Section 47A of BRA : Section 47A: Power Of Reserve Bank To Impose Penalty

Explanation using Example

Imagine a scenario where XYZ Bank fails to maintain the required minimum cash reserve ratio as mandated by the Reserve Bank of India (RBI). This is a contravention of the banking regulations. Upon identifying this failure, the RBI issues a notice to XYZ Bank, pointing out the contravention and asking the bank to show cause as to why a penalty should not be imposed as per Section 47A of the Banking Regulation Act, 1949.

XYZ Bank is then given a chance to present their case and explain the reasons for not maintaining the required reserve ratio. Despite this opportunity, the bank is unable to provide a satisfactory explanation.

As a result, the RBI, exercising its powers under Section 47A, imposes a penalty on XYZ Bank. The penalty could be up to twenty lakh rupees for the offence and if the bank continues to violate the regulation, an additional fifty thousand rupees could be charged for each day the contravention persists.

XYZ Bank is required to pay the penalty within fourteen days of receiving the notice. If the bank fails to pay within this time frame, the RBI can approach the principal civil court to enforce the penalty as if it were a decree made in a civil suit.

Furthermore, since the RBI has imposed a penalty under Section 47A, no other court can entertain a complaint against XYZ Bank for this particular contravention, ensuring that the bank does not face multiple legal challenges for the same offence.