Section 5 of the Banking Regulation Act, 1949: Interpretation and Definitions
Section 5 of the Banking Regulation Act, 1949 contains the core definitions used throughout the Act. It explains important expressions such as banking, banking company, approved securities, banking policy, branch, demand liabilities, secured loan or advance and substantial interest.
Updated: 13 September 2026. The statutory text should always be read with the latest amendments and official notifications.
What Section 5 does
Section 5 is the interpretation provision of the Banking Regulation Act, 1949. Unless the subject or context requires otherwise, the expressions defined in this section carry the stated meaning throughout the Act. These definitions are therefore important when applying provisions dealing with licensing, management, capital, advances, reserves, inspections and regulatory powers of the Reserve Bank of India.
The definition of "banking" in Section 5(b) is especially important because it identifies the essential activity regulated by the Act: accepting deposits of money from the public for lending or investment, where those deposits are repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.
Section 5: Important definitions
Section 5(a): Approved securities
"Approved securities" means securities issued by the Central Government or any State Government, or such other securities as may be specified by the Reserve Bank from time to time.
This definition was substituted by the Banking Laws (Amendment) Act, 2012 and is relevant, among other matters, to statutory liquidity and other regulatory requirements under the Act and RBI directions.
Section 5(b): Banking
"Banking" means accepting, for the purpose of lending or investment, deposits of money from the public which are repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.
The definition focuses on three linked elements: acceptance of public deposits, use of those deposits for lending or investment, and an obligation to repay or permit withdrawal in the manner contemplated by the Act.
Section 5(c): Banking company
"Banking company" means any company which transacts the business of banking in India.
The statutory explanation makes clear that a manufacturer or trader does not become a banking company merely because it accepts money from the public only to finance its own manufacturing or trading business.
Section 5(ca): Banking policy
"Banking policy" covers policy specified from time to time by the Reserve Bank in the interest of the banking system, monetary stability or sound economic growth, with regard to depositor interests, the volume of deposits and other resources, and their equitable and efficient use.
Section 5(cc): Branch or branch office
A branch or branch office of a banking company includes a place where deposits are received, cheques are cashed or money is lent. For Section 35, it also includes a place of business where another form of business referred to in Section 6(1) is transacted.
Section 5(d): Company
The enacted definition refers to a company as defined in the Companies Act, 1956 and includes a foreign company within the meaning stated there. Because the Companies Act, 1956 has since been replaced by the Companies Act, 2013, users should check the current statutory and judicial position whenever this cross-reference is material to a transaction, compliance question or proceeding.
Section 5(da): Corresponding new bank
This means a corresponding new bank constituted under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
Section 5(f): Demand liabilities and time liabilities
"Demand liabilities" are liabilities which must be met on demand. "Time liabilities" are liabilities which are not demand liabilities.
Section 5(ff): Deposit Insurance Corporation
The clause refers to the statutory deposit insurance corporation established under Section 3 of the 1961 legislation. The institution now operates as the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Section 5(ffb): Exim Bank
"Exim Bank" means the Export-Import Bank of India established under Section 3 of the Export-Import Bank of India Act, 1981.
Section 5(ffc): Reconstruction Bank
The text historically refers to the Industrial Reconstruction Bank of India established under the Industrial Reconstruction Bank of India Act, 1984. That institution and its governing framework were later restructured, so this expression should be read with the subsequent transfer and repeal legislation where relevant.
Section 5(ffd): National Housing Bank
"National Housing Bank" means the National Housing Bank established under Section 3 of the National Housing Bank Act, 1987.
Section 5(g): Gold
"Gold" includes gold in the form of coin, whether legal tender or not, and gold in the form of bullion or ingot, whether refined or not.
Section 5(gg): Managing agent
The definition includes secretaries and treasurers and, depending on whether the managing agent is a company or firm, specified directors, members or partners. The expression is largely of historical importance in modern company law but remains part of the statutory text.
Section 5(h): Managing director
A managing director is a director entrusted with the management of the whole or substantially the whole of the affairs of the banking company by agreement, corporate resolution, memorandum or articles, and includes a director occupying that position by whatever name called. The managing director exercises powers subject to the superintendence, control and direction of the Board.
Section 5(ha): National Bank
"National Bank" means the National Bank for Agriculture and Rural Development (NABARD) established under Section 3 of the National Bank for Agriculture and Rural Development Act, 1981.
Section 5(j): Prescribed
"Prescribed" means prescribed by rules made under the Banking Regulation Act, 1949.
Section 5(ja): Regional rural bank
"Regional rural bank" means a regional rural bank established under Section 3 of the Regional Rural Banks Act, 1976.
Section 5(l): Reserve Bank
"Reserve Bank" means the Reserve Bank of India constituted under Section 3 of the Reserve Bank of India Act, 1934.
Section 5(n): Secured and unsecured loan or advance
A "secured loan or advance" is one made on the security of assets whose market value is not, at any time, less than the amount of the loan or advance. An "unsecured loan or advance" is a loan or advance that is not so secured.
Section 5(ni): Small Industries Bank
"Small Industries Bank" means the Small Industries Development Bank of India (SIDBI) established under Section 3 of the Small Industries Development Bank of India Act, 1989.
Section 5(na): Small-scale industrial concern
The statutory text contains the older investment-based definition inserted in 1968. Because the wider statutory and policy framework for micro, small and medium enterprises has subsequently changed, this Banking Regulation Act definition should not automatically be treated as identical to classifications under later MSME legislation.
Section 5(nb): Sponsor Bank
"Sponsor Bank" has the meaning assigned to it in the Regional Rural Banks Act, 1976.
Section 5(nc): State Bank of India
"State Bank of India" means the State Bank of India constituted under Section 3 of the State Bank of India Act, 1955.
Section 5(nd): Subsidiary bank
The statutory text historically defines "subsidiary bank" by reference to the State Bank of India (Subsidiary Banks) Act, 1959. This is now a legacy cross-reference and should be read with subsequent merger and repeal legislation where relevant.
Section 5(ne): Substantial interest
In relation to a company: substantial interest includes beneficial interest held by an individual, or by the individual together with his or her spouse or minor child, in shares whose paid-up amount exceeds Rs. 2 crore or such other amount as may be notified by the Central Government, or 10 per cent of the paid-up capital of the company, whichever is less.
In relation to a firm: it means beneficial interest held by an individual, or by the individual together with his or her spouse or minor child, representing more than 10 per cent of the total capital subscribed by all partners.
The Rs. 2 crore threshold replaced the former Rs. 5 lakh amount under the Banking Laws (Amendment) Act, 2025, and took effect from 1 August 2025.
Section 5(o): Other words and expressions
The enacted text cross-refers to expressions defined in the Companies Act, 1956. Because that Act has been replaced by the Companies Act, 2013, this legacy cross-reference should be applied with care and with reference to later legislation and authoritative interpretation where the point is material.
Omitted and legacy clauses
Section 5 has been amended repeatedly since 1949. Some clause letters have been omitted, while some surviving definitions still contain references to institutions or enactments that have subsequently been repealed, transferred or replaced. For legal drafting, litigation or compliance, the safest approach is to verify both the current consolidated Act and the amending legislation rather than relying on an older bare-act reproduction.
Official legal resources
For authoritative verification, consult the Banking Regulation Act, 1949 on India Code, the Department of Financial Services, Ministry of Finance, and the Reserve Bank of India for current regulatory directions, notifications and circulars.