Home › The Reserve Bank of India Act, 1934 › Chapter III – Central banking functions
Section 42: Cash reserves of scheduled banks to be kept with the Bank
(b) the total amount of legal tender notes and coins held by it in India, (c) the balance held by it at the Bank in India, (d) the balances held by it at other banks in current account and the money at call and short notice in India, (e) the investments (at book value) in Central and State Government securities including treasury bills and treasury deposit receipts, (f) the amount of advances in India, (g) the inland bills purchased and discounted in India and foreign bills purchased and discounted. at the close of business on each alternate Friday, and every such return shall be sent not later than seven days after the date to which it relates: Provided that the Bank may, by notification in the Gazette of India, delete or modify or add to any of the particulars specified in the foregoing clauses: Provided further that where such alternate Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), for one or more offices of a scheduled bank the return shall give the preceding working day’s figures in respect of such office or offices, but shall nevertheless be deemed to relate to that Friday: Provided also that where the Bank is satisfied that the furnishing of a fortnightly return under this sub-section is impracticable in the case of any scheduled bank by reason of the geographical position of the bank and its branches, the Bank may allow such bank— (i) to furnish a provisional return for the fortnight within the period aforesaid to be followed by a final return not later than twenty days after the date to which it relates, or (ii) to furnish in lieu of a fortnightly return a monthly return to be sent not later than twenty days after the end of the month to which it relates giving the details specified in this sub-section in respect of such bank at the close of business for the month. (2A) Where the last Friday of a month is not an alternate Friday for the purpose of sub-section(2), every scheduled bank shall send to the Bank, a special return giving the details specified in sub-section (2) as at the close of business on such last Friday or where such last Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), as at the close of business on the preceding working day and such return shall be sent not later than seven days after the date to which it relates. (3) If the average daily balance held at the Bank by a scheduled bank during any fortnight is below the minimum prescribed by or under sub-section (1) or sub-section (1A), such scheduled bank shall be liable to pay to the Bank in respect of that fortnight penal interest at a rate of three per cent. above the bank rate on the amount by which such balance with the Bank falls short of the prescribed minimum, and if during the next succeeding fortnight, such average daily balance is still below the prescribed minimum, the rates of penal interest shall be increased to a rate of five per cent, above the bank rate in respect of that fortnight and each subsequent fortnight during which the default continues on the amount by which such balance at the Bank falls short of the prescribed minimum. (3A) When under the provisions of sub-section (3) penal interest at the increased rate of five per cent, above the bank rate has become payable by a scheduled bank, if thereafter the average daily balance held at the Bank during the next succeeding fortnight is still below the prescribed minimum,— (a) every director, manager or secretary of the scheduled bank, who is knowingly and wilfully a party to the default, shall be punishable with fine which may extend to five hundred rupees and with a further fine which may extend to five hundred rupees for each subsequent fortnight during which the default continues, and (b) the Bank may prohibit the scheduled bank from receiving after the said fortnight any fresh deposit, and, if default is made by the scheduled bank in complying with the prohibition referred to in clause (b), every director and officer of the scheduled bank who is knowingly and wilfully a party to such default or who through negligence or otherwise contributes to such default shall in respect of each such default be punishable with fine which may extend to five hundred rupees and with a further fine which may extend to five hundred rupees for each day after the first on which a deposit received in contravention of such prohibition is retained by the scheduled bank. Explanation.—In this sub-section “officer” includes a manager, secretary, branch manager, and branch secretary. (4) Any scheduled bank failing to comply with the provisions of sub-section (2) shall be liable to pay to the Bank a penalty of one hundred rupees for each day during which the failure continues. (5) (a) The penalties imposed by sub-sections (3) and (4) shall be payable within a period of fourteen days from the date on which a notice issued by the Bank demanding the payment of the same is served on the scheduled bank, and in the event of failure of the scheduled bank to pay the same within such period, may be levied by a direction of the principal civil court having jurisdiction in the area where an office of the defaulting bank is situated, such direction to be mode only upon an application made in this behalf to the court by the Bank; (b) when the court makes a direction under clause (a), it shall issue a certificate specifying the sum payable by the scheduled bank and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a suit; (c) notwithstanding anything contained in this section, if the Bank is satisfied that the defaulting bank and sufficient cause for its failure to comply with the provisions of sub-section (1), (1A) or (2), it may not demand the payment of the penal interest of the penalty, as the case may be. (6) The Bank shall, save as hereinafter provided, by notification in the Gazette of India,— (a) direct the inclusion in the Second Schedule of any bank not already so included which carries on the business of banking in India and which— (i) has a paid-up capital and reserve of an aggregate value of not less than five lakhs or rupees, and (ii) satisfies and Bank that its affairs are not being conducted in a manner detrimental to the interests of its depositors, and
Source: official text of The Reserve Bank of India Act, 1934 as published on India Code (PDF). All sections of the Reserve Bank of India Act, 1934.