Banking law in India- tannan, 27th edition- material for project.

Only those aspects which are

covered in the class.
History of banking- RBI website
Negotiable Instrument- Krishnaswamy

Terminologies
Bank-
What is the social relevance of an institution of a Bank? What makes it economically important?
History- People started using safes, for security, if somebody took away a safe, then what should
one do?
So banks are not safes[wont give you the same notes you deposited].
Why are the bank not charging you? Loans- bank is earning money on your money.
When we look at law permitting such institutions-
How would the state ensure that the money is into circulation?- features of security, making the
credit available to the business, pushing more money into the circulation
Why banking law?
What can be loan, can also be regulated to tap the resources into effective distribution. Good
market, no food-there should be societal and economic concerns.
If banking is business- is it protected under 19(1)(g).
Is it for the state or the union? F N Balsala case- promissory notes are in one list, notes-banks
are in one list.
The problem of rupee- Dr B R Ambedkar- the need of a central bank.

RBI History- from the website- need to read. Basic stuff.

Regular data releases-
BASIL committee of Central Banks- how do you govern banks, international institution.
Money Laundering- ill-gotten wealth into legal money.
KYC is an outcome of such money laundering exercises.
BANKS Charging money to keep your money- service charge- swiss bank- does not give out the
details of the customer
What is a bank? What is a customer?
TO read- first case- Foley v Hill (1848) II HLC (Clark's) 28

Sir John Paget-

Banker- must profess himself to be one and the public
ESSESNTIAL FUNTIONS OF A BANKER-
i. Take deposit, accounts
ii. Take current accounts
iii. Issue and pay cheques
iv. Collect cheques, crossed and uncrossed for his customers.
ACTING for a customer- you have to follow what is written on a cheque.
Halsbury’s law of England- banker is an individual, partnership, pot
DEFINITIONS UNDER SECTION 5(b) & (c) of the banking regulation act
Banking- you should accept money from the public, for the purpose of lending or investments,
it should be deposit of money, which is repayable, on demand withdrawable by cheque draft, or
otherwise- this is very important .
Banking company- company which does business, by starting the essential functions of a
banker.
This must perform both essential functions; a. accepting of deposits and b. lending or investing
the same, if the purpose of the accepting of deposits is not to lend or invest , the business will
not be called banking business.
5(c)- any company which is engaged in the manufacture of goods or carrier on any trade and
which accepts deposits of money from the public merely for the putpose

Essential functions of a bank-

As long as the bank does the business of banking, it is a bank, explain. 10 marks.
If you wanna buy a share(earlier), you would have to buy a share capital from a bank associated
to that company, and pay, the money would go to the company.
Bank emblems printed on the gold coins issued by the bank.
The deposits should be in terms of money only.
All capable who can have a contract can have an account.
Time and mode of withdrawal of deposit is mandated. As per the rules and regulations of the
banking.
Interpretation of sec 5 (b)- commissioner of income tax v co-op- supply & commission shop
limited.
Co-operative societies- V.S.S.S. Niyamitha v. State of Karnataka.
Multi state co-operative act- central legislation.
Can RBI regulate co-operative bank- which is different from cooperative societies.
Lending of money may be one phase of a banking business but
Cases- lakhi ram vs state of harayana

- Jagganath vs bank of india

Section 7- Bank, bankers , banking and banking company.
HDFC merger- example.

CUSTOMER-
Not defined by law.
A person who has an account in the bank is the customer.
A customer is not a consumer- 10 marker.
The account should be there for a time period, this is called a duration period. This is called a a
duration theory. Also there has to be a limited number of transactions.
This idea is now discarded.
Central Bank of India lit vs Gopinanthan Nair – AIR 1979 Ker 74

Trustee and beneficiary-

Ordinary a banker is a debtor of his customer in the respect of the deposits made by the latter,
but in certain circumstances he acts as a trustee also.
A trustee holds money or assets and performs certain functions for the benefots of some other
person called the beneficiary.
In case of trust, banker customer relationship is a special contract, when a person entrusts
valuable
Question- employee took money, check not issued, whose liability, KBC example.
Bank failed, you applied for refund, bank failed before that? How does this work?
Canara bank case apply here.

Thumb rule- when a person dealing with a bank delivers mobey to him an intention to create a
relationship of creditor and debtor between him and the bank in presumed , unless this
presumption is rebutted.
New bank of India vs Pyarelal-
KN Bhate vs Bhagwaan das
Official assignee of madras vs raja ram iyer
First national bank vs pioneer collection bank
Official assigning vs GW Iron
Bank of india vs official liquidator
UCO bank vs Hem Chandra sarkar

Different types of account- current, saving, and fd, time deposit ranging from three years
If Aadhar is necessary for you to open you bank account.
Banks have to compete the needs of the people and then compare the rate.
Form of deposit-
Demand deposit and time deposit.
Current Accounts- cash vs UPI example- panipuri wala receiving a notice of 25 lakh
In current accounts you genreall don’t have interst paid.
Find the directive and see if its still in operation- the reserve bank directive that prohibits the
payment of interest on current account.
Cheque- a document that you write ordering a bank to pay somebody- textile market in a locality.
Endorsing- giving the cheque to somebody, in current accounts third party cheques
Overdraft- for current accounts only, giving you more than what you have in account, for the
sake of the transaction.
Savings Account-
Meant for non trading customer-
Always have an interest , varies as per the bank.
Different types of accounts-

POST MID SEMS-

RBI ACT-

- 1934, the great economic depression.

- Run the system to its advantage.
- The Bailout of Greece-
- 2008 economic crises-
- Issue of Bank notes-
- Look into the case of Demonetisation
- Why did India open its market in 1991- We had a BOP crisis.
- What is monetary Policy and how is it different from fiscal policy?
- Purchasing power is more, then the price increases because of the demand- this can be
limited by the bank, how much can you limit it? Open Market Operations[treasury bill
and treasury bond]
- Growth vs Development

1. Monetary Stability
2. Currency and Credit System
 3. Modern Monetary Policy Framework
4. Price Stability
RBI-

- Central Bank, April 1935, Paid Up share capital 5 crore

- 1949- Nationalisation, not a commercial bank
- Headquarters and Member Boards
- RBI organisational chart
- Objectives- regulate issues of banknote, maintain reserves, operate the credit and
currency system.
A. Traditional Functions
i. Monopoly of Note Issue- Gold Standard- 1kg gold bar, which is equivalent to
some cash and Dollar Standard-
Section 22 of the RBI Act
RBI amendment act-
Section 38 of the act
Coins- are by the government, Notes- Are by the RBI.
Indian commemorative coins are issued by the Government of India, specifically
the Ministry of Finance through the Security Printing & Minting Corporation of
India Ltd.
Currency Chest
Mutilated notes can be exchanged for new ones
Remittance facilties-
ii. Banker to the Government
Budget Sessions- Finance bills that is placed.
Appropriation Act-
iii. Agent and Advisor of the Government
Demonetisation Case
iv. Banker to the Banks
One cannot open an account in the RBI
S bank Controversy and PMC Bank
Elasticity in Economics- The concerned economic institution, and its ability to
take a strain.
v. Acts as a Natural Clearing House
vi. Lender of Last Resort
Bank Rate
vii. Acts as the Controller of Credit
Trade Cycle-
viii. Custodian of Foreign Exchange Reserves
Foreign Exchange Management Act
ix. Exchange Control
x. Publishes Economic Statistics and Other Info
B. Supervisory Functions
i. Granting License to Bank- Under banking regulation act
 ii. Function of Inspection and Enquiry
iii. Implementing Deposit Insurance Scheme
iv. Periodical review of work done by commercial bank
v. Controls the NBFC
vi. Other headings from the PPT itself
C. PPT

RBI CONTROL OF BANK

Banking Regulation Act
Part ii- Business of Banking Companies- what can be seen as banking,
Section 6-

- Bank Guarantee- flows from 6(e)

- Can they do the technological advances of this?- yes it can.
- Apart from the listed ones they cant do anything else. In this Context, it is the central
government that permits.
Section 10(a)-

- People who have specialised knowledge in this field

- Mandatory to have, making the bank well grounded.
- This was discussed in detail
Section 10(b)

- Who can be a director

- CMD, director, BoD, etc- read from company law
- Chairman and managing director
- Section 36AA
- Appeal Mechanism
Section 10BB
Section 10D
Section 12A
Takeover and acquisition
Section 12B
Section 15
What is a dividend?
Section 18- cash reserves
Section 20
Section 21- What is an advance, and how is is it different from a role.
Amazon Flipkart- Buy now pay later- it is a loan
Section 22- told to investigate-

- Eligibility Criteria-
QUESTION- what all needs to become a bank.
Can you procure a license? If a company is incorporated today, can it become a bank?
Case- Dharini sugar vs UOI
POWER OF THE RESERVE BANK TO ISSUE DIRECTIONS-
Section 35A- Power of the Reserve Bank to issue direction

- Is cryptocurrency a legal valid tender in India? No, what about coin dcx?
- Any directions on NPA? And if so, where do they so source their power?
- KYC directions- And the source of the powers.- 35A, r/w 56.
- Willful Defaulter-Directions, and where do they source their power from?
- Is provincial framework applicable to co-operative banks? NO.
- Any info that can be derived out of the customer, can be derived from both ways, what
can be the counter to the power to counter section 35A.
- When an act is enacted, in the KYC scenario, if a request is made, you are expected to
share information. RTI act, can you write to the bank and ask for information, who is a
fugitive offender? What was its balance, did they take away money> should the bank
answer to such RTI application? –
- Do you have any of the NPA that are linked to the bank- should the bank answer your
RTI.
- HDFC case- module 1- RBI making the RTI regular- which was challenged.
- Article 19(6) – restrictions –
- We are looking at the limits of the powers of this section-
Section 35AA-

- Can reserve bank send out a direction to all the banks, to consider initiating action under
IBC, under the NPA.
- You don’t have a clear guideline on how they can use this power.
Section 35AB-
Dharini Sugars- this can be a direct question also

- Grounds for Contention- you don’t have a power, provided you have a power is it still
okay?
- Should bank proceed? So should they go with the IBC?
 - Read this again. Pakka question aayega isme.

Why is Non banking sector important?

Competence
Character
Durability
Absence of collateral litigation.
Yield: taken a security, If something is not okay. What is the yield I get?
Yojuls Interest Act
S.35 A
Payment and legislation act
Banking and regulation
Payment of debts
Safresi act
Dharani Sugar Mills
Is chit fund an NBFC?

CBI vs Ramesh Geli Case- 2016

Global trust Bank is merged with oriental bank of commerce.
Merger- ? – and how it is different from an acquisition.
They refer for an forensic audit, which showed some discrepancies. Which was money going out
of the bank, they notified the RBI, when the transaction was made, it was a private bank, now
can a action of corruption be brought against the manager of this bank? This was the issue,this
provision can be brought against a public official.
What is a public servant? - under the corruption act?
Para 12 of the decision-
Para 14- the start of the logic
Para 16- second limb of the logic
Typical Interpretation Clauses- para 21
Two important rules- in a rule or a regulation for a food safety standard, any milk food that is
adulterated, would attract sanctions. They gave what all comes under the milk, includes butter,
but not salted butter, Food authority- butter made from milk, or soy milk. Two rules in
determining the meaning.
Para 23- Venku Reddy- definition of Public Servant
Para 25-

DHARINI SUGAR CASE-

Oriental Kuries Limited, represented by its Chairman P. D. Jose v. Lissa and others 2019 Indlaw
SC 1092-
What is a chit fund?
Para 12-
Para13-
Should law regulated chit funds? By law we also means should RBI regulate chit funds?

State Bank of India vs Jah developers

Kailash Sahara v IDBI bank limited
WILLFUL DEFAULTERS-
On the circular-
1. You don’t have money
2. You took money for one purpose and do it another purpose
Then you are blacklist, you would brand somebody as unfit.
If wilful default is to be determined, by the bank, that is detrimental to my business, can I whose
conduct is in question, for that decision meeting should I be there? Can the lawyer of the
concerned person be there? Is the personal presence of the default holder mandatory? which
includes the army of the lawyers.