Section 35A of BRA : Section 35A: Power Of The Reserve Bank To Give Directions

Explanation using Example

Example of Application of Section 35A of The Banking Regulation Act, 1949:

Imagine a scenario where a banking company has been consistently engaging in high-risk lending practices without adequate safeguards, which could potentially harm the depositors' interests and destabilize the financial system. Observing these practices, the Reserve Bank of India (RBI) determines that immediate action is necessary to protect the public and maintain confidence in the banking system.

Under Section 35A of The Banking Regulation Act, 1949, the RBI uses its power to issue directions to this particular bank, mandating a reduction in high-risk lending and the implementation of stronger risk assessment protocols. The bank in question is legally required to comply with these RBI directions.

Later, the bank improves its risk management practices and approaches the RBI to review the imposed directions. After assessing the bank's current situation, the RBI decides to modify the earlier directions, allowing for some flexibility in lending but with new conditions to ensure continued protection of depositors' interests.