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Sec 36AA, Banking Reg. Act 1949: RBI to remove managerial persons from office

Section 36AA (Power of Reserve Bank to remove managerial and other persons from office) under Part IIA (Control Over Management) of the Banking Regulation Act 1949 :—

❝(1) Where the Reserve Bank is satisfied that in the public interest or for preventing the affairs of a banking company being conducted in a manner detrimental to the interests of the depositors or for securing the proper management of any banking company it is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing, by order, remove from office, with effect from such date as may be specified in the order, any Chairman, Director, chief executive officer(by whatever name called) or other officer or employee of the banking company.

(2) No order under sub-section (1) shall be made unless the Chairman, Director or chief executive officer or other officer or employee concerned has been given a reasonable opportunity of making a representation to the Reserve Bank against the proposed order:

 Provided that if, in the opinion of the Reserve Bank, any delay would be detrimental to the interests of the banking company or its depositors, the Reserve Bank may, at the time of giving the opportunity aforesaid or at any time thereafter, by order direct that, pending the consideration of the representation aforesaid, if any, the Chairman or, as the case may be, Director or chief executive officer or other officer or employee, shall not, with effect from the date of such order—
 (a) act as such Chairman or Director or chief executive officer or other officer or employee of the banking company;
 (b) in any way, whether directly or indirectly, be concerned with, or take part in the management of, the banking company.

(3)(a) Any person against whom an order of removal has been made under sub- section (1) may, within thirty days from the date of communication to him of the order, prefer an appeal to the Central Government.
 (b) The decision of the Central Government on such appeal, and subject thereto, the order made by the Reserve Bank under sub-section (I),shall be final and shall not be called into question in any court.

(4) Where any order is made in respect of a Chairman, Director or chief executive officer or other officer or employee of a banking company under sub- section (1), he shall cease to be a Chairman or, as the case may be, a Director, chief executive officer or other officer or employee of the banking company and shall not, in any way, whether directly or indirectly, be concerned with, or take part in the management of, any banking company for such period not exceeding five years as may be specified in the order.

(5) If any person in respect of whom an order is made by the Reserve Bank under sub-section (1) or under the proviso to sub-section (2) contravenes the provisions of this section, he shall be punishable with fine which may extend to two hundred and fifty rupees for each day during which such contravention continues.

(6) Where an order under sub-section (1) has been made, the Reserve Bank may, by order in writing, appoint a suitable person in place of the Chairman or Director, or chief executive officer or other officer or employee who has been removed from his office under that sub-section, with effect from such date as may be specified in the order.

(7) Any person appointed as Chairman, Director or chief executive officer or other officer or employee under this section shall, -
 (a) hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank may specify;
 (b) not incur any obligation or liability by reason only of his being a Chairman, Director or chief executive officer or other officer or employee or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto.

(8) Notwithstanding anything contained in any law or in any contract, memorandum or articles of association, on the removal of a person from office under this section, that person shall not be entitled to claim any compensation for the loss or termination of office.❞




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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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