Section 4 of The National Bank for Agriculture and Rural Development Act, 1981
- (1)The capital of the National Bank shall be one hundred crores of rupees: 1[Provided that the Central Government may, by notification, increase the said capital up to thirty thousand crore rupees: Provided further that the Central Government may, in consultation with the Reserve Bank and by notification, further increase the said capital to such amount as it may deem necessary from time to time]. 2[(2) The capital of the National Bank which has been subscribed to by the Reserve Bank valued at twenty crore rupees as on the date immediately preceding the commencement of the National Bank for Agriculture and Rural Development (Amendment) Act, 2018 shall, on such commencement, stand transferred to, and vested in, the Central Government: Provided that the National Bank may issue capital to such institutions and persons in such manner as may be notified by the Central Government: Provided further that the combined shareholding of the Central Government and the Reserve Bank shall not at any time be less than fifty-one per cent. of the total subscribed capital.
- (3)The Central Government shall give to the Reserve Bank an amount equal to the face value of the subscribed capital, valued at twenty crores of rupees, referred to in sub-section (2), in cash, for transfer to, and vesting in the Central Government of the capital of the National Bank which has been so subscribed to by the said Bank.]
Summary
- The starting capital of the National Bank is strictly set at one hundred crore rupees.
- The Central Government can increase this capital up to thirty thousand crore rupees just by issuing a notification.
- If the capital needs to be increased beyond thirty thousand crore rupees, the Central Government must consult the Reserve Bank first.
- The Central Government must always maintain ownership of at least fifty-one percent of the bank's total subscribed capital.
- Capital that was originally subscribed by the Reserve Bank (valued at twenty crore rupees) was transferred to the Central Government, and the government paid the Reserve Bank cash for it.
Practical examples
FAQ
1. What was the original starting capital of the bank?
The starting capital was one hundred crores of rupees.
2. Is there a limit to how much the government can increase the capital without asking the Reserve Bank?
Yes, the government can increase it up to thirty thousand crore rupees on its own by notification.
3. Can the government completely privatize the National Bank?
No, the law requires that the shareholding of the Central Government shall never be less than fifty-one percent.
Test yourself
Q1.Under Section 4 of The National Bank for Agriculture and Rural Development Act, 1981, what is the process if the Central Government wants to increase the bank's capital to forty thousand crore rupees?
Q2.Under Section 4 of The National Bank for Agriculture and Rural Development Act, 1981, what is the absolute minimum percentage of the bank's total subscribed capital that the Central Government must own?
Q3.Under Section 4 of The National Bank for Agriculture and Rural Development Act, 1981, what happened to the twenty crore rupees of capital that was originally subscribed by the Reserve Bank?
Q4.Under Section 4 of The National Bank for Agriculture and Rural Development Act, 1981, how did the Central Government compensate the Reserve Bank for transferring its twenty crore rupees of capital?