Banking Regulation Act, 1949

Section 13: Restriction on Commission, Brokerage, Discount, etc., on Sale of Shares

Section 13 of the Banking Regulation Act, 1949 places a statutory ceiling on the amount that a banking company may pay, directly or indirectly, as commission, brokerage, discount or any other form of remuneration in connection with shares issued by it.

Who is covered?Banking companies issuing their own shares.
Maximum amount2.5% of the price at which the shares are issued.
Payments coveredCommission, brokerage, discount or remuneration in any form.
Issue priceIncludes the amount or value of premium on the shares.

Text and Effect of Section 13

Section 13 provides that, notwithstanding the statutory cross-reference presently appearing in the Act to sections 76 and 79 of the Companies Act, 1956, a banking company cannot pay, directly or indirectly, commission, brokerage, discount or remuneration in any form in respect of shares issued by it beyond an aggregate ceiling of two and one-half per cent of the price at which those shares are issued.

The Explanation declares that the expression "price at which the said shares are issued" includes the amount or value of premium on those shares.

Important statutory note: The current consolidated text of Section 13 continues to reproduce a historical reference to sections 76 and 79 of the Companies Act, 1956. This page therefore preserves that statutory position rather than replacing the words of the enactment with a different Companies Act provision.

What Section 13 Means

The provision is intended to restrict excessive share-selling expenses by a banking company. The restriction is broad because it covers payments made either directly or indirectly and applies regardless of whether the payment is described as commission, brokerage, discount or some other form of remuneration.

The ceiling is calculated with reference to the issue price of the shares, not merely their face value or paid-up value. The statutory Explanation makes clear that share premium forms part of that issue price for this purpose.

How the 2.5% Limit Works

If a banking company issues shares at a price that includes a premium, the premium is included while determining the base on which the 2.5% statutory ceiling is calculated. The aggregate payment covered by Section 13 should therefore not exceed 2.5% of that issue price.

Amendment History Relevant to Section 13

  1. The earlier reference to sections 105 and 105A of the Indian Companies Act, 1913 was substituted by Act 95 of 1956 with effect from 14 January 1957.
  2. The words "paid-up value of the said shares" were replaced by "price at which the said shares are issued" by the Banking Laws (Amendment) Act, 2012 (Act 4 of 2013), with effect from 18 January 2013.
  3. The Explanation clarifying that the issue price includes premium was inserted by the same 2013 amendment with effect from 18 January 2013.

Official Source

For the consolidated statutory text and amendment notes, refer to the official India Code entry for the Banking Regulation Act, 1949.

Legal text checked against the current consolidated official source available in September 2026.