Banking Companies Acts, 1970 and 1980

The 1970 Act is Act No. 5 of 1970.

The 1980 Act is Act No. 40 of 1980.

The Act received enactment on 31 March 1970.

The 1980 Act was enacted on 11 July 1980.

The 1970 Act operated retrospectively from 19 July 1969.

The 1980 Act is deemed to have come into force on 15 April 1980.

The Acts provided for acquisition and transfer of undertakings of specified banking companies to support national economic and development objectives.

Fourteen major Indian scheduled banks were nationalised in 1969.

Six additional banks were nationalised in 1980.

The relevant threshold was at least ₹50 crore in deposits/liabilities, as specified under the applicable law and date.

The 1980 Act specified liabilities of not less than ₹200 crore as shown in the return as on 14 March 1980.

The Act refers to the return as on 14 March 1980 furnished to the RBI under section 42 of the RBI Act, 1934.

Section 1 concerns the short title and commencement.

Section 2 contains definitions used in the respective Act.

It refers to the body corporate specified against the existing bank in the First Schedule.

Section 3 provides for establishment of corresponding new banks and their business.

Section 4 provides for the undertaking of existing banks to vest in corresponding new banks.

Section 5 explains the general effect of vesting.

Section 6 of the 1970 Act deals with payment of compensation.

Section 6 of the 1980 Act deals with payment of amount.

Section 7 deals with head office and management.

Section 8 concerns directions of the Central Government.

Section 9 empowers the Central Government to make a scheme.

Section 9A deals with the Reserve Bank‘s power to appoint an additional director.

Section 10 addresses closure of accounts and disposal of profits.

Section 10A deals with the annual general meeting.

Section 10B deals with transfer of unpaid or unclaimed money.

Section 11 deals with the corresponding new bank being deemed an Indian company.

Section 12 of the 1970 Act addresses removal of the Chairman from office.

Section 12 of the 1980 Act addresses vacation of office of the Chairman and other specified persons.

Section 12A deals with bonus.

Section 13 deals with fidelity and secrecy obligations.

Section 14 provides that the Custodian is a public servant.

Section 15 contains the provision on certain defects not invalidating acts or proceedings.

Section 16 deals with indemnity.

Section 17 addresses references to existing banks on and from commencement.

Section 18 deals with dissolution.

Section 18A deals with supersession of the Board in certain cases.

Section 19 deals with the power to make regulations.

Section 21 deals with repeal and savings.

The undertaking vests in the corresponding new bank, with the Act setting out the legal effect of that vesting.

The statutory vesting provisions cover rights, powers, obligations and liabilities associated with the undertaking, subject to the Act.

The Acts include provisions to deal with cases where foreign law prevents or affects direct transfer, including arrangements involving the relevant bank‘s chief executive or custodian as applicable.

The First Schedule identifies existing banks and their corresponding new banks.

The policy aimed to support economic development, wider banking access and mobilisation of savings for productive purposes.

The 1980 Act refers to Article 39(b) and 39(c), relating to distribution of material resources and prevention of concentration of wealth and means of production.

The definition excludes a foreign company within the meaning specified in the Act.

Such terms generally carry the meanings assigned to them in the Banking Regulation Act, 1949.

Section 9 empowers the Central Government to make a scheme.

Section 9A grants this power to the Reserve Bank of India.

The Custodian is appointed or becomes the person responsible for management of the undertaking under the relevant provisions.

These provisions establish how accounts are closed and how profits are dealt with during the transition to the corresponding new bank.

The legal framework addresses continuity and terms of service for employees affected by transfer, subject to statutory provisions.

No. The Acts establish statutory corresponding new banks and provide for vesting of the specified undertaking in them.

The 1970 Act relates to the first nationalisation of 14 major banks in 1969, while the 1980 Act provided for the later nationalisation of six additional banks.

The official India Code versions and Ministry of Finance/Department of Financial Services publications are appropriate primary sources.