Reserve Bank of India Act, 1934 Reserve Bank of | UPSC Notes EPFO Labour Law

Reserve Bank of India Act, 1934


Reserve Bank of India was first enacted by parliament on 6 March 1934. In the beginning of 18 Th century, the joint – stock banking has been associated with the agency houses for the purpose of doing banking business. Indigenous bankers, nidhis, money lenders were acted as bankers. However, the growth of joint – stock banking with the help of agency houses leads to regulating the rules and regulation which was governing them as an act. So the need for the central banking system in India arose in 1773. However, it was the Hilton Young committee in 1926 recommended the establishment of a central bank in India. Therefore, it took 7 years to pass the RBI act 1934 as a shareholders banks. Finally, a number of banking companies were registered under the companies’ act 1956 and The RBI act 1934 for the purpose of protecting interests of the depositors’, ensuring control over the credit, develop banking on good lines and avoiding bank failures.

There are total 61 Sections in the RBI Act 1934.

Important Sections in the RBI Act 1934
Section 3: Establishment and incorporation of Reserve Bank.

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 17: The business that RBI can carry out

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 27: Re-issue of notes. The Bank shall not re-issue bank notes which are torn, defaced or excessively soiled.

Section 26 (1): Defines legal tender of notes

Section 26(2): Withdrawal of legal tender of notes

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.

The first schedule of the RBI Act 1934 defines the 4 areas under which the Indian states should come. The 4 areas are Western Area, Eastern Area, Northern Area, Southern Area

The second schedule of the Act lists all the SCHEDULED BANKS in India.