Returns, Inspection, Winding Up, Mergers & Acquisitions:(Module A) Unit-4

As we all know that  is Returns, Inspection, Winding Up, Mergers & Acquisitions for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are providing the Returns, Inspection, Winding Up, Mergers & Acquisitions (Unit-4), Regulations and Compliance (Module A), Legal & Regulatory Aspects of Banking -Paper 3.

♦Annual Accounts and Balance Sheet

• All Banks whose shares are listed with stock Exchange are required to publish their unaudited quarterly results as per proforma prescribe by the SEBI. Every banking company has to prepare its balance sheet and profit and loss account as stipulated in Section 29 of the Banking Regulation Act.
• The Balance sheet and Profit and loss account of a banking company incorporated in India has to be signed by the manager or principal officer of the company and at least 3 directors if there are more than 3 directors and by all directors if there are not more than 3 directors. Case of foreign banks, the manger or the agent of its principal office in India can sign.
• In case of banking companies, the profit and loss account, which has to be placed before the annual general meeting should relate to the period ending with the last working day of the year immediately preceding the year in which the annual general meeting is held. The Provisions of Section 210 of the Company Act, in this behalf, have been specifically made inapplicable to banking companies by Section 29(3A) of the Banking Regulation Act.
• Publication of Account and Balance sheet: The account and balance sheet prepared under Section 29 of the Banking Regulation Act along with the auditor’s report have to be published, as provided in Section 31 there of read with rule 15 of the Banking Regulation (Companies) Rules , 1949.
• Furnishing of Accounts and Balance sheet to Register: Section 220 of the Companies Act Provides for submission by companies of copies of accounts and balance sheet along with the auditor’s report to the Registrar of Companies. However, In the case of banking companies, Section 32 of the Banking Regulation Act provides for furnishing to the registrar Three copies of the account, balance sheet and auditor’s report submitted to the Reserve Bank under Section 31 of the Act, Which would be dealt with in all respect.

♦Audit and Auditors

The balance sheet and Profit and loss account of a banking company have to be audited, as stipulated under Section 30 of the Banking Regulation Act.

• Power and Functions of Auditors: The Powers, functions and duties of the auditors and  the liabilities and penalties to which they are subjected to under Section 227 of the Companies Act are applicable to auditors of banking companies.
• Special Audit: Reserve Bank is empowered under Section 30(1B) of the Banking Regulation Act to order a special audit of the accounts of any banking company.

♦Submission of Returns

• Return of Liquid Asset: Every Banking company has to submit has to submit a return of its liquid assets under Section 24(3) of the Banking Regulation Act. The Return has to be submitted 20 days form the end of the month to which it relates. The return has to be in the form prescribed under rule 13A of the Banking Regulation (Companies) Rules, 1949.
• Monthly Return: Last Friday Previous Month under Section 27 of the BR Act.
• Return of Assets  in India: Section 25(1) of the BR Act.
• Return of Unclaimed Deposit: Under Section 26 of the BR Act, a banking company has to file within 30 days of the close of each calendar year a return on unclaimed deposit (not operated for 10yrs).
• Return of Cash Reserve of Non- Scheduled Banks: Every Banking company, not being a scheduled bank, has to furnish a return to the Reserve Bank under Section 18(1) of the BR Act relating to cash reserve.
• Return by Scheduled Banks: Under Section 42 of the RBI Act, scheduled banks have to submit returns to the Reserve bank of their demand and time liabilities as specified in the sub-section (2) thereof.

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♦Inspection and Scrutiny

• Inspection: The Reserve Bank is empowered under Section 35 of the BR Act to conduct an inspection of any banking company.
• Power of the Government: A copy of the report of inspection has to be sent the central  govt. in all cases where inspections have been conducted as directed as by the Central government.

1. Prohibit the banking company from receiving fresh deposits.
2. Direct the Reserve Bank to apply for winding up of the banking under Section 38 of the BR Act.

• Scrutiny: Apart from making regular inspections, Reserve Bank is also empowered to conduct a scrutiny of the affairs and the books and accounts of any banking company under the sub-section (1A)of Section 35 of the Banking Regulation Act.

                    ♦Amalgamation of Banks♦

• Voluntary Amalgamation: A banking company may be amalgamated with another banking company under Section 44A of the Banking Regulation Act.
• Amalgamation by Government: The Central Government is empowered to order amalgamation of two banking companies under Section 396 of the Companies Act. However, such power has to be exercised only after consultation with the Reserve Bank.
• Moratorium and Amalgamation: The Reserve Bank is authorized under Section 45 of the Banking Regulation Act to apply to the Central Government for an order of moratorium in respect of any banking company where it appears to it that there is good reason to do so.

                         ♦Winding UP of Banks♦

• Suspension of Banking and Winding Up: A Banking company which is temporarily unable to meet its obligation may apply to the High Court under Section 37 of the Banking Regulation Act for staying the Commencement or continuance of any proceedings against it.
• Winding Up by High Court: The High court shall order the winding up of a banking company in the circumstances mentioned in Section 38 of the Banking Regulation Act.
• Official Liquidator: Section 38A of the BR act provides for a liquidator to be appointed by the Central Government, attached to respective High court, for conducting the winding up proceedings relating to banking companies.
• Reserve Bank as Liquidator: Although there is a provision for an official liquidator as above, of the Reserve Bank applies to the Court under Section 39 of the Act, the Reserve Bank, State bank or any other Bank notified by the Central Government in this behalf or any individual stated in the application may be appointed as the official liquidator.
• Preferential Payment: In the winding up proceedings, the liquidator of a banking company has to make certain preferential payments under Section 43A of the Banking Regulation Act.
• Voluntary Winding Up: Apart from the provision for compulsory winding up as above, Section 44 provides for voluntary winding up b banking Companies.

                             ♦Penalties for Offences♦

• Penalties under the RBI Act: Chapter V of the RBI Act deals with penalty for violation of the Act. Banking Companies have to make applications and furnish returns, statements, etc. Banking Companies have to make application and furnish returns, statements etc., under different provision of the Act, regulations, orders, directions etc. While doing so, the making of any statement which is false in any particular material, knowing it to be false or willfully omitting to make any material statement, is punishable with imprisonment up to a period of three years and also a fine.
• Penalties under the BR Act: The provisions of the Banking Regulation Act, relating to penalties, are provided in Section 46 thereof. According, making willfully any false in any return balance sheet or other document or information given under the Act is punishable. Similarly, willful omission to make any material statement is also punishable. In both case, punishment is up to 3 years imprisonment and fine.