Citation Act No. 2 of 1934 Enacted by Parliament of India Date commenced 1 April 1935 | Territorial extent Whole of India Date enacted 6 March 1934 | |
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Reserve Bank of India Act, 1934 is the legislative act under which the Reserve Bank of India was formed. This act along with the Companies Act, which was amended in 1936, were meant to provide a framework for the supervision of banking firms in India.
Summary
The Act contains the definition of the so-called scheduled banks, as they are mentioned in the 2nd Schedule of the Act. These are banks which were to have paid up capital and reserves above ₹5 lakh (US$7,400).
The Section 17 of the Act defines manner in which the RBI can conduct business. The RBI can accept deposits from the central and state governments without interest. It can purchase and discount bills of exchange from commercial banks. It can purchase foreign exchange from banks and sell it to them. It can provide loans to banks and state financial corporations. It can provide advances to the central government and state governments. It can buy or sell government securities. It can deal in derivative, repo and reverse repo.
The Section 18 deals with emergency loans to banks. The Section 21 states the RBI must conduct the banking affairs for the central government and manage public debt. The Section 22 says that only RBI has the exclusive rights to issue currency notes in India. The Section 24 states that the maximum denomination a note can be ₹10,000 (US$150).
The section 26 of Act , describes the legal tender character of Indian bank notes.
The Section 28 allows the RBI to form rules regarding the exchange of damaged and imperfect notes.
The Section 31 says that in India only the RBI or the central government can issue and accept promissory notes that are payable on demand. However, cheque, that are payable on demand, can be issued by anyone.
The Section 42(1) says that every scheduled bank must have an average daily balance with the RBI. The amount of the deposit shall be more that a certain percentage of its net time and demand liabilities in India.