Banking Regulation Act, 1949 · Part II

Section 6 of the Banking Regulation Act, 1949: Forms of Business in Which Banking Companies May Engage

Section 6 of the Banking Regulation Act, 1949 specifies the forms of business that a banking company may lawfully undertake in addition to the core business of banking. It operates as a statutory list of permitted ancillary, financial, agency, investment, trust and related activities, while sub-section (2) prohibits a banking company from engaging in forms of business outside that permitted field.

Act: Banking Regulation Act, 1949 Act No.: 10 of 1949 Provision: Section 6 Last reviewed: 13 September 2026

In brief: Section 6 allows a banking company to carry on banking together with specified additional businesses, including lending, dealing in negotiable instruments and securities, foreign exchange, agency functions, guarantees, management of certain property, trusts, estate administration and other activities incidental or conducive to banking. The Central Government may also specify further lawful forms of business by notification in the Official Gazette.

Meaning and legal context of Section 6

Section 6 appears in Part II of the Banking Regulation Act, 1949, which deals with the business of banking companies. The provision should be read with Section 5, which contains statutory definitions, and with other Part II restrictions governing the manner in which banking companies may conduct business.

The structure of Section 6 is important. Sub-section (1) identifies the additional forms of business a banking company may undertake. Sub-section (2) then states the negative rule: a banking company cannot engage in a form of business other than those referred to in sub-section (1).

Key definitions relevant to Section 6

"Banking" - Section 5(b): Broadly, banking means accepting deposits of money from the public for lending or investment, where those deposits are repayable on demand or otherwise and are withdrawable by cheque, draft, order or otherwise.

"Banking company" - Section 5(c): A banking company means a company which transacts the business of banking in India, subject to the statutory explanation and other provisions of the Act.

These definitions help distinguish the primary business of banking from the additional activities permitted by Section 6. Section 6 does not replace the definition of banking; it supplements it by identifying other businesses a banking company may lawfully conduct.

Section 6: Forms of business in which banking companies may engage

(1) In addition to the business of banking, a banking company may engage in any one or more of the following forms of business, namely:-

(a) the borrowing, raising, or taking up of money; the lending or advancing of money either upon or without security; the drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hundis, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scrips and other instruments, and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, traveller's cheques and circular notes; the buying, selling and dealing in bullion and specie; the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities and investments of all kinds; the purchasing and selling of bonds, scrips or other forms of securities on behalf of constituents or others; the negotiating of loans and advances; the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise; the providing of safe deposit vaults; and the collecting and transmitting of money and securities;

(b) acting as agents for any Government or local authority or any other person or persons; carrying on agency business of any description including the clearing and forwarding of goods, giving receipts and discharges and otherwise acting as an attorney on behalf of customers, subject to the statutory exclusion relating to prohibited management or secretarial functions;

(c) contracting for public and private loans and negotiating and issuing the same;

(d) effecting, insuring, guaranteeing, underwriting, participating in managing and carrying out any issue, public or private, of State, municipal or other loans or of shares, stock, debentures or debenture stock of any company, corporation or association, and lending money for the purpose of any such issue;

(e) carrying on and transacting every kind of guarantee and indemnity business;

(f) managing, selling and realising property which may come into the possession of the banking company in satisfaction or part satisfaction of its claims;

(g) acquiring, holding and generally dealing with property, or any right, title or interest in property, which may form the security or part of the security for loans or advances or may be connected with such security;

(h) undertaking and executing trusts;

(i) undertaking the administration of estates as executor, trustee or otherwise;

(j) establishing and supporting, or aiding in the establishment and support of, associations, institutions, funds, trusts and conveniences calculated to benefit employees or former employees of the company or their dependants or connections; granting pensions and allowances and making payments towards insurance; and subscribing to or guaranteeing money for charitable, benevolent, public, general or useful objects;

(k) acquiring, constructing, maintaining and altering buildings or works necessary or convenient for the purposes of the company;

(l) selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of, turning to account or otherwise dealing with all or any part of the property and rights of the company;

(m) acquiring and undertaking the whole or any part of the business of a person or company where that business is of a nature enumerated or described in this sub-section;

(n) doing all other things incidental or conducive to the promotion or advancement of the business of the company;

(o) any other form of business which the Central Government may, by notification in the Official Gazette, specify as a form of business in which it is lawful for a banking company to engage.

(2) No banking company shall engage in any form of business other than those referred to in sub-section (1).

Editorial note: The text above is formatted for readability. For litigation, compliance, regulatory interpretation or formal citation, verify the exact current statutory wording, amendments, footnotes and applicable notifications from the official India Code or Department of Financial Services publication linked below.

Section 6 explained: what business can a banking company undertake?

1. Lending, borrowing and negotiable instruments

Clause (a) is the broadest part of Section 6. It covers borrowing and raising money, secured and unsecured lending, dealing in bills and other financial instruments, letters of credit, travellers' cheques, bullion, foreign exchange, securities, investments, safe custody services, safe deposit vaults and collection or transmission of money and securities.

2. Agency and representative functions

Clause (b) permits a banking company to act as an agent for Government, local authorities and other persons, and to undertake agency-related functions. This supports many non-lending services traditionally associated with banking, subject to the limits imposed by the Act and other applicable laws.

3. Public and private loans, issues and underwriting

Clauses (c) and (d) permit participation in public and private borrowing arrangements and in the issue or underwriting of specified securities and loans. These activities remain subject to other applicable securities, company, foreign exchange and regulatory requirements.

4. Guarantees and indemnities

Clause (e) authorises guarantee and indemnity business. In practice, such transactions may include bank guarantees and related contingent obligations, subject to Reserve Bank of India directions and prudential requirements applicable to the relevant banking company and transaction.

5. Property connected with bank claims or security

Clauses (f), (g), (k) and (l) address property that comes to the bank through enforcement or satisfaction of claims, property connected with loan security, buildings needed for the bank's business, and the management or disposal of the bank's property and rights.

6. Trusts and administration of estates

Clauses (h) and (i) permit banking companies to undertake and execute trusts and to administer estates as executor, trustee or otherwise, subject to any other law governing the particular fiduciary function.

7. Employee welfare, charitable and useful objects

Clause (j) recognises activities relating to employee and former-employee welfare, pensions, insurance contributions and support for charitable, benevolent, public, general or useful objects.

8. Incidental business and notified additional business

Clause (n) covers things incidental or conducive to the promotion or advancement of the banking company's business. Clause (o) separately allows the Central Government to specify additional lawful forms of business by notification in the Official Gazette.

Restriction under Section 6(2)

Section 6(2) is the controlling limitation. It states that a banking company shall not engage in a form of business other than those referred to in Section 6(1). Accordingly, the question is not merely whether an activity is commercially useful, but whether it is authorised by Section 6(1), is incidental or conducive within clause (n), has been specified under clause (o), or is otherwise permitted under the applicable statutory and regulatory framework.

Official legal resources

For the current Act, amendments, rules and official statutory material, refer to India Code - The Banking Regulation Act, 1949 and the Department of Financial Services, Ministry of Finance - Banking laws and documents.

Regulatory directions, master directions, circulars and supervisory material applicable to banking companies should also be checked on the Reserve Bank of India official website.