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Regional Rural Banks Act,1976

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The Regional Rural Banks Act, 1976

(21 OF 1976)

21/945

[9th February, 1976]

An Act to provide for the incorporation, regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto.

Be it enacted by Parliament in the Twenty-seventh Year of the Republic of India as follows:—

LEGISLATIVE HISTORY 6

 

·  Banking and Public Financial Institutions Laws (Amendment) Act, 1976 (73 of 1976)

·  The Banking Laws (Amendment) Act, 1983 (1 of 1983)

·  The Banking Laws (Amendment) Act, 1985 (81 of 1985)

·  Regional Rural Banks (Amendment) Act, 1987 (1 of 1988)

·  Repealing and Amending Act, 1988 (19 of 1988)

·  Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988)

·  Credit Information Companies (Regulation) Act, 2005 (30 of 2005)

·  Banking Laws (Amendment) Act, 2012, (Act No. 4 Of 2013)

·  Regional Rural Banks (Amendment) Act, 2015 (14 of 2015)

CHAPTER I

Preliminary

  1. Short title, extent and commencement .—(1) This Act may be called The Regional Rural Banks Act, 1976.

(2) It extends to the whole of India.

(3) It shall be deemed to have come into force on the 26th day of September, 1975.

Object & Reasons6

 

Statement of Objects and Reasons.-The Regional Rural Banks Ordinance, 1975 (13 of 1975) was promulgated by the President to provide for the incorporation, regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs and for matters connected therewith and incidental thereto.

2. The Regional Rural Banks are intended to combine the local knowledge and familiarity of rural problems which the co-operatives possess and the degree of business organisation, ability to mobilise deposits, access to central money markets and a modernised out-look which the commercial banks have. This basic approach of the Regional Banks will distinguish it from the co-operatives on the one hand and the existing commercial banks on the other.

3. To ensure that, in their functioning, the Regional Rural Banks observe the utmost economy, it has been statutorily provided that, in determining the remu-ieration of the officers and employees appointed by the Regional Rural Banks, the Central Government shall have due regard to the salary structure of the employees of comparable level and status of the State Government and the local authorities.

4. The Bill seeks to replace the Ordinance.

Amendment Act 73 of 1976-Statement of Objects and Reasons.-It is proposed to bring about a measure of uniformity in the procedure for appointment, fixation of the terms and conditions of service including removal from or termination of, service of the chairman, vice-chairman, and managing directors of the State Bank of India, chairman of the Regional Rural Banks, chairman of the Industrial Finance Corporation of India and chairman and managing director of the Industrial Development Bank of India in the relevant enactments regulating the said institutions. These Executives will also have the option to relinquish office by giving the Central Government a notice of three months. It is proposed to make the amendments applicable to the existing incumbents of these offices also.

2. Opportunity has also been taken to streamline some other provisions of these Statutes.

Amendment Act 81 of 1985-Statement of Objects and Reasons.-The Banking Laws were last amended through the Banking Laws (Amendment) Act, 1983 which was brought into force in early 1984. Since then, in the course of administering the various Banking Laws, a need has arisen for some further amendments to the Acts governing, Reserve Bank of India, State Bank of India and its Subsidiaries, Deposit Insurance and Credit Guarantee Corporation, Nationalised Banks, Regional Rural Banks, Export-Import Bank of India and National Bank for Agriculture and Rural Development to achieve the following objectives:-

(i) To implement the recommendations of the Committee on Papers laid on the Table of Rajya Sabha regarding laying of Auditors’ Report and Annual Report of the public sector banks and financial institutions on the Tables of the two Houses.

(ii) To enable the Government to increase the paid-up capital of the nationalised banks so as to improve the banks’ debt equity ratio and profitability.

(iii) To bring the provisions including appointment and term of office of the Chairman, National Bank for Agriculture and Rural Development, on par with the provisions governing these matters in the case of Chief Executives of public sector banks and financial institutions.

(iv) To change the name of United Commercial Bank to UCO Bank so as to avoid confusion in the international operations of the bank in view of the existence of a bank with the same name set up in Bangladesh.

(v) To enable the Reserve Bank of India to retain the functions as the Government agency to settle claims against advances notified as in default on the date the Credit Guarantee Scheme for small scale industries was handed over by Reserve Bank of India to Deposit Insurance and Credit Guarantee Corporation.

(vi) To bring the term of Chairman and Managing Director of Export-Import Bank’of India on par with the Chief Executives of other banks and financial institutions.

(vii) To enable the Deposit Insurance and Credit Guarantee Corporation to exempt any amount due on account of any deposit with an insured bank.

(viii) To make consequential amendment in the Reserve Bank of India Act to enable the State Financial Corporations to borrow loans and advances not exceeding twice the amount of their paid-up share capital from Reserve Bank of India.

Amendment Act 1 of 1988-Statement of Objects and Reasons.-The Regional Rural Banks Act, 1976 provides for the incorporation, regulation and winding up of Regional Rural Banks (RRBs) with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly, to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs.

2. In the light of the experience gained in the administration of the RRBs during the last over ten years, a need was felt to amend the Act to improve the functioning of the RRBs and for strengthening their organisational structure and improving their overall capabilities.

3. The Bill, inter alia, seeks to make the following amendments as indicated below:-

(a) the authorised capital of the RRBs is being enhanced from Rs. 1 crore to Rs. 5 crores;

(b) the issued capital of a RRB is also being enhanced which shall in the first instance, be such, as may be determined by the Central Government not being less than Rs. 25 lakhs and not more than Rs. 1 crore;

(c) the composition of the Board of Directors of a RRB is being restructured. Under the amended provision, the Central Government will nominate only two non-official directors. The remaining directors will he the officers of the Reserve Bank of India, the National Bank for Agriculture and Rural Development, the Sponsor Bank and the State Government concerned, nominated by them. The Chairman of the Regional Rural Bank shall be appointed by the Sponsor Bank in consultation with the National Bank for Agriculture and Rural Development where he is not an officer of the Sponsor Bank and with the prior approval of the Central Government where he is not an officer of the Sponsor Bank, instead of his being appointed by the Central Government.

(d) provision for the amalgamation of Regional Rural Banks in certain circumstances is being provided;

(e) the Sponsor Banks are being empowered to undertake periodical inspection, internal auditing and monitoring the progress of their sponsored RRBs.

Amendment Act 66 of 1988-Statement of Objects and Reasons.-The Banking Laws were last amended through the Banking Laws (Amendment) Act, 1985 (81 of 1985), the various provisions which were brought into force on different dates in 1985 and 1986. Since then, in the course of administering various laws relating to banks and public financial institutions, a need has arisen for some further amendments to the Negotiable Instruments Act, 1881, the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the State Bank of India Act, 1955, the State Bank of India (Subsidiary Banks) Act, 1959, the Deposit Insurance and Credit Guarantee Corporation Act, 1961, the Industrial Development Bank of India Act, 1964, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the Regional Rural Banks Act, 1976, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, the Export-Import Bank of India Act, 1981, the National Bank for Agriculture and Rural Development Act, 1981 and the Industrial Reconstruction Bank of India Act, 1984, to achieve the following objectives:-

(i) to enable the Government to increase the paid-up capital of the nationalised banks so as to improve the banks debt equity ratio and profitability;

(ii) to invest the Reserve Bank of India with powers to have special audits of banks carried out whenever considered necessary in the public interest or in the interests of the banking company or its depositors either by the banks, auditor or any other auditor specially appointed for the purpose;

(iii) to provide uniform tenure to all non-official directors and employee directors on the Boards of the State Bank of India and its subsidiary banks and certain financial institutions and to limit their continuous membership of the Board of directors of a Bank or institution in keeping with the principle enunciated by the Estimates Committee;

(iv) to empower the Central Government to change the accounting year of any bank or financial institution by notification in the Official Gazette which would enable the Central Government to change the present accounting year of banks and financial institutions to coincide with the financial year (April-March) which is envisaged as the previous year for income-tax purposes;

(v) to provide transfer of whole or part of the undertaking of one corresponding new bank to another corresponding new bank;

(vi) to obviate avoidable delays by omitting the requirement of prior consultation with the State Bank of India or the Reserve Bank of India, as the case may be, in the matter of nomination or appointment of officials of the Central Government on the Boards of Directors of Subsidiary Banks of the State Bank of India and the National Bank for Agriculture and Rural Development as obtaining in other analogous statutes;

(vii) to provide for making of the regulations by the Board of Directors of the banks and financial institutions by notification in the Official Gazette;

(viii) to enable the Reserve Bank of India to make regulations to govern Clearing Houses which have as members, besides scheduled banks, other banks and post office savings banks;

(ix) to amend the Reserve Bank of India Act, 1934 to omit the ceiling on the quantum of loans and advances which could be made by the Reserve Bank of India to the Industrial Finance Corporation of India;

(x) to revise the rate of interest from the present level of six per cent. to eighteen per cent. per annum payable on a negotiable instrument from the due date in case no rate of interest is specified, or payable to an indorser from the date of payment on a negotiable instrument on its dishonour with a view to discouraging the withholding of payment on negotiable instruments on due dates;

(xi) to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment to honest drawers.

(xii) to empower the Chairman, National Bank for Agriculture and Rural Development (NABARD) to exercise the powers and discharge the functions also of the Managing Director, NABARD, during the period of any casual vacancy in the office of Managing Director, NABARD, for smooth functioning of NA BARD.

  1. Definitions .—In this Act, unless the context otherwise requires,—

(a) “Board” in relation to a Regional Rural Bank, means the Board of directors of that Regional Rural Bank;

(b) “Chairman”, in relation to a Regional Rural Bank, means the individual appointed or re-appointed under sub-section (1) of section 11 as the Chairman of that Bank;

(c) “director”, in relation to a Regional Rural Bank, means a member of the Board of that bank;

[(ca) “National Bank” means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);]

(d) “notified area” means the local limits, specified under sub-section (1) of section 3, within which a Regional Rural Bank shall operate;

(e) “prescribed” means prescribed by rules made under this Act;

(f) “Regional Rural Bank” means a Regional Rural Bank established under sub-section (1) of section 3;

(g) “Sponsor Bank”, in relation to a Regional Rural Bank, means a bank by which such Regional Rural Bank has been sponsored;

(h) “State Government” means,—

(i) in relation to a Regional Rural Bank established in a Union territory, the Central Government;

(ii) in relation to a Regional Rural Bank established in a State, the Government of that State;

(i) words and expressions used herein and not defined but defined in the Reserve Bank of India Act, 1934 (2 of 1934), shall have the meanings respectively assigned to them in that Act;

(j) words and expressions used herein and not defined either in this Act or in the Reserve Bank of India Act, 1934 (2 of 1934), but defined in the Banking Regulation Act, 1949 (10 of 1949), shall have the meanings respectively assigned to them in the Banking Regulation Act, 1949 (10 of 1949).

CHAPTER II

Incorporation And Capital Of Regional Rural Banks

  1. Establishment and incorporation of Regional Rural Banks .—(1) The Central Government may, if requested so to do by a Sponsor Bank, by notification in the Official Gazette, establish in a State or Union territory, one or more Regional Rural Banks with such name as may be specified in the notification and may, by the said or subsequent notification, specify the local limits within which each Regional Rural Bank shall operate.

(2) Every Regional Rural Bank shall be a body corporate with perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and to contract and may sue and be sued in its name.

[(3) It shall be the duty of the Sponsor Bank to aid and assist the Regional Rural Bank, sponsored by it, by—

(a) subscribing to the share capital of such Regional Rural Bank;

(b) training personnel of such Regional Rural Bank; and

(c) providing such managerial and financial assistance to such Regional Rural Bank [* * *], as may be mutually agreed upon between the Sponsor Bank and the Regional Rural Bank:] [* * *]

  1. Offices and agencies .—(1) A Regional Rural Bank shall have its head office at such place in the notified area as the Central Government may, after consultation with the [National Bank]and the Sponsor Bank, specify by notification in the Official Gazette.

(2) A Regional Rural Bank may, if it is of opinion that it is necessary so to do, establish its branches or agencies at any place in the notified area.

  1. Authorised capital .—The authorised capital of each Regional Rural Bank shall be [two thousand crore of rupees, divided into two hundred crore of fully paid-up shares of ten rupees each]:

Provided that the Central Government may, after consultation with the [National Bank] and the Sponsor Bank, increase or reduce such authorised capital; so, however, that the authorised capital shall not be reduced below [one crore of rupees, and the shares shall be, in all cases, fully paid-up shares of ten rupees each].

  1. Issued capital .— [(1) The issued capital of each Regional Rural Bank shall, in the first instance, be such as may be fixed by the Central Government in this behalf, but it shall in no case be less than [one crore of rupees.]

(2) Of the capital issued by a Regional Rural Bank under sub-section (1), fifty per cent shall be subscribed by the Central Government; fifteen per cent. by the concerned State Government and thirty-five per cent. by the Sponsor Bank.

[Provided that in case the Regional Rural Bank raises its capital from sources other than the Central Government or the State Government or the Sponsor Bank, the shareholding of the Central Government and the Sponsor Bank shall not be less than fifty-one per cent.

Provided further that the Central Government shall consult the concerned State Government if the level of shareholding in the Regional Rural Bank of such State Government is reduced below fifteen per cent.] [(2A) The Central Government may, in consultation with the Sponsor Bank and the State Government, by notification, either raise or reduce the limit of shareholding of the Central Government, the State Government or the Sponsor Bank specified in sub-section (2):

Provided that the Central Government shall consult the concerned State Government before reducing the limit of shareholding of such State Government.]

(3) The Board may, after consultation with the [National Bank], the concerned State Government and the Sponsor Bank and with the prior approval of the Central Government, from time to time, increase the issued capital of the Regional Rural Bank; and, where additional capital is issued, such capital shall also be subscribed in the same proportion as is specified in sub-section (2) [or, as the case may be, notified by the Central Government under sub-section (2A)].

  1. Shares to be approved securities .—Notwithstanding anything contained in the Acts hereinafter mentioned in this section, the shares of a Regional Rural Bank shall be deemed to be included among the securities enumerated in section 20 of the Indian Trusts Act, 1882 (2 of 1882), and shall also be deemed to be approved securities for the purposes of the Banking Regulation Act, 1949 (10 of 1949).

CHAPTER III

Management

  1. Management .—(1) Subject to the provisions of this Act, the general superintendence, direction and management of the affairs and business of a Regional Rural Bank shall vest in a Board of Directors which may exercise all the powers and discharge all the functions which may be exercised or discharged by the Regional Rural Bank.

(2) In discharging its functions, the Board shall act on business principles and shall have due regard to public interest.

  1. Board of Directors .—(1) The Board of Directors shall consist of the Chairman appointed under sub-section (1) of section 11, and the following other members, namely:—
[(a) two directors, who are not officers of the Central Government, State Government, Reserve Bank, National Bank, Sponsor Bank or any other bank, to be nominated by the Central Government;

[Provided that no person shall be nominated as a director, if he is already a director on the Board of any other Regional Rural Bank;]

(b) one director, who is an officer of the Reserve Bank, to be nominated by that Bank;

(c) one director, who is an officer of the National Bank, to be nominated by that Bank;

(d) two directors, who are officers of the Sponsor Bank, to be nominated by that Bank; and

(e) two directors, who are officers of the concerned State Government, to be nominated by that Government.] [(f) such number of directors elected by the shareholders other than the directors nominated by the Central Government, the State Government, the Sponsor Bank and other institutions owned or controlled by the Central Government or the State Government, whose names are entered in the register of shareholders of the Regional Rural Bank at least ninety days before the date of the meeting in which the election of directors takes place on the following basis, namely:—

(i) where the total amount of equity share capital issued to such shareholders is ten per cent. or less of the total issued equity capital, one director shall be elected from such shareholders;

(ii) where the total amount of equity share capital issued to such shareholders is more than ten per cent. but less than twenty-five per cent of the total issued equity capital, two directors shall be elected from the shareholders including the shareholders referred to in sub-clause (i);

(iii) where the total amount of equity share capital issued to such shareholders is twenty-five per cent. or more of the total issued equity capital, three directors shall be elected from the shareholders including shareholders referred to in sub-clauses (i) and (ii).]

(2) The Central Government may increase the number of members of the Board; so, however, that the number of directors does not exceed fifteen in the aggregate and also prescribe the manner in which the additional number may be filled in.

[(3) The Central Government may appoint an officer of the Central Government on the Board of Regional Rural Banks, if it considers necessary for the purpose of effective functioning of the Regional Rural Banks.]

[10. Term of office of director . — A director nominated under clause (a) of sub-section (1) of section 9 shall hold office during the pleasure of the Central Government and for such term, not exceeding three years, from the date on which he assumes his office, as the Central Government may specify at the time of his nomination and shall be eligible for renomination.

Provided that no such director shall hold office either continuously or intermittently for a period exceeding six years.]

  1. Chairman .—(1) [The Sponsor Bank]shall appoint an individual to be the Chairman of a Regional Rural Bank and specify the period, not exceeding five years, for which such individual shall, subject to the provisions of sub-section (4), hold office as the Chairman:
[Provided that no appointment of such an individual shall be made,—

(a) if such an individual is an officer of the Sponsor Bank, except after consultation with the National Bank; and

(b) in any other case, except with the prior approval of the Central Government.] [(1-A) Notwithstanding anything contained in sub-section (1),—

(a) the Sponsor Bank shall have the right to terminate the term of office of the Chairman at any time before the expiry of the period specified in sub-section (1):

Provided that no such termination shall be made,—

(a) if the Chairman is an officer of the Sponsor Bank, except after consultation with the National Bank; and

(b) in any other case, except with the prior approval of the Central Government:

Provided further that where the Chairman is not an officer of the Central Government, State Government, Reserve Bank, National Bank, Sponsor Bank or any other bank, he shall be given notice of not less than three months in writing or three months’ salary and allowances in lieu of such notice; and

(b) the Chairman shall have the right to resign his office at any time before the expiry of the period specified in sub-section (1) by giving to the Sponsor Bank, notice of not less than three months in writing.]

(2) The individual, appointed as a Chairman under sub-section (1), shall on the expiry of the period specified under that sub-section, be eligible for re-appointment.

(3) The Chairman shall devote his whole time to the affairs of the Regional Rural Bank and shall have, subject to the superintendence, control and direction of the Board, the management of the whole affairs of the Regional Rural Bank.

[(4) ][The Sponsor Bank][may, at any time, remove the Chairman from office:] [Provided that no such removal shall be made,—

(a) if the Chairman is an officer of the Sponsor Bank, except after consultation with the National Bank; and

(b) in any other case, except with the prior approval of the Central Government:

Provided further that no person shall be removed from his office, under this sub-section, unless he has been given an opportunity of showing cause against his removal.]

(5) The Chairman shall receive such salary and allowances and be governed by such terms and conditions of service as may be determined by [the Sponsor Bank in consultation with the National Bank] .

(6) If the Chairman is, by infirmity or otherwise, rendered incapable of carrying out his duties or is absent, on leave or otherwise, in circumstances not involving the vacation of office, the Central Government may appoint another individual to act as the Chairman during the absence of the first-mentioned Chairman.

  1. Disqualifications .—A person shall be disqualified for being appointed or, as the case may be, nominated as, and for being, a director, if he—

(a) is, or, at any time has been, adjudged insolvent or has suspended payment of his debt or has compounded with his creditors, or

(b) is of unsound mind and stands so declared by a competent Court, or

(c) is, or has been, convicted of an offence which, in the opinion of the Central Government, involves moral turpitude.

  1. Vacation of the seat of directors .—(1) If a director—

(a) becomes subject to any disqualification specified in section 12, or

(b) is absent without leave of the Board for more than three consecutive meetings thereof, his seat shall thereupon become vacant.

[(2) A director may resign his office by giving notice thereof in writing to the authority by which he was nominated; and, on such resignation being accepted, the director shall be deemed to have vacated his office.]
  1. Meetings of Board .—(1) The Board of directors of a Regional Rural Bank shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.

(2) The Chairman of the Regional Rural Bank shall preside over every meeting of the Board, and, in his absence, such director as the Chairman may generally, or in relation to any particular meeting, authorise in this behalf shall preside; and, in the absence of both the Chairman and the director so authorised, the directors present at the meeting shall elect one from among themselves to preside over the meeting.

Explanation .—For the purposes of this sub-section, “absence” from a meeting means non-attendance for any reason whatsoever at the meeting, or any part of the meeting during which any business is transacted.

(3) All questions at a meeting of the Board shall be decided by a majority of the votes of the directors present and voting; and, in case of equality of votes, the person presiding shall have a second or casting vote.

(4) No director shall, as a director, take part in the discussion of, or vote on, any contract, loan, arrangement or proposal, entered into or to be entered into, by or on behalf of the Regional Rural Bank, if he is, in any way, whether directly or indirectly, interested in the contract, loan, arrangement or proposal and, where a director is interested in any such matter, he shall, at the earliest possible opportunity, disclose to the Board the nature of his interest in such contract, loan, arrangement or proposal, and where he does so, his presence at the meeting shall not count for the purpose of forming any quorum at the time of any such discussion or vote, and if he does vote, his vote shall be void:

Provided that nothing contained in this sub-section shall apply to such director by reason only of his being—

(i) a shareholder (other than a director) holding not more than two per cent. of the paid-up capital in any public company within the meaning of the Companies Act, 1956 (1 of 1956), or any corporation established by or under any law for the time being in force in India or any co-operative society, with which the Regional Rural Bank has entered into, or proposes to enter into, any contract, loan, arrangement or proposal; or

(ii) a director of the Regional Rural Bank as such.

  1. Committees of Board .—The Board may constitute such committees, whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons, as it may think fit, for such purposes as it may decide.
  2. Fees and allowances of directors and members of committees .—(1) Every director and every member of a committee (other than the Chairman) shall be paid such fees and allowances as may be determined by the Central Government:

Provided that no fees shall be paid to any director, or member of a committee, if he is an officer of the Central Government, State Government, the Reserve Bank, [National Bank,] Sponsor Bank or any other bank.

(2) The allowances payable to a director or a member of a committee, who is an officer of the Central Government, State Government, Reserve Bank, [National Bank,] Sponsor Bank or any other bank, shall be paid by the Government or bank by which such officer is employed; and the allowances and fees payable to any other director or member of a committee shall be payable by the concerned Regional Rural Bank.

  1. Staff of Regional Rural Banks .—(1) A Regional Rural Bank may appoint such number of officers and other employees as it may consider necessary or desirable [in such manner as may be prescribed]for the efficient performance of its functions and may determine the terms and conditions of their appointment and service:

Provided that, it shall be lawful for a Sponsor Bank, if requested so to do by a Regional Rural Bank sponsored by it, to send [* * *] such number of officers or other employees on deputation to the Regional Rural Bank as may be necessary or desirable for the efficient performance of its functions:

Provided further that the remuneration of officers and other employees appointed by a Regional Rural Bank shall be such as may be determined by the Central Government, and, in determining such remuneration, the Central Government shall have due regard to the salary structure of the employees of the State Government and the local authorities of comparable level and status in the notified area.

(2) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being in force, no award, judgment, decree, decision or order of any Industrial tribunal, Court or other authority, made before the commencement of this Act, shall apply to the terms and conditions in relation to the persons appointed by a Regional Rural Bank.

(3) The officers and other employees of a Regional Rural Bank shall exercise such powers and perform such duties as may be entrusted or delegated to them by the Board.

CHAPTER IV

Business Of A Regional Rural Bank

  1. Business which a Regional Rural Bank may transact .—(1) Every Regional Rural Bank shall carry on and transact the business of banking as defined in clause (b) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) and may engage in one or more forms of business specified in sub-section (1) of section 6 of that Act.

(2) Without prejudice to the generality of the provisions of sub-section (1), every Regional Rural Bank may, in particular, undertake the following types of business, namely:—

(a) the granting of loans and advances, particularly to small and marginal farmers and agricultural labourers, whether individually or in groups, and to co-operative societies, including agricultural marketing societies, agricultural processing societies, co-operative farming societies, primary agricultural credit societies or farmers’ service societies, for agricultural purposes or agricultural operations or for other purposes connected therewith;

(b) the granting of loans and advances, particularly to artisans, small enterpreneurs and persons of small means engaged in trade, commerce or industry or other productive activities, within the notified area in relation to the Regional Rural Bank.

CHAPTER V

Accounts And Audit

  1. Closure of accounts .—(1) Every Regional Rural Bank shall cause its books to be closed and balanced as on the [31st day of March][or such other date in each year as the Central Government may, by notification in the Official Gazette, specify]and shall appoint with the approval of the Central Government auditors for the audit of its accounts:
[Provided that with a view to facilitating the transition from one period of accounting to another period of accounting under this sub-section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for the closing and balancing of, or for other matters relating to, the books in respect of the concerned years.]

(2) Every auditor of a Regional Rural Bank shall be a person who is qualified to act as an auditor of a company under section 226 of the Companies Act, 1956 (1 of 1956), and shall receive such remuneration as the Regional Rural Bank may fix with the approval of the Central Government.

(3) Every auditor shall be supplied with a copy of the annual balance-sheet and profit and loss account of the Regional Rural Bank, and a list of all books kept by the Regional Rural Bank, and it shall be the duty of the auditor to examine the balance-sheet and vouchers relating thereto, and in the performance of his duties, the auditor—

(a) shall have, at all reasonable times, access to the books, accounts and other documents of the Regional Rural Bank;

(b) may, at the expense of the Regional Rural Bank, employ accountants or other persons to assist him in investigating such accounts; and

(c) may, in relation to such accounts, examine the Chairman or any officer or employee of the Regional Rural Bank.

(4) Every auditor of a Regional Rural Bank shall make a report to that bank upon the annual balance-sheet and accounts and in every such report shall state,—

(a) whether, in his opinion, the balance sheet is a full and fair balance sheet containing all necessary particulars and is properly drawn up so as to exhibit a true and fair view of the affairs of the Regional Rural Bank, and, in case he had called for any explanation or information, whether it has been given and whether it is satisfactory;

(b) whether or not, the transactions of the Regional Rural Bank, which have come to his notice, have been within the powers of that bank;

(c) whether or not, the returns received from the offices and branches of the Regional Rural Bank have been found adequate for the purpose of his audit;

(d) whether the profit and loss account shows a true balance of profit or loss for the period covered by such accounts; and

(e) any other matter which he considers should be brought to the notice of the Regional Rural Bank.

  1. Annual report to be furnished to the shareholders .— [(1)]Every Regional Rural Bank shall, within[three months from the date of the closure of its accounting year, or such further period, not exceeding three months, as may be permitted by the Reserve Bank], send to each of its shareholders a report as to its working and activities during the accounting year immediately preceding together with a copy of its balance-sheet, profit and loss account and the auditor’s report in relation to the accounts of the said accounting year.
[(2) The Central Government shall cause every auditor’s report and report on the working and activities of each Regional Rural Bank to be laid, as soon as may be after they are received, before each House of Parliament.]
  1. Disposal of profits .—After making provisions for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and all other matters for which provision is, under law, necessary or which are usually provided for by banking companies, a Regional Rural Bank may, out of its net profits, declare a dividend.
  2. Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961.—For the purpose of the Income-tax Act, 1961 (43 of 1961), or any other enactment for the time being in force relating to any tax on income, profit or gains, a Regional Rural Bank shall be deemed to be a co-operative society.
  3. Interest-tax not payable .—Notwithstanding anything contained in the Interest-tax Act, 1974 (45 of 1974), no Regional Rural Bank shall be liable to pay any tax under that Act.

[CHAPTER V-A]

Amalgamation Of Regional Rural Banks

23-A. Amalgamation of Regional Rural Banks .—(1) Notwithstanding anything contained in this Act, if the Central Government, after consultation with the National Bank, the concerned State Government and the Sponsor Bank, is of the opinion that it is necessary in the public interest or in the interest of the development of the area served by any Regional Rural Bank or in the interest of the Regional Rural Banks themselves, that two or more Regional Rural Banks should be amalgamated, that Government may, by notification in the Official Gazette, provide for the amalgamation of such Regional Rural Banks (hereafter in this Chapter referred to as the transferor Regional Rural Banks) into a single Regional Rural Bank (hereafter in this Chapter referred to as the transferee Regional Rural Bank) with such constitution, property, powers, rights, interests, authorities and privileges; and with such liabilities, duties and obligations, as may be specified in the notification.

(2) Every notification issued under sub-section (1) shall indicate the date with effect from which the amalgamation shall become effective.

(3) Every notification issued under sub-section (1) may also provide for all or any of the following matters, namely:—

(a) the continuance in service of all the employees of the transferor Regional Rural Banks (excepting such of them as not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947) are specifically mentioned in the notification) in the transferee Regional Rural Bank at the same remuneration and on the same terms and conditions of service, which they were getting or, as the case may be, by which they were being governed, immediately before the date on which the amalgamation takes effect;

(b) notwithstanding anything contained in clause (a), where any of the employees of the transferor Regional Rural Banks, not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947) are specifically mentioned in the notification, or where any employee of the transferor Regional Rural Banks has by notice in writing given to the transferee Regional Rural Bank at any time before the expiry of a period of three months next following the date on which the amalgamation takes effect, intimated his intention of not becoming an employee of the transferee Regional Rural Bank, the payment to such employee of compensation, if any, to which he is entitled under the Industrial Disputes Act, 1947 (14 of 1947), and such gratuity, provident fund and other retirement benefits ordinarily admissible to him under the rules or authorisations of the concerned transferor Regional Rural Banks immediately before that date;

(c) the other terms and conditions for the amalgamation of Regional Rural Banks; and

(d) the continuance by or against the transferee Regional Rural Bank of any pending legal proceeding by or against any transferor Regional Rural Banks and such consequential, incidental and supplemental provisions, as may, in the opinion of the Central Government, be necessary to give effect to the amalgamation.

(4) Every notification issued under sub-section (1) shall as soon as may be after it has been made, be laid before each House of Parliament.

23-B. Notification under section 23-A to be sufficient notice to concerned parties .—(1) A notification issued under sub-section (1) of section 23-A, shall constitute sufficient notice of the provisions thereof to all the parties concerned and shall be binding on the transferor Regional Rural Banks and the transferee Regional Rural Bank and to the depositors, creditors, employees and all other persons having dealings with such banks.

(2) Notwithstanding anything contained in the Transfer of Property Act, 1882 (4 of 1882) or the Registration Act, 1908 (16 of 1908), any notification issued under sub-section (1) of section 23-A shall be sufficient conveyance, in accordance with the provisions of the notification, of the business, properties, assets and liabilities, rights, interests, powers, privileges, benefits and obligations of whatever nature of the transferor Regional Rural Banks to the transferee Regional Rural Bank.

(3) On and from the date on which the amalgamation takes effect under section 23-A, any reference to the transferor Regional Rural Banks in any agreement, conveyance, assurance, power of attorney or any other document of whatsoever nature, shall be deemed to be a reference to the transferee Regional Rural Bank and the rights and obligations of the transferor Regional Rural Banks shall be deemed to be the rights and obligations of the transferee Regional Rural Bank to the extent specified in the said amalgamation.

23-C. Cessation of business of transferor Regional Rural Banks .—On and from the date on which the amalgamation takes effect under section 23-A, the transferor Regional Rural Banks shall cease to carry on business, including that of making of any payment to any depositors or discharge any liability or obligation to the creditors except to the extent as may be necessary for the implementation of the provisions of the said amalgamation.

23-D. Liquidation of Regional Rural Banks .—Where a notification is issued for the amalgamation of Regional Rural Banks under sub-section (1) of section 23-A, the Central Government may, by a further notification in the Official Gazette, direct that on such date, as may be specified therein, the transferor Regional Rural Banks, which by reason of amalgamation will cease to function, shall stand dissolved and such direction shall take effect notwithstanding anything to the contrary contained in section 26.

CHAPTER VI

Miscellaneous

  1. Power of Central Government to give directions .—(1) A Regional Rural Bank shall, in the discharge of its functions, be guided by such directions in regard to matters of policy involving public interest as the Central Government may, after consultation with the Reserve Bank, give.

(2) If any question arises as to whether any such direction relates to a matter of policy involving public interest, the decision of the Central Government thereon shall be final.

[24-A. Inspection, audit and scrutiny by the Sponsor Bank .—Notwithstanding anything contained in section 19 and without prejudice to the provisions of section 35 of the Banking Regulation Act, 1949 (10 of 1949), the Sponsor Bank shall, from time to time monitor the progress of the Regional Rural Banks sponsored by it and cause inspection, internal audit and scrutiny to be made by one or more of its officers and suggest corrective measures to be taken by such Regional Rural Bank.]

  1. Obligations as to fidelity and secrecy .—(1) A Regional Rural Bank shall observe, except as otherwise required by law, the practices and usages customary among bankers and, in particular, it shall not divulge any information relating to, or to the affairs of, its constituents except in circumstances in which it is, in accordance with the law or practice and usage customary among bankers, necessary or appropriate for the Regional Rural Bank to divulge.

(2) Every director, member of a committee or auditor, officer or other employee of a Regional Rural Bank shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the Schedule to this Act

[(3) Nothing contained in this section shall apply to the credit information disclosed under the Credit Information Companies (Regulation) Act, 2005 (30 of 2005).]
  1. Bar to liquidation of Regional Rural Bank .—No provision of law relating to the winding up of companies shall apply to a Regional Rural Bank and a Regional Rural Bank shall not be placed in liquidation save by order of the Central Government and in such manner as it may direct.
  2. Defects in appointment or constitution not to invalidate acts or proceedings .—(1) No act of a Chairman, acting in good faith, shall be invalid merely by reason of any defect in his appointment or in the procedure.

(2) No act or proceeding of any Board of directors or of any committee of a Regional Rural Bank shall be invalid merely on the ground of the existence of any vacancy in, or defect in the constitution of, such Board or committee, as the case may be.

(3) Acts done by a person, acting in good faith, as a director or member of a committee of a Regional Rural Bank shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in any law for the time being in force:

Provided that nothing in this section shall be deemed to give validity to any act done by a director or a member of any committee of a Regional Rural Bank after his appointment has been shown to the Regional Rural Bank to be invalid or to have terminated.

  1. Indemnity of directors, etc .—(1) A director or a member of a committee of a Regional Rural Bank shall not be responsible for any loss or expense caused to such bank by insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf of a Regional Rural Bank or by the insolvency or wrongful act of any customer or debtor or anything done in, or in relation to, the execution of the duties of his office, unless such loss, expense, insufficiency or deficiency was due to any wilful act or default on the part of such director or member.

(2) The Chairman of a Regional Rural Bank and every officer of the Central Government or State Government or an officer of the Reserve Bank [or the National Bank] or the Sponsor Bank and every officer or other employee of a Regional Rural Bank shall be indemnified by such bank against all losses and expenses incurred by him in, or in relation to, the discharge of his duties except such as have been caused by his own wilful act or default.

  1. Power to make rules .—(1) The Central Government may, after consultation with the [National Bank]and the Sponsor Bank, by notification in the Official Gazette, make rules for carrying out the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:—

(a) the manner in which the additional number of members of the Board may be filled in, under sub-section (2) of section 9;

(b) the time and place at which the Board of Directors of a Regional Rural Bank shall meet and the rules of procedure which shall be observed by the Board in regard to the transaction of business at its meetings, under sub-section (1) of section 14;

([ba) the manner in which the officers and other employees of the Regional Rural Banks shall be appointed;]

(c) any other matter which is required to be, or may be, prescribed.

(3) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive session aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

  1. Power to make regulations .— [(1)]The Board of Directors of a Regional Rural Bank may, after consultation with the Sponsor Bank and the [National Bank], and with the previous sanction of the Central Government, [by notification in the Official Gazette]make regulations, not inconsistent with the provisions of this Act and the rules made thereunder, to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act.
[(2) Every regulation shall, as soon as may be after it is made under this Act by the Board of directors, be forwarded to the Central Government and that Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.]
  1. Removal of difficulties .—If any difficulty arises in giving effect to the provisions of this Act, the Central Government may make such order, not inconsistent with the provisions of this Act, as may appear to it to be necessary for the purpose of removing the difficulty:

Provided that no such order shall be made after the expiry of a period of five years from the commencement of this Act.

  1. Act to override the provisions of other laws .—The provisions of this Act shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force or in any contract, express or implied, or in any instrument having effect by virtue of any law other than this Act, and notwithstanding any custom or usage to the contrary.

CHAPTER VII

Amendment Of Certain Enctments

[ Repealed by the Repealing and Amending Act,1988 (19 of 1988), section and Schedule I (w.e.f.31-3-1988)]

THE SCHEDULE

[See section 25 (2)]

I,……………….., do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as a director, member of a committee, officer, employee or auditor (as the case may be) of the Regional Rural Bank and which properly relate to any office or position in the said Bank held by me.

I further declare that I will not communicate or allow to be communicated to any person not legally entitled thereto any information relating to the affairs of the Regional Rural Bank or to the affairs of any person having any dealings with the Regional Rural Bank, nor will I allow any such person to inspect or have access to, any books or documents belonging to, or in the possession of the Regional Rural Bank and relating to the business of the Regional Rural Bank, or to the business of any person having any dealings with the Regional Rural Bank.

Signed before me.

Dated :

………………………………………..

Signature.

 

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