Important Banking Acts in India: The Short Answer
The two acts that form the base of Indian banking are the Reserve Bank of India Act, 1934, which created the RBI, and the Banking Regulation Act, 1949, which lets the RBI license, regulate and supervise banks. Around them sit acts for special institutions (SBI Act 1955, NABARD Act 1981), nationalisation (the Banking Companies Acquisition Acts of 1970 and 1980), deposit safety (DICGC Act 1961), recovery of bad loans (RDB Act 1993, SARFAESI Act 2002, IBC 2016), payments (Payment and Settlement Systems Act 2007) and financial crime (FEMA 1999, PMLA 2002). The latest major change is the Banking Laws (Amendment) Act, 2025, which allows up to four nominees for a bank account from 1 November 2025.
Key takeaway for bank exams: Questions ask the year of an act, which act created which body, the section behind a well-known rule (Section 138 cheque bounce, Section 7 of the RBI Act), and recent amendments. Facts below are checked against PIB, RBI, DICGC and the Gazette of India as of October 2026.
For RBI's tools under these acts, read monetary policy tools of RBI and CRR and SLR rate 2026.
List of Important Banking Acts in India (with Years)
| Act | Year | What it does |
|---|---|---|
| Negotiable Instruments Act | 1881 | Law for cheques, promissory notes and bills of exchange; Section 138 (added in 1988) makes cheque bounce an offence |
| Reserve Bank of India Act | 1934 | Created the RBI, which began work on 1 April 1935; RBI was nationalised on 1 January 1949 |
| Banking Regulation Act | 1949 | Licensing, regulation and supervision of banks by the RBI; passed as the Banking Companies Act and renamed in 1966 |
| State Bank of India Act | 1955 | Converted the Imperial Bank of India into SBI on 1 July 1955 |
| Deposit Insurance and Credit Guarantee Corporation Act | 1961 | Deposit insurance; DICGC now covers up to ₹5 lakh per depositor per bank |
| Banking Companies (Acquisition and Transfer of Undertakings) Act | 1970 | Gave legal effect to the nationalisation of 14 banks (19 July 1969) |
| Banking Companies (Acquisition and Transfer of Undertakings) Act | 1980 | Nationalised 6 more banks on 15 April 1980 |
| Regional Rural Banks Act | 1976 | Legal framework for RRBs (first RRBs set up on 2 October 1975) |
| Export-Import Bank of India Act | 1981 | Created EXIM Bank |
| National Bank for Agriculture and Rural Development Act | 1981 | Created NABARD (set up on 12 July 1982) |
| National Housing Bank Act | 1987 | Created NHB (set up on 9 July 1988) |
| Small Industries Development Bank of India Act | 1989 | Created SIDBI (set up on 2 April 1990) |
| Recovery of Debts and Bankruptcy Act (earlier RDDBFI Act) | 1993 | Set up Debt Recovery Tribunals (DRTs) for bank loan recovery |
| Foreign Exchange Management Act (FEMA) | 1999 | Replaced FERA 1973; manages foreign exchange as a civil law |
| SARFAESI Act | 2002 | Lets banks seize and sell secured assets of defaulters without a court order |
| Prevention of Money Laundering Act (PMLA) | 2002 | Anti-money-laundering law; basis of KYC record-keeping by banks |
| Credit Information Companies (Regulation) Act | 2005 | Regulates credit bureaus such as CIBIL |
| Government Securities Act | 2006 | Law for government securities managed by the RBI |
| Payment and Settlement Systems Act | 2007 | RBI regulates payment systems such as NEFT, RTGS, UPI and cards |
| Insolvency and Bankruptcy Code (IBC) | 2016 | Time-bound insolvency resolution of companies and individuals |
| Fugitive Economic Offenders Act | 2018 | Confiscates property of economic offenders who flee India |
| Banning of Unregulated Deposit Schemes Act | 2019 | Bans unregulated deposit-taking schemes (ponzi schemes) |
| Banking Regulation (Amendment) Act | 2020 | Brought co-operative banks under stronger RBI supervision |
| Banking Laws (Amendment) Act | 2025 | 19 amendments across five banking acts; up to four nominees, ₹2 crore "substantial interest" |
Reserve Bank of India Act 1934: Important Sections
| Section | What it covers |
|---|---|
| Section 3 | Establishment of the Reserve Bank |
| Section 7 | Central government may give directions to the RBI after consulting the Governor |
| Section 8 | Composition of the Central Board (Governor, up to four Deputy Governors, directors) |
| Section 17 | Business the RBI may carry on |
| Section 22 | RBI's sole right to issue bank notes (₹1 notes and coins are issued by the Government of India) |
| Section 24 | Denominations of notes (up to ₹10,000) |
| Section 42 | Cash Reserve Ratio (CRR) that scheduled banks keep with the RBI |
| Section 45ZB | Monetary Policy Committee (added in 2016) |
Exam line: The RBI Act was passed on the recommendations of the Hilton Young Commission (Royal Commission on Indian Currency and Finance, 1926). The RBI's first Governor was Sir Osborne Smith, and its first Indian Governor was C. D. Deshmukh.
Banking Regulation Act 1949: Important Sections
| Section | What it covers |
|---|---|
| Section 5(b) | Definition of "banking" (accepting deposits repayable on demand and withdrawable by cheque or otherwise, for lending or investment) |
| Section 6 | Forms of business a bank may carry on |
| Section 22 | A banking licence from the RBI is required |
| Section 24 | Statutory Liquidity Ratio (SLR) |
| Section 35A | RBI's power to issue directions to banks |
| Section 45 | RBI may prepare a scheme of reconstruction or amalgamation |
| Section 45ZA to 45ZF | Nomination for deposits, safe-custody articles and lockers (amended in 2025) |
Remember the split: CRR comes from Section 42 of the RBI Act, while SLR comes from Section 24 of the BR Act. This is one of the most asked one-liners in bank exams.
Banking Laws (Amendment) Act 2025: Key Changes
The Banking Laws (Amendment) Act, 2025 (Act 16 of 2025) was notified on 15 April 2025 and contains 19 amendments across five laws: the RBI Act 1934, the Banking Regulation Act 1949, the SBI Act 1955 and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 (PIB, 30 July 2025).
| Change | Details | In force from |
|---|---|---|
| "Substantial interest" limit | Raised from ₹5 lakh (unchanged since 1968) to ₹2 crore | 1 August 2025 |
| Co-operative bank directors | Maximum tenure raised from 8 years to 10 years (other than chairperson and whole-time director), in line with the 97th Constitutional Amendment | 1 August 2025 |
| Unclaimed amounts in PSBs | Unclaimed shares, interest and bond redemption money can go to the Investor Education and Protection Fund (IEPF) | 1 August 2025 |
| Statutory auditors of PSBs | PSBs can decide auditor remuneration | 1 August 2025 |
| Nomination | Up to four nominees for deposits, simultaneous (with percentage shares totalling 100%) or successive; lockers and safe-custody articles allow successive nomination only | 1 November 2025 |
| CRR and SLR reporting | Reporting dates moved from "alternate Fridays" to the last day of each fortnight | Not part of the two PIB-announced stages; check the RBI for its start date |
Sources: PIB releases of 30 July 2025 (PRID 2150371) and 23 October 2025 (PRID 2181734); Gazette notifications S.O. 3494(E) dated 29 July 2025 and S.O. 4789(E) dated 22 October 2025.
DICGC Act 1961: Deposit Insurance Limit 2026
- Deposit insurance limit: ₹5 lakh per depositor per bank, for principal and interest together, in force since 4 February 2020 (raised from ₹1 lakh).
- The DICGC Annual Report 2025-26 (October 2026) confirms the limit was unchanged during the year and that 1,950 banks were insured on 31 March 2026.
- A 2021 amendment lets DICGC pay depositors (up to the limit) of a bank placed under RBI "All Inclusive Directions" without waiting for liquidation.
- DICGC is a wholly owned subsidiary of the RBI. Deposits of foreign governments, central and state governments and inter-bank deposits are not insured.
Media reports in June 2026 said the finance ministry had proposed raising the cover to ₹7.5 lakh, but no change had been notified as of October 2026. Treat ₹5 lakh as the exam answer until an official notification.
Bad Loan Recovery Laws: RDB Act vs SARFAESI vs IBC
| Feature | RDB Act 1993 | SARFAESI Act 2002 | IBC 2016 |
|---|---|---|---|
| Purpose | Fast recovery through tribunals | Enforce security without a court | Time-bound resolution of insolvency |
| Forum | Debt Recovery Tribunal (DRT), appeal to DRAT | Bank acts directly; borrower can appeal to DRT | National Company Law Tribunal (NCLT) for companies |
| Minimum amount | Claims of ₹20 lakh or more (raised from ₹10 lakh in 2018) | Loan must be an NPA; secured debt | ₹1 crore default for companies (raised from ₹1 lakh in 2020) |
| Key feature | Recovery certificate | 60-day notice to the borrower, then possession | Resolution in 330 days (including litigation), regulated by IBBI |
SARFAESI also created the legal base for Asset Reconstruction Companies (ARCs) that buy bad loans from banks. Revise the NPA and provisioning norms note for how loans become NPAs.
Other Acts Linked to Banking (One-Liners)
- FEMA 1999 replaced FERA 1973. FEMA is a civil law; violations attract penalties, not arrest. It came into force on 1 June 2000.
- PMLA 2002 came into force on 1 July 2005. The Financial Intelligence Unit – India (FIU-IND) receives suspicious transaction reports from banks.
- Payment and Settlement Systems Act 2007 is why the RBI authorises NPCI, card networks and payment aggregators. Read NEFT, RTGS, IMPS and UPI difference.
- Credit Information Companies (Regulation) Act 2005 covers the four credit bureaus licensed by the RBI.
- Negotiable Instruments Act 1881: a bounced cheque complaint under Section 138 must follow a demand notice within 30 days of the bank's return memo. See types of cheques in banking.
Banking Acts Quick Revision Table (Most Asked)
| Question | Answer |
|---|---|
| Act that created the RBI | RBI Act, 1934 |
| Year RBI started functioning | 1935 (1 April) |
| Section for CRR | Section 42, RBI Act |
| Section for SLR | Section 24, BR Act |
| Cheque bounce section | Section 138, NI Act |
| Act behind DRTs | RDB Act, 1993 |
| Banks can seize assets without court | SARFAESI Act, 2002 |
| Act that replaced FERA | FEMA, 1999 |
| Deposit insurance limit | ₹5 lakh (since 4 Feb 2020) |
| Maximum nominees for a bank account | Four (from 1 Nov 2025) |
| "Substantial interest" limit now | ₹2 crore |
| MPC added to the RBI Act | 2016 (Section 45ZB) |
Banking Acts Practice Questions (with Answers)
1. Under which act does the RBI fix the Cash Reserve Ratio? Section 42 of the RBI Act, 1934.
2. SLR is maintained under which provision? Section 24 of the Banking Regulation Act, 1949.
3. Which act allows banks to take possession of secured assets without approaching a court? SARFAESI Act, 2002.
4. From which date can a depositor nominate up to four persons for a bank account? 1 November 2025, under the Banking Laws (Amendment) Act, 2025.
5. The Banking Laws (Amendment) Act, 2025 raised the "substantial interest" limit to: ₹2 crore (from ₹5 lakh).
6. Which act gave legal effect to the 1969 nationalisation of 14 banks? Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.
7. NABARD was set up under an act passed in which year? 1981 (NABARD began on 12 July 1982).
8. What is the DICGC deposit insurance limit per depositor per bank? ₹5 lakh, covering principal and interest.
9. Which act replaced FERA, 1973? FEMA, 1999.
10. Under which act does the RBI regulate UPI and card networks? Payment and Settlement Systems Act, 2007.
Important Banking Acts FAQs
What are the important banking acts in India for bank exams?
The RBI Act 1934, Banking Regulation Act 1949, Negotiable Instruments Act 1881, SBI Act 1955, DICGC Act 1961, the Bank Nationalisation Acts of 1970 and 1980, RDB Act 1993, FEMA 1999, SARFAESI 2002, PMLA 2002, Payment and Settlement Systems Act 2007, IBC 2016 and the Banking Laws (Amendment) Act 2025.
What is the Banking Regulation Act 1949?
It is the main law under which the RBI licenses, regulates and supervises banks in India. It came into force in March 1949 as the Banking Companies Act and was renamed the Banking Regulation Act in 1966, when it was also extended to co-operative banks.
What changed under the Banking Laws (Amendment) Act 2025?
It allows up to four nominees for bank deposits and successive nominees for lockers (from 1 November 2025), raises the "substantial interest" limit to ₹2 crore, extends co-operative bank director tenure to 10 years, and lets PSBs move unclaimed amounts to IEPF (from 1 August 2025).
Which section of the RBI Act deals with CRR?
Section 42 of the RBI Act, 1934. SLR is under Section 24 of the Banking Regulation Act, 1949.
What is the difference between SARFAESI and IBC?
SARFAESI lets a secured lender seize and sell the borrower's assets after notice, without a court. IBC is a process before the NCLT to resolve or liquidate a defaulting company within a set time.
Is the DICGC limit still ₹5 lakh in 2026?
Yes. The DICGC Annual Report 2025-26 confirms the cover is ₹5 lakh per depositor per bank, effective since 4 February 2020.
Practice Next
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