I received an interesting query on Quora earlier this month. Another day, another reader asked on WhatsApp why Registrar of Companies or Serious Fraud Investigation Office is not taking action against “PMC Bank Limited”. The reader was ignorant of the word “co-operative” in the name of scam-hit banks. Last year, one member/shareholder of the State Bank of India queried about compliance by the bank under the Companies Act, 2013.
This clearly indicates the ignorance about organisation structures of banks in India. It is a flexible structure and to me, it is very innovative too.
Indian Banks have various structures from cooperative to departmental undertaking of the government to just a small cooperative society. Additionally, there are non-banking finance companies, nidhi companies and other microfinance companies and even self-help groups doing somewhat banking operations in a limited manner.
Central Bank – a Statutory Corporation
First thing first: the Reserve Bank of India is a bank – more precisely a Central Bank the banker of the Sovereign of India. This is a statutory corporation. A statutory corporation is a business organisation established by an Act of Parliament or state legislature. Life Insurance Corporation of India and State Bank of India is also Statutory Corporation. The important feature of the Reserve Bank of India is its regulatory powers provided by the incorporating and governing statute.
Statutory Banking Corporation
State Bank of India is a statutory corporation like Reserve Bank of India, Life Insurance Corporation of India etc. It is predecessor Imperial Bank of India was incorporated under the Imperial Bank of India Act, 1920 (47 of 1920). Later the State Bank of India Act, 1955 established the State Bank of India. The Imperial Bank had its roots in the Bank of Culcutta founded on 2nd June 1806 and renamed as Bank of Bengal on 2nd January 1809. Presently its authorised capital is five hundred crores of fully paid-up shares of ten rupees each. Itis not governed by the Companies Act, 2013 or any earlier companies law unless any provision of the companies law is specifically adopted by its governing statute.
Corresponding New Banks
Another structure is Government of India Undertakings – technically called corresponding new banks. There are two sets of corresponding new banks in India One set of corresponding new bank are defined in sub-section (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970). Another set of the corresponding new bank is defined in clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980).
CORRESPONDING NEW BANK UNDER BANK NATIONALIZATION 1969
Sub-section (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 defines corresponding new bank for the Bank Nationalization 1969. Accordingly “corresponding new bank”, in relation to an existing bank, means the body corporate specified against such bank in column 2 of the First Schedule of that Act.
|EXISTING BANK ON 19th day of July, 1969||CORRESPONDING NEW BANK|
|The Central Bank of India Limited||Central Bank of India|
|The Bank of India Limited||Bank of India|
|The Punjab National Bank Limited||Punjab National Bank|
|The Bank of Baroda Limited||Bank of Baroda.|
|The United Commercial Bank Limited||UCO Bank|
|Canara Bank Limited||Canara Bank|
|United Bank of India Limited||United Bank of India|
|Dena Bank Limited||Dena Bank|
|Syndicate Bank Limited||Syndicate Bank|
|The Union Bank of India Limited||Union Bank of India|
|Allahabad Bank Limited||Allahabad Bank|
|The Indian Bank Limited||Indian Bank|
|The Bank of Maharashtra Limited||Bank of Maharashtra|
|The Indian Overseas Bank Limited||Indian Overseas Bank|
CORRESPONDING NEW BANK UNDER BANK NATIONALIZATION 1980
Clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 defines corresponding new bank for the Bank Nationalization 1980. Accordingly “corresponding new bank”, in relation to an existing bank, means the body corporate specified against such bank in column 2 of the First Schedule.
|EXISTING BANK ON 15th April 1980||CORRESPONDING NEW BANK|
|The Corporation Bank Limited||Corporation Bank|
|The New Bank of India Limited||New Bank of India|
|The Oriental Bank of Commerce Limited||Oriental Bank of Commerce|
|The Punjab and Sind Bank Limited||Punjab and Sind Bank|
|Vijaya Bank Limited||Vijaya Bank|
Subsidiary Bank is defined in clause (k) of section 2 of the State Bank of India (Subsidiary Bank) Act, 1959 (38 of 1959). Accordingly, “subsidiary bank” means any new bank and includes the Hyderabad Bank. According to Section 2(f) of that Act, “new bank” means any of the banks constituted under section 3. Accordingly to Section 3 of that Act, there shall be constituted the following new banks, namely:―
- the State Bank of Bikaner;
- the State Bank of Mysore;
- the State Bank of Patiala; and
- the State Bank of Travancore;
Private Banks Surviving Nationalisation
This is an interesting but significant group of Private Banks. Jammu and Kashmir Bank Ltd and Karnataka Bank Limited fall in this group but both are significantly different legal status.
State-owned Private Bank
The Jammu and Kashmir Bank was founded on 1 October 1938 under letters patent issued by the Maharaja of Jammu and Kashmir. Later this bank becomes a state (not State) owned bank where a state government has controlling holding and it was and still is a government banker of the state. Organizationally, it still is a private bank and a company under the Companies Act.
Private Bank surviving Nationalisation
Karnataka Bank Limited may be an example. This was not so significant to be nationalised at the time of nationalisation and is a company under the Companies Act.
New Private Banking companies
These essentially are banking companies registered under the Companies Act. Axis Bank Limited or Kotak Mahindra Bank Limited are two examples. All Payments banks are also companies under the Companies Act.
These are Cooperative societies either under the Multistate Cooperative Societies Act, central legislation or a bank under Cooperative Societies Acts of respective States.
Multi-State Cooperative Banks
These are Multi-State Cooperative Banks under the Multi-State Co-operative Societies Act. Ministry of Agriculture of Government of India is administrative ministry of this Act.
State Cooperative Banks
These Banks are cooperative Societies registered under state cooperative societies.
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