Section 3 of the Reserve Bank of India Act, 1934 - Establishment and Incorporation of Reserve Bank
Section 3 is the statutory provision that constitutes the Reserve Bank of India and gives it a separate corporate identity. It appears in Chapter II of the Reserve Bank of India Act, 1934, dealing with incorporation, capital, management and business.
Section 3 - Establishment and incorporation of Reserve Bank
Section 3(1) - Constitution and purpose of the Bank
A bank called the Reserve Bank of India is constituted to take over the management of currency from the Central Government and to carry on banking business in accordance with the provisions of the Reserve Bank of India Act, 1934.
Section 3(2) - Corporate status
The Reserve Bank of India is a body corporate under that name. It has perpetual succession and a common seal, and it may sue and be sued in its corporate name.
Meaning and legal effect of Section 3
Section 3 performs two fundamental functions. First, it creates the Reserve Bank of India for the statutory purposes identified in subsection (1). Second, subsection (2) gives the Bank a legal personality separate from the persons who manage or serve it.
- Statutory establishment: the Reserve Bank derives its existence from the Reserve Bank of India Act, 1934.
- Currency management: Section 3 expressly identifies taking over the management of currency from the Central Government as one of the purposes for which the Bank was constituted.
- Banking under the Act: the Bank carries on banking business subject to the powers, duties and limitations contained in the Act.
- Body corporate: the Bank has its own corporate legal identity.
- Perpetual succession: its legal existence continues despite changes in its Governor, directors, officers or other office-holders.
- Capacity to litigate: the statutory words permitting the Bank to sue and be sued allow legal proceedings to be instituted by or against it in its own name.
How Section 3 fits within the RBI Act
Section 3 is the opening substantive provision of Chapter II. The provisions that follow deal with matters such as the Bank's capital, offices and branches, management, the Central Board, Local Boards, permissible business and prohibited business. The corporate entity created by Section 3 is therefore the institution upon which those later provisions operate.