Debt Recovery Tribunals in India were established under an Act of which year?

The correct answer is B, the Reserve Bank of India Act, 1934. Section 22 of that Act gives the Reserve Bank the sole right to issue bank notes in India, and the Bank has done so since it began operations on 1 April 1935. Only the one rupee note and coins are issued by the Government of India. Option A is wrong because the Banking Regulation Act, 1949 controls banking companies, dealing with licences, capital, the Statutory Liquidity Ratio and inspection, and says nothing about the issue of currency. Option C is wrong because the Coinage Act deals with coins and their denominations, which belong to the Government and not to the Bank's note-issuing power. Option D is wrong because the Negotiable Instruments Act, 1881 governs promissory notes, bills of exchange and cheques between private parties.

The correct answer is C, 1 March 1966. The Act was passed in 1949 as the Banking Companies Act and came into force on 16 March 1949; when its scope was extended to cooperative banks, it was renamed the Banking Regulation Act, 1949 with effect from 1 March 1966, the year being retained in the title. Option A, 1 April 1935, is the date on which the Reserve Bank of India began its operations under the Act of 1934. Option B, 1 January 1949, is the date on which the Reserve Bank was nationalised, and it is the closest trap because it falls in the same year as the Banking Companies Act. Option D, 19 July 1969, is the date on which fourteen major commercial banks were nationalised, later given effect by the Act of 1970.

The correct answer is A, Section 5(b). It defines banking as accepting, for the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. Two elements of that definition are what separate a bank from a finance company: deposits from the public, and repayment on demand. Option B is wrong because Section 11 lays down the minimum paid-up capital and reserves a banking company must have. Option C is wrong because Section 22 requires a licence from the Reserve Bank before banking business may be carried on, which follows from the definition but is not the definition. Option D is wrong because Section 35A is the Reserve Bank's power to issue directions to banking companies in the public interest.

The correct answer is B, Section 24 of the Banking Regulation Act, 1949. It requires every banking company to maintain in India, in cash, gold or unencumbered approved securities, assets of a value not less than the prescribed percentage of its demand and time liabilities, and that percentage is the Statutory Liquidity Ratio. Option A is the classic trap, because Section 42(1) of the RBI Act, 1934 is the provision for the Cash Reserve Ratio that scheduled banks keep with the Reserve Bank; candidates who remember only that the Reserve Bank fixes both ratios pick it. Option C is wrong because Section 17 of the Banking Regulation Act requires a transfer of not less than twenty per cent of profit to the reserve fund. Option D is wrong because Section 45-IA deals with the registration of non-banking financial companies.

The correct answer is C, Section 138. Inserted into the Negotiable Instruments Act by the amendment of 1988, it makes the drawer of a cheque that is returned unpaid for insufficiency of funds, or because it exceeds the arrangement, punishable with imprisonment or fine, provided the payee gives notice of demand within the prescribed time and the drawer fails to pay. Option A is wrong because Section 31 of the RBI Act, and not of the NI Act, restricts who may draw instruments payable to bearer on demand. Option B is wrong because Section 118 lays down presumptions as to negotiable instruments, such as the presumption of consideration. Option D is wrong because Section 148, a later insertion, deals with the power of the appellate court to order deposit of part of the compensation during an appeal.