RESERVE BANK OF INDIA (AMENDMENT) ACT, 2006

Sun Feb 27 2022 | Banking and Insurance | Comments (0)

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Year : 2006

[Act, No. 26 of 2006]
[12th June, 2006]

PREAMBLE

An Act further to amend the Reserve Bank of India Act, 1934.

BE it enacted by Parliament in the Fifty-seventh Year of the Republic of India as follows:-

Section -1  Short title and commencement

(1) This Act may be called the Reserve Bank of India (Amendment) Act, 2006.

(2) It shall come into force on such date 1* as the Central Government may, by notification in the Official Gazette, appoint; and different dates 1* may be appointed for different provisions of this Act.

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1. All provisions except Section 3 of the Act enforced on 9th January, 2007, vide Notification No. SO21(E), dated 09.01.2007.

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Section -2  Amendment of section 17

In section 17 of the Reserve Bank of India Act, 1934(2 of 1934) (hereinafter referred to as the principal Act),-

(i) After clause (6), the following shall be inserted, namely:-

(6A) Dealing in derivatives, and, with the approval of the Central Board, in any other financial instrument.

Explanation.-

For the purposes of this clause, "derivative" means an instrument, to be settled at a future date, whose value is derived from change in one or a combination of more than one of the following underlyings, namely:-

(a) Interest rate,

(b) Price of securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government,

(c) Price of foreign securities,

(d) Foreign exchange rate,

(e) Index of rates or prices,

(f) Credit rating or credit index,

(g) Price of gold or silver coins, or gold or silver bullion, or

(h) Any other variable of similar nature;';

(ii) After clause (12A), the following shall be inserted, namely:-

(12AA) Lending or borrowing of securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities;

(12AB) dealing in repo or reverse repo:

Provided that lending or borrowing of funds by way of repo or reverse repo shall not be subject to any limitation contained in this section.

Explanation.-

For the purposes of this clause,-

(a) "Repo" means an instrument for borrowing funds by selling securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed;

(b) "Reverse repo" means an instrument for lending funds by purchasing securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the funds lent;.

Section -3  Amendment of section 42

1*[In section 42 of the principal Act,-

(i) In sub-section (1),-

(a) For the words, brackets and figure "three 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)", the words, brackets and figure "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" shall be substituted;

(b) The proviso shall be omitted;

(ii) Sub-sections (1AA) and (1B) shall be omitted.]

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1. Section 3 of the Act enforced on 1st April, 2007, vide Notification No. SO337(E), dated 09.03.2007.

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Section -4  Insertion of new Chapter IIID

After Chapter IIIC of the principal Act, the following Chapter shall be inserted, namely:-

CHAPTER IIID

REGULATION OF TRANSACTIONS IN DERIVATIVES, MONEY MARKET INSTRUMENTS, SECURITIES, ETC.

45U. Definitions.-

For the purposes of this Chapter,-

(a) "Derivative" means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or credit index, price of securities (also called "underlying"), or a combination of more than one of them and includes interest rate swaps, forward rate agreements, foreign currency swaps, foreign currency-rupee swaps, foreign currency options, foreign currency-rupee options or such other instruments as may be specified by the Bank from time to time;

(b) "Money market instruments" include call or notice money, term money, repo, reverse repo, certificate of deposit, commercial usance bill, commercial paper and such other debt instrument of original or initial maturity up to one year as the Bank may specify from time to time;

(c) "Repo" means an instrument for borrowing funds by selling securities with an agreement to repurchase the securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed;

(d) "Reverse repo" means an instrument for lending funds by purchasing securities with an agreement to resell the securities on a mutually agreed future date at an agreed price which includes interest for the funds READ MORE

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