KSLU Solved Question Papers
Banking Law
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 8
2026 Jan Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 8 Banking Law 2026 Jan Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Model answers written and edited by the munotes.in editorial desk.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2026 Jan examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2026 Jan examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2026 Jan examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all 5 Units. (2) One essay type question and short note/problems is compulsory from each Unit. (3) Figures to the right indicate marks. (4) Answer should be written either in English or Kannada completely.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)Explain on different kinds of banks.[10]
Answer
For full marks, cover: what a bank is in law (section 5(b) and (c) of the Banking Regulation Act, 1949); the classification by function (central, commercial, co-operative, development, specialised); the classification by ownership (public, private, foreign); scheduled and non-scheduled banks; the newer differentiated banks; the statute that governs each kind, with Rustom Cavasjee Cooper and Pandurang Ganpati Chaugule; a table.
Why banks are classified
A bank is an institution that accepts deposits from the public and lends or invests them. Section 5(b) of the Banking Regulation Act, 1949 defines "banking" as "the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise". Section 5(c) calls any company that transacts this business in India a "banking company".
Banks are not all alike. They differ in who owns them, whom they serve and which law created them. The classification matters in law, because the kind of bank decides which statute governs it. So an answer should classify banks in more than one way.
1. By function
- Central bank. The Reserve Bank of India, set up under the Reserve Bank of India Act, 1934, sits at the top. It issues currency, acts as banker to the Government and to other banks, and regulates the whole system. It does not deal with the public as an ordinary bank does.
- Commercial banks. These accept deposits and give short and medium term loans to trade, industry and individuals. They are the banks most people use.
- Co-operative banks. These are co-operative societies doing banking for their members. In the rural sector there are State co-operative banks at the top and district central co-operative banks below them. In towns there are urban co-operative banks.
- Development banks. These give long-term finance to one sector under their own statutes. Examples are NABARD (agriculture and rural development), SIDBI (small industry), the EXIM Bank (foreign trade) and the National Housing Bank (housing finance).
- Specialised banks. Regional rural banks under the Regional Rural Banks Act, 1976 lend to small farmers, labourers and artisans. Small finance banks lend mainly to small borrowers. Payments banks take small deposits and provide payment services but may not lend.
2. By ownership
- Public sector banks. These are the State Bank of India (State Bank of India Act, 1955) and the nationalised banks. Since the mergers of 1 April 2020 there are twelve public sector banks.
- Private sector banks. These are companies licensed under section 22 of the Banking Regulation Act. The old private banks existed before nationalisation. The new private banks were licensed after the reforms of the 1990s.
- Foreign banks. These are incorporated abroad and work in India under a Reserve Bank licence, through branches or a wholly owned subsidiary.
3. Scheduled and non-scheduled banks
A scheduled bank is a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (section 2(e)). Under section 42(6)(a), the Reserve Bank includes a bank whose paid-up capital and reserves are not less than five lakh rupees. Its affairs must not be conducted to the detriment of its depositors. A scheduled bank keeps its cash reserve with the Reserve Bank. In return it can borrow from the Reserve Bank and use clearing.
A non-scheduled bank is still a licensed bank. It keeps its cash reserve under section 18 of the Banking Regulation Act instead. Scheduled does not mean public sector: private and foreign banks are scheduled too.
The leading cases
Nationalised banks. Rustom Cavasjee Cooper v. Union of India, (1970) 1 SCC 248, arose from the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969. That Act took over fourteen major banks. A shareholder and customer challenged it. The Supreme Court struck it down. It discriminated by stopping the named banks from banking while other banks, even foreign ones, could continue. Its compensation was also illusory. Parliament re-enacted the law in 1970, and six more banks were taken over in 1980. The case explains why a nationalised bank is a "corresponding new bank" under its own Act, not a banking company.
Co-operative banks. Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Ltd., (2020) 9 SCC 215, was decided by a Constitution Bench. Borrowers of co-operative banks argued that these banks were mere co-operative societies under State law. So, they said, the SARFAESI Act could not be used against them. The Court rejected this. It held that co-operative banks doing banking are governed, as to banking, by Parliament's law under Entry 45 of the Union List. They are banking companies under section 5(c) read with section 56 of the Banking Regulation Act. They are also "banks" under SARFAESI. The case shows that a co-operative bank is a bank in law, though a society in form.
The kinds of banks in one table
| Kind | Created by | Main law |
|---|---|---|
| Reserve Bank of India | RBI Act, 1934 | Its own Act |
| State Bank of India | SBI Act, 1955 | Its own Act; Banking Regulation Act through section 51 |
| Nationalised banks | Acquisition Acts, 1970 and 1980 | Their own Acts; Banking Regulation Act through section 51 |
| Kind | Created by | Main law |
|---|---|---|
| Private and foreign banks | Companies Act and a licence under section 22 | Banking Regulation Act in full |
| Regional rural banks | Notification under the RRB Act, 1976 | RRB Act and Banking Regulation Act |
| Co-operative banks | State co-operative law or the Multi-State Co-operative Societies Act, 2002 | Banking Regulation Act as applied by section 56 |
| Small finance and payments banks | Companies Act and a licence with conditions | Banking Regulation Act and the licence terms |
| Development banks | Their own Acts | Their own Acts and Reserve Bank directions |
A short illustration
A dairy farmer in a Karnataka village may deal with five kinds of bank. A nationalised bank branch and a regional rural bank can both lend to her. A district central co-operative bank can lend to her through its society. A small finance bank may lend her a small sum. A payments bank can hold her savings and send her money, but cannot lend her anything. The word "bank" on the signboard does not tell her the law. Its statute does.
Conclusion. Banks in India are classified in three ways. By function they are central, commercial, co-operative, development and specialised banks. By ownership they are public, private and foreign. By their place in the Second Schedule they are scheduled or non-scheduled. The classification decides the governing law. A private or foreign banking company is governed by the Banking Regulation Act in full. The State Bank and the nationalised banks are governed by their own Acts, and by that Act through section 51. That is the position that followed Rustom Cavasjee Cooper. Co-operative banks are banks under section 56, as Pandurang Ganpati Chaugule settled.
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