Section 46 of the Banking Regulation Act, 1949: Penalties
Section 46, contained in Part IV of the Banking Regulation Act, 1949, prescribes criminal and monetary consequences for specified false statements, failures connected with inspection or scrutiny, receipt of deposits contrary to an order, and other contraventions or defaults under the Act. It also contains rules fixing liability where the contravention is committed by a company.
At a glance: Section 46 combines imprisonment and monetary penalties depending on the nature of the offence or default. Sections 47 and 47A should also be read with it because they deal respectively with cognizance of offences and the Reserve Bank of India's power to impose monetary penalties.
Section 46(1): False statements and material omissions
A person commits the offence contemplated by sub-section (1) where, in a return, balance sheet, other document, or information required or furnished under or for the purposes of the Act, that person wilfully makes a materially false statement knowing it to be false, or wilfully omits a material statement.
The punishment may extend to three years' imprisonment, or a fine up to Rs. 1 crore, or both. The provision therefore requires more than an accidental inaccuracy: the statutory language uses the elements of wilfulness and, for a false statement, knowledge of falsity.
Section 46(2): Failure to produce records or furnish information
Sub-section (2) applies where a person fails to produce a book, account or other document, furnish a statement or information required under Section 35(2), or answer a question relating to the business of a banking company asked by an officer conducting inspection or scrutiny under that section.
The fine may extend to Rs. 20 lakh for each offence. If the refusal continues, a further fine may extend to Rs. 50,000 for every day during which the offence continues.
Section 46(3): Deposits received contrary to an order under Section 35
Where deposits are received by a banking company in contravention of an order made under Section 35(4)(a), every director or other officer concerned may be deemed guilty unless that person proves that the contravention occurred without his or her knowledge or that all due diligence was exercised to prevent it.
The fine under this sub-section may extend to twice the amount of the deposits received in contravention.
Section 46(4): Other contraventions and defaults
Sub-section (4) operates as a broader penalty provision for other contraventions of the Act and defaults in complying with requirements of the Act, or an order, rule, direction or condition made or imposed under it. It also covers failure to carry out the terms or obligations of a scheme sanctioned under Section 45(7).
The fine may extend to Rs. 1 crore or twice the amount involved in the contravention or default, where that amount is quantifiable, whichever is more. Where the contravention or default continues, a further fine may extend to Rs. 1 lakh for every day during which it continues.
Section 46(5) and 46(6): Liability where a company commits the default
Under sub-section (5), where a contravention or default is committed by a company, the company and every person who was in charge of and responsible to it for the conduct of its business at the relevant time may be deemed guilty and proceeded against.
The statutory defence is that the person proves that the contravention or default occurred without his or her knowledge or that due diligence was exercised to prevent it.
Sub-section (6) separately provides for liability where the contravention or default is proved to have been committed with the consent or connivance of, or to be attributable to gross negligence on the part of, a director, manager, secretary or other officer of the company.
Penalty summary under Section 46
| Provision | Nature of contravention | Maximum consequence |
|---|---|---|
| Section 46(1) | Wilfully false material statement or wilful material omission | Imprisonment up to 3 years, or fine up to Rs. 1 crore, or both |
| Section 46(2) | Failure to produce records, furnish information or answer inspection/scrutiny questions | Fine up to Rs. 20 lakh per offence and up to Rs. 50,000 per day for continuing refusal |
| Section 46(3) | Receipt of deposits contrary to an order under Section 35(4)(a) | Fine up to twice the amount of deposits received |
| Section 46(4) | Other contraventions/defaults under the Act, orders, rules, directions or conditions | Up to Rs. 1 crore or twice the quantifiable amount involved, whichever is more, plus up to Rs. 1 lakh per day for a continuing default |
Section 46A: Certain banking personnel deemed public servants
Section 46A provides that a whole-time chairman, managing director, director, auditor, liquidator, manager and any other employee of a banking company are deemed to be public servants for the purposes stated in that section.
Current statutory-text note: The official consolidated Banking Regulation Act continues to phrase Section 46A by reference to Chapter IX of the Indian Penal Code, 1860. The Bharatiya Nyaya Sanhita, 2023 came into force on 1 July 2024 and replaced the IPC as the general substantive criminal code for offences governed by the new law. Because the Banking Regulation Act's published text still retains the historical IPC wording, the statutory text should be quoted as enacted rather than silently rewritten. For a live prosecution or compliance issue, the applicable criminal-law transition provisions and the date of the alleged conduct should be examined separately.
Relationship with Sections 47 and 47A
Section 47 - Cognizance of offences
Section 47 regulates cognizance of offences punishable under Section 46 and specifies the authorised complaint mechanism and the competent criminal court.
Section 47A - RBI power to impose monetary penalty
Section 47A gives the Reserve Bank of India power, notwithstanding Section 46, to impose monetary penalties on banking companies for specified contraventions or defaults falling within Section 46(2), (3) or (4), subject to the statutory procedure including notice and a reasonable opportunity of being heard.
RBI enforcement orders continue to use Section 47A(1)(c) read with Section 46(4)(i) where banks fail to comply with statutory or regulatory directions.
Important compliance points
- Section 46 distinguishes deliberate false statements from regulatory non-compliance and inspection-related defaults.
- Continuing defaults can attract additional daily monetary consequences.
- Officers of a company may have statutory defences based on absence of knowledge or exercise of due diligence where the relevant sub-section permits them.
- Consent, connivance or gross negligence may create personal liability under Section 46(6).
- For banking-company regulatory defaults, Section 47A is important because RBI may impose monetary penalties through an adjudicatory process.
Key takeaway
Section 46 is the principal penalty provision in Part IV of the Banking Regulation Act, 1949. Its consequences depend on the specific conduct involved, ranging from imprisonment for wilful materially false statements to substantial monetary penalties for failures to provide information, prohibited receipt of deposits, non-compliance with statutory or RBI requirements, and continuing defaults.