Section 8 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
Every corresponding new bank shall, in the discharge of its functions, be guided by such directions in regard to matters of policy involving public interest as the Central Government may, after consultation with the Governor of the Reserve Bank, give.
Summary
- The Central Government has the power to give policy directions to a bank to protect the public interest.
- Before issuing these directions, the Central Government must consult with the Governor of the Reserve Bank.
- The bank is legally required to be guided by these directions while carrying out its daily functions and business.
Practical examples
FAQ
1. Can the Central Government give directions on any topic it wants?
No, the government can only give directions regarding matters of policy that involve the public interest.
2. Does the Central Government make these rules entirely on its own?
No, the Central Government is legally required to consult with the Governor of the Reserve Bank before giving these directions.
3. Can a bank choose to ignore these directions if it hurts their profits?
No, the law states the bank must be guided by these directions when discharging its functions.
Test yourself
Q1.Under Section 8 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, what specific type of matters can the Central Government issue directions on?
Q2.Under Section 8 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, who must the Central Government consult before giving a policy direction to a bank?
Q3.Under Section 8 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, how is a bank expected to treat the directions given by the Central Government?
Q4.Under Section 8 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, which of the following scenarios is a valid use of the Central Government's power?