Reserve bank of India Act Amendments, Indian Union Budget 2019-20


Indian Budget 2019-20,Amendment of Reserve Bank of India Act,1934

 

Reserve Bank of India Act,1934, Amendments

As per Indian Budget 2019-2020:

The following details explain about Reserve Bank of India Act,1934, Amendments.

Indian Union Budget, 2019 finance Minister Nirmala Sitharaman presented on 5th July,2019.

 

AMENDMENTS TO THE RESERVE BANK OF INDIA ACT, 1934

 

The provisions of this Part shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
Commencement of this Part 2 of 1934

Amendment of section 45-IA.

In the Reserve Bank of India Act, 1934 (hereafter in this Part referred to as the principal Act), in section 45-IA, in sub-section (1), for clause (b), the following shall be substituted, namely:— 

“(b) having the net owned fund of twenty-five lakh rupees or such other amount, not exceeding 40 hundred crore rupees, as the Bank may, by notification in the Official Gazette, specify:

Provided that the Bank may notify different amounts of net owned fund for different categories of non-banking financial companies.”.

After section 45-IC of the principal Act, the following sections shall be inserted, namely:—

Insertion of new sections 45-ID and 45-IE. 

“45-ID.(1) Where the Bank is satisfied that in the public interest or to prevent the affairs of a non-
Power of Bank to remove directors from office

banking financial company being conducted in a manner detrimental to the interest of the depositors or creditors, or financial stability or for securing the proper management of such company, it is necessary so to do, the Bank may, by order and for reasons to be recorded in writing, remove from office, a director (by whatever name called) of such company, other than Government owned non-banking financial company with effect from such date as may be specified in the said order.

(2) No order under sub-section (1) shall be made unless the director concerned has been given 

a reasonable opportunity of making a representation to the Bank against the proposed order:
Provided that if, in the opinion of the Bank, any delay will be detrimental to the interest of the said
company or its depositors, the Bank may, at the time of giving the aforesaid opportunity or at any
time thereafter, by order direct that, pending the consideration of the representation, if any, the
director, shall not, with effect from the date of such order––
(a) act as such director of that company;
(b) in any way, whether directly or indirectly, be concerned with or take part in the management
of that company.
(3) Where any order is made in respect of a director of a company under sub-section (1), he shall
cease to be a director of that non-banking financial company and shall not, in any way, whether
directly or indirectly, be concerned with, or take part in the management of any non-banking financial
company for such period not exceeding five years at a time as may be specified in the order.
(4) Where an order under sub-section (1) has been made, the Bank may, by order in writing,
appoint a suitable person in place of the director, who has been so removed from his office, with
effect from such date as may be specified in such order.
(5) Any person appointed under sub-section (4) shall,—
(a) hold office during the pleasure of the Bank and subject thereto for a period not exceeding
three years or such further periods not exceeding three years at a time;
(b) not incur any obligation or liability by reason only of his being a director for anything done
or omitted to be done in good faith in the execution of the duties of his office or in relation thereto.
(6) Notwithstanding anything contained in any other law for the time being in force or in any
contract, memorandum or articles of association, on the removal of a director from office under this
section, such director shall not be entitled to claim any compensation for the loss or termination from
office.
Supersession of Board of directors of non-banking financial company (other than Government Company).
45-IE. (1) Where the Bank is satisfied that in the public interest or to prevent the affairs of a
non-banking financial company being conducted in a manner detrimental to the interest of the
depositors or creditors, or of the non-banking financial company (other than Government Company),
or for securing the proper management of such company or for financial stability, it is necessary
so to do, the Bank may, for reasons to be recorded in writing, by order, supersede the Board of
Directors of such company for a period not exceeding five years as may be specified in the order,
which may be extended from time to time, so, however, that the total period shall not exceed five
years.
(2) The Bank may, on supersession of the Board of Directors of the non-banking financial company
under sub-section (1), appoint a suitable person as the Administrator for such period as it may
determine.
(3) The Bank may issue such directions to the Administrator as it may deem appropriate and the
Administrator shall be bound to follow such directions.
(4) Upon making the order of supersession of the Board of Directors of a non-banking financial
company,––
(a) the chairman, managing director and other directors shall from the date of supersession of
the Board of Directors vacate their offices;
(b) all the powers, functions and duties, which may, by or under the provisions of this Act or
any other law for the time being in force, be exercised and discharged by or on behalf of the
Board of Directors of such non-banking financial company or by a resolution passed in general
meeting of such non-banking financial company, shall, until the Board of Directors of such company
is reconstituted, be exercised and discharged by the Administrator referred to in sub-section (2).
(5) (a) The Bank may constitute a committee consisting of three or more members who have
experience in law, finance, banking, administration or accountancy to assist the Administrator in
discharge of his duties.

(b) The committee shall meet at such times and places and observe such rules of procedure as

may be specified by the Bank.
(6) The salary and allowances payable to the Administrator and the members of the committee
constituted by the Bank shall be such as may be specified by the Bank and be paid by the concerned
non-banking financial company.

(7) On or before the expiration of the period of supersession of the Board of Directors as specified in the order issued under sub-section (1), the Administrator of the non-banking financial company shall facilitate reconstitution of the Board of Directors of the non-banking financial company.

(8) Notwithstanding anything contained in any other law for the time being in force or in any contract, no person shall be entitled to claim any compensation for the loss or termination of his office.

(9) The Administrator referred to in sub-section (2) shall vacate office immediately after the Board of Directors of the non-banking financial company has been reconstituted.”.

After section 45MA of the principal Act, the following section shall be inserted, namely:—
Insertion of new section 45MAA

Power to take action against auditors. 

‘‘45MAA. Where any auditor fails to comply with any direction given or order made by the Bank under section 45MA, the Bank, may, if satisfied, remove or debar the auditor from exercising the duties as auditor of any of the Bank regulated entities for a maximum period of three years, at a time.”.
Insertion of new section 45MBA.
Resolution of non-banking financial company

After section 45MB of the principal Act, the following section shall be inserted, namely:— 

‘45MBA. (1) Without prejudice to any other provision of this Act or any other law for the time being in force, the Bank may, if it is satisfied, upon an inspection of the Books of a non-banking financial company that it is in the public interest or in the interest of financial stability so to do for enabling the continuance of the activities critical to the functioning of the financial system, frame schemes which may provide for any one or more of the following, namely:––

(a) amalgamation with any other non-banking institution;

(b) reconstruction of the non-banking financial company; 

(c) splitting the non-banking financial company into different units or institutions and vesting viable and non-viable businesses in separate units or institutions to preserve the continuity of the activities of that non-banking financial company that are critical to the functioning of the financial
system and for such purpose establish institutions called “Bridge Institutions”.

Explanation.––For the purposes of this sub-section, “Bridge Institutions” mean temporary institutional arrangement made under the scheme referred to in this sub-section, to preserve the continuity of the activities of a non-banking financial company that are critical to the functioning of the financial system.

(2) Without prejudice to the generality of the foregoing provisions, the scheme referred to in sub-section (1) may provide for––

(a) reduction of the pay and allowances of the chief executive officer, managing director, chairman or any officer in the senior management of the non-banking financial company;

(b) cancellation of all or some of the shares of the non-banking financial company held by the

chief executive officer, managing director, chairman or any officer in the senior management of the non-banking financial company or their relatives;

(c) sale of any of the assets of the non-banking financial company.

(3) The chief executive officer, managing director, chairman or any officer in the senior management of the non-banking financial company whose pay and allowances are reduced or the shareholders
whose shares are cancelled under the scheme shall not be entitled to any compensation.’.

After section 45NA of the principal Act, the following section shall be inserted, namely:—
Insertion of new section 45NAA.

Power in respect of group companies

“45NAA. (1) The Bank may, at any time, direct a non-banking financial company to annex to its financial statements or furnish separately, within such time and at such intervals as may be specified by the Bank, such statements and information relating to the business or affairs of any group company
of the non-banking financial company as the Bank may consider necessary or expedient to obtain for the purposes of this Act.

(2) Notwithstanding anything to the contrary contained in the Companies Act, 2013, the Bank
may, at any time, cause an inspection or audit to be made of any group company of a non-banking.

financial company and its books of account.

Explanation.––For the purposes of this section,––

(a) “group company” shall mean an arrangement involving two or more entities related to each other through any of the following relationships, namely:––

(i) subsidiary— parent (as may be notified by the Bank in accordance with Accounting Standards);

(ii) joint venture (as may be notified by the Bank in accordance with Accounting Standards);

(iii) associate (as may be notified by the Bank in accordance with Accounting Standards);

(iv ) promoter-promotee (under the Securities and Exchange Board of India Act, 1992 or the rules or regulations made thereunder for listed companies);

(v) related party;

(vi) common brand name (that is usage of a registered brand name of an entity by another entity for business purposes); and 

(vii) investment in equity shares of twenty per cent. and above in the entity;
(b) “Accounting Standards” means the Accounting Standards notified by the Central
Government under section 133, read with section 469 of the Companies Act, 2013 and sub-
section (1) of section 210A of the Companies Act, 1956.”.
Amendment of section 58B
In section 58B of the principal Act,––

(i) in sub-section (2), for the words “two thousand rupees” and “one hundred rupees”, the words
“one lakh rupees” and “five thousand rupees” shall respectively be substituted;
(ii) in sub-section (4A), for the words “five lakh rupees”, the words “twenty-five lakh rupees” shall
be substituted;
(iii) in sub-section (4AA), for the words “five thousand rupees”, the words “ten lakh rupees” shall
be substituted;
(iv) in sub-section (4AAA), for the words “rupees fifty”, the words “five thousand rupees” shall be
substituted;
(v) in sub-section (5),––
(A) in clause (a), for the words “any deposit”, the words “any deposit without being authorised
so to do or” shall be substituted;
(B) in clause (b), for the word, figures and letters “section 45NA”, the word, figures and letter 30
“section 45J” shall be substituted;
(vi) in sub-section (6), for the words “two thousand rupees” and “one hundred rupees”, the words
“one lakh rupees” and “ten thousand rupees” shall respectively be substituted.

Amendment of section 58G.
In section 58G of the principal Act, in sub-section (1),—
(A) in clause (a) for the words ‘‘five thousand’’, the words ‘‘twenty-five thousand ’’ shall be

substituted;

(B) in clause (b) for the words ‘‘five lakh’’ and ‘‘twenty-five thousand’’, the words ‘‘ten lakh’’ and ‘‘one lakh’’ respectively shall be substituted.

 

 

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