The Section 11 of Banking Regulation Act, 1949 describes paid up capital and reserves requirement of banks in India. The amount specified has reference of “place of business”. The “place of business” means any office, sub-office, sub-pay office and any place of business at which deposits are received, cheques cashed, or moneys lent.
As per section 11(2) of Banking Regulation Act, 1949, the banking company incorporated outside India (Foreign Bank) must maintain paid-up capital and reserves of 15 lakhs rupees and if it has a place or places of business in the city of Mumbai or Calcutta or both, 20 lakhs rupees. The bank has to deposit such capital in form of cash or in the form of unencumbered approved securities, or partly in cash and partly in the form of such securities with Reserve Bank of India. Such foreign bank shall deposit an amount of 20 percent of its profit for each year in respect of all business transacted through its branches in India, as disclosed in the profit and loss account. In case of cessation of banking company incorporated outside India, the amount deposited with RBI form the assets of the company and all the creditors of the company shall have first charge.
As per section 11(2) of Banking Regulation Act, 1949, the banking company incorporated in India must maintain paid-up capital and reserves of:
For banking company which commences banking business after the commencement of this act, the amount is limited to Rs 5 lakh.
The subscribed capital of the banking company should not be less than one-half of the authorised capital. The paid-up capital should not be less than one-half of the subscribed capital. If the capital is increased, the company must comply with the prescribed conditions within two years or as directed by RBI.
As per Section 12 (1)(ii) of Banking Regulation Act, the capital of bank must consists of equity shares and preference shares. The issue of preference share shall be in accordance with the guidelines framed by the Reserve Bank.
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