(2) Relationship between Banker and Customer;

(3) Negotiable Instruments;

(4) Statutory Protection to Banker;

(5) Advances.

The Banking Regulation Act, 1949 is a law in India that regulates all banking companies in India.^[1] Passed as the Banking Companies Act 1949, it came into force on 16 March 1949 and changed to Banking Regulation Act 1949 from 1 March 1966. It is applicable in Jammu and Kashmir from 1956. Initially, the law was applicable only to banking companies. But, in 1965 it was amended to make it applicable to cooperative banks and to introduce other changes.^[2] In 2020 it was amended to bring the cooperative banks under the supervision of the Reserve Bank of India (RBI).

BUY LAW OF BANKING AND NEGOTIABLE INSTURMENTS S R MYNENI | ASIA LAW HOUSE| BEST QUALITY |5TH EDITION | 2025|

The Act provides a framework for the regulation of commercial banking in India. It supplements the Companies Act, 1956.^[4] Primary Agricultural Credit Society and cooperative land mortgage banks are excluded from the Act.^[2]

The Act gives the RBI the power to license banks, have regulation over shareholding and voting rights of shareholders; supervise the appointment of the boards and management; regulate the operations of banks; lay down instructions for audits; control moratorium, mergers and liquidation; issue directives in the interests of public good and on banking policy, and impose penalties.^[2]

In 1965, the Act was amended to include cooperative banks under its purview by adding the Section 56. Cooperative banks, which operate only in one state, are formed and run by the state government. But, RBI controls the licensing and regulates the business operations.^[2] The Banking Act was a supplement to the previous acts related to banking.

Banking regulation and supervision refers to a form of financial regulation which subjects banks to certain requirements, restrictions and guidelines, enforced by a financial regulatory authority generally referred to as banking supervisor, with semantic variations across jurisdictions. By and large, banking regulation and supervision aims at ensuring that banks are safe and sound and at fostering market transparency between banks and the individuals and corporations with whom they conduct business.

BUY LAW OF BANKING AND NEGOTIABLE INSTURMENTS S R MYNENI | ASIA LAW HOUSE| BEST QUALITY |5TH EDITION | 2025|

Its main component is prudential regulation and supervision whose aim is to ensure that banks are viable and resilient (“safe and sound”) so as to reduce the likelihood and impact of bank failures that may trigger systemic risk.

Prudential regulation and supervision requires banks to control risks and hold adequate capital as defined by capital requirements, liquidity requirements, the imposition of concentration risk (or large exposures) limits, and related reporting and public disclosure requirements and supervisory controls and processes.

Other components include supervision aimed at enforcing consumer protection, sometimes also referred to as conduct-of-business (or simply “conduct”) regulation and supervision of banks, and anti–money laundering supervision that aims to ensure banks implement the applicable AML/CFT framework.

Deposit insurance and resolution authority are also parts of the banking regulatory and supervisory framework. Bank (prudential) supervision is a form of “microprudential” policy to the extent it applies to individual credit institutions, as opposed to macroprudential regulation whose intent is to consider the financial system as a whole.

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