Law of Banking and Negotiable Instruments Notes | B.A. LL.B. (Five Year Course) Semester 10 | Mumbai University | munotes

Contents

Module I

1. What Banking Is 1
2. How Banking Grew: From the Goldsmiths and the Hundi to the Reserve Bank 6
3. Who Is a Banker and Who Is a Customer 12
4. The Relationship between Banker and Customer 17
5. The Duties of a Banker 23
6. The Rights of a Banker: Lien, Set-off and Appropriation 30
7. Garnishee Orders and the Attachment of Bank Accounts 36
8. Bank Accounts and Special Classes of Customers 42
9. The Structure of the Indian Banking System 47
10. Social Control and the Nationalisation of Banks 52
11. Banking after 1991: The Reforms 58
12. Public Sector Banks and the State Bank of India 63
13. Co-operative Banks 68
14. Commercial Banks: Public, Private and Foreign 72
15. Regional Rural Banks and Local Area Banks 76
16. Small Finance Banks and Payments Banks 80
17. Development Finance Institutions 84
18. Non-Banking Financial Companies 88
19. The Functions of Commercial Banks 92
20. How Banks Lend: Advances and Securities 95
21. The Role of Financial Institutions in the Economy 100
22. Digital Banking and Payment Systems 103
23. Why the Insolvency and Bankruptcy Code: Its Object 108
24. The Scheme and the Institutions of the Code 113
25. Financial Institutions and Financial Creditors under the Code 117
26. Information Utilities 122

Module II

1. The Laws Governing Financial Institutions in India 127
2. The Banking Regulation Act: Its Scheme and Application 131
3. Key Definitions of the Banking Regulation Act 136
4. What a Banking Company May and May Not Do 140
5. The Management of a Banking Company 145
6. Capital, Shares, Dividends and Reserves 150
7. Restrictions on Loans and Advances 156
8. Licensing of Banking Companies and Branches 161
9. Assets in India, Unclaimed Deposits and Returns 167
10. Accounts and Audit of Banking Companies 175
11. Inspection and Directions by the Reserve Bank 182
12. The Reserve Bank's Control over Management 190
13. Acquisition of the Undertakings of Banking Companies 197
14. Moratorium, Reconstruction and Amalgamation 203
15. Winding Up of Banking Companies 211
16. Speedy Disposal of Winding Up Proceedings 219
17. Nomination: Deposits, Safe Custody and Lockers 226
18. Offences and Penalties under the Banking Regulation Act 233
19. Private Banking Companies and the Remaining Provisions 240
20. Co-operative Banks under the Banking Regulation Act 244
21. The Banking Laws (Amendment) Act, 2025 251
22. The Reserve Bank: Origins and Establishment 257
23. Definitions, and What Makes a Bank Scheduled 262
24. The Central Board and the Local Boards 267
25. The Business of the Reserve Bank 273
26. The Reserve Bank as Banker to Government 279
27. Currency and Legal Tender 283
28. The Issue Department, Reserves and Accounts 289
29. Monetary Policy and the Monetary Policy Committee 294
30. Credit Information, and the Regulation of Money Markets 300
31. NBFCs under the Reserve Bank Act: Registration and Regulation 306
32. NBFCs: Supervision, Enforcement and Depositors 315
33. Deposits by Unincorporated Bodies 320
34. Offences and Penalties under the Reserve Bank Act 324
35. The Functions and Powers of the Reserve Bank, Taken Together 330
36. The Banking Regulation (Companies) Rules, 1949 336
37. How the Reserve Bank Regulates: Notifications, Directions and Master Directions 342
38. Cash Reserve Ratio 347
39. Statutory Liquidity Ratio 353
40. CRR and SLR Compared, and Their Place in Monetary Policy 357
41. Why Banks Need Capital: The Basel Committee and Basel I 361
42. Basel II: The Three Pillars 369
43. Basel III: Capital Requirements 376
44. Basel III: Liquidity, Leverage and What Comes Next 385

Module III

1. Why SEBI: The Securities Market and Its Regulator 393
2. The Formation of the SEBI Board 398
3. The Functions and Powers of SEBI 403
4. Registration of Intermediaries, and Market Abuse 411
5. SEBI, Banking Companies and NBFCs 418
6. Penalties and Adjudication under the SEBI Act 423
7. The Securities Appellate Tribunal 430
8. Offences, Special Courts and Recovery under the SEBI Act 436
9. SEBI's Finance and the Remaining Provisions 442
10. From FERA to FEMA 448
11. The Key Definitions of FEMA 453
12. Dealing in and Holding Foreign Exchange 458
13. Current Account Transactions 463
14. Capital Account Transactions and Foreign Investment 467
15. Export of Goods and Services, and Realisation of Foreign Exchange 472
16. Authorised Persons and the Reserve Bank under FEMA 477
17. Contraventions, Penalties and Compounding 482
18. Adjudication and Appeals under FEMA 488
19. The Directorate of Enforcement, and the Rest of FEMA 494
20. Why SARFAESI: Its Scheme and Reach 500
21. The Definitions That Run SARFAESI 507
22. Asset Reconstruction Companies and Securitisation 513
23. The Reserve Bank's Powers over Asset Reconstruction Companies 520
24. Enforcement of Security Interest: The Demand Notice 524
25. Taking Possession, Sale, Takeover and Redemption 531
26. The Magistrate's Help, and the Tenant 538
27. The Borrower's Remedies: DRT, DRAT and the Writ Court 545
28. The Central Registry and the Priority of Secured Creditors 552
29. Offences, Penalties and the Rest of SARFAESI 558
30. The Bankers' Books Evidence Act, 1891 564
31. The Bankers' Books Evidence Act, 2026: Bankers' Books and Certified Copies 571
32. The Bankers' Books Evidence Act, 2026: The Bank Officer, the Court and the Repeal 577

Module IV

1. What a Negotiable Instrument Is 582
2. Promissory Notes 586
3. Bills of Exchange 590
4. Cheques 595
5. Promissory Note, Bill of Exchange and Cheque Compared 599
6. Amount, Date and Maturity 602
7. Holder and Holder in Due Course 606
8. Consideration and the Negotiable Instrument 611
9. Negotiation and Indorsement 615
10. The Liability of Parties 620
11. Presentment for Acceptance and for Sight 625
12. Presentment for Payment 630
13. Payment in Due Course, and Interest 635
14. Dishonour and Notice of Dishonour 639
15. Noting, Protest, and Acceptance and Payment for Honour 644
16. Discharge from Liability 650
17. Special Presumptions and Rules of Evidence 654
18. Crossing of Cheques 659
19. Protection of the Paying and the Collecting Banker 663
20. Foreign Instruments and Hundis 668
21. Dishonour of a Cheque as an Offence: Section 138 672
22. The Presumption in Favour of the Holder, and the Defences 678
23. Offences by Companies: Section 141 683
24. The Complaint, the Court and the Trial 688
25. Interim Compensation and the Deposit on Appeal 694
26. Why Debt Recovery Tribunals 699
27. The Debts Recovery Tribunal: Establishment and Composition 703
28. The Debts Recovery Appellate Tribunal 707
29. Jurisdiction, Powers and Authority of the Tribunals 711
30. The Application to the Tribunal, and Its Procedure 715
31. Appeals to the Appellate Tribunal 721
32. The Recovery Certificate and the Recovery Officer 726
33. The Recovery Map: Civil Suit, DRT, SARFAESI, IBC and Lok Adalat 732