The Act aimed at regulation and supervision of the banking sector to maintain operational integrity of banking system and protect depositor’s interests in India.
- Before independence, regulation of banks was done through the Companies Act (1850) and Reserve Bank of India Act, 1934.
Key Provisions of the Banking Regulation Act, 1949
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Achievements of the Banking Regulation Act, 1949
- Inclusion and Outreach: Through initiatives like the ‘Priority Sector Lending’ under the Act has been a tool to direct credit towards agriculture and small industries.
- Stabilization: Played a crucial role in maintaining banking sector stability during various economic cycles.
- e.g., Regulatory measures under the Act, like capital adequacy requirements and liquidity coverage ratio, insulated Indian banks from the effects of the global financial crisis (2008).
- Trust Building: Increased public confidence in banks due to regulatory oversight and depositor protection.
- Prompt Corrective Action (PCA) Framework: Introduced by RBI under the Act helps in identifying financial distress early and mandates corrective measures.
- Adaptation: Adjusted to meet new challenges like digital banking, financial inclusion, and global financial standards.
- e.g., Introduction of Payment Banks in 2014 and Small Finance Banks in 2016.
