Banking Laws Notes
Subject Overview
The third Banking and Insurance elective, covering the statutory framework of Indian banking — the Banking Regulation Act 1949, the Negotiable Instruments Act 1881, the RBI Act 1934, and recovery/
Subject at a glance
4
Units
35
Topics
4
Credits
4
Infographics
Unit-wise Syllabus
4 units — open any unit for detailed topic-wise notes, diagrams and important exam questions
- Concept of bank and banker
- functions and classification of banks
- bank-customer relationship
- government control
- management of banking companies
- reconstruction and reorganization
- suspension and winding up
- social control over banking
Licensing
Section 22: licence to do banking
Management
Board, CEO appointments
Cash reserve and SLR
Inspection and directions
Amalgamation and winding up
Study guide
This unit covers the Banking Regulation Act 1949: bank and banker, functions, classification, bank-customer relationship, government control, management, reconstruction, suspension, winding up and social control. Learn the key sections on licensing and control.
- Definition and characteristics of negotiable instruments
- types
- promissory notes/bills of exchange/cheques
- liabilities and capacity of parties
- holder in due course
- transfer and negotiation
- crossing and payment
- dishonor
- noting and protest
- endorsement rules
General crossing
Pay only through a bank account
Two parallel lines
Special crossing
Pay only through the named bank
Bank's name written
Account payee
Credit only to the payee's account
A/c Payee written
Study guide
You study the Negotiable Instruments Act 1881: types, liabilities, holder in due course, negotiation, crossing and payment, dishonour, noting and protest and endorsement. Practise identifying the type of endorsement.
- Incorporation
- capital
- management and business of banking companies
- RBI's central banking functions
- collection of credit information
- RBI's control over non-banking and financial institutions
- credit control
- RBI's changing role
Quantitative
Repo rate, CRR, SLR, open market operations
Qualitative
Margin requirements, credit rationing
Moral suasion
Persuasion and guidance
Direct action
Against non-compliant banks
Study guide
You study the Reserve Bank of India Act 1934: incorporation, capital, management, central banking functions, credit information, control over NBFCs and credit control. Learn the RBI's main functions and powers.
- Law of Limitation
- Bankers' Books Evidence Act
- Recovery of Debts Due to Banks and Financial Institutions Act 1993
- TDS/banking cash transaction tax
- SARFAESI Act 2002
- asset reconstruction companies
- Banking Ombudsman
- Lok Adalats
- Lender's Liability Act
DRT (RDDBFI Act)
Debts of ₹20 lakh and above
Special tribunals, faster recovery
SARFAESI Act
Secured loans
Enforce security without court
Lok Adalat
Smaller and compromise cases
Settlement, no appeal
Study guide
You study the Law of Limitation, the Bankers' Books Evidence Act, the Recovery of Debts Act 1993, SARFAESI Act 2002, ARCs, the Banking Ombudsman, Lok Adalats and lender's liability. Understand how banks recover bad loans.
Why Banking Laws Matters
Banking law knowledge is vital for banking, legal and compliance careers and for JAIIB and CAIIB certifications.
How to Prepare for Banking Laws
- Prepare short notes on each Act's key provisions.
- Learn leading case laws on cheque dishonour.
- Study the recovery mechanisms for NPAs.
Banking Laws: Frequently Asked Questions
What does the SARFAESI Act allow?
It allows banks to enforce security and recover non-performing assets without court intervention, under specified conditions.