Salient Feature of Banking Laws (Amendment) Bill 2012

The Banking Laws
(Amendment) Bill
2011 was introduced
in order to amend the
Banking Regulation
Act, 1949, the Banking
Companies
(Acquisition and
Transfer of
Undertakings) Act,
1970/1980. The said
Bill has been passed
by both the Houses of
Parliament during its
just concluded Winter
Session
.
This Bill would
strengthen the
regulatory powers of
Reserve Bank of India
(RBI) and to further
develop the banking
sector in India. It will
also enable the
nationalized banks to
raise capital by issue
of preference shares
or rights issue or
issue of bonus shares.
It would also enable
them to increase or
decrease the
authorized capital
with approval from
the Government and
RBI without being
limited by the ceiling
of a maximum of Rs.
3000 crore.
Beside above, the Bill
would pave the way
for new bank licenses
by RBI resulting in
opening of new banks
and branches. This
would not only help
in achieving the goal
of financial inclusion
by providing more
banking facilities but
would also provide
extra employment
opportunities to the
people at large in the
banking sector.
The salient features of
the Bill are as follows:

• To enable banking
companies to issue
preference shares
subject to regulatory
guidelines by the RBI;

• To increase the cap
on restrictions on
voting rights;

• To create a
Depositor Education
and Awareness Fund
by utilizing the
inoperative deposit
accounts;

• To provide prior
approval of RBI for
acquisition of 5% or
more of shares or
voting rights in a
banking company by
any person and
empowering RBI to
impose such
conditions as it deems
fit in this regard;

• To empower RBI to
collect information
and inspect associate
enterprises of banking
companies;

• To empower RBI to
supersede the Board
of Directors of
banking company and
appointment of
administrator till
alternate
arrangements are
made;

• To provide for
primary cooperative
societies to carry on
the business of
banking only after
obtaining a license
from RBI;
• To provide for
special audit of
cooperative banks at
instance of RBI by
extending
applicability of
Section 30 to them;
and

• To enable the
nationalized banks to
raise capital through
“bonus” and “rights”
issue and also enable
them to increase or
decrease the
authorized capital
with approval from
the Government and
RBI without being
limited by the ceiling
of a maximum of Rs.
3000 crore under the
Banking Companies
(Acquisition and
Transfer of
Undertakings) Act,
1970/1980.