(1)

Every bank included in the Second Schedule shall maintain with the Bank an average daily balance the amount of which shall not be less than

such per cent. of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section (2), as the Bank may from time to time, having regard to the needs of securing the monetary stability in the country, notify in the Gazette of India.

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Explanation.— For the purposes of this section,—

(a) “average daily balance” shall mean the average of the balances held at the close of business of each day of a fortnight;

(b) “fortnight” shall mean the period from Saturday to the second following Friday, both days inclusive;

(c) “liabilities” shall not include—

(d) the aggregate of the liabilities” of a Scheduled bank which is not a State co-operative bank, to,—

(e) the aggregate of the “liabilities” of a scheduled bank which is a State co-operative bank, to,—

(1A)

Notwithstanding anything contained in sub-section (1), the Bank may, by notification in the Gazette of India, direct that every scheduled bank shall, with effect from such date as may be specified in the notification, maintain with the Bank, in addi­tion to the balance prescribed by or under sub-section (1), an additional average daily balance the amount of which shall not be less than the rate. specified in the notification, such addi­tional balance being calculated with reference to the excess of the total of the demand and time liabilities of the bank as shown in the return referred to in sub-section (2) over the total of its demand and time liabilities at the close of business on the date specified in the notification as shown by such return so however, that the additional balance shall, in no case, be more than such excess:

Provided that the Bank may, by a separate notification in the Gazette of India, specify different dates in respect of a Bank subsequently included in the Second Schedule.

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(1C)

The Bank may, for the purposes of this section, specify from time to time with reference to any transaction or class of trans­actions that such transaction or transactions shall be regarded as liability in India of a scheduled bank, and if any question arises as to whether any transaction or class of transactions shall be regarded, for the purposes of this section, as liability in India of a scheduled bank, the decision of the Bank thereon shall be final.

(2)

Every scheduled bank shall send to the Bank a return signed by two responsible officers of such bank showing—

(a) the amount of its demand and time liabilities and the amount of its borrowings from banks in India, classifying them into demand and time liabilities,

(b) the total amount of legal tender notes and coins held by it in India,

(c) the balance held by it at the Bank in India,

(d) the balances held by it at other banks in current account and the money at call and short notice in India,

(e) the investments (at book value) in Central and State Govern­ment securities including treasury bills and treasury deposit receipts,

(f) the amount of advances in India,

(g) the inland bills purchased and discounted in India and foreign bills purchased and discounted.

(i) to furnish a provisional return for the fortnight within the period aforesaid to be followed by a final return not later than twenty days after the date to which it relates, or

(ii) to furnish in lieu of a fortnightly return a monthly return to be sent not later than twenty days after the end of the month to which it relates giving the details specified in this sub-section in respect of such bank at the close of business for the month.

(2A)

Where the last Friday of a month is not an alternate Friday for the purpose of sub-section(2), every scheduled bank shall send to the Bank, a special return giving the details specified in sub-section (2) as at the close of business on such last Friday or where such last Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), as at the close of business on the preceding working day and such return shall be sent not later than seven days after the date to which it re­lates.

(3)

If the average daily balance held at the Bank by a sched­uled bank during any fortnight is below the minimum prescribed by or under sub-section (1) or sub-section (1A), such scheduled bank shall be liable to pay to the Bank in respect of that fortnight penal interest at a rate of three per cent. above the bank rate on the amount by which such balance with the Bank falls short of the prescribed minimum, and if during the next succeeding fortnight, such average daily balance is still below the prescribed minimum, the rates of penal interest shall be increased to a rate of five per cent. above the bank rate in respect of that fortnight and each subsequent fortnight during which the default continues on the amount by which such balance at the Bank falls short of the prescribed minimum.

(3A)

When under the provisions of sub-section (3) penal inter­est at the increased rate of five per cent. above the bank rate has become payable by a scheduled bank, if thereafter the average daily balance held at the Bank during the next succeeding fortnight is still below the prescribed minimum, —

(a) every director, manager or secretary of the scheduled bank, who is knowingly and wilfully a party to the default, shall be punishable with fine which may extend to five hundred rupees and with a further fine which may extend to five hundred rupees for each subsequent fortnight during which the default continues, and

(b) the Bank may prohibit the scheduled bank from receiving after the said fortnight any fresh deposit, and, if default is made by the scheduled bank in complying with the prohibition referred to in clause (b), every director and officer of the scheduled bank who is knowingly and wilfully a party to such default or who through negligence or otherwise contributes to such default shall in respect of each such default be punishable with fine which may extend to five hundred rupees and with a further fine which may extend to five hundred rupees for each day after the first on which a deposit received in contravention of such prohibition is retained by the scheduled bank.

(4)

Any scheduled bank failing to comply with the provisions of sub-section (2) shall be liable to pay to the Bank a penalty of one hundred rupees for each day during which the failure continues.

(5)

(a) The penalties imposed by sub-sections (3) and (4) shall be payable within a period of fourteen days from the date on which a notice issued by the Bank demanding the payment of the same is served on the scheduled bank, and in the event of failure of the scheduled bank to pay the same within such period, may be levied by a direction of the principal civil court having juris­diction in the area where an office of the defaulting bank is situated, such direction to be mode only upon an application made in this behalf to the court by the Bank;

(b) when the court makes a direction under clause (a), it shall issue a certificate specifying the sum payable by the scheduled bank and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a suit;

(c) notwithstanding anything contained in this section, if the Bank is satisfied that the defaulting bank and sufficient cause for its failure to comply with the provisions of sub-section (1), (1A) or (2), it may not demand the payment of the penal interest of the penalty, as the case may be.

(6)

The Bank shall, save as hereinafter provided, by notifica­tion in the Gazette of India,—

(a) direct the inclusion in the Second Schedule of any bank not already so included which carries on the business of banking in India and which—

(b) direct the exclusion from that Schedule of any scheduled bank,—

(c) alter the description in that Schedule whenever any scheduled bank changes its name.

(6A)

In considering whether a State co-operative bank or a regional rural bank should be included in or excluded from the Second Schedule, it shall be competent for the Bank to act on a certificate from the National Bank on the question whether or not a State co-operative bank or a regional rural bank, as the case may be, satisfies the requirements as to paid-up capital and reserves or whether its affairs are not being conducted in a manner detrimental to the interests of its depositors.

(7)

The Bank may, for such period and subject to such condi­tions as may be specified, grant to any scheduled bank such exemp­tions from the provisions of this section as it thinks fit with reference to all or any of its offices or with reference to the whole or any part of its assets and liabilities.