Banking Regulation Act 1949
Sections 21 and 35A
The Banking Regulation Act, 1949 is the primary legislation governing commercial banking in India. Section 21 empowers the RBI to determine the policy in relation to advances made by banks — this covers credit policy directives including which sectors banks can lend to, exposure limits, interest rate frameworks, and loan conditions. Section 35A empowers the RBI to issue directions to banking companies to secure their proper management. Directions issued under Section 35A are binding on all scheduled commercial banks and are used to implement regulatory policy changes including lending norms, asset classification standards, and exposure limits. Together, Sections 21 and 35A form the principal legal basis for RBI's prudential lending directives.
- Section 21: RBI's power to determine credit policy and advance-related directives
- Section 35A: RBI's power to issue binding directions for proper bank management
- Banking Regulation Act, 1949: enacted March 10, 1949 (Act No. 10 of 1949)
- RBI also has inspection and scrutiny powers under Section 35 of the same Act
- Directions under these sections are distinct from guidelines (which are advisory); directions are mandatory
● Tracked since April 24, 2026 · last seen June 10, 2026 · updates as the daily brief publishes