Banking Law Notes for LLB Students

Banking Law is a common elective in Indian LL.B. courses, covering the regulatory and transactional framework of banking. These notes cover the core statutes examined.

Banking Regulation Act, 1949

This Act empowers the Reserve Bank of India (RBI) to regulate and supervise banking companies in India — licensing (Section 22), minimum capital and reserve requirements, restrictions on loans to directors (Section 20), and the power to inspect and give directions to banks (Sections 35, 35A).

Negotiable Instruments Act, 1881

Defines and governs promissory notes, bills of exchange and cheques (Sections 4, 5, 6). Section 138 (dishonour of cheque for insufficiency of funds) is the most heavily litigated and examined provision — it creates a criminal offence (punishable with imprisonment up to 2 years or fine up to twice the cheque amount, or both) where a cheque is dishonoured and the drawer fails to pay within 15 days of a statutory demand notice issued within 30 days of dishonour.

SARFAESI Act, 2002

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 allows banks and financial institutions to enforce security interests (recover secured debt) without court intervention, through measures under Section 13(4) — taking possession of secured assets, sale, or management takeover — for non-performing assets above the prescribed threshold.

Insolvency and Bankruptcy Code, 2016

The IBC provides a time-bound insolvency resolution process (Corporate Insolvency Resolution Process, CIRP, to be completed within 330 days including litigation time) for corporate debtors, administered by the National Company Law Tribunal (NCLT), with financial creditors (including banks) playing a central role through the Committee of Creditors.

RBI’s Regulatory Role

Beyond the Banking Regulation Act, the RBI Act, 1934 establishes the RBI itself and its monetary policy functions; the Payment and Settlement Systems Act, 2007 regulates digital payment systems (UPI, NEFT, RTGS).

Key exam questions to prepare

• Essentials of an offence under Section 138, Negotiable Instruments Act.
• How does SARFAESI allow banks to recover secured debt without court intervention?
• Role of the Committee of Creditors under the Insolvency and Bankruptcy Code, 2016.

More: all LL.B. subject notes