Section 11 of BRA : Section 11: Requirement As To Minimum Paid-Up Capital And Reserves

Explanation using Example

Imagine a foreign bank, "Global Bank Corp", which is incorporated in the UK, wants to open branches in India. According to Section 11(2) of the Banking Regulation Act, 1949, before starting its operations in India, Global Bank Corp must ensure that its paid-up capital and reserves total at least ₹15 lakhs (or ₹20 lakhs if operating in Mumbai or Kolkata). Additionally, it must deposit with the Reserve Bank of India (RBI) either cash or approved securities, or a combination of both, amounting to not less than the minimum capital required.

After the end of each financial year, Global Bank Corp is also required to deposit with the RBI 20% of its yearly profits from its Indian branches. However, with the permission of the Indian government and based on RBI's recommendations, Global Bank Corp might be exempted from this requirement if its existing deposits are deemed adequate in relation to its deposit liabilities in India.

If Global Bank Corp decides to cease its operations in India, the amount it has deposited with the RBI will be used to settle any claims from its creditors in India, as per Section 11(4).