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THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959

Title : THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959

Year : 1959



(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) *****]

36A -5* 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 arises between a subsidiary bank and the Reserve Bank as to the interpretation of any agreement between them, the matter shall be referred to the Central Government and the decision of the Central Government thereon shall be final.

(4) A subsidiary bank may transact any business or perform any functions entrusted to it under sub-section (1), by itself or through any agent approved by the Reserve Bank.

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4. Sub-sections (3) and (4) omitted by the State-Associated Banks (Miscellaneous Provisions) Act, 1962 (56 of 1962), Section 3.(viii) w.e.f. 14-12-62.

5. Inserted by the Banking Laws (Amendment) Act, 1983(1 of 1984), Section 49 w.e.f. 15-2-1984.

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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 subsidiary bank from carrying on or transacting any form of business which, but for this clause, it is lawful for the subsidiary bank to engage in.

(3) Save as otherwise provided in sub-section (2), a subsidiary bank shall not engage in any form of business other than that referred to in sub-section (1).

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1. Substituted for sub-section(1) by the State Bank Laws (Amendment) Act, 1973 (43 of 1973), Section 29 w.e.f. 31-12-1973.

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(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 of the banking institution concerned, the terms and conditions as sanctioned by the Central Government shall come into effect on the date specified by the Central Government in this behalf in the order of sanction and be binding upon the subsidiary bank and the banking institution concerned as well as upon the shareholders (or, as the case may be, proprietors) and creditors to that banking institution.

(4) If for any reason the terms and conditions cannot come into effect on the date specified in the order of sanction, the Central Government may fix another suitable date for that purpose.

(5) On the date on which the terms and conditions as aforesaid come into effect, the business and the assets and liabilities of the banking institution concerned as covered by the acquisition shall, by virtue and in accordance with the provisions, of the order of sanction stand transferred to, and become respectively the business and the assets and liabilities of the subsidiary bank concerned.

(6) The consideration for the acquisition of the business and the assets and liabilities of any bank┬Čing institution under this section may, if so agreed upon, be paid either in cash or by allotment of shares in the capital of the subsidiary bank concerned or partly in cash and partly by allotment of shares, and the subsidiary bank may, for the purpose of any such allotment, increase, subject to the other provisions contained in this Act relating to the increase of capital, the capital of the subsidiary bank by the issue of such number of shares as may be determined by the subsidiary bank.

(7) Any business acquired under this section shall thereafter be carried on by the subsidiary bank in accordance with the provisions of this Act subject to such exemptions or modifications as the Central Government may, by notifications in the Official Gazette, make in this behalf in consultation with the Reserve Bank;

Provided that no such exemption or modification shall be made so as to have effect for a period of more than seven years from the date of acquisition.

(8) Notwithstanding anything contained in the Industrial Disputes Act, 1947, or in any other law or in any agreement for the time being in force on the acquisition of the business and the assets and liabilities of any banking institution under this section, no officer or other employee of that banking institution shall be entitled to any compensation to which be may be entitled under that act or that other law or that agreement, and no claim in respect of such compensation shall be entertained by any Court, tribunal or other authority if on his having accepted in writing an offer of employment by the subsidiary bank concerned on the terms and conditions proposed by it be has been employed in accordance with such terms and conditions.

(9) The Central Government may. if it considers necessary or expedient in the case of any banking institution in relation to which an order of sanction has been made under this section, appoint, whether before or after the coming into effect of the terms and conditions relating to the business and the assets and liabilities of that banking institution, a suitable person to take over the management of that banking institution for the purposes of winding up its affairs and distributing its assets, and the expenditure incurred in connection with such management (including the remuneration of the person so appointed and his staff, if any) shall be paid out of the assets of the banking institution or by the subsidiary bank concerned as the Central Government may direct.

(10) Simultaneously with the appointment of a suitable person, under sub-section (9) or immediately thereafter, the Central Government shall issue directions to be followed by that person in the management of that banking institution for the purposes aforesaid and thereupon-

(a) The provisions of the Companies Act, 1956. or the 1*[Banking Regulation Act, 1949] or any other law for the time being in force or any instrument having effect by virtue of any such Act or law in so far as they are inconsistent with such directions shall cease to apply to, or in relation to that banking institution :

(b) All persons in charge of the management, including any person holding office as manager or director, of the banking institution, immediately before the issue of such directions, shall be deemed to have vacated their offices as such; and

(c) The person appointed to take over the management of the banking institution shall in accordance with those directions, take all such steps as may be necessary to facilitate the winding up of its affairs and the distribution of its assets.

(11) The Central Government, when satisfied that nothing further remains to be done in order to wind up the affairs of the banking institution concerned may, by order in writing, direct that as from such date as may be specified therein, the banking institution shall stand dissolved and thereupon any such direction shall have effect notwithstanding anything to the contrary contained in any other law.

(12) No action under this section shall be questioned on the ground merely of any defect in the constitution of any banking institution in relation to which such action has been taken or in the constitution of its Board of Directors or in the appointment of any persons entrusted with the management of its affairs.

(13) The provisions of this section shall apply in relation to the acquisition by one subsidiary bank of the business including the assets and liabilities of another subsidiary bank as they apply in relation to the acquisition by a subsidiary bank of the business including the assets and liabilities of any other banking institution.

(14) In this section, "banking institution" includes any individual or any association of individuals (whether incorporated or not. or whether a department of Government or a separate institution), carrying on the business of banking.

38A - 2*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 appointed as aforesaid shall-

(a) Hold office during the pleasure of the subsidiary bank and may be removed or substituted by any person by order in writing of the subsidiary bank;

(b) Not incur any obligation or liability by reason only of his being a Director or for anything done or omitted to be done in good faith in the discharge of his duties as a Director or anything in relation thereto;

(c) Not be liable to retirement by rotation and shall not be taken into account for computing the number of Directors liable to such retirement.

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1. Substituted by the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007 (Act No. 30 of 2007) for the words and figures "Banking Companies Act, 1949"

2. Inserted by the Banking Law, (Amendment) Act, 1983 of 1984), Section 50 w.e.f. 15-2-1984.

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Last updated on September, 2016

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