Section 18 - Power of direct discount : RBI Act 1934



What is Power of direct discount? Section 18 of Reserve Bank of India Act 1934

Section 18 of RBI Act 1934 : "Power of direct discount"

When, in the opinion of the Bank a special occasion has arisen making it necessary or expedient that action should be taken under this section for the purposes of regulating credit in the interests of Indian trade, commerce, industry and agricultural, the Bank may, notwithstanding any limitation contained in section 17,-

(1) purchase, sell or discount any bill of exchange or promissory note though such bill or promissory note is not eligible for purchase or discount by the Bank under that section ; or

(2) [Omitted by the Reserve Bank of India (Amendment) Act, 1978, w.e.f. 21-7-1978.]
(3) make loans or advances to-

(a) a State co-operative bank, or


(b) on the recommendation of a State co-operative bank, to a co-operative society registered within the area in which the State co-operative bank operates, or

(c) any other person, repayable on demand or on the expiry of fixed periods, not exceeding ninety days, on such terms and conditions as the Bank may consider to be sufficient.

(2) [Omitted by the Reserve Bank of India (Amendment) Act, 1974.]


RBI ACT 1934

Section 2 - Definitions

Section 3 - Establishment and incorporation of Reserve Bank

Section 4 - Capital of the Bank

Section 5 - Increase and reduction of Share Capital

Section 6 - Offices, branches and agencies



Section 7 - Management

Section 8 - Composition of the Central Board and term of office of Directors

Section 9 - Local Boards, their constitution and functions

Section 10 - Disqualifications of Directors and members of Local Boards



Section 11 - Removal from and vacation of office

Section 12 - Casual vacancies and absences

Section 13 - Meetings of the Central Board

Section 17 - Business which the Bank may transact



Section 18 - Power of direct discount

Section 18A - Validity of loan or advance not to be questioned

Section 19 - Business which the Bank may not transact


Section 20 - Obligation of the Bank to transact Government business

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