STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959
This Act may be called the State Bank of India (Subsidiary Banks) Act, 1959.
In this Act, unless the context otherwise requires,--
(a) "appointed day" means,--
(i) in relation to an existing hank, the date on which the corresponding new bank is constituted under section 3;
(ii) in relation to a new bank, the date on which that new bank is constituted under section 3;
(iii) in relation to the Hyderabad Bank, the dale on which the amendments to the State Bank of Hyderabad Act, 1956, take effect under Part VII of the Third Schedule;
2[***]
(b) "corresponding bank" means,--
(i) in relation to the State Bank of Bikaner, the Bank of Bikaner, Limited;
5[*
With effect from such date, as the Central Government may, by notification in the Official Gazette, specify in this behalf, there shall be constituted the following new banks, namely:--
(a) the State Bank of Bikaners;
2[***]
1[***]
(d) the State Bank of Mysore;
(e) the State Bank of Patiala;
(f) The State Bank of Travancore; and different dates may be specified for different new banks.
________________________
1. Heading of Chap. II substituted and clause (c) omitted by the State -- Associated Banks (Miscellaneous Provisions)
1[3A. Change Or Name Of A Subsidiary Bank
(1) The Central Government after consulting the State Bank and the Reserve Bank may, by notification in the Official Gazette direct that the name of any subsidiary bank shall, with effect from such date as may be specified in this behalf, be changed to any other name and thereupon any reference 10 that subsidiary bank in this Act or any other law for the time being in force or in any contract, instrument or document shall be construed as a reference to that bank by its new name.
(2) The change in the name of a subsidiary bank under sub-section (1) shall not affect any rights or obligations of that bank or render defective any legal proceedings by or against it, and any legal proceedings which might have been continued or commenced by or against that bank by its former name may be continued by or
(1) Every new bank shall be a body corporate with perpetual succession and a common seal and shall sue and be sued in its name.
(2) The body corporate constituting each of the new banks shall consist of the State Bank and other shareholders, if any, for the time being of the new bank.
(3) Every new bank shall carry on the business of banking and other business in accordance with the provisions of this Act, and shall have power to acquire and hold properly, whether movable or immovable, for the purposes of its business and to dispose of the same.
(1) The head office of each of the new banks shall be at such place as the Central Government may, by notification in the Official Gazette, from time to time, specify.
(2) Every new bank shall maintain as its branches all branches of the coresponding bank in existence immediately before the appointed day, and shall not establish any new branch or discontinue any branch except in consultation with the State Bank and with the approval of the Reserve Bank.
1[6. Authorised capital of new bank.-
(1) Subject to the provisions of this Act, the authorised capital of every new bank shall be rupees five hundred crores.
(2) The authorised capital of every new bank shall be divided into shares of one hundred rupees each or of such denomination as the new bank may, with the approval of the State Bank, decide.
(3) Every new bank may issue the certificates of shares of equivalent values of such denomination as the new bank may, decide, with the approval of the State Bank, in accordance with the procedure as may be prescribed and every shareholder of the new bank shall be entitled to have the certificate of shares of equivalent value of such denomination.
(4) Notwithstanding anything contained in sub-section (1),
(1) On the appointed day, the issued capital of a new bank shall consist of such amount divided into fully paid-up shares of hundred rupees each, as the State Bank may, with the approval of the Reserve Bank, fix.
1[(1A) Notwithstanding anything contained in sub-section (1), the issued capital of a new bank shall, consist of such amount as the State Bank may, with the approval of the Reserve Bank, fix, and shall be divided into fully paid-up shares of such denomination in accordance with sub-section (2) of section 6.]
(2) All shares in the issued capital of a new bank shall, on the appointed day stand allotted to the State Bank.
(3) The State Bank shall, as soon as may be, after the determination, if any, by the Tribunal, of the amount of compensation payable in respect of an existing bank, con
(1) Every new bank shall establish a reserve fund which subject to the provisions of sub-section (3) of section 7 and of sub-section (2) of this section, shall--
(a) on the appointed day, consist of sucii sum as the State Bank, with the approval of the Reserve Bank, may determine; and
(b) after the appointed day, consist of the sum aforesaid together with such further sums as may be transferred to the reserve fund by the new bank out of its annual net profits before declaring a dividend.
(2) The State Bank shall, us soon as may be after the determination, if any, of the amount of compensation by the Tribunal, in respect of an existing bank, consider whether any increase in, or reduction of, the reserve fund of the corresponding new bank, by way of adjustment, by transfer from, or to, any accou
On the constitution of a new bank, all shares in the capital of the corresponding banks, where such corresponding bank has a share capital, shall stand transferred to, and shall vest in, the State Bank, free of all trusts, liabilities and encumbrances.
(1) Subject to the other provisions contained in this Act, when a new bank is constituted, the undertaking of the corresponding bank shall stand transferred to, and vest in, the new bank.
(2) The undertaking of the corresponding bank referred to in sub-section (1) shall be deemed to include all rights, powers, authorities and privileges and all property, movable and immovable, including cash balances, reserve funds investments and all other interests and rights in, or arising out of, such property and all books, accounts and documents relating thereto as may be in the possession of that bank immediately before the appointed clay, and shall also be deemed to include all debts, liabilities and obligations of whatever kind, then existing of that bank.
(3) Without prejudice to the other provisions contained in this Act, all contracts, deeds,
(1) Save as otherwise provided in this Act, every employee of an existing bank in the employment of that bank immediately before the appointed day, shall, on and from that day become an employee of the corresponding new bank and shall hold his office or service therein by the same tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to pension, gratuity and other matters as be would have held the same on the appointed day, if the undertaking of the existing bank had not been transferred to and vested in the corresponding new bank and shall continue to do so unless and until his employment in that bank is terminated or until his remuneration or other terms and conditions of service are revised or altered by the corresponding new bank under, or in pursuance of, any law, or in accordance with any provision which, for the time being governs, his service:
(1) If, according to the laws of any country outside India, the provisions of this Act by themselves are not effective to transfer or vest any asset or liability situated in that country which forms part of the undertaking of an existing bank to, or in, the corresponding new bank, the affairs of the existing bank in relation to such asset or liability shall, on and from the appointed day, stand, entrusted to the1[managing director] for the time being of the corresponding new bank and the1[managing director] may exercise all powers and do all such acts and things as are exercised or done by the existing bank for the purpose of effectively winding up the affairs of that bank.
(2) The1[managing director] of the corresponding new bank shall, in exercise of the powers conferred on him by sub-section (1), take all such steps as may be required by the laws of any such country outside Indi
(1) Every person who and any State Government which immediately before the appointed day is registered as a holder of shares in the books of an existing bank shall be given by the State Bank such compensation in respect of the transfer to the State Bank of the shares in the capital of that bank as is determined in accordance with the principles contained in the First Schedule.
(2) The amount of compensation to be given in accordance with the principles contained in the First Schedule shall be determined in the first instance by the State Bank, in consultation with the Reserve Bank, and shall be offered by it to all those to whom compensation is payable under sub-section (1) in full satisfaction thereof.
(3) If the amount of compensation offered by the State Bank in terms of sub-section (2) is not acceptable to any shareholder of an exist
(1) The State Government of Punjab in respect of the Bank of Patiala 2[***] and the Reserve Bank in respect of the Hyderabad Bank, shall be given, by reason of the provisions of this Act or of the amendmerits contained in Pan V or Part VII of the Third Schedule, such compensation by the State Bank as is determined in accordance with the principles contained in the First Schedule.
(2) The amount of compensation to be given in accordance with the principles contained in the First Schedule shall be determined in the first instance by the State Bank, and shall be offered by it to the State Government of Punjab, 3[***], or the Reserve Bank, as the casemay be, in full satisfaction of the compensation payable under sub-section (1):
Provided that in determining the amount of compensation to be offered to the Suite Government of Punjab 4[***], th
Section 14 of the State Bank of India (Subsidiary Banks) Act, 1959, deals with the statutory provisions relating to the bifurcation, amalgamation, or reorganization of subsidiary banks under the overarching framework of the Act. It provides the legal basis and procedural guidelines for the government or the Reserve Bank of India to direct such changes, ensuring orderly management of banking institutions linked to the State Bank of India.
While the exact text of Section 14 is not provided in the sources, the context from related judgments and statutory provisions indicates that Section 14 pertains to the powers of the State Government or the Reserve Bank of India to issue directions for the reorganization, amalgamation, or bifurcation of subsidiary banks, including the transfer of assets and liabilities, subject to statutory procedures.
The sources do not specify any penal provisions or punishments directly associated with violations of Section 14. However, procedural violations or misuse of powers under this section could potentially attract penalties under general provisions of the Act or related laws, such as criminal or civil liabilities for abuse of authority.
Power to Direct Amalgamation - Section 14 empowers the government or Reserve Bank to issue directions for amalgamation or bifurcation of subsidiary banks, facilitating orderly restructuring in public interest [Section 14, SIAC, 1959].
Procedural Compliance - Any action under Section 14 must adhere to statutory procedures, including issuance of notifications and approvals, ensuring legality and transparency in bank reorganizations [Full Bench of Kerala High Court, Canara Bank v. State of Kerala].
Public Interest and Administrative Necessity - The section is invoked primarily for public interest, administrative efficiency, or economic reasons, emphasizing the importance of government discretion in bank management [Full Bench of Kerala High Court, Canara Bank v. State of Kerala].
Scope of Authority - The section applies to the formation, reorganization, or division of subsidiary banks, which are created under the Act and are distinct legal entities with their own rights and liabilities [Section 14, SIAC].
Legal Validity of Orders - Orders issued under Section 14 are valid if they are made following statutory procedures and are based on reasons such as public interest, as upheld by courts [Supreme Court, Dhanbad Central Cooperative Bank case].
Judicial Review - Courts have limited scope to interfere with orders under Section 14 unless procedural irregularities or violations of constitutional rights are established [Supreme Court, Malla Raj Urs v. State Bank of Mysore].
Protection of Staff Rights - Transfers or bifurcations under Section 14 must respect the rights of employees, and courts scrutinize whether proper procedures, including consultation and approval, were followed [High Court of Karnataka, Malla Raj Urs case].
Legality of Notifications - Notifications issued under Section 14 must be supported by reasons and comply with statutory requirements; otherwise, they may be challenged as illegal or arbitrary [Kerala High Court, Canara Bank case].
Interplay with Other Laws - Section 14 operates in conjunction with other statutes like the Companies Act, Banking Regulation Act, and specific sectoral laws, requiring compliance with multiple legal frameworks [Section 14, SIAC].
Role of Reserve Bank of India - The RBI's approval is essential for certain actions under Section 14, especially those involving transfer of assets and liabilities, ensuring financial stability [RBI guidelines, Supreme Court judgments].
Legislative Intent - The section reflects legislative intent to maintain stability and integrity of banking institutions, allowing executive intervention only through statutory procedures [Preamble and objects of the Act].
Scope of Judicial Intervention - Courts generally do not interfere in policy decisions under Section 14 unless there is evidence of procedural violations, mala fide intent, or violation of constitutional rights [Supreme Court, Associate Banks case].
Protection Against Arbitrary Action - Orders under Section 14 must be reasoned and supported by evidence; arbitrary or capricious decisions can be struck down by courts [Kerala High Court, Canara Bank case].
Legal Certainty and Stability - The section provides a legal mechanism to ensure stability in the banking sector during reorganizations, mergers, or bifurcations, safeguarding public interest and financial stability [Full Bench of Kerala High Court].
Limitations of Power - While Section 14 grants wide powers, these are subject to constitutional limitations, procedural safeguards, and judicial review to prevent abuse of authority [Supreme Court, Mohandas v. Bank of India].
Impact on Employees and Stakeholders - Orders under Section 14 should consider the rights of employees and stakeholders, ensuring fair procedures and avoiding undue hardship [High Court of Karnataka, Malla Raj Urs].
Power to reorganize - Section 14 authorizes government and RBI to direct mergers/bifurcations of subsidiary banks [SIAC, 1959].
Procedural adherence - Orders must follow statutory procedures, including notifications, approvals, and reasons [Kerala High Court, Canara Bank].
Public interest focus - Actions are primarily justified on grounds of public and economic interest [Full Bench Kerala].
Legal status of orders - Validity depends on compliance with legal procedures and reasons provided [Supreme Court].
Limited judicial review - Courts scrutinize procedural legality, not policy merits, unless procedural irregularities are evident [Associate Banks case].
Protection of staff rights - Transfers and bifurcations must respect employee rights and follow due process [Malla Raj Urs].
Order legality - Orders should be supported by reasons; arbitrary orders are liable to be quashed [Kerala High Court].
Interplay with other laws - Must comply with Companies Act, Banking Regulation Act, and sectoral laws [Section 14, SIAC].
RBI's role - Essential for approval, ensuring financial stability during restructuring [Judgments].
Legislative intent - To facilitate stability and orderly management of banks, with safeguards against misuse [Preamble].
Judicial restraint - Courts generally do not interfere with policy decisions under Section 14 unless legality is compromised [Supreme Court].
Protection against abuse - Orders must be non-arbitrary, transparent, and supported by reasons [Canara Bank case].
Impact on stakeholders - Fair procedures are essential to protect employees and public interest [Malla Raj Urs].
Note: The actual text of Section 14 is not provided in the sources, but the analysis is based on relevant judgments, related provisions, and the interpretative context from the cited cases.
(1) The Central Government may for the purposes of this Act constitute a Tribunal which shall consist of a Chairman and two other members.
(2) The Chairman shall be a person who is, or has been, a Judge of a High Court or has been a Judge of the Supreme Court and of the two other members, one, shall be a person, who, in the opinion of the Central Government, has had experience of commercial banking and the other shall be a person who is a chartered accountant within the meaning of the Chartered Accountants Act, 1949.
(3) If, for any reason, a vacancy occurs in the office of the Chairman or any other member of the Tribunal, the Central Government shall fill the vacancy by appointing another person thereto in accordance with the provisions of sub-section (2) and any proceeding may be continued before the Tribunal so reconstituted from the
(1) The Tribunal shall have the powers of a Civil Court while trying a suit under the Code of Civil Procedure, 1908, in respect of the following matters, namely:--
(a) summoning and enforcing the attendance of any person and examining him on oath.
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits; and
(d) issuing commissions for the examination of witnesses or documents.
(2) Notwithstanding anything contained in sub-section (1) or in any other law for the time being in force, the Tribunal shall not compel the Reserve Bank, the State Bank or any subsidary bank--
(a) to produce any books of account or other documents wh
(1) The Tribunal shall have power to regulate its own procedure.
(2) The Tribunal may hold the whole or any part of its enquiry in camera.
(3) Any clerical or arithmetical mistake in any order of the Tribunal or any error arising therein from any accidental slip or omission may at any time be corrected by the Tribunal either of its own motion or on the application of any of the parties.
(1) Save as otherwise provided in sub-section (2) the shares of a subsidiary bank shall be freely, transferable.
(2) Nothing contained in sub-section (1) shall entitle the State Bank to transfer any shares held by it in any subsidiary bank if such transfer will result in reducing the shares held by it to less than 1[fifty-one per cent. of the issued capital consisting of equity shares] of that subsidiary bank.
_____________________________
1. Substituted by the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007 (Act No. 30 of 2007) for the words "fifty-five per cent, of the issued capital"
1[18A. Right of registered shareholder to nominate.-
(1) Every individual registered shareholder of a subsidiary bank may, at any time, nominate, in the prescribed manner, an individual to whom all his rights in the shares shall vest in the event of his death.
(2) Where the shares are registered in the name of more than one individual jointly, the joint holders may together nominate in the prescribed manner, an individual to whom all their rights in the shares shall vest in the event of the death of all the joint holders.
(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such shares where a nomination made in the prescribed manner purports to confer on any individual the right to vest the
2[19. Restriction on voting rights.-
No shareholder, other than the State Bank, shall be entitled to exercise voting rights in respect of any shares held by him in excess of ten per cent. of the issued capital of the subsidiary bank concerned:
Provided that the shareholder holding any preference share capital in the subsidiary bank shall, in respect of such capital, have a right to vote only on resolutions placed before such subsidiary bank which directly affect the rights attached to his preference shares:
Provided further that no preference shareholder shall be entitled to exercise voting rights in respect of preference shares held by him in excess of ten per cent of the total voting rights of all the shareholders holding preference share capital only.]
Notwithstanding anything contained in the Acts hereinafter mentioned in this section, the shares of a subsidiary bank shall be deemed to be included among the securities enumerated in section 20 of the Indian Trusts Act, 1882, and also to be approved securities for the purposes of Insurance Act 1938, and the Banking Companies Act, 1949.
2[(1)] Every subsidiary bank shall keep at its head office a register, in one or more books, of the shareholders and shall enter therein the following particulars so far as they may be available:--
(i) the names, addresses and occupations, if any, of the shareholders and a statement of the shares held by each shareholder, distinguishing each share by its denoting number;
(ii) the date on which each person is so entered as a shareholder;
(iii) the date on which any person ceases to be a shareholder; and
(iv) such other particulars as may be prescribed.
1[Provided that nothing in this section shall apply to the shares held with a depository.]
3[(2) Notwithstandin
1[21A. Register Of Beneficial Owners
The register of beneficial owners maintained by a depository under section 11 of the Depositories Act, 1996 shall be deemed tobe a register of shareholders for the purposes of this Act."]
________________________
1. Inserted by Depositories Related Laws (Amendment) Act (8 of 1997) Section 7 (w.r.e.f. 15-1-97).
2[No notice of any trust], express, implied or constructive, shall be entered on the register of shareholders of a subsidiary bank or be receivable by it in respect of its shares.
1["Provided that nothing in this section shall apply to a depository in respect of shares held by it as a registered owner on behalf of the beneficial owners.
Explanation.-- For the purposes of section 21 section 21A and this section, the expression "beneficial owner", "depository" and "registered owner" shall have the meanings respectively assigned to them in clauses (a), (e) and (j) of sub-section (1) of section 2 of the Depositories Act, 1996]
___________________________
1. Inserted by Depositaries Related Laws (Amendment) Act(8 of 1997) Section 8 (w.r.e.f. 15-1-97).
Every person holding office as chairman, director, member of the Board of Management (including a member of a local or advisory committee), managing director, general manager, manager (other than manager of a branch), deputy managing director, deputy general manager, assistant general manager or adviser, as the case may be, in an existing bank (other than the Bank of Patiala), 1[and the hyderabad Bank] immediately before the appointed day, shall be deemed to have vacated that office on the appointed day, and notwithstanding anything, contained in this Act or in any other law for the time being in force or in any agreement or contract, such person shall not be entitled to any compensation for the loss of office or for the premature termination of any agreement or contract relating to his employment, except such pension, compensation or other benefit as the corresponding new bank, 2[or the Hyderabad Bank], as the case may be. m
(1) The State Bank may, from time to time, give directions and instructions to a subsidiary bank in regard to any of its affairs and business, and that bank shall be bound to comply with the directions and instructions so given.
(2) Subject to any such directions and instructions, the general superintendence and conduct of the affairs and business of a subsidiary bank shall, as from the appointed day, vest in a Board of Directors who may, with the assistance of the 1 [managing director], exercise all powers and do all acts and things as may be exercised or done by that bank.
(3) The Board of Directors of a subsidiary bank shall, in discharging its functions under this Act, act on business principles, regard being had to public interest.
________________________
(1) Subject to the provisions of sub-section (2) the Board of Directors of a subsidiary bank shall consist of the following:--
4[(a) the Chairman for the time being of the State Bank, ex officio or an official of the State Bank or of the subsidiary bank nominated by him as Chairman, with the approval of the Reserve Bank;]
1[(aa) the managing director appointed under sub-section (1) of section 29 or under section 32;]
5(b) one director, possessing necessary expertise and experience in the matters relating to regulation or supervision of commercial banks, to be nominated by the Reserve Bank;
(c) not more than five directors to be nominated by the State Bank of whom not more than three shall be officers of that bank:
&
1[25A. Fit and proper status of an elected director.-
(1) The Directors to be elected under clause (d) of sub-section (1) of section 25 shall-
(a) have special knowledge or practical experience in respect of one or more of the following matters, namely:--
(i) agricultural and rural economy,
(ii) banking,
(iii) co-operation,
(iv) economics,
(v) finance,
(vi) law,
(vii) small-scale industry,
(viii) any other matter the special knowledge of, and practical experience in, which would, in t
1[25B. Power of Reserve Bank to appoint additional directors
(1) If the Reserve Bank is of the opinion that in the interest of banking policy or in the public interest or in the interests of the subsidiary bank or its depositors, it is necessary so to do, it may, from time to time and by order in writing appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the subsidiary bank.
(2) Any person appointed as additional director in pursuance of this section shall--
(a) hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further period not exceeding three years at a time as the Reserve Bank may specify;
(b) not
(1) A director of a subsidiary bank1[nominated under clause (b) or clause (c) or clause (e) of sub-section (1) of section 25 or appointed under clause (ca) or clause (cb) of that sub-section], shall hold office during the pleasure of the authority2[nominating or appointing] him.
3[(2) Subject to the provisions contained in section 25 a director elected under clause (d) of subsection (1) of that section shall hold office for three years and5[***], and shall be eligible for re-election:
Provided that no such director shall hold office continuously for a period exceeding six years.
(2A) Subject to the provisions contained in section 25 and in sub-section (1), a director nominated under clause (c) and not being an officer of the State Bank or a director appointed under clause (ca) or clause (cb) o
(1) A person shall be disqualified to be a director of a subsidiary bank, if-
(a) he holds the office of director, provisional director, promoter, agent, or manager of any banking company or a banking company for the formation of which a prospectus has been issued; or
(b) he is a salaried officer of Government; or
(c) he has been removed or dismissed from the service of Government or a local authority or a corporation or a company in which not less than fifty-one per cent, of the paid-up share capital is held by Government; or
(d) he holds any office of profit under the subsidiary banks 1 [other than the office of the managing director]; or
1 [(da) in the case of a director appointed under clause (ca) or
If a director of a subsidiary bank--
(a) is, or has become, subject to any of the disqualification mentioned in section 27; or
(b) resigns his office by giving notice in writing under his hand, in the case of a nominated director to the State Bank, and in the case of an elected director to the Board of Directors of the subsidiary bank, and his resignation is accepted, or
(c) is absent without leave of the Board of Directors for more than three consecutive meetings thereof:
his seat on the Board of Directors shall thereupon become vacant:
Provided that nothing in Clause (b) or Clause (c) shall apply to a director referred to in clause (b) of sub-section (1) of section 25 or to a director, being an officer
1[Managing Director
(1) The State Bank shall, after consulting the Board of Directors of a subsidiary bank, and with the approval of the Reserve Bank, appoint a1[ managing director] for that subsidiary bank;
Provided that in the case of the first appointment of the1[managing director] no such consultation with the Board of Directors of the subsidiary bank shall be necessary.
(2) Subject to the general control of the Board of Directors, the day-to-day administration and management of the affairs of a subsidiary bank shall vest in the1[managing director] and the1managing director] shall exercise such other powers and perform such other duties as may be delegated to him by the Board of Directors.
(3) The1[managing director] of a subsidiary bank--
&n
A director of a subsidiary bank shall be paid for unending the meetings of the Board of Directors or of any of its committees and for attending to any other business of the subsidiary bank such fees and allowances as may be prescribed;
Provided that no fee shall be payable to the chairman of the State Bank1[or the managing director of the subsidiary bank] or any other director who is a whole time officer of the Central Government or the Reserve Bank or the State Bank.
_________________________
1. Inserted by the State Bank Laws (Amendment) Act, 1973 (48 of 1973), Section 25 w.e.f.1-7-1974.
(1) The State Bank may, with the approval of the Reserve Bank, for any sufficient reason, remove from office a director nominated under clause (c) of sub-section (1) of section 25 and not being an officer of the State Bank.
(2) The Central Government may, in consultation with the State Bank, for any sufficient reason, remove from office a director1[appointed under clause (ca) or clause (cb) or nominated under clause (e)] of sub-section (1) of section 25 and not being an officer of the Central Government.
(3) Any director elected under clause (d) of sub-section (1) of section 25 may be removed from office--
(a) by the State Bank, with the approval of the Reserve Bank, if at the time of the removal there are no shareholders other than the State Bank registered in the books, of the subsidiary ban
32. Appointment Of Another Person For Discharging The Duties Of1[Managing Director] During His Absence
If the1[managing director] of a subsidiary bank is rendered incapable of discharing his duties by reason of infirmity or otherwise or is absent on leave or otherwise in circumstances not involving the vacation of his office, the State Bank may appoint another person to officiate for the1[managing director] until the date on which the1[managing director] resumes duty.
________________________
1. Substituted for the words "general manager" by the State Bank Laws (Amendment) Act, 1973(48 of 1973), Section 21 w.e.f. 1-7-1974.
(1) Where any vacancy occurs before the expiry of the term of office of a director of a subsidiary bank1[other than the managing director or a director appointed under clause (ca) or clause (cb) of sub-section (1) of section 25 the vacancy shall be filled--
(a) in the case of a director nominated under clause (c) of sub-section (1) of section 25 not being an officer of the State Bank, by nomination by the State Bank;
(b) in the case of a director elected under clause (d) of sub-section (1) of section 25 by election or where the proviso to that clause is applicable, by nomination by the State Bank.
Provided that where the duration of the vacancy in the office of an elected director is likely to be less than six months, the vacancy may be filled by the remaining directors by co-opting a person f
3[(1) The Board of Directors of a subsidiary bank shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed; and the meeting of the Board of Directors may be held by participation of the directors of the Board through video-conferencing or such other electronic means, as may be presented, which are capable of recording and recognising the participation of the directors and the proceedings of such meetings are capable of being recorded and stored:
Provided that the Central Government may in consultation with the Reserve Bank, by a notification in the Official Gazette, specify the powers which shall not be exercised in a meeting of the Board of Directors held through videoconferencing or such other electronic means.]
(2) 4[The Chairman of the Bo
(1) There shall be an executive committee in respect of a subsidiary bank consisting of such directors as may be prescribed :
Provided that if any such director being an officer of the State Bank and nominated by that bank under clause (e) of sub-section (1) of section 25, is for any reason unable to exercise his functions or to discharge his duties in relation to the executive committee, the State Bank may depute any of its officers to exercise all the functions and to discharge all the duties of such director in relation to the executive committee whenever such director is so unable to exercise his functions or discharge his duties and the officer so deputed shall, for all purposes of this Act, in so far as it applies to the executive committee, be deemed to be a director of the subsidiary bank.
(2) Subject to any regulations made unde
1[35A. Supersession of Board of Directors in certain cases.-
(1) Where the Reserve Bank, on the recommendation of the State Bank is satisfied that in the public interest or for preventing the affairs of a subsidiary bank being conducted in a manner detrimental to the interest, of the depositors or the subsidiary bank or for securing the proper management of the subsidiary bank, it is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing, by order, supersede the Board of Directors of the subsidiary bank for a period not exceeding six months as may be specified in the order:
Provided that the period of supersession of the Board of Directors may be extended from time to time, so, however, that the total period shall not exceed twelve months.
(2) The Reserve Bank may, on
(1) A subsidiary bank shall, if so required by the State Bank, act as agent of the State Bank at any place in India for--
(a) paying, receiving, collecting and remitting money, bullion and securities on behalf of any Government in India; and
(b) undertaking and transacting any other business which the Reserve bank may, from time to time, entrust to the state Bank.
(2) The terms and conditions on which any such agency business shall be carried on by the subsidiary bank on behalf of the State Bank shall be such as may be determined by the State Bank, after consultation with the subsidiary bank and with the approval of the Reserve Bank,
1[(3)-(4) *****]
________________________
&nb
1[36-A. Subsidiary Bank To Act As Agent Of The Reserve Bank
(1) A subsidiary bank shall, if so required by the Reserve Bank, act as agent of the Reserve Bank at all places in India, where it has a branch, for--
(a) paying, receiving, collecting and remitting money, bullion and securities on behalf of any Government in India; and
(b) undertaking and transacting any other business which the Reserve Bank may from time to time entrust to it.
(2) The terms and conditions on which any such agency business shall be carried on by the subsidiary bank on behalf of the Reserve Bank shall be such as may be agreed upon.
(3) If, no agreement can be reached on any matter referred to in sub-section (2) or if a dispute ar
1[(1) Subject to the other provisions contained in this Act, a subsidiary bank may carry on and transact the business of banking as defined in clause (b) of section 5 of the Banking Regulation Act, 1949, and may engage in one or more of the other forms of business specified in sub-section (1) of section 6 of that Act.]
(2) The Central Government may, after consultation with the Reserve Bank and the State Bank, by order in writing--
(a) authorise subsidiary bank to do such other forms of business as the Central Government may consider necessary or expedient;
(b) direct that any form of business as is mentioned in the order shall be carried on subject to such restrictions, conditions and safeguards as may be specified therein; or
(c) prohibit a subsid
(1) A subsidiary bank may, with the approval of the State Bank, and shall, it the Reserve Bank, in consultation with the State Bank, so directs, enter into negotiations for acquiring the business, including the assets and liabilities of any other banking institution.
(2) The terms and conditions relating to such acquisition, if agreed upon by the Board of Directors of the subsidiary bank concerned and the directorate or management of the banking institution concerned and approved by the Reserve Bank, shall be submitted to the Central Government for its sanction and that Government may by order in writing (hereafter in this section referred to as the order of sanction) accord its sanction thereto.
(3) Notwithstanding anything contained in this Act or any other law for the time being in force or any instrument regulating the constitution o
1[38A. Arrangement With Subsidiary Banks On Appointment Of Directors To Prevail
(1) Where any arrangement entered into by a subsidiary bank with a company provides for the appointment by the subsidiary bank of one or more Directors of such company, such provision and any appointment of Directors made in pursuance thereof shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956, or in any other law for the time being in force or in the memorandum, articles of association or any other instrument relating to the company and any provision regarding share qualification, age limit number of directorships, removal from office of Directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any Director appointed by the subsidiary bank in pursuance of the arrangement as aforesaid. (2) Any Director
A subsidiary bank shall cause its books to be closed and balanced1[as] on the thirty-first day of 4[March] 2[or such other date in each year as the Central Government may, by notification in the official Gazette, specify].
3[Provided that with a view to facilitating the transaction from one period of accounting to another period of accounting under this section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for the closing and balancing of, or for other matters relating to, the books in respect of the concerned years.]
__________________________
1. Inserted by the State Bank Laws (Amendment) Act, 1973 (48 of 1973), Section 30 w.e.f. 31-12-1973.
2. Substituted for w
(1) After making provision for bad and doubtful debts, depreciation in assets, equalisation of dividends, contribution to staff and superannuation funds and for all other matters for which provision is necessary by or under this Act or which are usually provided for by banking companies, a subsidiary bank may, out of its net profits, declare a dividend.
(2) The rate of dividend shall be determined by the Board of Directors of the subsidiary bank concerned.
(3) Nothing in this section shall be deemed to preclude the payment of interim dividends in such manner and to such extent as may be prescribed.
1[40A. Transfer of unpaid or unclaimed dividend to unpaid dividend account.-
(1) Where, after the commencement of the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007, a dividend has been declared by the subsidiary bank but has not been paid, or claimed, within thirty days from the date of declaration, to or by any shareholder entitled to the payment of the dividend, the subsidiary bank shall, within seven days from the date of the expiry of such period of thirty days, transfer the total amount of dividend which remains unpaid, or unclaimed within the said period of thirty days, to a special account to be called "unpaid dividend account of...................................... (Name of the subsidiary bank)".
Explanation.-- In this sub-section, the expression "dividend which remains unpaid" means any dividend the warrant in
(1) Subject to the provisions of section 42, the accounts of a subsidiary bank shall be audited by an auditor duly qualified to act as an auditor of companies under sub-section (1) of section 226 of the Companies Act, 1956, who shall be appointed by the State Bank, with the approval of the Reserve Bank.
(2) The auditor shall receive such remuneration as the State Bank may fix.
(3) No director or officer of a subsidiary bank shall be eligible to be its auditor during his continuance in office as such director or officer.
(4) The auditor shall be supplied with a copy of the annual balance sheet and profit and loss account, and a list of all books kept by the subsidiary bank, and it shall be the duty of the auditor to examine the balance sheet and profit and loss account with the accounts and vou
If, on the appointed day, any appointment of an auditor made by, or in respect of, an existing bank, 1[or the Hyderabad Bank], as the case may be, is subsisting, the State Bank may, on or after such day, cither confirm the appointment in accordance with the provisions of this Act, subject to such modifications of the terms and conditions of the appointment, as if may deem necessary, or terminate the appointment, and may, if it so terminates the appointment, fix such remuneration as appears to it to be reasonable having regard to the wink already done, functions discharged, or duties performed by the auditor concerned.
___________________________
1. Substituted by the State Bank of Saurashtra (Repeal) and the State Bank of India (Subsidiary Banks) Amendment Act, 2009 w.e.f. 01.06.2010 previou
(1) A subsidiary bank shall furnish to the State Bank1[the Reserve Bank and the Central Government)--
(a)2[within three months from the 31st day of 7[March] [or the date notified under section 39. as the case may be.] as on which its books are closed and balanced], its balance sheet, together with the profit and loss account and the auditor's report, and a report by the Board of Directors on the working3[and activities] of the subsidiary bank during the period covered by the accounts; and
(b) any other information relating to the affairs and business of the subsidiary bank which the State Bank or the Reserve Bank may require.
4[Provided that the Reserve Bank may, after consultation with the State Bank, extend the said period of three months by such further period, not exceeding three months, a
(1) A general meeting (Hereinafter referred to as an annual general meeting) of a subsidiary bank shall be held1[in each year] at the place where the head office of the subsidiary bank is situate, and any other general meeting may be convened by the Board of Directors at any time.
2[Provided that such annual general meeting shall be held before the expiry of six weeks from the date on which the balance-sheet, together with the profit and loss account and auditors's report, is under sub-section (1) of Section 43, forwarded to3[the State Bank, the Reserve Bank or the Central Government ], whichever date is earlier. ]
(2) The shareholders present at an annual general meeting shall be emitted to 6[discuss and adopt the balance sheet] and profit and loss account of the bank concerned, made up to the previous 31st day of 7[March] 14[or the dat
For the purpose of facilitating the full and effective transfer of the undertaking of an existing bank in accordance with the provisions of this Act or in order to remove any difficulty which in the opinion of the Central Government has arisen or is likely to arise in connection with such transfer, the Central Government may, in consultation with the Reserve Bank, give such directions to any existing bank or the State Bank us appear to it to be necessary and the said bank or the State Bank, as the case may be, shall comply with such directions.
(1) The State Bank may, in relation to any existing bank 1[***], at any time before the appointed day,--
(a) depute one or more persons to watch the proceedings at any meeting of the Board of Directors, any committee or other body of the bank; require the bank to give an opportunity to the person or persons so deputed to be heard at such meetings and also require such person or persons to send a report of such proceedings to the State Bank;
(b) require the Board of Directors, any committee or other body of the bank to give in writing to any person specified by the State Bank in this behalf, at his usual address, all notices of, and other communications relating to, any meeting of the Board committee or other body, as the case may be;
(c) appoint one or more persons to observe the manner in whi
(1) Without prejudice to the other provisions contained in this Act, the State Bank may, at any time, cause an inspection to be made by one or more of its officers of any existing bank, 1[or the Hyderabad Bank.]
(2) It shall be the duty of every person who is or has at any time been a director, officer or other employee of a bank which is inspected under sub-section (1), to produce to any officer making the inspection, all such balances, books, accounts, securities and other documents in his custody or power and to furnish the said officer with any statements and information relating to the affairs of the bank as the said officer may require of him within such time as the said officer may specify.
(3) If any person--
(a) fails, within the stipulated time, to produce any balance, book, account,
(1) A subsidiary bank may accept any subsidies offered by the State Bank to meet--
(a) the cost of the whole or any part of any specific programme of development undertaken by that subsidiary bank with the approval of the State Bank; and
(b) such losses or expenditure as may be approved by the State Bank, with the consent of the Reserve Bank.
(2) For the purposes of the 1[Income tax-Act, 1961], any subsidy received by a subsidiary bank under sub-section (1) shall not be treated us income, profits or gains of the subsidiary bank.
________________________________
1. Substituted by the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007 (Act No. 30 of 2007) for the words and figures "Indian Incom
(1) Notwithstanding anything contained in any of the other provisions of this Act, or in any other law or in any contractor service or other document, no appointment made or promotion, increment in salary, pension or allowance or any other benefit granted to any person by an existing bank 1[***] after the 10th day of Feb., 1958, and before the appointed day, which would not ordinarily have been made or granted or which would not ordinarily have been admissible under the rules or authorisations of the said banks or of any provident, pension or other fund in force before the 10th day of February, 1958, shall have effect or be payable or claimable from the subsidiary bank concerned, or from any provident, pension or other fund or from any authority administering any such fund, unless the State Bank has, with the approval of the Reserve Bank, by a general or special order, confirmed the appointment, promotion or increment or has
(1) A subsidiary bank may, subject to such limitations and conditions as may be prescribed, appoint such number of officers, advisers and employees as it considers necessary or desirable, for the efficient performance of its functions and on such terms and conditions us it may deem fit.
1[(1A) The officers, advisers and employees of the subsidiary bank concerned shall individually or jointly, or with other officers, advisers and employees in a committee exercise such powers and perform such duties as may, by general or special order, be entrusted or delegated to them by the Board of Directors or its Executive Committee.]
(2) For the removal of doubts, it is hereby declared that the officers, advisers and employees of a subsidiary bank, in whatever capacity engaged, shall not be deemed to be officers, advisers or employees of the State Ba
(1) No officer, adviser or other employee other than an employee within the meaning of clause (13) of section 2 of the Payment of Bonus Act. 1965] of a subsidiary bank shall be entitled to be paid any bonus.
(2) No employee of a subsidiary bank, being an employee within the meaning of clause (13) of section 2 of the Payment of Bonus Act, 1965, shall be entitled to be paid any bonus except in accordance with the provisions of that Act.
(3) The provisions of this section shall have effect notwithstanding any judgment, decree or order of any court, tribunal or other authority and notwithstanding anything contained in any other provision of this Act or in the Industrial Disputes Act, 1947, or any other law for the time being in force or any practice, usage or custom or any contract, agreement, settlement, award or other instrument.]
Notwithstanding anything to the contrary contained in any other law for the time being in force, a subsidiary bank may establish and maintain super annuaton pension, provident or other funds for the benefit of its officers or employees or the dependants of such officers or employees or for the purposes of the subsidiary bank, and grant super annuation allowances, annuities and pensions payable out of any such fund.
(1) A subsidiary bank shall observe, except as otherwise required by law, the practices and usages customary among bankers, and in particular, it shall not divulge any information relating to, or to the affairs of its constituents except in circumstances in which it is, in accordance with the law or practice and usage customary among bankers, necessary or appropriate for that bank to divulge such information.
(2) Every director, auditor, adviser officer or other employee of a subsidiary bank shall, before entering upon his duties, make a declaration of fidelity and secrecy as in the form set out in the Second Schedule:
1"(3) Nothing contained in this section shall apply to the credit information disclosed under the Credit Information Companies (Regulation) Act, 2005.".
Provided that any declar
(1) Every director of a subsidiary bank shall be indemnified by that bank against all losses and expenses incurred by him in, or in relation to, the discharge of his duties except such us are caused by his own wilful act or default.
(2) A director of a subsidiary bank shall not be responsible for any loss or expense caused to the bank by the insufficiency or deficiency of the value of, or title to, any properly or security acquired or taken on behalf of the bank or by the insolvency or wrongful act of any customer or debtor or by anything done in, or in relation to, the execution of the duties of his office or otherwise than for his wilful act or default.
"[(3) Where the State Bank nominates any of its officers as director of a subsidiary Bank, such director shall not incur any obligation or liability by reason only of his being a direct
(1) No actor proceeding of the Board of Directors of a subsidiary bank shall be questioned on the ground merely of the existence of any vacancy in, or defect in the constitution of, the Board.
(2) All acts done by any person acting in good faith as a director of a subsidiary bank shall, notwithstanding that be was disqualified to be a director or that there was any other defect in his appointment, be deemed to be valid.
Subject to the provisions of this Act and unless the Central Government by notification in the Official Gazette, otherwise, directs, on and from the appointed day, the provisions of the Companies Act 1956, and the 1[Banking Regulation Act], 1949, shall not apply to an existing bank in so far as the said provisions impose any obligation on, or require anything to be done by, any such bank.
____________________________
1. Substituted by the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007 (Act No. 30 of 2007) for the words "Banking Companies Act".
The State Bank of Patiala 1[***] shall be entitled to recover in the same manner as an arrear of land revenue any moneys due in respect of loans or advances made before the appointed day by the Bank of Patiala 2[***] and. the provisions of any law relating to such recovery as were applicable to that bank before the appointed day shall continue to apply to the State Bank of Patiala 2[***], in respect of such recovery after the appointed day.
__________________________________
1. Omitted by the State Bank of Saurashtra (Repeal) and the State Bank of India (Subsidiary Banks) Amendment Act, 2009 w.e.f. 01.06.2010 previous text was :- "and the Saurashtra Bank"
2. Omitted by the State Bank of Saurashtra (Repeal) and the State Bank of India (Subsidiar
No provision of law relating to the winding up of companies shall apply to a subsidiary bank nor shall it be placed in liquidation, save as provided in this Act or by order of the Central Government and in such manner as the Central Government may direct.
Notwithstanding anything contained in this Act or in any other law for the time being in force or in any contract or other instrument an existing bank shall, on such date as the Central Government may, by notification in the Official Gazette, specify in this behalf, stand dissolved.
1[59.Construction Of References To Existing Banks
(1) For the purposes of sections 45, 49.55, 58 and the First Schedule, the expression 'existing bank' shall include the Bank of Jaipur Limited. (2) Except as otherwise provided in any general or special order made by the Central Government any reference in any law, other than this Act, or in any contract or other instrument--
(a) to an existing bank, shall be construed as a reference to the corresponding new bank;
(b) to the Bank of Jaipur Limited, shall be construed as a reference to the State Bank of Bikaner.]
________________________
1. Substituted for former Section 59 by the State Associated Banks (Miscel
Any powers, duties or functions conferred, imposed or entrusted by this Act on, or to, the Reserve Bank, shall be exercised, or performed by the Governor of the Reserve Bank or, in his absence, by a Deputy Governor nominated under sub-section (3) of section 7 of the Reserve Bank of India Act, 1934, or by such officer or officers of the Reserve Bank in respect of such matters and subject to such conditions and limitations as the Governor of the Reserve Bank may specify.
(1) No suit or other legal proceeding shall lie against the Central Government, the Reserve Bank or the State Bank or any officer of the Central Government, the Reserve Bank or the State Bank for any damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of this Act.
(2) No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred or any damage caused by reason of the operation of, or anything done in pursuance of, the provisions contained in sections 46 and 47.
(1) The Central Government may, by notification in the Official Gazette. [make rules to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act]
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for--
(a) the terms and conditions of service of the Chairman, members and staff of the Tribunal;
(b) the manner of and the procedure for payment of compensation (including allotment of sharesin lieu of compensation under this Act, including the requirements subject to which the payment shall be made:
(c) the determination of the persons to whom compensation shall be payable in all cases including cases where shares have been h
4[(1) The Board of Directors of a subsidiary bank may, after consultation with the State Bank and with the previous approval of the Reserve Bank, by notification in the Official Gazette, make regulations not inconsistent with this Act and the rules made thereunder, to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act or any other law for the time being in force;
(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for--
(a) the powers and duties of the general manager of the subsidiary bank;
(b) the fees and allowances which may be paid to directors or others for attending any meetings of the Board of Directors or of its committees (including the executi
[Repeated by Repealing and Amendment Act, 1964 (52 of 1964), Section 2 and Sch. 1 (29-12-1964.)]
Nothing in this Act shall be deemed to affect the provisions of section 35 of the State Bank of India Act, 1955.
(Sec sections 13 and 14)
PRINCIPLES OF COMPENSATION
1. A. The compensation to be given by the State Bank shall in the case of the Hyderabad Bank, 1[or the Bank of Patiala], be an amount equal to the value of the assets of that bank as on the day immediately before the appointed day, computed in accordance with the provisions of Part 1 of this paragraph less the total amount of liabilities thereof computed in accordance with the provisions of Part II of this paragraph.
B. The total compensation to be given by the State Bank in respect of the transfer of the shares in the capital of the existing banks, other than the Bank of Patiala to the persons (including any State Government) who, immediately before the appointed day, are registered as holders of shares in the books of each of these ban
(See section 52).
DECLARATION OF FIDELITY AND SECRECY
I………………………………………........ do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as…………………………...... (director, auditor, adviser, officer or employee, us the cast may be) of the State Bank of …………………………...... and which properly relate to the office or position held by me in, or in relation to the said Bank, I further declare that I will not communicate, or allow to be communicated, to any person not legally entitled thereto any information relating to the affairs of the State Bank of …………………………...... or to the affairs of any person having any dealing with the said bank nor will I allow any such person to inspect or have any access to any books or documents belonging to, or in the possession of the State Bank
(See section 64)
Amendments to certain enactments.-- [Repealed by the Repealing and Amending Act, 1964 (52 of 1964). section 2 and Schedule. I (29-2-1964).]
Note.-- Amendments made by the Schedule to the various Banking Laws have been incorporated in the respective Acts.
Elevate your legal practice with advanced AI-driven research and drafting solutions. Experience unmatched efficiency, precision, and security, tailored exclusively for legal professionals.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
AI Assistant
