RBI Act, 1934 – PART IV — SECTION 32 TO SECTION 45F

Sections 32 to 45F

Continuing exactly section-by-section.

32. Penalty

32. Penalty — [REPEALED]

This section has been repealed by the Reserve Bank of India (Amendment) Act, 1974.

Exam point

Section 32 = Repealed
Do not waste time trying to remember an operative penalty under Section 32.

33. Assets of the Issue Department

33(1)

The assets of the Issue Department must consist of:

gold coin,
gold bullion,
foreign securities,
rupee coin, and
rupee securities.

The total value of these assets must not be less than the total liabilities of the Issue Department.

33(2)

At no time shall:

A. Gold coin + gold bullion + foreign securities together be less than ₹200 crore.

B. Gold coin + gold bullion together be less than ₹115 crore.

33(3)

The remaining assets can be held in:

rupee coin;
Government of India rupee securities of any maturity;
promissory notes drawn by the National Bank for loans/advances under Section 17(4E);
bills of exchange and promissory notes payable in India which are eligible for purchase by RBI under:
- Section 17(2)(a),
- Section 17(2)(b),
- Section 17(2)(bb), or
- Section 18(1).

33(4) — Valuation

For valuation:

Gold coin + gold bullion → valued at a price not exceeding the prevailing international market price.
Rupee coin → valued at face value.
Securities → valued at rates not exceeding prevailing market rates.

33(5)

Of the gold coin and gold bullion held as assets:

at least 17/20ths must be held in India.
All gold coin and gold bullion held as assets must be in the custody of:
- RBI, or
- its agencies.

Proviso: Gold belonging to RBI which is:

in another bank,
in a mint,
in a treasury, or
in transit,

may still be counted as part of the assets.

33(6) — What counts as foreign securities?

Foreign securities may include:

33(6)(i)

Securities payable in the currency of a foreign country which is a member of IMF, including:

(a)

balances with the principal currency authority/bank of that foreign country;
foreign-currency balances/securities with or issued by:
- IMF,
- International Bank for Reconstruction and Development,
- International Development Association,
- International Finance Corporation,
- Asian Development Bank,
- Bank for International Settlements,
- or any banking/financial institution approved by Central Government.

Such instruments must be repayable within 10 years.

(b)
Bills of exchange:

having 2 or more good signatures;
drawn on and payable at a place in that foreign country;
maturity not exceeding 90 days.

(c)
Government securities of that foreign country maturing within 10 years.

33(6)(ii)

Foreign assets may also include drawing rights representing a liability of IMF.

🔥 Section 33 — Numbers to memorize

₹200 crore → Gold + bullion + foreign securities
₹115 crore → Gold + bullion
17/20 → minimum gold in India
10 years → certain foreign securities
90 days → foreign bills

34. Liabilities of the Issue Department

34(1)

The liabilities of the Issue Department are equal to:

Total amount of Government of India currency notes + banknotes currently in circulation.

Simple understanding

Section 33 tells you what backs the Issue Department’s liabilities.

Section 34 tells you what those liabilities are.

🔥 Exam trap

Section 33 = Assets
Section 34 = Liabilities

35. Initial assets and liabilities

35. Initial assets and liabilities — [REPEALED]

Repealed by the 1948 amendment.

36. Method of dealing with fluctuations in rupee coin assets

36. [REPEALED]

Repealed by the 1963 amendment.

37. Suspension of assets requirements as to foreign securities

RBI may temporarily hold foreign securities below the amount required under Section 33(2).

But there are strict conditions:

37

RBI must obtain previous sanction of the Central Government.
Initial period → maximum 6 months.
It can be extended:
- with Central Government sanction,
- each extension → maximum 3 months at a time.

🔥 Remember

Section 33(2) requirement can be relaxed under Section 37.

But:

RBI + prior Central Government sanction + 6 months initially + 3 months each extension.

38. Obligations of Government and the Bank in respect of rupee coin

Main rule

The Central Government undertakes not to put rupees into circulation except through RBI.

RBI undertakes not to dispose of rupee coin except for circulation purposes.

Easy memory

Government → puts rupees into circulation through RBI.
RBI → disposes of rupee coins only for circulation.

39. Obligation to supply different forms of currency

39(1)

RBI must:

A.

Issue rupee coins on demand in exchange for:

banknotes, and
Government of India currency notes.

B.

Issue currency notes/banknotes on demand in exchange for:

coins which are legal tender under the Coinage Act, 2011.

In simple language:

RBI must facilitate conversion between eligible notes and coins.

39(2)

If someone gives RBI:

currency notes/banknotes of ₹2 or more

RBI must supply:

lower-value currency notes/banknotes, or
other legal-tender coins,

in quantities which RBI considers necessary for circulation.

Government’s obligation

The Central Government must supply such coins to RBI on demand.

If Government fails to supply them:

RBI is released from its obligation to supply those coins to the public.

🔥 Exam trap

The threshold in the uploaded Act is:

₹2 or upwards

Not ₹5.

40. Transactions in foreign exchange

RBI shall buy or sell foreign exchange from/to an authorised person who makes a demand.

This applies at:

Bombay,
Calcutta,
Delhi,
Madras,

or such RBI branches as the Central Government determines by order.

Rates and conditions

The transaction takes place at:

exchange rates, and
conditions

determined by the Central Government, by general or special order.

For exchange rates, Government must have regard to India’s obligations to the IMF.

Proviso

No person can demand purchase or sale of foreign exchange of a value below:

₹2 lakh.

Explanation — Authorised person

“Authorised person” means a person entitled under the Foreign Exchange Regulation Act, 1973 to buy/sell the relevant foreign exchange.

🔥 Exam numbers

₹2 lakh minimum value

41. Obligation to buy sterling

41 — REPEALED

Repealed by the Reserve Bank of India Amendment Act, 1947.

41A. Obligation to provide remittance between India and Burma

41A — REPEALED

Repealed by the 1947 amendment.

42. Cash reserves of scheduled banks to be kept with the Bank

This is a very important RBI Grade B section.

42(1)

Every bank included in the Second Schedule must maintain with RBI an:

average daily balance

which must not be less than such percentage of its:

demand and time liabilities in India

as RBI may notify in the Gazette of India.

RBI determines the percentage having regard to the need to secure monetary stability in India.

Translation

This is the statutory foundation for Cash Reserve Ratio (CRR).

⚠️ Important

The Act text does not hard-code a particular current CRR percentage here.

RBI can notify the percentage.

Explanation to Section 42

42 Explanation (a) — Average daily balance

It means:

Average of the balances held at the close of business on each day of a fortnight.

42 Explanation (b) — Fortnight

“Fortnight” means:

Saturday to the second following Friday, both days inclusive.

🔥 Remember

Saturday → next 2nd Friday

42 Explanation (c) — What is NOT included in liabilities?

42(c)(i)

Do not include:

paid-up capital;
reserves;
credit balance in profit & loss account.

42(c)(ii)

Do not include loans taken from specified institutions, including:

RBI;
Exim Bank;
Reconstruction Bank;
National Housing Bank;
National Bank;
Small Industries Bank;
National Bank for Financing Infrastructure and Development;
other development financial institutions.

42(c)(iii) — State co-operative bank

For a State co-operative bank, liabilities also exclude:

loans taken from State Government;
loans taken from National Co-operative Development Corporation;
deposits representing reserve fund or part thereof maintained with the bank by a co-operative society within its area of operation.

42(c)(iv)

For a State co-operative bank which has granted an advance against a balance maintained with it:

that balance is excluded to the extent of the outstanding advance.

42(c)(v) — Regional Rural Bank

For an RRB:

loans taken from its Sponsor Bank are excluded.

42(d) — Inter-bank liabilities: scheduled bank other than State co-operative bank

The aggregate liabilities of such scheduled bank to:

State Bank;
subsidiary bank under SBI (Subsidiary Banks) Act, 1959;
corresponding new bank under the 1970 nationalisation law;
corresponding new bank under the 1980 nationalisation law;
banking company under Section 5(c), Banking Regulation Act;
co-operative bank; or
other financial institution notified by Central Government,

are reduced by:

the aggregate liabilities of those banks/institutions to the scheduled bank itself.

Simple concept

This prevents certain inter-bank liabilities from being counted gross when there are corresponding liabilities in the opposite direction.

42(e) — State co-operative bank

For a scheduled bank which is a State co-operative bank, the corresponding calculation applies to liabilities towards:

State Bank;
subsidiary bank;
corresponding new bank under 1970 law;
corresponding new bank under 1980 law;
banking company;
other financial institution notified by Central Government.

These are reduced by liabilities of those institutions to the State co-operative bank.

42(1A)

RBI may, by notification in the Gazette of India, require every scheduled bank to maintain:

an additional average daily balance

over and above the balance required under Section 42(1).

Calculation

The additional balance is linked to the excess of:

total demand + time liabilities shown in the relevant return

over the relevant demand + time liabilities at the specified date.

Ceiling

The additional balance:

cannot exceed that excess amount.

Proviso

For a bank subsequently included in the Second Schedule, RBI may specify a different date by separate Gazette notification.

42(1AA) — REPEALED

The old sub-section limiting the required balance to 20% of demand and time liabilities was omitted by the 2006 amendment.

Exam trap

Don’t blindly write:

“CRR under Section 42 cannot exceed 20%.”

That was an old provision, not the operative text in this PDF.

42(1B) — REPEALED

This old provision dealt with RBI paying interest on certain excess balances maintained under notifications.

It was also omitted by the 2006 amendment.

42(1C)

RBI may specify, from time to time, with reference to:

any transaction, or
class of transactions,

that such transaction(s) shall be treated as a liability in India of a scheduled bank.

If there is a dispute about whether a transaction/class of transactions is such a liability:

RBI’s decision is final for purposes of Section 42.

42(2) — Return by scheduled banks

Every scheduled bank must send RBI a return:

signed by two responsible officers of the bank;
containing specified information.

The return includes:

42(2)(a)

demand and time liabilities;
borrowings from banks in India;
classified into demand and time liabilities.

42(2)(b)

Total legal tender notes and coins held in India.

42(2)(c)

Balance held by the bank with RBI in India.

42(2)(d)

Balances held with other banks in:

current account;
money at call and short notice in India.

42(2)(e)

Investments at book value in:

Central Government securities;
State Government securities;
Treasury bills;
Treasury deposit receipts.

42(2)(f)

Amount of advances in India.

42(2)(g)

inland bills purchased/discounted in India;
foreign bills purchased/discounted.

Frequency

Return relates to:

close of business on every alternate Friday

and must be sent:

within 7 days after the date to which it relates.

First proviso to 42(2)

RBI may, by Gazette notification:

delete,
modify, or
add

to the particulars required in the return.

Second proviso

If the alternate Friday is a public holiday under the Negotiable Instruments Act for one or more offices:

use the preceding working day’s figures for those offices.

But the return is still treated as relating to that Friday.

Third proviso

If RBI is satisfied that fortnightly returns are impracticable because of the geographical position of the bank/branches, RBI may allow either:

(i) provisional fortnightly return within the normal period, followed by final return within 20 days; OR

(ii) monthly return, to be sent within 20 days after month-end.

42(2A) — Special monthly return

If the last Friday of a month is not an alternate Friday, every scheduled bank must submit a special return.

It must show the Section 42(2) details as at:

close of business on that last Friday; or
preceding working day if that Friday is a public holiday.

It must be submitted within:

7 days of the relevant date.

42(3) — Penal interest for CRR shortfall

If a scheduled bank’s average daily balance during a fortnight is below the required minimum:

First default fortnight

Bank pays penal interest at:

3% above Bank Rate

on the amount of the shortfall.

Next succeeding fortnight

If the balance remains below the minimum:

5% above Bank Rate

on the shortfall.

Continuing default

The 5% above Bank Rate rate continues for each subsequent fortnight while the default continues.

🔥 Must remember

First shortfall → Bank Rate + 3%
Continued shortfall → Bank Rate + 5%

42(3A)

Once the increased 5% above Bank Rate penal rate has become payable, and the bank continues to maintain below the required minimum during the next succeeding fortnight:

42(3A)(a)

Every:

director,
manager, or
secretary

who is knowingly and wilfully a party to the default

can be punished with:

fine up to ₹500, and
further fine up to ₹500 for each subsequent fortnight during which default continues.

42(3A)(b)

RBI may prohibit the scheduled bank from accepting fresh deposits after that fortnight.

If the bank violates this prohibition:

every director/officer who knowingly and wilfully participates in, or through negligence/otherwise contributes to, the default is punishable with:

fine up to ₹500, plus
further fine up to ₹500 for every day after the first on which the wrongly received deposit is retained.

Explanation

“Officer” includes:

manager;
secretary;
branch manager;
branch secretary.

The PDF shows an omitted historical term before “manager.”

42(4) — Failure to submit return

If a scheduled bank fails to comply with Section 42(2):

penalty = ₹100 per day for every day the failure continues.

42(5) — Recovery of penalties

42(5)(a)

Penalties under 42(3) and 42(4) must be paid within:

14 days

from service of RBI’s demand notice.

If not paid, RBI can apply to the principal civil court having jurisdiction where an office of the defaulting bank is situated.

42(5)(b)

The court issues a certificate specifying the amount payable.

That certificate is enforceable like:

a court decree.

42(5)(c)

If RBI is satisfied that the bank had sufficient cause for failure to comply with:

42(1),
42(1A), or
42(2),

RBI may decide not to demand the penal interest/penalty.

42(6) — Inclusion/exclusion from Second Schedule

RBI may, by Gazette notification:

42(6)(a) — Include a bank

RBI may include a bank in the Second Schedule if it:

(i)

has paid-up capital + reserves of at least:

₹5 lakh;

(ii)

satisfies RBI that its affairs are not conducted in a manner detrimental to depositors; and

(iii)

is one of the eligible categories specified, including:

State co-operative bank;
qualifying company;
institution notified by Central Government;
corporation/company incorporated under law outside India.

42(6)(b) — Exclude a scheduled bank

RBI may exclude a scheduled bank where:

(i)

paid-up capital + reserves fall below:

₹5 lakh;

(ii)

after inspection under Section 35 of the Banking Regulation Act, RBI believes its affairs are conducted detrimentally to depositors; or

(iii)

it goes into liquidation or otherwise stops banking business.

Proviso

On application by the bank, RBI may defer exclusion under 42(6)(b)(i) or (ii):

for a reasonable period;
subject to conditions imposed by RBI;

to give the bank an opportunity to:

restore capital + reserves to at least ₹5 lakh; or
correct the defects in its conduct.

42(6)(c)

If a scheduled bank changes its name:

RBI may alter its description in the Second Schedule.

Explanation — “value”

“Value” means:

real or exchangeable value, not merely the nominal book value.

If there is a dispute about the aggregate value of paid-up capital and reserves:

RBI’s determination is final for Section 42(6).

42(6A)

For deciding whether a:

State co-operative bank, or
Regional Rural Bank

should be included/excluded from the Second Schedule, RBI may act on a certificate from NABARD regarding whether the bank:

satisfies the paid-up capital/reserves requirement; or
is conducting its affairs detrimentally to depositors.

42(7) — Exemptions

RBI may grant any scheduled bank exemptions from Section 42:

for a specified period;
subject to specified conditions;
covering all or some offices; or
covering whole or part of its assets and liabilities.

43. Publication of consolidated statement by the Bank

RBI must publish every fortnight a consolidated statement showing:

aggregate liabilities and assets of all scheduled banks together.

The statement is based on:

returns, and
information

received under the RBI Act or any other law in force.

🔥 Memory

42 → scheduled banks maintain/report reserves
43 → RBI publishes consolidated position

43A. Protection of action taken in good faith

43A(1)

No suit or legal proceeding can be brought against:

RBI, or
its officers

for anything done or intended to be done in good faith under:

Section 42;
Section 43;
Chapter III-A.

43A(2)

Similarly, no suit/legal proceeding lies against RBI or its officers for damage caused or likely to be caused by anything done/intended in good faith under:

Section 42;
Section 43;
Chapter III-A.

Key phrase

Good faith protection — not blanket immunity for everything.

44. Power to require returns from co-operative banks

44 — REPEALED

Repealed by the Banking Laws (Application to Co-operative Societies) Act, 1965.

45. Appointment of Agents

45(1)

Unless Central Government directs otherwise for a particular place, RBI may appoint certain banks as its agents.

While doing so RBI considers:

public interest;
convenience of banking;
banking development;
other relevant factors.

Eligible agents include:

NABARD;
State Bank;
corresponding new bank under the 1970 Act;
corresponding new bank under the 1980 Act;
subsidiary bank under the SBI (Subsidiary Banks) Act, 1959.

RBI can appoint them:

at all places or any place in India

for purposes specified by RBI.

45(2)

Where a bank is appointed RBI’s agent to receive:

payments due to RBI; or
bills, hundies or other securities required to be delivered to RBI,

under any law, rule, regulation or instruction having force of law:

payment/delivery to the appointed agent is treated as payment/delivery to RBI.

CHAPTER III-A

COLLECTION AND FURNISHING OF CREDIT INFORMATION

45A. Definitions

For Chapter III-A:

45A(a) — Banking company

“Banking company” means a banking company as defined under Section 5 of the Banking Regulation Act, 1949.

It also includes:

State Bank of India;
subsidiary banks;
corresponding new banks under the 1970 Act;
other financial institutions notified by Central Government.

45A(b) — Borrower

“Borrower” means:

a person to whom any credit limit has been sanctioned by a banking company, whether or not the person has actually used it.

This includes:

(i) Company/corporation

Its subsidiaries.

(ii) HUF

Any member of the HUF or any firm in which that member is a partner.

(iii) Firm

Any partner of the firm, or any other firm in which that partner is a partner.

(iv) Individual

Any firm in which that individual is a partner.

🔥 Trap

Borrower ≠ only someone who has actually drawn the loan.

Even a person with a sanctioned credit limit not yet availed is included.

45A(c) — Credit information

Credit information includes information relating to:

45A(c)(i)

Amounts and nature of:

loans;
advances;
other credit facilities

granted by a banking company to:

any borrower, or
class of borrowers.

45A(c)(ii)

Nature of security taken from a borrower/class of borrowers for credit facilities.

45A(c)(iii)

Guarantee furnished by a banking company for:

any customer; or
class of customers.

45A(c)(iv)

Information about:

means;
antecedents;
financial transaction history;
creditworthiness

of a borrower/class of borrowers.

45A(c)(v)

Any other information RBI considers relevant for:

more orderly regulation of credit or credit policy.

45B. Power of Bank to collect credit information

RBI may:

45B(a)

Collect credit information from banking companies in whatever manner RBI considers appropriate.

45B(b)

Furnish such information to banking companies according to Section 45D.

Simple chain

Banks → give credit information → RBI → RBI can furnish relevant information → banks

45C. Power to call for returns containing credit information

45C(1)

To enable RBI to perform its Chapter III-A functions, RBI may at any time direct a banking company to submit:

statements;
relating to specified credit information;
in specified form;
within specified time.

45C(2)

Even if there is:

another law,
constitutional/institutional document of the bank, or
agreement requiring secrecy of dealings with customers,

the banking company is still:

bound to comply with RBI’s direction under 45C(1).

🔥 Exam point

Customer secrecy cannot be used to defeat a valid RBI demand under Section 45C.

45D. Procedure for furnishing credit information to banking companies

45D(1)

A banking company may, in connection with a:

financial arrangement already entered into, or
proposed financial arrangement,

with any person, apply to RBI for credit information.

Application must be:

in the form specified by RBI;
requesting specified credit information.

45D(2)

After receiving the application, RBI must, as soon as possible, provide the applicant with credit information relating to the matters specified in the application which is in RBI’s possession.

Proviso

The information supplied must not reveal the names of the banking companies that supplied the information to RBI.

45D(3)

RBI may charge a fee for each application.

Maximum fee:

₹25.

🔥 Number

45D → ₹25 maximum fee

45E. Disclosure of information prohibited

45E(1)

Credit information contained in:

statements submitted under Section 45C, or
information furnished by RBI under Section 45D,

must be treated as:

CONFIDENTIAL

It cannot be published or otherwise disclosed except for purposes of Chapter III-A.

45E(2) — Exceptions

45E(2)(a)

A banking company may disclose information supplied under Section 45C if it has:

previous permission of RBI.

45E(2)(b)

RBI may publish information collected under 45C if RBI considers it necessary in the:

public interest

but only in consolidated form and without revealing:

name of banking company; or
name of borrowers.

45E(2)(c)

Credit information may be disclosed/published by:

banking company, or
RBI,

to another banking company or:

according to customary banking practice/usage; or
as permitted/required by another law.

Proviso: Information received by a banking company under this clause cannot be published except according to:

customary banking practice/usage; or
another law permitting/requiring it.

45E(2)(d)

Disclosure of credit information under the:

Credit Information Companies (Regulation) Act, 2005

is also outside the prohibition.

45E(3) — Protection from compulsory disclosure

Notwithstanding any other law:

no court, tribunal or other authority can compel RBI or a banking company to produce/permit inspection of the Section 45C statement or disclose credit information furnished by RBI under Section 45D.

🔥 Core idea

Credit information = confidential, subject to specified statutory exceptions.

45F. Certain claims for compensation barred

No person has a right—whether:

under contract, or
otherwise—

to claim compensation for any loss incurred because of the operation of the provisions of Chapter III-A.

Simple meaning

You cannot claim compensation merely because the operation of the credit-information provisions caused you a loss.

45G. Penalties

45G — REPEALED

Repealed by the Reserve Bank of India (Amendment) Act, 1974.

🔥 RBI GRADE B — SECTION 32–45F RAPID REVISION

Section	Core point
32	Repealed
33	Assets of Issue Department
34	Liabilities of Issue Department
35	Repealed
36	Repealed
37	Foreign-security asset requirement can be temporarily relaxed
38	Government puts rupee coins into circulation through RBI
39	RBI’s obligation to supply different forms of currency
40	Foreign-exchange transactions
41	Repealed
41A	Repealed
42	Cash reserves/CRR of scheduled banks
43	Consolidated statement of scheduled banks
43A	Good-faith protection
44	Repealed
45	RBI may appoint banking agents
45A	Credit-information definitions
45B	RBI collects credit information
45C	RBI can demand credit-information returns
45D	RBI furnishes credit information to banks
45E	Confidentiality of credit information
45F	No compensation claim for loss from Chapter III-A
45G	Repealed

Numbers you absolutely should know

33(2) → ₹200 crore
33(2) → ₹115 crore
33(5) → 17/20 gold in India
33(6) → 10 years / 90 days
37 → 6 months initially + 3 months extensions
40 → ₹2 lakh minimum FX transaction
42 → CRR / average daily balance
42 Explanation → fortnight = Saturday to second following Friday
42(2) → alternate Friday return
42(2) → 7 days
42(2A) → 7 days
42(3) → Bank Rate + 3%
42(3) → continued default = Bank Rate + 5%
42(3A) → ₹500 + ₹500 per subsequent fortnight
42(4) → ₹100 per day
42(5) → 14 days to pay penalty
42(6) → ₹5 lakh capital + reserves threshold
45D(3) → maximum ₹25 fee

Next logical block: Sections 45H onward — Chapter III-B, i.e. the major RBI provisions governing NBFCs/non-banking institutions, including deposits, registration, net owned funds, directions, inspection, and related powers.