Section 13 of BRA : Section 13: Restriction On Commission, Brokerage, Discount, Etc, On Sale Of Shares

Explanation using Example

Imagine a scenario where XYZ Bank is issuing new shares to raise capital. The bank decides to hire a brokerage firm to facilitate the sale of these shares. According to Section 13 of The Banking Regulation Act, 1949, XYZ Bank is legally restricted to pay the brokerage firm a commission that does not exceed 2.5% of the price at which the shares are issued. If the shares are being issued at Rs. 100 each, XYZ Bank cannot pay more than Rs. 2.50 per share as commission to the brokerage firm. This includes any premium on the shares, so if the bank is also charging a premium of Rs. 20 per share, the commission still cannot exceed Rs. 2.50 per share in total.