Section 24 of the Banking Regulation Act, 1949: Maintenance of a Percentage of Assets

24. Maintenance of a percentage of assets.

(2A) A scheduled bank, in addition to the average daily balance which it is, or may be, required to maintain under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934) and every other banking company, in addition to the cash reserve which it is required to maintain under section 18, shall maintain in India, assets, the value of which shall not be less than such percentage not exceeding forty per cent. of the total of its demand and time liabilities in India as on the last day of the second preceding fortnight as the Reserve Bank may, by notification in the Official Gazette, specify from time to time and such assets shall be maintained, in such form and manner, as may be specified in such notification.

(3) For the purpose of ensuring compliance with this section, every banking company shall, not later than twenty days after the end of the month to which it relates, furnish to the Reserve Bank in the prescribed form and manner a monthly return showing particulars of its assets maintained in accordance with this section and its demand and time liabilities in India at the close of business on the last day of each fortnight during the month, or if the last day of any such fortnight is a public holiday, at the close of business on the preceding working day. Every Regional Rural Bank shall also furnish a copy of the return to the National Bank.

(4)(a) If, on the last day of any fortnight or, if that day is a public holiday, on the preceding working day, the amount maintained by a banking company falls below the minimum prescribed under sub-section (2A), the banking company is liable to pay penal interest to the Reserve Bank for that day at three per cent. per annum above the Bank Rate on the amount of the shortfall.

(4)(b) If the default occurs again on the last day of the next succeeding fortnight and continues on the last day of succeeding fortnights, the penal interest is increased to five per cent. per annum above the Bank Rate on each such shortfall for the period of continuing default.

(5) The Reserve Bank may require a banking company to furnish a daily return for a month showing the assets maintained and its demand and time liabilities in India. It may also require payment of penal interest for a daily failure to maintain the required amount, with the enhanced rate applying where the default continues on the next succeeding working day.

(6) A penalty payable under sub-sections (4) and (5) must be paid within fourteen days from service of the Reserve Bank notice. If it is not paid, recovery may be directed by the principal civil court having jurisdiction where an office of the defaulting banking company is situated, and the court certificate is enforceable as if it were a decree in a suit.

(7) Where the higher penal interest under sub-section (4)(b) has become payable and the shortfall continues on the last day of the next succeeding fortnight, every director, manager or secretary knowingly and wilfully party to the default may be punishable with the fine prescribed by the section, together with a further fine for each subsequent fortnight on which the default continues.

(8) If the Reserve Bank is satisfied, on a written application by the defaulting banking company, that there was sufficient cause for failure to comply with sub-section (2A), it may decide not to demand penal interest.

Explanation. For this section, "public holiday" means a day which is a public holiday under the Negotiable Instruments Act, 1881.