<P> The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in India . Passed as the Banking Companies Act 1949, it came into force from 16 March 1949 and changed to Banking Regulation Act 1949 from 1March 1966 . It is applicable in jammu and kashmir from 1956 . Initially, the law was applicable only to banking companies . But, 1965 it was amended to make it applicable to cooperative banks and to introduce other changes . </P> <P> The Act provides a framework using which commercial banking in India is supervised and regulated . The Act supplements the Companies Act, 1956 . Primary Agricultural Credit Society and cooperative land mortgage banks are excluded from the Act . </P> <P> The Act gives the Reserve Bank of India (RBI) the power to license banks, have regulation over shareholding and voting rights of shareholders; supervise the appointment of the boards and management; regulate the operations of banks; lay down instructions for audits; control moratorium, mergers and liquidation; issue directives in the interests of public good and on banking policy, and impose penalties . </P> <P> In 1965, the Act was amended to include cooperative banks under its purview by adding the Section 56 . Cooperative banks, which operate only in one state, are formed and run by the state government . But, RBI controls the licensing and regulates the business operations . The Banking Act was a supplement to the previous acts related to banking . </P>

Need and importance of banking regulation in india