THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1980

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The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 was enacted on July 11, 1980 and came into effect on April 15, 1980. The legislation was framed for the purpose of acquiring and assigning the industries under the control of the banking sector considering the dimension, supply, coverage and management of such industries. This is done to regulate the economic development in order to gradually achieve and advance the wants of progression of the economy as well as to advance the wellbeing of the people to be in parity with the strategies formulated by the State to comply with the rationale enumerated under Article 39 (b) and 39 (c) of the Indian Constitution. As described under the interpretation clause, the term banking company excludes a foreign company as provided under the provisions of Companies Act of 1956. The corresponding new bank with respect to the already existing banks has the same status as that of a company stated under Schedule I Column 2 of the enactment.

By virtue of the terms of the Act, corresponding new banks shall be established from the date of initiation of the Act as stated under the Schedule I Column 2 of the present Act. The new banks thus established shall keep their paid up capital equal to that of the already prevailing banks unless new terms are fixed in this behalf. Moreover, the newly constituted banks shall keep the authorized capital at 1500 crores that can be parted to 150 crores of fully paid up shares of the value of Rs.10 each. The proviso to the section states that the Government of India is empowered to take the advice of the Reserve Bank of India to enhance or deduct the authorized capital and such enhancement or deduction shall be between Rs.3000 crores and Rs.1500 crores. The Act further states that the paid up capital of the recently constituted bank shall periodically and prior to the increase of paid up capital be decreased by the Government of India subsequent to the advice of the Reserve Bank of India by withdrawing the previously lost paid up capital. The Director Board shall also decrease the paid up capital with prior authorization of the Government of India and following discussion with the Reserve Bank of India by giving the paid up capital that is additional to the needs of the newly constituted banks.

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Likewise, the shares that are held by the new banks which are not under the Government of India shall be assigned without any restrictions. For the purposes provided under the Act, the new banks shall have power to act as a mediator or agent of the Reserve Bank of India. The undertakings under the control of the presently existing banks shall be assigned to the new banks constituted under the Act. The Central Government is under obligation to pay off certain amount as a return for such assignment as per the provisions of the enactment to the new banks of the establishment of the prevailing banks as prescribed in the Schedule II. In order to implement the terms of the Act more effectively, the Central Government shall formulate strategies after conferring with the Reserve Bank of India. The new banks constituted under the Act shall be considered as a company where general public has considerable interest in connection with the Income Tax Act of 1961. The employees shall be given bonus as per the terms of the present enactment and not by virtue of the Payment of Bonus Act, 1965. Also, the custodians appointed under the Act shall be supposed to be a public servant as per the provisions of the Indian Penal Code.

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The present Act repealed the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1980. Amendment was also effected to the present Act by the formulation of the Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act, 1995