The government directly or indirectly controls the activity of banks through Reserve Bank of India. The Government regulates PSBs under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970; the Bank Nationalisation Act, 1980, and the State Bank of India Act, 1955. Various acts empower government as regulator of banks in India.
Government as Regulator of Banks
The following acts empower government as regulator of banks in India:
- Section 7 of the RBI Act empowers the government to issue directions to the RBI. Under this section, the Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest
- The Section 35AA of Banking Regulation Act gives power to Central Government to authorize the Reserve Bank to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016
- Section 52 of Banking Regulation Act empowers Central Government to make rules after consultation with the Reserve Bank necessary for the purpose of giving effect to the provisions of the Act
- Financial Intelligence Unit – India (FIU-IND) was set by the Government of India vide O.M. dated 18th November 2004 as the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions. s also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and related crimes. The main function of FIU-IND is to receive cash/suspicious transaction reports, analyse them and, as appropriate, disseminate valuable financial information to intelligence/enforcement agencies and regulatory authorities. FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister
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