 the reserve bank of india (amendment) bill, 1962- (as introducbd in lob: sabra on 24th august, 1962)  the reserve bank of india (amendment) bill, 1962 (as introduced in lok sabha) a billjutther to amend the reserve bank of iftdia act, 1934 end to make ce,tain consequential amendments in the state bank of india act, 1955 be it enacted by parliament in the ·thirteenth year of the republic of india as follows:-1 this act may be called the reserve bank of india (amend- short tide ment) act 1962 :a of 1914 s '2 to sub-section (2) of section 8 of the reserve bank of india amcndmedt act, 1934 (hereinafter referred to as the principal act) the follow- of lectloa i ing proviso shall be added, namely:-10 "provided that the central board may, if in its opinion it is necessary in the public interest so to do permit the governor or a deputy governor to undertake, at the request of the central government ar any state government such parttime honorary work whether related to the purposes of this act or not as is not likely to interfere with his duties as governor or deputy governor as the case may be" is 3 in section 17 of the principal act,-  (a) in sub-clause (4) of clause (2), for the words "maturing within ninety days from the date of such purchase or re-discount, exclusive of days of grace;" the following words shall be substituted, namely:-20 fcmaturlng,-1500(b) ls-l (i) in the case of bills of exchange and promissory notes arising out of any such transaction relating to the export of goods from india within one hundred and eighty days, and (ii) ib any other case, within ninety days, s from the date of such purchase or re-discount, exclusive of days of grace;"; (b) in clause (3), for sub-clause (b), the following sub" clause ahall be substituted, namely:-·'(b) the purchase, sale and re-discount of bills of ex- 10 change (including treasury bills) drawn in or on any place in any country outside india which is q member of the international monetary fund and maturmg,-(i) in the case of buls of exchange arising out of any bona fide transaction relating to the export of goods is from india, within one hundred and eighty days and (ii) in any other case, within ninety days, from the date of such purchase or il'e-discount: provided that no such purchase, sale or re-discount ihall be made in india except with a scheduled bank or a 20 state co-ope1'8'tdve bank"; (c) after cla\lse (3), the following clause shall be inserted, name1y:-"(3a) the making to any scheduled bank or state co- ' operative bank, of loans and advances, against promissory 25 notes of such bank, i"epayable on demand or on the expiry of fixed periods not exceeding one hundred and eighty days: provided that the borrowing bank furnishes a declaration in writing, to the effect that-30 (i) it holds bills of exchange arising out of any transaction relating to the export of goods from india of a value not less tb8ll the amount of such loans or advances,-(a) drawn in india and on any place in any 3s country outside india which is a member of the international monetary fund or in any otha!: country notiaed in this behalf by the bank in the gazette of india, and (b) maturing not later than one hundred and eighty days from the date of the loan or advance; and 5 (ii) it will so long as any part of such loans and advances remains unpaid, continue to hold such bills of exchange of a value not less than the amount of such loans or advances outstanding for the time being;"; 10 (d) to clause (4), the following proviso shall be added, namely:-"provided that loans and advances made against the security of bills of exchange and promissory notes arising out of any transaction relating to the export of goods from is india shall be repayable on demand or on the expiry of fixed periods not exceeding one hundred and eighty dayi", 4 in section 42 of the principal act,-arneadment orlcdoa ~ (a) in sub-section (1) ,-20 (i) for the words "five per cent of the demand liabilities and two per cent of the time liabilities", the words "three per cent of the total of the demand and time liabilities" shall be substituted; (ii) for the proviso, the following proviso shall be substituted namely:-2s "provided that the bank may, by notification in the gazette of india, increase the said rate to such higher rate as may be specified in the notification so however that the rate shall not be more than fifteen per cent of the total of the demand and time liabilities"; 30 (iii) in the explanation, in clause (e), for the words and brackets "refinance corporation for industry (private) limited", the words "refinance corporation for industry limited" shall be substituted; (b) in sub~ion (1a),-35 (i) for the words "rates specifted in the notifteation, such additional ·balance being calculated with reference to the excess of the demand and time liabuities of the bank u shown in the return referred to in sub-section (2) over its demand and time liabilities" the words "rate specified in the notification, such additional balance being calculated with reference to the excess of the total of the demand and time liabilities of the bank as shown in the return referred 5 to in sub-section (2) over the total of its demand and time liabilities" shall be substituted; (ii) the proviso shall be omitted; (c) after sub-seclion (1a) the following sub-section mall h~ inserted namely: -10 "(1aa) notwithstanding any1thing contained in subsection (1) or sub-section (1 a) it shall not be necesarv for any scheduled bank :to maintain wi·th the bank anv balance which shall be more than fifteen per cent of the total of its demand and time liabilities as shown in the return is referred to in sub-section (2) "; (d) in sub-section (1b) the following proviso shall hf" inserted at the end namely:-"provided further that where the bank does not under sub-section (5) demand the payment of the penalty im- 20 poled by 8ub-section (3) it may pay interest at such rate or rates as may !be determined by the bank from time to time on the amount actually maintained with it by the scheduled bank, notwithstanding that such amount is less than the balance required to be maintained in pursuance of 25 a notification issued under the proviso to sub-section (1) or under sub-section (1a) "; (e) for sub-section (5), the following sub-section shall b-lubstituted namely:-"(5) (a) the penalties imposed by sub-sections (3) ancl 30 (4) shall be payable within a period of fourteen days from the date on which a notice issued by the bank demandin~ the payment of the same is served on the scheduled bank, and in the event of a failure of the scheduled bank to pay the same within such period mav be levied by the dirpc- 35 tion of the principal civil court havin~ jurisdiction in the area where an office of the defaulting bank is situated such direction to be made only unon an application made in this behalf to the court by the bank; (b) when tlle court makes a direction under clause 40 (a) it shall issue a certificate specifying the sum payable by the scheduled bank and every such certificate shall be enforceable in the same manner as h it were a decree made by the court in a suit; (c) notwithstanding anything contained in this section if the bank is satisfied that the defaulting bank had sufficient cause for its failure to comply with the provisions of sub-eection (1), (ia) or (2), it may not demand the payment of the penal interest or the penalty, as the case may be" 5 in section 43a of the principal act, after the words and figures amendment oflectlon "or aection 43", wherever they occur, the words and figures and 4,a letter "or in pursuance of the provisions of chapter ilia" shall be inserted e in the principal act, after chapter iii, the following chapter inlertion of ihall be inserted namely: -ftfk~r  "chapter rnacoubctron and fubnishing of credit inporma'l'ion 45a in this chapter, unless the context otherwise require<: -definition, (a) "banking company" means a banking company as deftned in section 5 of the banking companies act, 1949 and includes the state bank of india or any other banking or ftnancial institution notified by the central government in this behalf; (b) "borrower" means any person to whom any credit limit has been sanctioned by any banking company, whether availed of or not, and includes-(i) in the case of a company or corporation, its subsidiaries; (ii) in the case of a hindu undivided ~uy, any member thereof or any firm in which such ·member is a partner; (iii) in the case of a firm, any 'partner thereof or my other firm in which such partner is a partner; and (iv) in the case of an individual, any firm in which such individual is a partner; (c) "credit information" means any information relating to-' (i) the amounts and the nature of loans or advances and other credit facilities granted bya banking company to any borrower or class of borrowers; (ii) the nature of security taken from any borrower for credit facilities granted to him; and (iii) the guarantee furnished by a banking company fot any of its customers 45b (1) the bank may-power of information (a) collect, in such manner as it may think fit, credit information from banking companies; and (b) furnish such information to any banking company in accordance with the provisions of section 45d 45c (1) for the purpose of enabling the bank to discharlie 10 its functions under this chapter, it may at any time direct any banking company to submit to it such statements relating to such credit information and in such form and within such time as may be specified by the bank from time to time (2) a banking company shall, notwithstanding anything is to th~ contrary contained in any law for the time being in force or in any instrument regulating the constitution thereof or in any agreement executed by it, relating to the secrecy of its dealings with its constituents, be bound to comply with any direction issued under sub-section (1) 20 45d (1) a banking company may, in connection with any financial arrangement entered into or' proposed to be entered into by it, with any person, make an application to the bank in such form as the bank may specify requesting it to furnish the applicant with such credit information as may be specified in 25 the application (2) on receipt of an application under sub-section (1), the bank shall, as soon as mny be, furnish the applicant with such credit information relating to the matters specified in the application, as may be in its possession: 30 provided that the information so furnished shall not disclose the names of the banking companies which have submitted such information to the bank (3) the bank may in respect of each application levy such fees, not exceeding twenty-five rupees, as it may deem fit for 35 furnishing credit information ditcl08ure of information prohibited 45e (1) any credit information contained in any statement submitted by a banking company under section 45c or furnished by the bank to any banking company under section 45d, shall be treated as confidential and shall not, except for the purposes 40 of this chapter, be published or otherwise disclosed (2) nothing in this sect!on shall apply to-(a) the disclosure by any banking company, with the previous permission of the bank, of any information furnished to the bank under section 45c;  5 (b) the publication by the bank, if it considers necessary in the public interest so to do, of any information collected by it under section 45~, in such consolidated form 88 it may think fit without disclosing the name of any banking company or its borrowers 10 is (3) notwithstanding anything contained in any law for the time being in force, no court, tribunal or other authority shall compel the bank or any banking company to produce or to give inspection ctf any stajtement submitted by that banking company under section 45c or to disclose any credit information furnished by the bank to that banking company under section 45d 45f no person shall have any right, whether in contract certain or otherwise, to any compensation for any loss incurred by claims for :reason of the operation of any of the provisions of this chapter ::p:d 45g (1) if any banking company-20 (a) fells to submilt any statement required under section 45c or submits under that section a statement which is fabe in any material particular; or {b) faill to comply with any condition imposed wlder this chapter, every director or other officer of the company and every other person who is knowingly a party to the breach shall be punishable with fine which may extend to two thousand rupees 30 (2) if any person discloses any credit information, the disclosure of which is prohibited under section 45e, he shall be punishable with imprisonment which may extend to six months or with tine which may extend to one thousand rupees or with both", 35 7 in the state bank of india act, 1~,-amendment (i) in section 33, in clause' (zixb), after the words "classes ~k of tate of industries", the words "or in such business or trade or classes india n:t of buliness or trade" shall be inserted; 1955 (ii) in section 34, to 9ub-stoction (3), the following proviso shall be added, namely:-uprovided that nothing in sub-clause (ii) of clause (b) shall apply where the state bank holds by way of a eollatera! security any negotiable instrument or security which does not mature within six months from the date aforesaid in respect of any loan, advance or ea~ e:redit dctiolled under this act"   the reserve bank of india act does not permit the bank to make any loans or advances or to grant financial accommodation in any other form to commercial banks for periods in excess of ninety days it is also not possible for the bank to make any such loans 01' to granti any such accommodation on the security of documents bearing only a single signature on behalf of any borrowing institution as it has been represented that these restrictions render it difficult for banks to extend to exporters 'credit facilities for the periods for which or the conditions on which such credit may be required by them, it is prcposed to amend the r~levant provisions of the act, so as to permit the reserve bank to grant loans and advances or other financial accommodation, so far as exports are concerned on somewholt more liberal terms and for any period up to one hundred and eighty days the state bank of india act as it now stands does not enable the bank to grant term credits to exporters for periods in excess of six months the bill seeks to amend the relevant provisions of the act so as to enable the bank to grant medium-term credits against ex· ports for periods up to seven years it has' been represented that in the absence of any regular and systematic arrangement for the collection, pooling and supply of particulars relating to the loans and advances or other credit facm· ties granted by the various banks and financial institutions to those borrowing any amounts from them, individual banks or other financial institutions are handicapped in obtaining reliable information about the credit-worthiness or financial position of the various persons to whom credit has been or may have to be granted the bill seeks to enable the reserve bank to collect and supply the relevant information in a consolidated form to the lending institutions in view of the changes in recent years in the pattern of deposits of the scheduled banks, it is proposed that the balances which they are required to keep with the reserve bank should be prescribed at the uniform rate of three per cent of ,the total liabilities, the overall limit for such balances or any additional balances or special deposits as the case may be being fixed consequentially at fifteen per cent of the total liabilities' the scope and object of the various amendments are further explained in the notes on the various clauses of the bill nzw di:lri; morarji desai the 17th august, 1962 clause 2-sub-section (2) of section 8 of the reserve bank of india act as it now stands requires the governor and the deputy governors of the reserve bank to devote their wholetime to the affairs of the bank it is proposed to add a proviso to this sub-aee-~ion, so as to permi t the governor or a deputy governor to under  take, at the request of the central government or of a state go,-ernment, any part time honorary work, even though it may not be strictly related to or connected with the affairs of the bank clause 3 seeks to amend sub-clause (a) of clause (2) and subclause (b) of clause (3), of section 17 of the reserve bank of india act and to add a new clause, namely, clause (3a) and a provtso nelow the existing clause (4) in that section so as to provide that: (a) the period of maturity of eligible bills of exchange (including treasury bills) and promissory notes, whether drawn on or in india or drawn on or in any other country which is a member of tlie international monetary fund may be increased from' ninety days to one hundred and eighty days if the bills of exchange or the promis-ciiory notes as the case may be relate to the export of goods from india; (b) loans to scheduled banks or to state cooperative lanks may be granted against the signature of the borrowing institu-!ions themselves, instead of on the basis of two good signature as now prescribed in the act if the borrowing institutions furnish declarations to the effect that they are holding and will continue to hold so long as the advances granted to them by the reserve bank remain outstanding bills drawn by indian exporters on foreign countries maturing within one hundred and eighty days; and (e) normal banking accommodation to the scheduled bank or to the state cooperative banks may be granted for one hundred and eighty instead of ninety days if the accommodation ta for the purpose of financing exports rza1lsp 4-section 42 of the reserve bank of india act now provides for the maintenance by scheduled banks with the reserve bank of india of balances to the extent of two per cent of their time liabilities and five per cent of their demand liabilities in view of the marked increase in time as distinguished from demand liabilities in the last few years, the actual balances required to be maintained with the reserve bank are now somewhat less than in the past and will diminish further if the present trend were to continue the substantive portion of sub-section (1) of section 42 is, therefore, pro-'posed to be amended so as to require the banks to maintain a uniform percentage of three per cent of the total time and demand liabilities the proviso to suh-6ection (1) of section 42 permits the reserve bank to increase the minimum balances which are required to be maintained with it to eight per cent and twenty per cent in the case of time and demand liabilities respectively an overall limit in terms of these percentages is also laid down for normal and increased balances under sub-section (1) and special deposits under subsectioa (la) considered tclgether the ceilings mentioned in the proviso to' sub-section (1) and the overall limit are proposed to be auered to fifteen per cent of the total liabilities the reserve bank does not pay any interest on the normal minimmn balances, but is permitted to pay interest at a rate determined by it on the increased balances or special deposits, if there is no default on the part of any scheduled bank in maintaining such balances or deposits it is proposed to add a new proviso to subsection (lb) in section 42 to empower the reserve bank to pay in its discretion interest on any balances or deposits which may be in excess of the normal minimum balance but less than the increased minimum balance or special deposit which is required to be maintained a minor amendment to clause (c) of the explanation below subsection (1) seeks to delete the word "private" from the title of the reftnance corporation for industry which is now a public limited company and sub-section (5) as recast provides for the sums determined by a court as penalties due from banks to be recovered as decreed amounts clause 5 provides for the amendment of section 43a of the reserve bank of india act so as to extend the prot~ion which is now afforded to the reserve bank and its officials to anything w'hlch is done in good faith, in the exercise of the bank's functions in regard to the collection and supply of credit information clause 6 seeks to add a new chapter to the reserve bank of india' act defining the duties and obligations of the bank in regard to the pooling consolidation and publication of credit information section 45a defines the expressions used in the chapter the words "banking company" as used in this chapter will include in addition to commercial banks any financial institution which may be notified for this purpose every banking company will be required, notwithstanding the provisions of any other law or instrument to supply any infonnation relating to any constituent which may be required by the reserve bank and will be entitled on an application accompanied by the payment of a fee not exceeding twenty-five rupees to consolidated information relating to all the loans granted by the banking companies to any person borrowing or intending to borrow from it suitable penalties are proposed to be prescribed for any failure on the part of banking c'ompanies to comply with any of the provisions of the chapter, including those prohibiting the further publication by the banking companies of any information supplied to them and the reserve bank is also proposed to be indemnified against any action on the ground that the supply of credit information by it to the banking companies has been unauthorised or that the rights of any constituent have been violated czau8e 7 seeks to amend clause (xixb) of section 33 of the state bank: of india act, 1955 so as to enable the state bank to grant term loans for periods in excess of six months but not in excess of seven years to persons engaged in such business or trade or classes of business or trade as may be approved by the central board the intention is that loans for these periods should be granted, ii necessary, to indian exporters in order to enable them to offer competitive terms to the customers abroad sub-section (3) of section 34 of the same act so as to enable the state bank to obtain and hold as collateral security any negotiable instrument relating to or arising out of exports from india and maturing after a period of six months  extracts from the reserve bank of india act, 1934 (2 of 1934) - • - • •17 the bank shall be authoris~ to carry on and transact the seveiul kinds of business hereinaftej; ,specified, namely:-business which the bank may transact (1) the accepting ef money on deposit without interest from, and the collection of money for the central government, the stalte governments, local authorities, banks and any other persons; (2) (a) the purchase, sale and rediscount of bills of exchange and promissory notes, drawn on and payable in india and arising out of bona fide commercial or trade transactions bearing two or more good signatures, one of which shall be that of a scheduled bank or q state co-operative bank, and maturing within ninety days from the date of such purchase or rediscount, exclusive of days of grace; - - - - - (3) (b) the purchase, sale and rediscount of bills of exchange (including treasury bills) drawn in or on any place in any country outside india which is iii member of the international monetary fund and maturing within ninety days from the date of purchase, provided that ·no such purchase, sale or rediscount shall be made in india except with iii scheduled bank - - - - - cash reserves of icheduled banks to be kept with the bank 42j (1) every bank included in the second schedule shall maintain with the bank an average daily balance the amount of which shall not be less thm five per cent of the demand liabilities and two per cent of the time liabilities in india of such bank as shown in the return referred to in sub-section (2): provided that the bank may, by notification in the gazette of india, increase the said rates to such higher rates as may be specified in the notifiootion so however, thart the rate shall not be more than twenty per cent, in the case demand liabilities and more than eight per cent, in the case of time liabilities explanation-for the purposes of this section,-(a) "average daily balance" shall mean the average of the balances held at the close of business on each day of a week; (b) "week" shall mean the period from saturway to the following friday, both days inclusive; (c) "liabilities" shall not include the paid-up capital or the reserves or any credit balance in the profit and loss account of the bank or the amount of eny loan taken from the bank or from the refinance corporation for industry (private) limited, or from the state bank or from any other bank notified by the central government in this behalf (ia) notwithstanding anything contained in sub-section (1), the bank may, by notification in the gfizette of india, direct that every scheduled bank shall, with effect from such date as may be specified in the notification, maintain with the bank, in addition to the balance prescribed by or under sub-section (1), an additionqi average daily balance the amount of which shall not be less than the rates specified in the notiiication, such additional balance being calculated with reference to the excess of the demand and time litabihties of the bank as shown in the return referred to in sub-section (2) over its demand and time liabilities at the close of business on the date specified in the notification as shown by such return so howev~r, that the additional balance shall, in no crase, be more than such excess: provided that nothing in this sub-section shall make it necessary for any scheduled bank to maintain with the bank any ball3nce which shall be more than twenty per cent of its demand liabilities and eight per cent of its time liabilities as shown in  the return referred to in sub-section (2) - - - - - (5) the penalties imposed by sub-sections (3) and (4) shall be payable on demand made by the bank, and, in the event of a refusal by the defaulting bank to pay on such demand, may be levied by a direction of the principal civil court having jurisdiction in the area where an omce of the defaulting bank is situated, such direction to be made only upon application made in this behalf· to the court by the bank  - - - - ga (1) no suit or other legal proceeding shall lie a~ainst the protection ba~k or any of its omcers for anything which is in good faith done :r=ir: or mtended to be done in pursuance of section 42 or section 43 ,ood faith (2) no suit or other legal proceeding shall lie against u1e bank or any of its officers for any damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of section 42 or section 43  - - - - - power or the central board to make regu-iatiods 58 (1) the centml board may, with the previous sanction of the central government, make regulations consistent with this act to provide for all matters for which provision is necessary or convenient for the purpose of giving effect to the provisions of this act (2) in particular and without prejudice to the generality of the foregoing provision, such regulations may provide for all or any of the following matters, namely:-(f) the manner in which the business of the ceutntl board shall be transacted, and the procedure to be followed at meetings thereof; (g) the conduct ext business of local board! and the delega tion to such boards of powers and functions;  (h) the delegation of powers and funetions of the cebtral board to deputy governors, directors or ofticers of the bank; (i) the formation of committees of the central board, the delegation of powers and functions of the central board to such committees, and the conduct of business in such committees; (j) the constitution and management of staft and superannuation funds for the officers amd servants of the bank; (k> the manner and form in which contmcts binding on the bank may be executed; (t) the provision of an official seltl of ,the bank and the manner and effect of its use; , (m) the manner and form in which the ,balanee--sheet of the bank shall be drown up, and in which the accounts shall de maintained; l (11) the remuneratiojl of directors of the bank; (0) the relations of the scheduled banks with the bank and the returns to be submitted by the scheduled banks to the bank; (p) the regulation of clearing-houses for the scheduled ~ i ' (q) the circumstances in which, and the conditions ibild limitations subject to which, the value of any lost, stolen, mutihited or imperfect currency note of the govt!rnment of india or bank note may be refunded; and (r) generally, for the- efficient conduct of the business of the bank: i (3) copies of all regulations made under this section shall be awilable to the public on payment_ - - - - - may transact extract from the state bank of india act, 1955 (23 of 1955) - - - - - 33 subject to the other provisions contained in ihis act, the state other bank may carry on and transact any of the following kinds of bu~inels - which the busme6s, namely: -state bank - •• - - - (ri%b) the advancing or lending of money to persons engaged in such industries or classes of industries as may be specified by the central board by directions issued in this behalf, for any period in excess of six months but not exceeding seven years, and subject thereto and to such directions as may be issued by the central board, such advance or loan may be made on such terms and conditions and upon such security (including the security of any immovable properiy) as the state bank may deem 1iti i - - - - - a bill further to amend the reserve bank of india act, 1934, and to make certain consequential amendments in the state bank of india act, 1955 (shri morarji desgi, mi"ister of fiftqllce) 