Banking Regulation Act, 1949

Section 25 of the Banking Regulation Act, 1949: Assets in India

Section 25 of the Banking Regulation Act, 1949 requires every banking company to maintain a prescribed minimum proportion of its demand and time liabilities in India in the form of assets in India. The section also requires a quarterly return to the Reserve Bank of India and defines key expressions used for this purpose.

Current statutory text of Section 25

Meaning and practical effect of Section 25

1. Minimum assets in India

The central rule is that a banking company must keep assets in India equal to at least 75% of its demand and time liabilities in India. The section therefore imposes a statutory asset-location requirement linked to the bank's Indian liabilities.

2. Relevant date for measuring compliance

Compliance is measured at the close of business on the last Friday of each quarter. If that Friday is a public holiday under the Negotiable Instruments Act, 1881, the relevant date shifts to the preceding working day.

3. Quarterly return to the Reserve Bank

The banking company must submit a return to the Reserve Bank within one month from the end of every quarter. The return must contain the assets and liabilities referred to in sub-section (1) as at the prescribed quarter-end reference date.

4. Additional requirement for regional rural banks

A regional rural bank must also furnish a copy of the return to the National Bank. In this context, the statutory reference is to the National Bank for Agriculture and Rural Development.

Definitions used in Section 25

Assets in India: The definition is inclusive. It extends to specified export bills, import bills and approved securities even where those bills or securities are physically held outside India, provided the statutory conditions and Reserve Bank approvals are satisfied.

Liabilities in India: Paid-up capital, reserves and any credit balance in the profit and loss account are excluded when liabilities in India are computed for this section.

Quarter: A quarter is a three-month period ending on the last day of March, June, September or December.

Relationship with other Banking Regulation Act provisions

Section 25 should be read as a separate statutory requirement concerning the location of a banking company's assets in India. It is distinct from other prudential provisions of the Banking Regulation Act, including requirements concerning cash reserves and maintenance of specified assets.

Legislative notes

• Sub-sections (1) and (2) were substituted by Act 33 of 1959, section 16, with effect from 1 October 1959.
• The proviso relating to regional rural banks was inserted by Act 61 of 1981, section 61 and the Second Schedule, with effect from 1 May 1982.
• Clause (a) was substituted by Act 20 of 1950, section 7, with effect from 18 March 1950.
• Clause (b) was inserted by Act 33 of 1959, section 16, with effect from 1 October 1959.
• The former clause (b) was re-lettered as clause (c) by Act 33 of 1959, section 16, with effect from 1 October 1959.