Which section of the banking regulation act 1949 prohibits banks from granting any loan or advance to any of its directors?

Option 1 : Section 20

The correct answer is Section 20.

• Section 20 of the Banking Regulation Act 1949 deals with the "restrictions on loans and advances" to any of its directors.
• No banking company shall grant any loans or advances on the security of its shares.
• No banking company should enter into any commitment for granting any loan or advance to or on behalf of:
  • Any of its directors.
  • Any firm in which any of its directors is interested as partner, manager, employee, or guarantor.
  • Any company of which 2 any of the directors of the banking company is a director, managing agent, manager, employee or guarantor or in which he holds a substantial interest.
  • Any individual in respect of whom any of its directors is a partner or guarantor. 

• Amendments in Banking Regulation Act 1949:
  • The Banking Regulation (Amendment) Bill, 2020 was introduced in Lok Sabha by the Minister of Finance, Mrs. Nirmala Sitharaman, on March 3, 2020. 
  • The Act regulates the functioning of banks and provides details on various aspects such as licensing, management, and operations of banks.  
• After amendment this act shall not apply to: 
  • Primary Agricultural Credit Societies 
  • Co-operative Societies