Prohibition of common directors

Section 16 of the Banking Regulation Act, 1949 deals with prohibition of common directors. No banking company incorporated in India shall have as a director in its Board of directors any person who is a director of any other banking company. The Act came into force on 16 Mar 1949.

¹[16. Prohibition of common directors.--²[(1) No banking company incorporated in India shall have as a director in its Board of directors any person who is a director of any other banking company.

(1A) No banking company referred to in sub-section (1) shall have in its Board of directors, more than three directors who are directors of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent.of the total voting rights of all the shareholders to that banking company.]

(2) If immediately before the commencement of the Banking Companies (Amendment) Act, 1956 (95 of 1956), any person holding office as a director of a banking company is also a director of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent. of the total voting rights of all the share-holders of the banking company, he shall, within such period from such commencement as the Reserve Bank may specify in this behalf--

(a) either resign his office as a director of the banking company; or

(b) choose such number of companies as among themselves are not entitled to exercise voting rights in excess of twenty per cent. of the total voting rights of all the share-holders of the banking company as companies in which he wishes to continue to hold the office of a director and resign his office as a director in the other companies.]

³[(3) Nothing in sub-section (1) shall apply to, or in relation to, any director appointed by the Reserve Bank.]

Section 16, The Banking Regulation Act, 1949 (Act 10 of 1949).