Banking law in India is the primary body of law that governs the activities undertaken by banks and other financial institutions. This ever-evolving field is designed to protect depositors, consumers, and the financial system as a whole. The evolution of Indian banking system from lending money to traders and craftsmen to modern-day banking started around 18th century when the Central Bank of India and Hindustan Bank came into existence.
The industry witnessed a major change with the establishment of The Reserve Bank of India in 1934, as the Central Bank of the country. The Reserve Bank of India Act, 1934 covers the constitution, powers, and functions of the RBI, ensuring stability in the country’s financial system. RBI’s Banking Regulation Act, 1949, one of the most essential legal frameworks for banks.
The Banking Laws (Amendment) Bill, 2021 aims to re-evaluate banking companies’ acquisition and transfer laws of 1970 and 1980, and the Banking Regulation Act, 1949 to grant the privatization of two Public Sector Banks (PSBs).
Banking law and practice is a highly complex structure that requires in-depth knowledge of Indian financial markets, and cross-border transactions regulated under FEMA (Foreign Exchange Management Act, 1999) for international expertise. Our experienced banking lawyers ensure to comply with the rules and regulations formulated by RBI. They act as dedicated legal counsel for the banks, draft and negotiate loan agreements and other legal documents for the bank, represent banks in litigation and other regulatory disputes, advise on every legal regime to control banking frauds and help banks to manage their risk exposure.
Proudly serving several banking and financial sector companies, our banking practice is spread over a vast spectrum ranging from conducting legal due diligence of the borrower entities to dealing with various regulators and key banking sector stakeholders. We also assist our clients in structuring and advising on regulatory aspects of foreign currency loans availed through external commercial borrowings/overseas direct investments. We help foreign lenders with regulatory aspects of creation and perfection of security about foreign currency loans.
We prepare and finalize the entire documentation set for factoring and collection transactions. It includes structuring and advising on regulatory and implementation aspects of Securitization along with factoring and drafting, negotiating, reviewing and finalizing transaction documents.
Considering the importance of legal and regulatory aspects of banking, it protects consumers from unfair practices by banks, prevent bank failures by promoting financial stability and risk management of bank, and prevent financial crimes such as money laundering and fraud. Some of the prominent legal banking aspects include –
- The Law of Contract – A document enforceable at law, mutually agreed by two or more parties.
- Elements of a Contract – A lawful offer and lawful acceptance by each of the parties, defined by set rules.
- Void Agreement – An agreement unenforceable by law, presented by a minor, against policy, without consideration, etc., is void.
- Voidable Agreement – An agreement enforceable by law at the option of one or more parties. For example, undue influence, fraud, contracts made by coercion, misrepresentation, etc., are voidable.
Concerning the important blend of banking theory, law and practice, our lawyers understand the relationship between banker and customer, role and management of RBI, commercial banking, employment of bank funds, investment in securities, etc. We have been routinely advising and assisting in enforcing and implementing security mechanisms through strategies on various modes of security enforcements and resolution of bad debts as well as stressed/ non-performing assets.
