Reserve Bank of India Act, 1934 is the legislative act under which the Reserve Bank of India was formed. This act along with the Companies Act, which was amended in 1936, were meant to provide a framework for the supervision of banking firms in India.
In this Article we are Reserve Bank of India Act, 1934 and Important Sections with the Banking Exams (IBPS, SBI & RBI Grade B) Perceptive. These days in lots of Competitive Exam specially in banking sector, questions are directly coming from Important Sections of Reserve Bank of India Act, 1934
Some Important Sections Which were in News Recently
Section 7 (News :- Govt and RBI Rift, Govt Imposed Section 7 and Raghuram Rajan Resigned)
Section 7 of the RBI Act empowers the central government to issue directions in public interest from time to time to the bank in consultation with RBI Governor. This section also provides power of superintendence and direction of the affairs and business of RBI to Central Board of Directors.
Section 3 - Section 3 of the RBI act provides for establishment of Reserve Bank of India for taking over the management of the currency from Central Government and of carrying on the business of banking in accordance with the provisions of this Act.
Section 17 - This section deals with the functioning of RBI. The RBI can accept deposits from the central and state governments without interest.It can purchase and discount bills of exchange from commercial banks. It can purchase foreign exchange from banks and sell it to them. It can provide loans to banks and state financial corporations. It can provide advances to the central government and state governments. It can buy or sell government securities. It can deal in derivative, repo and reverse repo.
Section 26 ;- Legal Tender of Notes
Section 26(1) - Subject to the provisions of sub-section (2), every bank note shall be legal tender at any place in 1[India] in payment, or on account for the amount expressed therein, and shall be guaranteed by the 2[Central Government].
Section 26(2) - On recommendation of the Central Board the 2[Central Government] may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender 3[save at such office or agency of the Bank and to such extent as may be specified in the notification]
There are total 61 Sections in the RBI Act 1934.
Section 4: Capital of the Bank. The capital of the Bank shall be five crores of rupees.
Section 6: Establishment of Offices, branches and agencies
Section 8: The composition of central board of Reserve Bank of India
Section 20: Obligation of the Bank to transact Government business.
Section 21: Bank to have the right to transact Government business in India.
Section 21A: Bank to transact Government business of States on agreement.
Section 22: Right to issue bank notes.
Section 24: Denominations of notes. (1) Subject to the provisions of sub-section (2), bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees.
Section 26 (1): Defines legal tender of notes
Section 26(2): Withdrawal of legal tender of notes
Section 27: Re-issue of notes. The Bank shall not re-issue bank notes which are torn, defaced or excessively soiled.
Section 42: Cash reserves of scheduled banks to be kept with the Bank.
Section 45(U): Defines repo, reverse repo, derivative, money market instruments and securities.
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