Weekly Banking Awareness Capsule 3

Weekly Banking Awareness Capsule 3

Dear Mockbankers

This is the second article in our series. In this article you will get, information about different topics of Banking Awareness in the form of Weekly Banking Awareness Capsule.

Banking Awareness section has become an essential section of majority of anking/recruitment examination conducted in India. Essentially it checks how much is the candidate keeping up with the knowledge of banking and financial sector,with special reference to the banking industry

In this article, we are providing the Important Acts related to the Banking Sector:

Banking Regulation Act,1949

  • As per Section 5(b) Banking is defined.
  • As per Section 8, Trading of goods by a Banking Company is restricted.
  • As per Section 17 every banking company incorporated in India is required to transfer each year to Reserve Fund a sum equivalent to not less than 20% of profit before declaration of dividend
  • As per Section 24, SLR is to be maintained.
  • As per Section 45(Z) Nomination facility has been granted for bank deposits.
  • As per Section 35A ,RBI has prohibited stapling of currency notes.

Reserve Bank of India Act,1934 Scheduled Bank-

  • As per Section 2(e) a Scheduled Bank is one whose name is included in the Second Schedule to RBI Act, 1934.
  • Section 17(4) enables RBI to grant loans and advances to Scheduled Banks
  • Section 20 empowers RBI to act as Banker to the Govt.
  • Section 22 gives right to issue Bank Notes.
  • As per Section 29, Bank note shall be exempted from stamp duty under Indian Stamp Act.
  • Section 31 prohibits issue of notes payable to bearer by any person in India other than RBI.
  • As per Section 38 RBI is the sole authority to issue currency in the country except for one rupee note or coins( which is issued by Central Govt.)
  • As per Section 42(1) all scheduled banks are required to maintain CRR in the form of cash.
  • As per Section 45B RBI collects credit information from all banking companies and furnish consolidated credit information to any banking company.

National Bank for Agriculture and Rural Development Act,1981

  • As per Section 3 NABARD was established.
  • As per Section 4, capital shall be Rs.100 crore which may be increased to Rs.5000 crore by Central Govt. in consultation with RBI.
  • Provides refinance facilities for credit to agriculture, small and village and cottage industries and Co-operative Banks.

Banking Ombudsman Scheme,2006

  • As per Section 4, RBI appoints one or more of its officers in the rank of Chief General Manager or General Manager to be known as Banking Ombudsman.
  • If a complaint on deficiencies in banking services is not responded by the concerned Bank within one month or the reply has not satisfied the complainant, the Banking Ombudsman whose jurisdiction covers the Bank Branch may be approached.
  • The complaint should be made before expiry of one year after the cause of action has arisen. Complaint can be filed simply by writing on a plain paper.
  • Complaint can be filed by authorized representative (other than an advocate) of the complainant.
  • No fees are charged for resolving a complaint.
  • Complaint may be settled by agreement within a period of one month.
  • In case it is not settled by agreement, Banking Ombudsman may pass an award by giving reasonable opportunity to both sides.
  • The award is on compensation, not more than actual loss suffered on account of the act of omission or commission by the bank or Rs.10 lac whichever is lower.
  • In case Award is not acceptable, the party not accepting the award may approach the appellate authority i.e. Deputy Governor of RBI within 30 days from the date of receipt of the award. The complainant has also the recourse before Court.

Prevention of Money Laundering Act, 2002

  • Records of cash transactions above Rs.10 lac or its equivalent in foreign currency have to be maintained. Records of series of cash transactions connected to each other of below Rs 10 lac or its equivalent in foreign currency within a month and the aggregate value of such transactions exceeds Rs.10 lac have to be maintained.
  • Records of Cash transactions in forged or counterfeit currency notes or bank notes and where forgery of any valuable security has taken place have to be maintained.
  • Records of Suspicious transactions in cash or otherwise have to be maintained. Records of transactions, both domestic and international, between the bank and the client need be preserved for at least 10 years from the date of cessation of transaction.
  • Cash Transactions Report (CTR) for transactions of above Rs.10 lac in a month have to be submitted to Financial Intelligence Unit-India (FIU-IND) within 15 days of close of the month.
  • Suspicious Transactions Report(STR) of a transaction ,in cash or non-cash, or a series of transactions integrally connected have to be reported within 7 days of arriving at the conclusion.

Indian Stamp Act,1989

  • As per section 17 of Indian Stamp Act,1989 all instruments/documents chargeable with duty and executed by any person in India shall be stamped before or at the time of execution.
  • The Stamp Act extends to whole of India except J&K. Stamp duty on Demand Promissory Note, Bill of Exchange payable otherwise than on demand, money receipts, proxies and transfer of shares comes under Central List.
  • Powers to reduce or remit the duty on these instruments are vested with the Central Govt. For other instruments stamp duty rates are prescribed by the respective State Govts.
  • In case of Usance Bills, arising out of bonafide commercial or trade transaction, of not more than 3months usance after date or sight drawn on or made by or in favour of a Commercial Bank/Co-operative Bank stamp duty is remitted.
  • Documents under Central list are not admissible in evidence if unstamped or understamped and are nullified.

Stamps are of three types:

  • Postage stamps- These are covered under India Post Office Act for postal charges.
  • Judicial stamps- These are used in connection with filing suit, court fees and other judicial matters as per provisions of Court Fees Act.
  • Non-judicial stamps- These are used as per provisions of Stamp Act for commercial transactions.

Non-judicial stamps are of three kinds:

  • Adhesive stamps- Adhesive stamps are those which are affixed by adhesive. There are many varieties of adhesive stamps such as revenue stamp, foreign bill stamp, share transfer stamp, insurance stamp, notary stamp, attorney stamp, consular stamp. These stamps are used for transaction.
  • Embossed or Impressed stamps- Impressed stamps are Hundi papers( on which Hundis are to be drawn) or Non-judicial stamp papers( on which stamps are already printed). These are mostly used for execution of agreement such as hypothecation, pledge & lien agreements, letter of continuity, letter of guarantees, mortgage deed etc.
  • Special adhesive stamps- These stamps are substitutes for non-judicial stamp papers. It is convenient to use them in printed agreements. Special adhesive stamps are to be affixed and cancelled by proper officer notified under the stamp rules.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)

In the event of default by a borrower, the bank have the powers to

  1. Take possession, sell or lease the secured assets
  2. Take over the management of the business of the borrower
  3. Appoint a Manager( not below Scale-IV Officers)
  4. Recover money from the debtor of the borrower Loans outstanding of Rs.1 lac & above are covered by the Act. Agri. Loans and where 80% recovery has been done are exempted.
  • U/s. 13(2) of the Act, secured creditor has to serve 60 days’ notice before taking any of the measures under Section 13(4) of the Act.
  • After service of notice if the borrower makes a representation or raises any objection, the secured creditor shall consider such representation or objection and if the same is acceptable or tenable, the reasons of non-acceptance have to be communicated within one week of receipt.

Central Registry under SARFAESI Act,2002 ( CERSAI)

  • Central Registry of Securitization, Asset Reconstruction and Security Interest of India(CERSAI in short), a Government Company, licensed under Section 25 of the Companies Act, 1956 has been incorporated CERSAI has become operational from 31.3.2011.

Section 20 of the SARFAESI Act,2002provides for setting up of a Central Registry for the purpose of registration of transactions of securitisation, asset reconstruction and security interest under the SARFAESI Act.

It contains the following Four Forms:

  • FORM-I – To be used for filing Particulars of Creation or Modification of Security Interest in favour of Secured Creditors Fee:For a loan upto Rs.5 lac : Rs. 250/- for both creation and modification of security interest For a loan above Rs. 5.00 lakh: Rs. 500/- for creation and for any subsequent modification of security interest in favour of a secured creditor.
  • FORM-II – To be used for filing Satisfaction of any existing Security Interest Fee – Rs. 250/-
  • FORM-III – To be used for filing Particulars of Securitisation or Reconstruction of Financial Assets Fee – Rs. 1000/- FORM-IV – To be used for filing Particulars of Satisfaction of Securitisation or Reconstruction transactions Fee – Rs. 250/- The particulars of every transaction referred to above shall have to be filed with Central Registrar within a period of thirty days from the date of such transaction. In case of delay in filing, the Central Registrar may on an application being made stating the reasons for delay not exceeding thirty days, allow filing of particulars on payment of additional fees, as specified in the SARFAESI (Central Registry) Rules.-.

Friends this is it regarding Weekly Banking Awareness. We will update Weekly Banking Awareness Capsule like this every week.If you have any suggestion or query, kindly post it in the comments section.Also as per the demand from your side, you can also download it in the pdf format from below.

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