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Sec 19, Banking Regulation Act 1949: Restriction on Nature of Subsidiary Companies

Section 19 (Restriction on nature of subsidiary companies) under Part II (Business of Banking Companies) of the Banking Regulation Act 1949 :—

❝(1) A banking company shall not form any subsidiary company except a subsidiary company formed for one or more of the following purposes, namely: -
  (a) the undertaking of any business which, under clauses (a) to (o) of sub- section (3) of section 6, is permissible for a banking company to undertake, or
  (b) with the previous permission in writing of the Reserve Bank, the carrying on of the business of banking exclusively outside India, or
  (c) the undertaking of such other business, which the Reserve Bank may, with the prior approval of the Central Government, consider to be conducive to the spread of banking in India or to be otherwise useful or necessary in the public interest.

Explanation.—For the purposes of section 8, a banking company shall not be deemed, by reason of its forming or having a subsidiary company, to be engaged indirectly in the business carried on by such subsidiary company.

(2) Save as provided in sub-section (1), no banking company shall hold shares in any company, whether as pledgee, mortgagee or absolute owner, of an amount exceeding thirty per cent of the paid-up share capital of that company or thirty per cent of its own paid-up share capital and reserves, whichever is less:

 Provided that any banking company which is on the date of the commencement of this Act holding any shares in contravention of the provisions of this sub-section shall not be liable to any penalty therefor if it reports the matter without delay to the Reserve Bank and if it brings its holding of shares into conformity with the said provisions within such period, not exceeding two years, as the Reserve Bank may think fit to allow.

(3) Save as provided in sub-section (1) and notwithstanding anything contained in sub-section (2), a banking company shall not, after the expiry of one year from the date of the commencement of this Act, hold shares, whether as pledgee, mortagagee or absolute owner, in any company in the management of which any Managing Director or manager of the banking company is in any manner concerned or interested.

(4) Save as provided in clause (c) of sub-section (1), a banking company may form a subsidiary company to carry on the business of credit information in accordance with the Credit Information Companies (Regulation) Act, 2005.❞




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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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