).

12.Sub-section (6) omitted by Act 18 of 1964, section 38 and Schedule II (w.e.f.1-7-1964).


Section 9. Local Boards, their constitution and functions

1[9. Local Boards, their constitution and functions

(1) A Local Board shall be constituted for each of the four areas specified in the First Schedule and shall consist of five members to be appointed by the Central Government to represent, as far as possible, territorial and economic interests and the interests of cooperative and indigenous banks.

(2) The members of the Local Board shall elect from amongst themselves one person to be the chairman of the Board.

2[(3) Every member of a Local Board shall hold office for a term of four years and thereafter until his successor shall have been appointed and shall be eligible for re-appointment.]

(4) A Local Board shall advise the Central Board on such matters as may be generally or specifically referred to it and shall perform such duties as the Central Board may delegate to it.]

1. Substituted by Act 62 of 1948, section 7 and Schedule, for section 9 (w.e.f. 1-1-1949).

2. Substituted by Act 51 of 1974, section 5, for sub-section (3) (w.e.f. 13-12-1974).


Section 10. Disqualifications of Directors and members of Local Boards

(1) No person may be a Director or a member of a Local Board who-

(a) is a salaried Government official 1 [***] 2 [***], or

(b) is, or at any time has been, adjudicated an insolvent, or has suspended payment or has compounded with his creditors, or

(c) is fund lunatic or becomes of unsound mind, or

(d) is an officer or employee of any bank, or

3 [(e) is a Director of banking company within the meaning of clause (c) of section 5 of the 4 [Banking Regulation Act, 1949 (10 of 1949)], or of a co-operative bank.]

(2) No two persons who are partners of the same mercantile firm, or are Directors of the same private company, or one of whom is the general agent of or holds a power of procuration from the other, or from a mercantile firm of which the other is a partner, may be Directors or members of the same Local Board at the same time.

(3) Nothing in clause (a), clause (d) or clause (e) of sub-section (1) shall apply to the Governor, or to a Deputy Governor or to the Director nominated under clause (d) of sub-section (1) of section 8.

1. The words "or a salaried official of a State in India" omitted by the A.O. 1950.

2. The words "or Burma" Inserted by the India and Burma (Burma Monetary Arrangements) Order, 1937 and omitted by Act 11 of 1947, section 8 (w.e.f. 1-4-1947).

3. Substituted by Act 23 of 1965, section 3, for clause (e) (w.e.f. 1-3-1966).

4. Substituted by Act 51 of 1974, section 3, for "Banking Companies Act, 1949" (w.e.f. 13-12-1974).


Section 11. Removal from and vacation of office

(1) The 1 [Central Government] may remove from office the Governor, or a Deputy Governor or 2 [any other Director or any member of Local Board]:

3 [***]

4 [(2) A Director nominated under clause (b) or clause (c) of sub-section(l) of section 8 shall cease to hold office if without leave from the Central Board he absents himself from three consecutive meetings of the Board convened under sub-section (1) of section 13.]

(3) The 1 [Central Government] shall remove from office any Director, and the Central Board shall remove from office any member of a Local Board, if such Director or member becomes subject to any of the disqualifications specified in sub-section (1) or sub-section (2) of section 10.

(4) A Director or member of a Local Board removed or ceasing to hold office under the foregoing sub-sections shall not be eligible for re-appointment either as Director or as member of a Local Board until the expiry of the term for which his appointment was made.

(5) The 5 [***] nomination 6 [***] as Director or member of a Local Board of any person who is a member of 7 [Parliament or the Legislature 8 [of any State]] shall be void, unless within two months of the date of his 5 [***] nomination 2 [***] he ceases to be such member, and if any Director or member of a Local Board is elected or nominated as a member of 9 [Parliament or any such Legislature], he shall cease to be a Director or member of the Local Board as from the date of such election or nomination, as the case may be.

(6) A Director may resign his office to the 1 [Central Government], and a member of a Local Board may resign his office to the Central Board, and on the acceptance of the resignation the office shall become vacant.

1. Substituted by the India and Burma (Burma Monetary Arrangements) Order, 1937, for "Governor-General in Council".

2. Substituted by Act 32 of 1951, section 6, for "any other Director" (w.e.f. 1-11-1951).

3. The proviso omitted by Act 62 of 1948, section 7 and Schedule (w.e.f. 1-1-1949).

4. Substituted by Act 62 of 1948 section 7 and Schedule, for sub-section (2) (w.e.f. 1-1-1949).

5. The word "appointment ," omitted by Act 62 of 1948 section 7 and Schedule (w.e.f. 1-1-1949).

6. The words "or election" omitted by Act 62 of 1948 section 7 and Schedule, (w.e.f. 1-1-1949).

7. Substituted by the A.O. 1950, for "the Central Legislature, a provincial legislature or the Coorg Legislature Council".

8. Substituted by Act 32 of 1951, section 6, for "of a Part A State or a Part C State" (w.e.f. 1-11-1951).


Section 12. Casual vacancies and absences

(1) If the Governor ora Deputy Governor by infirmity or otherwise is rendered incapable of executinghis duties or is absent on leave or otherwise in circumstances not involving thevacation of his appointment, the 1 [Central Government] may, afterconsideration of the recommendations made by the Central Board in this behalf,appoint another person to officiate for him, and such person may,notwithstanding anything contained in clause (d) or sub-section (1) of section10, be an officer of the Bank.

2 [***]

(3) Where any casualvacancy in the office of any member of a Local Board occurs 3 [***]the Central Board may nominate thereto any 4 [***] person recommendedby the 5 [other] members of the Local Board.

(4) Where any casualvacancy occurs in the office of a Director other than the vacancies provided forin sub-section(l), the vacancy shall be filled 6 [by the CentralGovernment].

(5) A person nominated 7 [***]under this section to fill a casual vacancy shall 8 [***] hold officefor the unexpired portion of the term of his predecessor.

1.Substituted by the India and Burma (Burma Monetary Arrangements) Order, 1937,for "Governor-General in Council".

2.Sub-section (2) omitted by Act 62 of 1948, section 7 and Schedule (w.e.f.1-1-1949).

3.Certain words omitted by Act 62 of 1948, section 7 and Schedule (w.e.f.1-1-1949).

4.The word "qualified" omitted by Act 62 of 1948, section 7 and Schedule(w.e.f. 1-1-1949).

5.Substituted by Act 62 of 1948, section 7 and Schedule, for "elected"(w.e.f. 1-1-1949).

6.Substituted by Act 62 of 1948, section 7 and Schedule, for certain words (w.e.f.1-1-1949).

7.The words "or elected" omitted by Act 62 of 1948, section 7 andSchedule (w.e.f. 1-1-1949).

8.The words "subject to the proviso contained in sub-section (4)"omitted by Act 62 of 1948, section 7 and Schedule (w.e.f. 1-1-1949).