Questions

08.
[Link]
The relationship between a Banker and a Customer is based on trust. In today’s world, banks
are considered a pivotal element for the economy of the country. It is an effective banking
system that paves the way for the proper growth of the economy. Customers avail different
kinds of services from the bank. This article critically analyses different types of relationship
between customer and banker. It also discusses different legislations that protect the interest
of the banker and customer and also provide proper remedies to them.

[Link] of the Relationship between Banker and Customer

The relationship between banker and Customer are categorized into three;
1 Relationship as debtor and creditor.
2 Banker as a trustee.
3 Banker as an agent.
4 Other special relationships with the customer, obligations of a banker

. Relationship as Debtor and Creditor

On the opening of an account, the banker assumes the position of a debtor. A depositor
remains a creditor of his banker so long as his account carries a credit balance.
The relationship with the customer is reserved as soon as the customer account is overdrawn.
The banker becomes a creditor of the customer who has taken a loan from the banker and
continues in that capacity fills the loan is repaid

.Banker as a Trustee
Ordinally a banker is a debtor of his customer in the report of the deposit made by the letter,
but in certain circumstances, he acts as trustee also.
A trustee holds money or asset and performs certain functions to benefit some other person
called the beneficiary.
For example;
If the customer deposits securities or other values with the banker for safe custody, the letter
acts as a trustee of his customer.

.Banker as an Agent
A banker acts as an agent of his customer and performs a number of agency functions for the
convenience of his customer.
For example, he buys or sells securities on behalf of his customer, collects checks/cheques,
and pays various customer dues.

.Special relationship with customer/obligation of a banker:

The primary relationship between a banker and his customer is a debtor and a creditor or vice
versa. The special features of this relationship, as a note above, impose the following
additional obligations on the banker.

The obligation to maintain the secrecy of the customer accounts

The banker is obligated to take the utmost care in keeping secrecy about his customer’s
account. By keeping secrecy is that the account books of the bank will not be thrown open to
the public or government officials if the following reasonable situation does not occur,
Discloser of information required by law.
Discloser permitted by bankers’ practice and wages. The practice and wages are customary
amongst bankers to permit disclosure of certain information and the following circumstances.
With express or implied consent of the customer.
Banker reference.
Duty to the public to disclose.

The obligation to honor the Check/Cheques

The deposit accepted by a banker is his liabilities repayable on demand or otherwise.
Therefore, the banker is under a statutory obligation to honor his customer’s check/cheque in
the usual course.
According to section 31 of the negotiable instruments. Act 1881, the banker is bound to honor
his customer’s check/cheque provided by following conditions are fulfilled:
Availability of sufficient funds of the customer.
The correctness of the check/cheque.
Proper presentation of the check/cheque.
A reasonable time for collection.
Proper drawing of the check/cheque.

07.
Introduction
A commercial bank is a financial organisation that accepts deposits, provides checking
account services, makes different loans, and provides basic financial products to people and
small companies such as certificates of deposit (CDs) and savings accounts. Most individuals
conduct their banking at a commercial bank.
Commercial banks generate money by making loans and charging interest on them, such as
mortgages, vehicle loans, business loans, and personal loans. Customer deposits provide the
capital for banks to make these loans.
Commercial bank functions
Primary Function
The bank accepts deposits in the form of savings, checking, and fixed deposits. Firms and
people who have extra money in their accounts lend it out to meet short-term needs in
business transactions.
Gives out loans and advances: One of the most important things this bank does is give out
loans and advances to business owners and entrepreneurs and collect interest on them. It is
the most important way for banks to make money. In this method, a bank keeps a small
amount of deposits as a reserve and gives the rest of the money to borrowers in the form of
demand loans, overdrafts, cash credits, short-term loans, and other similar loans.
Credit cash: When a customer gets a loan or line of credit, they do not get cash. First, a
customer’s bank account is set up, and then the money is moved into the account. Through
this process, the bank can make money.
Secondary Functions
Bills of exchange can be discounted. This is a written agreement that says how much money
will be paid for goods at a certain time in the future. The amount can also be paid off before
the time given by using a commercial bank’s discounting method.
Overdraft facility: A customer gets a loan by letting their checking account go overdrawn up
to a certain limit.
Buying and selling securities: The bank gives you the option of buying and selling
securities.
Customers can use lockers at a bank to store their valuables or important papers in a safe
place. For this service, the banks charge at least one fee per year.
For paying and collecting the credit, different tools are used, such as a promissory note, a
check, or a bill of exchange.
Commercial bank examples
Here are a few instances of commercial banks in India:
State Bank of India (SBI)
Housing Development Finance Corporation (HDFC) Bank.
Industrial Credit and Investment Corporation of India (ICICI) Bank.
Dena Bank.
Corporation Bank.
Many of the major financial institutions in the world, including commercial banks and banks
with commercial banking activities, are based in the United States. For instance, JPMorgan
Chase’s commercial banking division is called Chase Bank. Chase Bank, with its
headquarters in New York City, reported assets of over $3.2 trillion as of June 2021. 4 With
66 million clients, including both individual consumers and small and mid-sized enterprises,
Bank of America is the second-largest bank in the United States, with more than $2.35 trillion
in assets.
Types of commercial bank
Commercial banks come in three main varieties.
Private banks are a subset of commercial banks where the majority of the share capital is
owned by private persons and companies. All private banks are listed as limited liability
firms. Examples of such banks are Industrial Credit and Investment Corporation of India
(ICICI) Bank, Yes Bank, and Housing Development Finance Corporation (HDFC) Bank.
Public bank: This category of bank is nationalised, and the government owns a substantial
portion of it. For instance, Bank of Baroda, Punjab National Bank, Dena Bank, Corporation
Bank, and State Bank of India (SBI).
Foreign bank: These financial institutions were founded in other nations and have branches
there. Examples of such banks are American Express Bank, Citibank, Standard & Chartered
Bank, and Hong Kong and Shanghai Banking Corporation (HSBC).
Conclusion
The system of commercial banking that is used in India is completely unique and cannot be
found anywhere else in the world. The most important sources of capital for a commercial
bank are the deposits made by customers, the sale of certificates of deposit, and reserves
generated from earnings that are kept on hand.

04.
Introduction
The record of the bank can be drawn back to the colonial period. Throughout this moment,
the banking system in India was established. It started in the year 1770 with the structure of
the bank of Hindustan.
The Banking system of India Indian is currently split into commercial, regional, and
cooperative banks. Commercial banks are categorized into two types, public financial banks
and private financial banks.
A significant event in the Indian banks is the Nationalization of banks. The history of
Nationalization can be traced back to 1949, January, when the Reserve Bank Of India was
nationalised. It has assisted India in emerging as a major economy around the globe.
The Indian banking system has passed many years of Bank Nationalisation efficiently.
Nationalised banks have added much to the economic situation after that. On that note, let’s
get deep right into the concept of the Nationalization of Indian banks.
History Of Nationalisation Of Banks In India
After Independence, several Banks started running during that period. Those banks are
operating even today, like Bank Of India, Allahabad Bank, and Punjab National bank. This
duration was noted to be the merging duration combined with many banks.
The Imperial bank is a notable instance because of the merging of the Bank of Bengal, the
Bank of Madras, and the Bank of Bombay, which later became the Reserve Bank of India.

The 2nd phase started in 1947 and 1991, majorly referred to as the Nationalising period for
Indian Banks. Indira Gandhi came up with a plan supporting the Central Indian government.
Shortly after that, the Indian government started providing the ordinance of the Bank in 1969.
As well as after two weeks of the problem regulation, Parliament enacted the Bank
(Acquisition and Transfer of Undertakings) companies act.
As an outcome, banks were nationalised, like- the Bank of India, Allahabad Bank, Union
Bank of India, Bank of India, UCO Bank, Bank of Maharashtra, Punjab National Bank and
Canara Bank.

In 1980, the 2nd round of Nationalisation began when six more banks, Oriental Bank of
Commerce, Vijaya Bank, Punjab and Sind Bank, New Bank of India, Corporation Bank,
Andhra Bank, obtained nationalisation. The delivery of credit to the Indian government was
the significant reason. With the 2nd round of Nationalisation, the government regulated
approximately ninety-one per cent of banking in the nation.

The third stage began in 1991. It is happening till today. The liberalisation policy was duly
adhered to during this duration, and as an outcome, a few banks got authorised. They were
referred to as the New generation banks. These banks are also tech-savvy, which is combined
with Indian bank names. UTI Bank, HDFC Bank, Oriental Bank of Business, ICICI Bank,
and IndusInd Bank.
The three fields of banks, i.e. Private, government and foreign, provided their fairest to
advance the nation’s economy. As an outcome of the Liberalization of Indian banks, several
private banks appeared.
The Requirement Of Nationalisation In India
The requirements for the Nationalization of banks emerged due to numerous reasons. These
were dealing with the requirements of big business and also large markets. Additionally,
exports, agriculture, and small industries were hanging back. However, these all were thought
about throughout the Nationalization of Banks.

Later, the comprehensive demands of fields like foreign trades, real estate, and farming were
satisfied, which was satisfied by establishing NABARD, NHB, SIDBI, and EXIM.
Conclusion
The nationalisation of banks boosted the financial system in India. Which likewise boosted
the confidence of the public sector banks. The lagging sectors, like small markets and
farming, obtained a boost. This led to a rise in funds and, therefore, an increase in India’s
economic growth.
The dominance of banks was also reduced. Their monopoly was reduced. The Nationalisation
of banks also increased bank penetration, which was generally seen in the rural areas of India.

06.
Introduction
The Reserve Bank of India is the backbone of the Financial System of the country. It has been
entrusted by the people and the Government to control, supervise and promote the flow of
money in the market. It also takes part in planning and development to maintain economic
stability of the country and take the country towards growth.
Reserve Bank of India was established in 1935 and since then it has regulated the flow of
Indian rupee in the country. The Reserve Bank is also responsible for managing other
commercial banks through its various policies and directions.
Every bank is entitled to keep an amount of money with the RBI which serves as the limit to
the amount of money that bank can lend to the public. There are various other policies and
rules through which RBI keeps a check on the economy of the country.

Objectives of RBI
Being the backbone of the financial state of the country, RBI has various objectives as
mentioned in the RBI preamble. Some of them are listed below:
• Primary Objectives: The primary objectives of RBI includes:
• Addressing the issue of Banknotes
• Maintaining monetary stability in the country
• To operate the credit system and currency in the country to its own advantage
• Remain independent of the political influence: In order to maintain financial
stability and promote economic growth, RBI should be free from any political
pressure and refrain from corrupted activities
• Fundamental objectives: RBI should serve as a central authority and serve as:
– Bank of all the other Commercial banks
– Only authority who has note issuing power
– Bank to the Government of India
• Promote Economic Growth: RBI, along with maintaining price stability, should also
design policies which promote economic growth within the framework

Functions of RBI
According to the RBI act 1934 RBI has various functions to serve. Some of them include:
1. Monetary Authority: It plans and supervises the monetary policies designed for the
country. The objective behind this is that every policy should be designed keeping in
mind the idea of growth and at the same time should also maintain price stability.
2. Financial System Supervisor: It designs the parameters under which all the banks of
the country should work. The main aim here is to maintain the trust of the general
public in the financial system of the country and provide them services which are
cost-friendly.
3. Foreign Exchange: All the foreingn exchange that happens between the countries is
maintained and looked after by RBI. This is done so that easy and smooth foreign
trade can happen and also foreign market remains maintained.
4. Issuer of currency: RBI is the authority who issues notes, destroys the old notes and
decides which currency is fit for circulation among the people. Demonetisation was
done after taking advice from RBI and the new notes of 2000 came into circulation.
5. Development: various national projects are funded by RBI. It undertakes
development of the country as its objective and invests at various places in national
interest.

Supervisory functions of RBI

RBI also has certain supervisory functions to fulfil. They include:
 1. Granting licence to commercial banks
2. Inspection of the other banks
3. Implementing Deposit Insurance scheme
4. Controlling Non-Banking financial institutions

Conclusion
RBI has 27 regional and 4 sub offices. Most of these offices are located in the state capitals to
ensure the right running of the state economy. It maintains the economy of a state through its
capital. The Indian economy and its regulation is in the hands of the RBI. It designs and
promotes policies which can boost our economy and help people grow substantially. It also
keeps in mind to keep a check on price stability.
The Reserve Bank of India has a credit policy. The main aim of this policy is to ensure
growth while keeping price stability in check. Promoting growth means more goods are
produced in India and more services are provided in the country. This helps to increase GDP
and has an overall positive impact on the economy of India.
Price stability, on the other hand, does not mean that there will be no alterations in the price
of the things but it simply means that inflation should be controlled. RBI also aims to
promote industrial and agricultural developments.

05.
Introduction
The Banking regulations act 1949 was also named the Banking Companies Act [Link] it
was passed for the first time with the name Banking Companies Act 1949. But after a little bit
of time, its name was modified into the Banking Regulation Act 1949 on 1 March 1966, and
its regulations actually came into power on 16 March 1949. Apart from this, it is India’s
legislation that regulates and controls all banking firms which are established in India. The
banking laws and acts have also been applied in the State of India Jammu and Kashmir since
1956. The functions of commercial banks include advances, receiving deposits, credit,
endowing loans, cash, discounting of bills, overdraft, etc. Below is more information about it
in detail, you can also know about it.

Banking Regulation Act, 1949

As the names already defined, it is regulated and controls the banks which are established in
India. The Banking Regulation Act 1949 is a lawmaking act in India. It is normally working
to regulate and manage the working of all banking corporations in India. Apart from this, it
was first passed in India as the Banking Companies Act, 1949, and it really came into power
on 16 March 1949. After passing it, too many causes arise, and then some changes are made
up in this act again. Thereafter, its name was transformed to Banking Regulation Act 1949 on
1 March 1966. Moreover, the Banking regulation act has also been applied in the State of
India Jammu and Kashmir since 1956. Originally, the Banking law was applicable
exclusively to banking companies. Though, in 1965 it was amended to create it appropriate
for cooperative banks and to familiarize further modifications.

History of the Banking Regulation Act, 1949

Following is the history of the banking regulations act 1949. Let’s know about them below.
1. The banking act was passed for the first time as the Banking Companies Act 1949. It
essentially regulates the company. This act actually came into power on 16 March
1949, and the name was Banking Companies Act 1949 transformed into Banking
Regulation Act 1949. It fully came into power on 1 March 1966.
 2. Thereafter, the banking laws are applied to every state of Indian banks, including
Jammu and Kashmir.
3. The Banking Regulation Act, 1949 Territorial extent into the Whole of India.
4. Apart from this, the Banking Regulation Act, 1949, was enacted by the Parliament of
India. It essentially regulates all banks of India because it is a legislative body of
India.
5. It was Enacted on 10 March 1949.

Features of the Banking Regulation Act, 1949

Here are the following features of the Banking Regulation Act that are explained below. Let’s
know about all.
1. A thorough depiction of banking so as to obtain within the extent of the lawmaking
regulations into all institutions that obtain repayable on demand, deposits, lending, or
investment.
2. Apart from this, another feature is the forbidding of non banking assets or companies
from receiving deposits money again payable on demand.
3. Prohibiting trading to annihilate non-banking sectors’ multifarious risks.
4. Remedy of lowest capital averages.
5. Specifying the ideal payments of compensation and dividends.
6. Inclusion of the extent of legislation of banks enlisted beyond the multifarious
sections of India.
7. Preface of a complete system of authorizing banks and their constituents.
8. Prescription of a particular form of balance sheet. Apart from this, it also conferred
several banks of powers and controls on the Reserve Bank to call for a particular time
recovery.
9. Assessment of books and reports of a bank is made by the Reserve Bank.

Pivotal Provisions of the Banking Regulation Act, 1949

Following are the main provisions of the acts of banking regulation. If you would like to
know all the provisions, then let’s know about them below.
1. The first provision of the BR Act is Title, size, and conception.
2. Another is the Restricted functions of Banks.
3. Apart from this, the Administration of a Bank is also another provision of the BR act.
4. Also, the Capital and Reserves.
5. Rules and laws regarding settlement of bonus and dividend provision.
6. Restriction on nature of subsidiary companies
7. Limitations on multifarious Loans and Advances.
8. Authorisation of banking institutions.
9. Launching the new branches and transfer of existing branches.
10. Assets, recoveries, details, accounts, audits, etc.

Conclusion
In the end, the following information is given above for the banking regulations act 1949.
Suppose you wish to know about its amendment act, all the pertinent facts, various
provisions, features, objectives, etc. Then, you might emulate the above-mentioned
information. It clearly defines the Banking Regulation Act, 1949. Also, it gives you an
explanation of how it works and why it is made up. So, that’s all the information about this
legislation in India above. Usually, it regulates and controls all the banking firms which are
established in the country of India. Apart from this, the Banking regulation act was Passed
initially as the Banking Companies Act 1949. It had legally come into power on 16 March
1949 and its name transformed to Banking Regulation Act 1949 on the date 1 March 1966.