Loans and Advances

(i) The definition of banking in section 5(b) of Banking Regulation Act indicates that acceptance of deposits may be for lending and investment. Thus lending or making of loans and advances is a core business of a banking company. Lending may be for short term or long term, on secured or unsecured basis and for different purpose.
(ii) Regulation of Loans and Advances:
    (a) The reserve is empowered under 21 of the Banking Regulation Act to issue directions to control advances by banking companies. Apart from this, the general powers to give directions under Section 35A are also available for regulation of loans and advances.Such directions may be issued to banking companies generally or to any particular company. The reserve Bank may determine the policy in relation to advance and issue directions when it is satisfied that it is necessary to give directions

Nomination

(i) Repayment of Deposits: Section 45Z of the Banking Regulation Act provides that a depositor or depositors of a banking company may nominate one person in the prescribed manner as nominee to whom the deposit may be returned in the event of the death of the sole depositors or depositors. Unless the nomination is varied or cancelled, the nominee is entitled to all the rights of the depositor/s in the event of death of the depositor/s. In the case of minor nominee, there is also a provision to appoint a person to receive the deposit on behalf of the minor. Rule 2 of the banking companies Rules, 1985 provides for the procedure and forms for making nomination in respect of deposits with commercial banks.

Acceptance of Deposits in Banking

(i) The essence of banking is the acceptance of deposits from the public withdrawal by cheque.
(ii) Types of Deposits: Banks accepts different types of deposits, both time and demand deposits, from the public. While time deposits, like fixed deposits or recurring deposits are repayable after an agreed period. Demand deposits, like deposits in current account and savings bank accounts, are repayable on demand, subject to term and conditions of the deposits. The period of deposit and rate of interest applicable to the deposit are matter to be agreed between the depositor and the bank under the terms of deposit, subject to any directions given by the RBI in this regard.

Power to Issue Directions In Banking

(i) The Banking Regulation: This Act authorised the Reserve Bank of India to issue direction to bank under Sections 21 and 35A. While Section 21 gives the power to regulate advances by banking companies, Section 35A gives wide powers generally to regulate banking companies. The Reserve Bank of India has been issuing directions from time to time under section 21 regulating rates of interest and other term and conditions of acceptance of deposits and making of loans and advances.
(ii) Nature of Directions: The direction issued by RBI in exercise of powers under Section 21 and 35A of the BR Act, being statutory direction, are binding on banks, even if they do not specially refer to any statutory