Maintenance of a percentage of assets
Section 24 of the Banking Regulation Act, 1949 deals with maintenance of a percentage of assets. 1* * * * * [(2A) A scheduled bank, in addition to the average daily balance which it is, or may be, required to maintain under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934) and every other banking company, in addition to the cash reserve which it is required to maintain under section The Act came into force on 16 Mar 1949.
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2[(2A) A scheduled bank, in addition to the average daily balance which it is, or may be, required to maintain under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934) and every other banking company, in addition to the cash reserve which it is required to maintain under section 18, shall maintain in India, assets, the value of which shall not be less than such percentage not exceeding forty per cent. of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight as the Reserve Bank may, by notification in the Official Gazette, specify from time to time and such assets shall be maintained, in such form and manner, as may be specified in such notification.]
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4 [(3) For the purpose of ensuring compliance with the provisions of this section, every banking company shall, not later than twenty days after the end of the month to which it relates, furnish to the Reserve Bank in the prescribed form and manner a monthly return showing particulars of its assets maintained in accordance with this section, and its demand and time liabilities in India at the close of business on each alternate Friday during the month, or if any such Friday is a public holiday, at the close of business on the preceding working day:
Provided that every Regional Rural Bank shall also furnish a copy of the said return to the National Bank.
(4) (a) If on any alternate Friday or, if such Friday is a public holiday, on the preceding working day, the amount maintained by a banking company at the close of business on that day falls below the minimum prescribed by or under 5*** sub-section (2A), such banking company shall be liable to pay to the Reserve Bank in respect of that day's default, penal interest for that day at the rate of three per cent. per annum above the bank rate on the amount by which the amount actually maintained falls short of the prescribed minimum or that day; and
(b) if the default occurs again on the next succeeding alternate Friday, or, if such Friday is a public holiday, on the preceding working day, and continues on succeeding alternate Fridays or preceding working days, as the case may be, the rate of penal interest shall be increased to a rate of five per cent. per annum above the bank rate on each such shortfall in respect of that alternate Friday and each succeeding alternate Friday or preceding working day, if such Friday is a public holiday, on which the default continues.
(5) (a) Without prejudice to the provisions of sub-section (3), the Reserve Bank may require a banking company to furnish to it a return in the form and manner specified by it showing particulars of its assets maintained in accordance with this section and its demand and time liabilities in India, as at the close of business on each day of a month; and
(b) without prejudice to the provisions of sub-section (4), on the failure of a banking company to maintain as on any day, the amount so required to be maintained by or under 5*** sub-section (2A) the Reserve Bank may, in respect of such default, require the banking company to pay penal interest for that day as provided in clause (a) of sub-section (4) and if the default continues on the next succeeding working day, the penal interest may be increased as provided in clause (b) of sub-section (4) for the concerned days.
(6) (a) The penalty payable under sub-section (4) and sub-section (5) shall be paid within a period of fourteen days from the date on which a notice issued by the Reserve Bank demanding payment of the same is served on the banking company and in the event of failure of the banking company to pay the same within such period, the penalty may be levied by a direction of the principal civil court having jurisdiction in the area where an office of the defaulting banking company is situated, such direction to be made only upon an application made by the Reserve Bank in this behalf to the court; and
(b) when the court makes a direction under clause (a), it shall issue a certificate specifying the sum payable by the banking company and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a suit.
(7) When under the provisions of clause (b) of sub-section (4), penal interest at the increased rate of five per cent. above the bank rate has become payable by a banking company, if thereafter the amount required to be maintained on the next succeeding alternate Friday, or if such Friday is a public holiday, the next preceding working day, is still below the prescribed minimum, every director, manager or secretary of the banking company, who is knowingly and wilfully a party to the default, shall be punishable with fine which may extend to five hundred rupees and with a further fine which may extend to five hundred rupees for each subsequent alternate Friday or the preceding working day, as the case may be, on which the default continues.
(8) Notwithstanding anything contained in this section, if the Reserve Bank is satisfied, on an application in writing by the defaulting banking company, that the banking company had sufficient cause for its failure to comply with the provisions of 6*** sub-section (2A), the Reserve Bank may not demand the payment of the penal interest.
Explanation.--In this section, the expression "public holiday" means a day which is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881).]
Section 24, The Banking Regulation Act, 1949 (Act 10 of 1949).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Pr. Commissioner of Income Tax 2 vs Icici Bank LTD
Court's Decision & Legal Precedent
The Court held that government securities a scheduled bank acquires to maintain the Statutory Liquidity Ratio required by Section 24 do not thereby become capital investments: they remain stock-in-trade of the banking business, so broken period interest paid on their purchase is deductible revenue expenditure under Section 28 of the Income Tax Act, and Vijaya Bank Ltd. was held inapplicable to assessment years after the repeal of Sections 18 to 21.
On this section: Holds that compliance with the Section 24 percentage-of-assets obligation does not change the commercial character of the securities the bank holds to meet it.
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Commissioner of Income Tax Jaipur Ii vs State Bank of India through Its Manager
Court's Decision & Legal Precedent
Applying the same reasoning in the connected appeals, the Court held that securities held by scheduled banks under the Statutory Liquidity Ratio requirement, whether categorised Held to Maturity, Available for Sale or Held for Trading, form part of the circulating capital of the banking business; the American Express and Citi Bank line was approved and the Tribunal's findings that the securities were stock-in-trade were restored.
On this section: Applies Section 24 by treating SLR-mandated holdings as trading assets of the bank rather than investments, across the RBI's HTM/AFS/HFT classification.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… It is the fiscal policies of the Central Government which are implemented through Scheduled Banks. 6. The learned counsel for the petitioner further argued that Section 24 of the Banking Regulation Act and Section 42 of the RBI Act would undoubtedly establish that the respondent-Bank is an instrumentality of the State. In view of the facts and circumstances, the respondent-Bank should be considered as an instrumentality of the State, contended the counsel. 7. I have heard the …
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… The question sought to be urged by the Department for consideration is regarding the ITAT allowing the claim of deduction under Section 80 (P)(2)(a)(i) of the Income Tax Act, 1961 (IT Act) on interest income on investments made in unapproved securities given in Annexure-III under Section 24 of the Banking Regulation Act, 1949, made out of the surplus funds which according to the Department was not approved by the Reserve Bank of India. > 3. It appears that this was virtually the second round of litigation before the ITAT. In the present round, after the Assessing Officer (AO) passed an order …
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… with the provisions of the Banking Regulation Act, 1949; - (d) exempting the Company from obtaining license under section 22 of the Banking Regulation Act, 1949; - (e) exempting from maintaining for a period of five years from the appointed day the percentage of assets required to be maintained under section 24 of the Banking Regulation Act, 1949; - (f) conferring power upon the Central Government to direct, in consultation with RBI, by notification, that provisions of the Banking Regulation Act, 1949 shall not apply or apply with exceptions, modifications and adaptations and such notification shall be required to be …
Made under this section, and citing it
1 instrument names this provision in its title or its text without being made under it.
Questions about Section 24
What have the courts held on Section 24 of the Banking Regulation Act?
Pr. Commissioner of Income Tax 2 vs Icici Bank LTD (16 Oct 2024) is the leading judgment on this section among those set out below: Holds that compliance with the Section 24 percentage-of-assets obligation does not change the commercial character of the securities the bank holds to meet it. Another 1 judgment on this section is set out below, all of them from the Supreme Court.
How do I find court cases under Section 24 of the Banking Regulation Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Banking Regulation Act 1949 24, section 24 Banking Regulation Act 1949, section 24 of the Banking Regulation Act. People searching for it also type banking regulation act 1949 section 24. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 2 reported judgments on this section are set out on this page, beginning with Pr. Commissioner of Income Tax 2 vs Icici Bank LTD (16 Oct 2024).
What should I read with Section 24 of the Banking Regulation Act, and has it changed?
Its own text turns on section 18 (Cash reserve), so none of them can safely be read on its own. 3 other provisions in this corpus refer back to it. One instrument names it without being made under it, most recently Banking Regulation (Companies) Rules 1949 (1949).
When did Section 24 of the Banking Regulation Act come into force?
Section 24 of the Banking Regulation Act, cited as Banking Regulation Act 1949 24, came into force on 16 Mar 1949, having been enacted on 10 Mar 1949. It is in force as at the date shown on this page.
Other sections of this Act
- 56. Act to apply to co-operative societies subject to modifications5544 words
- 45. Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution or amalgamation2310 words
- 10B. Banking company to be managed by whole time chairman1171 words
- 5. Interpretation1164 words
- 43A. Preferential payments to depositors1031 words
- 11. Requirement as to minimum paid-up capital and reserves988 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 23 Oct 2026. This page is not a substitute for legal advice.