MEANING OF BANKING

Bank is an important organ of the modern trade and commerce. Banks in India are regulated by the Banking Regulation Act, 1949. The banking activities in India are regulated by the Banking Regulations Act, 1949. Under Section 5(b) of the said Act “Banking” means, the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Any bank which transacts this business in India is called a banking company. However, any company which is engaged in the manufacturer of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as manufacturer or trader shall not be deemed to transact the business of banking. It may be mentioned that the Banking Regulation Act, 1949 is not applicable to a primary agricultural society, a co-operative land mortgage bank and any other co-operative society except in the manner and to the extent specified in Part V of the Act. Some banks are included in the Second Schedule to the Reserve Bank of India Act, 1934; these are called Scheduled Banks. The Reserve Bank includes a bank in this schedule if itfulfils certain conditions. The Reserve Bank gives certain facilities to scheduled banks including the following: (a) The purchase, sale, and re-discounting of certain bills of exchange, or promissory notes; (b) Purchase and sale of foreign exchange; (c) Purchase, sale and re-discounting of foreign bills of exchange; (d) Making of loans and advances to scheduled banks; (e) Maintenance of accounts of the scheduled bank in its banking department and issue department; (f) Remittance of money between different branches of scheduled banks through the offices, branches or agencies of Reserve Bank free of cost or at nominal rates.
Section 6 of the Banking Regulation Act, 1949 specifies the forms of business in which a banking company may engage. These are : (i) borrowing, raising or taking up of money; lending or advancing of money; drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hundies, promissory notes, etc.; (ii) acting as agents for any government or local authority or any other person; (iii) directing for public and private loans and negotiating and issuing the same; (iv) effecting, insuring, guaranteeing, under-writing, participating in managing and carrying out of any issue of shares, stock, debentures etc.; (v) carrying on and transacting every kind of guarantee and indemnity business; (vi) managing, selling and realising property which may come into the possession of the banking company in satisfaction of its claim; (vii) acquiring and holding and generally dealing with any property or any right, title or interest in such property which may form the security for any loans and advances; (viii) underwriting and executing trusts; (ix) establishing and supporting or aiding in the establishment and support of institutions, funds, trusts etc. (x) acquisition, construction, maintenance and alteration of any building and works necessary for the purpose of the banking company; (xi) selling, improving, managing, developing, exchanging, leasing, mortgaging, depositing of or turning into account or otherwise dealing with all or any part of the property and rights of the company;(xii) acquiring and undertaking whole or any part of the business of any person or company; (xiii) doing all such other things as are incidental or conductive to the promotion or advancement of the business of the banking company; (xiv) any other business which the Central Government may specify by notification in the Official Gazette. No banking company shall engage in any form of business other than those referred to above.