BANKING AFFAIRS

Detailed explanation-1: -Section 20 of Banking Regulation Act, 1949 (B.R. Act, 1949) prohibits banks from granting any loan or advance to any of its Directors.

Detailed explanation-2: -(b) “director” includes a member of any board or committee in India constituted by a banking company for the purpose of managing, or for the purpose of advising it in regard to the management of, all or any of its affairs.

Detailed explanation-3: -Under the provisions of Section 23 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies), primary (urban) cooperative banks are required to obtain permission from the Reserve Bank of India for opening branches.

Detailed explanation-4: -(i) “Banking” does not include other commercial activities of the banking institution; Rustom Cavasjee Cooper v. Union of India, AIR 1970 SC 564. (ii) The essential characteristic of banking is the ability to receive money by way of deposit from the customers and also to honour the customers’ cheque.

Detailed explanation-5: -# 20 Restrictions on loans and advances Provided further that this sub-section shall not apply if and when the director concerned vacates the office of the director of the banking company, whether by death, retirement, resignation or otherwise.