The minimum statutory requirements for setting up new banks in India are stipulated in the BR Act, 1949.
• The RBI explicates the eligibility criteria for the entry of new banks. At present, the capital requirement for any new bank entry is Rupees 500 crores.
• Reserve Bank of India also releases some guidelines / directive on various issues relating to banking operations including expansion, control etc. Some areas on which guidelines / directives are issued are:
• Guidelines / directives to update its branch authorization policy, which governs the opening of new branches by all Scheduled Commercial Banks in the country.
• Under the banking structure, private money lenders do not form the part of scheduled banking structure. 16 Banking and Banking Structure–Legal Aspects
• Legally, banks are not permitted to create a charge upon any unpaid capital of the company as per Banking Regulation Act, 1949 (section-14).
• Under the Banking Companies (Acquisition & Transfer of Undertaking) Acts of 1970 and 1980, as amended in 1994, public sector banks are permitted to offer their equity shares to public up to 49 per cent of the capital of the bank.
• For the uniform and fair conduct of the banking business by banks in India, a Banking Codes and Standard Board of India (BCSBI) has been created.
• At present there are 19 public sector banks (nationalized banks); State Bank of India (1) and SBI Associates (5).
• Government introduced the Banking Companies (Acquisition and Transfer of Undertaking) and Financial Institution Laws (Amendment) Bill, 2000 which allowed Government to dilute its sharing holding to 33 per cent, mainly for the purpose of raising fresh equity.
• This bill empowers the Government to supersede the Board of Directors of public sector banks.
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