7. Head office and management.—(1) The head office of each corresponding new bank shall be at
such place as the Central Government may, by notification in the Official Gazette, specify in this behalf,
and, until any such place is so specified, shall be at such place at which the head office of the existing
bank, in relation to which it is the corresponding new bank, is on the commencement of this Act, located.
(2) The general superintendence, direction and management of the affairs and business of a
corresponding new bank shall vest in a Board of Directors which shall be entitled to exercise all such
powers and do all such acts and things as the corresponding new bank is authorised to exercise and do.
(3) (a) As soon as may be after the commencement of this Act, the Central Government shall, in
consultation with the Reserve Bank, constitute the first Board of Directors of a corresponding new bank,
consisting of not more than seven persons, to be appointed by the Central Government, and every director
so appointed shall hold office until the Board of Directors of such corresponding new bank is constituted
in accordance with the scheme made under section 9:
Provided that the Central Government may, if it is of opinion that it is necessary in the interests of the
corresponding new bank so to do, remove a person from the membership of the first Board of Directors
and appoint any other person in his place.
(b) Every member of the first Board of Directors (not being an officer of the Central Government or
of the Reserve Bank) shall receive such remuneration as is equal to the remuneration which a member of
the Board of Directors of the existing bank was entitled to receive immediately before the commencement
of this Act.
(4) Until the first Board of Directors is appointed by the Central Government under sub-section (3),
the general superintendence, direction and management of the affairs and business of a corresponding
new bank shall vest in a Custodian, who shall be the chief executive officer of that bank and may exercise
all powers and do all acts and things as may be exercised or done by that bank.
(5) The Chairman of an existing bank holding office as such immediately before the commencement
of this Act, shall be the Custodian of the corresponding new bank and shall receive the same emoluments
as he was receiving immediately before such commencement:
Provided that the Central Government may, if the Chairman of an existing bank declines to become,
or to continue to function as, a Custodian of the corresponding new bank, or, if it is of opinion that it is
necessary in the interests of the corresponding new bank so to do, appoint any other person as the
Custodian of a corresponding new bank and the Custodian so appointed shall receive such emoluments as
the Central Government may specify in this behalf.
Explanation.—In this sub-section and in sub-section (1) of section 12, the expression “Chairman”, in
relation to any existing bank, includes the person carrying out the duties of the Chairman or otherwise
functioning as the chief executive officer of that bank.
(6) The Custodian shall hold office during the pleasure of the Central Government.
8. Corresponding new banks to be guided by the directions of the Central Government.—Every
corresponding new bank shall, in the discharge of its functions, be guided by such directions in regard to
matters of policy involving public interest as the Central Government may, after consultation with the
Governor of the Reserve Bank, give.
9. Power of Central Government to make scheme.—(1) The Central Government may, after
consultation with the Reserve Bank, make a scheme for carrying out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, the said scheme may
provide for all or any of the following matters, namely:—
(a) the capital structure of the corresponding new bank 1
***
1. The words “, so however that the paid-up capital of any such bank shall not be in excess of rupees one thousand five hundred
crores” omitted by Act 37 of 1994, s. 14 (w.e.f. 15-7-1994).
9
(b) the constitution of the Board of Directors, by whatever name called, of the corresponding new
bank and all such matters in connection therewith or incidental thereto as the Central Government
may consider to be necessary or expedient;
(c) the reconstitution of any corresponding new bank into two or more corporations, the
amalgamation of any corresponding new bank with any other corresponding new bank or with
another banking institution, the transfer of the whole or any part of the undertaking of a
1
[corresponding new bank to any other corresponding new bank or banking institution] or the transfer
of the whole or any part of the undertaking of any other banking institution to a corresponding new
bank;
2
[(ca) the manner in which the excess number of directors shall retire under the second proviso to
clause (i) of sub-section (3);]
(d) such incidental, consequential and supplemental matters as may be necessary to carry out the
provisions of this Act.
3
[(3) Every Board of Directors of a corresponding new bank, constituted under any scheme made
under sub-section (1), shall include—
4
[(a) not more than five whole-time directors to be appointed by the Central Government after
consultation with the Reserve Bank:
Provided that the Central Government, may, after consultation with the Reserve Bank, by
notification published in the Official Gazette, post a whole-time director so appointed to any other
corresponding new bank.
Explanation.—For the purposes of this clause , the expression “corresponding new bank” shall
include a “corresponding new bank” as defined in clause (d) of section 2 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970;]
(b) one director who is an official of the Central Government to be nominated by the Central
Government:
Provided that no such director shall be a director of any other corresponding new bank.
Explanation.—For the purposes of this clause, the expression “corresponding new bank” shall include
a corresponding new bank within the meaning of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 (5 of 1970);
5
[(c) one director, possessing necessary expertise and experience in matters relating to regulation
or supervision of commercial banks, to be nominated by the Central Government on the
recommendation of the Reserve Bank;]
Explanation.—For the purpose of this clause, “an officer of the Reserve Bank” includes an officer of
the Reserve Bank who is deputed by that Bank under section 54AA of the Reserve Bank of India Act,
1934 (2 of 1934) to any institution referred to therein;
6
* * * * *
(e) one director, from among such of the employees of the corresponding new bank who are
workmen under clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947), to be
nominated by the Central Government in such manner as may be specified in a scheme made under
this section;
(f) one director, from among the employees of the corresponding new bank who are not workmen
under clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947), to be nominated by the
Central Government after consultation with the Reserve Bank;
(g) one director who has been a Chartered Accountant for not less than fifteen years to be
nominated by the Central Government after consultation with the Reserve Bank;
(h) subject to the provisions of clause (i) not more than six directors to be nominated by Central
Government;
1. Subs. by Act 66 of 1988, s. 36, for “corresponding new bank to any other banking institution” (w.e.f. 30-12-1988).
2. Ins. by Act 45 of 2006, s. 9 (w.e.f. 16-10-2006).
3. Subs. by Act 37 of 1994, s. 14, for sub-section (3) (w.e.f. 15-7-1994).
4. Subs. by Act 23 of 2019, s. 151, for clause (a) (w.e.f. 09-08-2019).
5. Subs. by Act 45 of 2006, s. 9, for clause (c) (w.e.f 16-10-2006).
6. Clause (d) omitted by s. 9, ibid. (w.e.f. 16-10-2006).
10
1
[(i) where the capital issued under clause (c) of sub-section (2B) of section 3 is—
(I) not more than sixteen per cent. of the total paid-up capital, one director;
(II) more than sixteen per cent. but not more than thirty-two per cent. of the total paid-up
capital, two directors;
(III) more than thirty-two per cent. of the total paid-up capital, three directors,
to be elected by the shareholders, other than the Central Government, from amongst themselves:
Provided that on the assumption of charge after election of any such director under this
clause, equal number of directors nominated under clause (h) shall retire in such manner as may
be specified in the scheme:
Provided further that in case the number of directors elected, on or before the commencement
of the Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions
Laws (Amendment) Act, 2006, in a corresponding new bank exceed the number of directors
specified in sub-clause (I) or sub-clause (II) or sub-clause (III), as the case may be, such excess
number of directors elected before such commencement shall retire in such manner as may be
specified in the scheme and such directors shall not be entitled to claim any compensation for the
premature retirement of their term of office.]
(3A) The directors to be nominated under clause (h) or to be elected under clause (i) of
sub-section (3A) shall—
(A) have special knowledge or practical experience in respect of one or more of the following
matters, namely:—
(i) agricultural and rural economy,
(ii) banking,
(iii) co-operation,
(iv) economics,
(v) finance,
(vi) law,
(vii) small-scale industry,
(viii) any other matter the special knowledge of, and practical experience in, which would, in
the opinion of the Reserve Bank, be useful to the corresponding new bank;
(B) represent the interests of depositors; or
(C) represent the interests of farmers, workers and artisans.
2
[(3AA) Without prejudice to the provisions of sub-section (3A) and notwithstanding anything to the
contrary contained in this Act or in any other law for the time being in force, no person shall be eligible to
be elected as director under clause (i) of sub-section (3) unless he is a person having fit and proper status
based upon track record, integrity and such other criteria as the Reserve Bank may notify from time to
time in this regard.
(3AB) The Reserve bank may also specify in the notification issued under sub-section (3AA), the
authority to determine the fit and proper status, the manner of such determination, the procedure to be
followed for such determination and such other matters as may be considered necessary or incidental
thereto.]
(3B) where the Reserve Bank is of the opinion that any director of a corresponding new bank elected
under clause (i) of sub-section (3) does not fulfil the requirements of 3
[sub-section (3A) and
sub-section (3AA)], it may, after giving to such director and the bank a reasonable opportunity of being
heard, by order, remove such director and on such removal, the Board of Directors shall co-opt any other
person fulfilling the requirments of
3
[sub-section (3A) and sub-section (3AA)] as a director in place of the
person so removed till a director is duly elected by the shareholders of the corresponding new bank in the
1. Subs. by Act 45 of 2006, s. 9, for clause (i) (w.e.f. 16-10-2006).
2. Ins. by s. 9, ibid. (w.e.f. 16-10-2006).
3. Subs. by s. 9, ibid., for “sub-section (3A)” (w.e.f. 16-10-2006),
11
next annual general meeting and the person so co-opted shall be deemed to have been duly elected by the
shareholders of the corresponding new bank as a director.]
(4) The Central Government may, after consultation with the Reserve Bank, make a scheme to amend
or vary any scheme made under sub-section (1).
1
[(5) On and from the date of coming into operation of a scheme made under this section with respect
to any of the matters referred to in clause (c) of sub-section (2) or any matters incidental, consequential
and supplemental thereto,—
(a) the scheme shall be binding on the corresponding new bank or corporations or banking
institutions, and also on the members, if any, the depositors, and other creditors and employees of
each of them and on any other persons having any right or liability in relation to any of them
including the trustees or other persons, managing or in any other manner connected with, any
provident fund or other fund maintained by any of them;
(b) the properties and assets of the corresponding new bank or, as the case may be, of the banking
institution shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vested
in, and the liabilities of the corresponding new bank or, as the case may be, of the banking institution
shall, by virtue of, and to the extent provided in the scheme, stand transferred to, and become the
liabilities of, the corporation or corporations brought into existence by reconstitution of the banking
institution or the corresponding new bank, as the case may be.]
2
[Explanation I].—In this section, “banking institution” means a banking company and includes
the State Bank of India or a subsidiary bank.
3
[Explanation II.—For the purposes of this section, the expression “corresponding new bank”
shall include a corresponding new bank within the meaning of the Banking Companies (Acquisition
and Transfer of Undertakings) Act, 1970 (5 of 1970).]
4
[(6)] Every scheme made by the Central Government under this Act shall be laid, as soon as may be
after it is made, before each House of Parliament, while it is in session, for a total period of thirty days
which may be comprised in one session or in two or more successive sessions, and if, before the expiry of
the session immediately following the session or the successive sessions aforesaid, both Houses agree in
making any modification in the scheme or both Houses agree that the scheme should not be made, the
scheme shall thereafter have effect only in such modified form or be of no effect, as the case may be; so,
however, that any such modification or annulment shall be without prejudice to the validity of anything
previously done under that scheme.
5
[9A. Power of Reserve Bank to appoint additional director.—(1) If the Reserve Bank is of the
opinion that in the interest of banking policy or in the public interest or in the interests of the
corresponding new bank or its depositors, it is necessary so to do, it may, from time to time, by order in
writing, appoint, with effect from such date as may be specified in the order, one or more persons to hold
office as additional directors of the corresponding new bank.
(2) Any person appointed as an additional director in pursuance of this section—
(a) shall hold office during the pleasure of the Reserve Bank and subject thereto for a period not
exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank
may specify;
(b) shall not incur any obligation or liability by reason only of his being a director or for anything
done or omitted to be done in good faith in the execution of the duties of his office or in relation
thereto; and
(c) shall not be required to hold qualification shares in the corresponding new bank;
1. Ins. by Act 1 of 1984, s. 72 (w.e.f 15-2-1984).
2. Explanation numbered as Explanation I thereof by Act 66 of 1988, s. 36 (w.e.f 30-12-1988).
3. Ins. by s. 36, ibid. (w.e.f. 30-12-1988).
4. Sub-section (5) re-numbered as sub-section (6) by Act 1 of 1984, s. 72 (w.e.f. 15-2-1984).
5. Ins. by Act 45 of 2006, s. 10 (w.e.f. 16-10-2006).
12
(3) For the purpose of reckoning any proportion of the total number of directors of the
corresponding new bank, any additional director appointed under this section shall not be taken into
account.]