Business Accounting tutorials | Introduction

Introduction

The Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934 governs the Banking system in India. The Reserve Bank of India and the Government of India are bestowed with the power to control banks. Example:-

They control the functions of the banks from opening of banks to their winding up by virtue of the powers conferred to them.

Defination of Banking

As per Section 5(b) of Banking Regulation Act, 1949, Banking refers to the acceptance of deposit from the public for lending or investment purposes, repayable on demand or otherwise, and withdrawal by cheque, draft, orders, or otherwise

The essential functions performed by a bank are acceptance of public deposits and lending or investment of such deposits. These deposits are repayable on demand or after a period of time as agreed by the banker and the customer. The banker can accept deposits of money and not anything else, here accepting deposits from the public indicates that a banker accepts deposits from anyone who offers money such purpose. The opening of accounts is subject to certain conditions like proper checking and identification. However, a bank can refuse to open account for an objectionable entity.