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Sec 16, Banking Regulation Act 1949: Prohibition of Common Directors

Section 16 (Prohibition of common directors) under Part II (Business of Banking Companies) of the Banking Regulation Act 1949 :—

❝(1) No banking company incorporated in India shall have as a director in its Board of directors any person who is a director of any other banking company.

(1A) No banking company referred to in sub-section (1) shall have in its Board of directors, more than three directors who are directors of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent.of the total voting rights of all the shareholders of that banking company.

(2) If immediately before the commencement of the Banking Companies (Amendment) Act, 1956 (95 of 1956), any person holding office as a director of a banking company is also a director of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent. of the total voting rights of all the share-holders of the banking company, he shall, within such period from such commencement as the Reserve Bank may specify in this behalf—
  (a) either resign his office as a director of the banking company; or
  (b) choose such number of companies as among themselves are not entitled to exercise voting rights in excess of twenty per cent. of the total voting rights of all the share-holders of the banking company as companies in which he wishes to continue to hold the office of a director and resign his office as a director in the other companies.

(3) Nothing in sub-section (1) shall apply to, or in relation to, any director appointed by the Reserve Bank.❞




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Notes:

The Banking Regulation Act, 1949 (Act No. 10 of 1949) was amended by various other enactments subsequently as mentioned hereunder:

- Banking Companies (Amendment) Act, 1950 (No. 20 of 1950);
- Banking Companies (Amendment) Act, 1953 (52 of 1953);
- State Bank of India Act, 1955 (No. 23 of 1955);
- Jammu and Kashmir (Extension of Laws) Act, 1956 (No. 62 of 1956);
- State Bank of Hyderabad Act, 1956 (No. 79 of 1956);
- Banking Companies (Amendment) Act, 1956 (No. 95 of 1956);
- Banking Companies (Amendment) Act, 1959 (No. 33 of 1959);
- State Bank of India (Subsidiary Banks) Act, 1959 (No. 38 of 1959)
- Banking Companies (Second Amendment) Act, 1960 (No. 37 of 1960);
- Banking Companies (Amendment) Act, 1961 (No. 7 of 1961);
- Deposit Insurance and Credit Guarantee Corporation Act, 1961 (No. 47 of 1961);
- Banking Companies (Amendment) Act, 1962 (No. 36 of 1962);
- Banking Laws (Miscellaneous Provisions) Act, 1963 (No. 55 of 1963);
- Banking Laws (Application to Co-operative Societies) Act, 1965 (No. 23 of 1965);
- Banking Laws (Amendment) Act, 1968 (No. 58 of 1968);
- National Bank for Agriculture and Rural Development Act, 1981 (No. 61 of 1981);
- Banking Laws (Amendment) Act, 1983 (No. 1 of 1984);
- Industrial Reconstruction Bank of India Act, 1984 (No. 62 of 1984);
- National Housing Bank Act, 1987 (No. 53 of 1987);
- Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (No. 66 of 1988);
- Small Industries Development Bank of India Act, 1989 (No. 39 of 1989);
- Banking Regulation (Amendment) Act, 1991 (No. 54 of 1991);
- Banking Regulation (Amendment) Act, 1994 (No. 20 of 1994);
- Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 (No. 24 of 2004);
- Special Economic Zones Act, 2005 (No. 28 of 2005);
- Banking Regulation (Amendment) Act, 2007 (No. 17 of 2007);
- Banking Laws (Amendment) Act, 2012 (No. 4 of 2013);
- Banking Regulation (Amendment) Act, 2017 (No. 30 of 2017).

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