Commercial banks
Indian Central Banking Enquiry Committee (majority report)
Recommended a special Bank Act, incorporating the existing banking provisions of the Indian Companies Act and adding provisions on (i) organisation, (ii) management, (iii) audit and inspection and (iv) liquidation and amalgamation
VerifiedOfficial record. Source: RBIH1 ch. 2 p. 66; ICBEC1931 ch. XXV
Agricultural credit
ICBEC, Reserve Bank's lending to agriculture
Recommended the Reserve Bank Act provide that: provincial co-operative banks be listed as member banks with rediscount facilities; the RBI rediscount agricultural bills maturing within 9 months; a maximum limit for agricultural bills rediscounted be prescribed but fixed with regard to agriculture's requirements; the RBI make loans/advances repayable on demand or within 90 days on agricultural paper endorsed by the provincial bank; and the RBI lend on the security of movable goods, wares and merchandise and warehouse warrants/receipts
VerifiedOfficial record. Source: ICBEC1931 ¶191
Bank governance
ICBEC, Indianisation of bank boards
Majority of natural-born or domiciled Indian directors for every institution doing banking business in British India other than a foreign bank; no new non-foreign bank to operate unless it has a majority of Indian shareholders and is incorporated under Indian law
VerifiedOfficial record. Source: ICBEC1931 recommendations, ch. XXV (item i–ii)
Bank management
ICBEC, prohibition of banking on the managing agency system
"We accordingly recommend that the Bank Act should prohibit the organization of a bank on the managing agency system and provide further that any arrangement made subsequently for conducting the management of a bank under such a system shall be void." Object: "to prevent long-term agency contracts being given to firms or individuals creating, so to say, a hereditary title to the agency"
VerifiedOfficial record. Source: ICBEC1931 ¶693 and recommendation (iii)
New banks
ICBEC, minimum capital
A joint-stock bank with limited liability registered under the Act should not commence business until its paid-up capital is at least Rs 50,000; authorised capital not more than double subscribed capital; paid-up not less than 50 per cent of subscribed before commencement
VerifiedOfficial record. Source: ICBEC1931 ¶694 and recommendation (iv)
Bank ownership records
ICBEC, register of non-national shareholdings
Institutions doing banking business in India to keep a separate register of shares owned by non-nationals; a separate index of members for inspection by shareholders
VerifiedOfficial record. Source: ICBEC1931 recommendations (v)–(vi)
Bank entry
ICBEC, licensing of banks
Licensing of banks to prevent over-extension of banking (recorded by BAN1940 as one of the Committee's main regulatory suggestions)
VerifiedPeer-reviewed. Source: BAN1940
Foreign banks
ICBEC, attitude to foreign banks
The Committee recorded the view that foreign banks' balance sheets were less informative than Indian ones and their head offices inaccessible, and that "these considerations would lead one to expect an attitude of greater scepticism towards and less confidence in, foreign banks, whereas we find the reverse to be the case"; but it also quoted the Punjab Inquiry Committee of 1913: the failures of that year "were not due to any inherent inefficiency in Indian banking organisation nor to any incapacity on the part of Indians in managing banks, but to causes inevitable in the formative stages of banking in any country"
VerifiedOfficial record. Source: ICBEC1931 (bank-failure chapter)
Exchange banking
ICBEC, exchange banks and Indian competition
Listed seven structural obstacles to an Indian bank entering exchange business: the strong position of the exchange banks and very narrow margins; the need for trained international-exchange staff; the need for large floating resources; the effect of the political movement on facilities an Indian bank could expect from British and foreign banks in London; the need for a London head office; the impossibility of attracting London local deposits ("Even banks like Chartered, National and Mercantile are not much patronised by the public in London"); and the exchange banks' established funding through Indian branches and the London discount market at cheap rates. Suggested Government could "encourage approved Indian banks to establish branches" abroad
VerifiedOfficial record. Source: ICBEC1931 (exchange-bank chapter, sub-paras 1–7)
Indian banking structure; bank failures; a central bank
Central Banking Enquiry
Indian Central Banking Enquiry Committee, 1931: majority report (2 parts), written evidence, oral evidence, foreign-experts discussion
VerifiedOfficial record. Source: india.history.resource.109583–109586
all Indian banking companies
Indian Central Banking Enquiry Committee, recommendation of a special Bank Act
After analysing the causes of failure given in evidence, dishonest management; incompetent directors "too innocent of banking practice or business prudence" to check "the manipulations of designing directors or managers"; bad and speculative investments; unrestricted loans given to directors or concerns in which they were interested; injudicious advances; use of short-term deposits for long-term loans; insufficient paid-up capital; insufficient reserves; insufficient liquidity, the Committee recommended a special Bank Act covering organisation, management, audit and inspection, and liquidation and amalgamation. It also recommended prohibiting the managing-agency system in banking, requiring a minimum paid-up capital, and a provision on the English model (Roman's Act, the Sale and Purchase of Bank Shares Act 1867) requiring every seller of bank shares to give the actual numbers of the shares sold.
VerifiedOfficial record. Source: Indian Central Banking Enquiry Committee, Report, Vol. I, Part I (Majority Report), Calcutta, 1931, paras 674–676, 693–694, 748 (archive.org)
