Law of Banking & Insurance

LAW OF BANKING & INSURANCE

As per the reports of the Reserve Bank of India (“RBI”), India’s banking sector is sufficiently capitalised and well-regulated. The financial conditions and the economy in the present moment are far better than any country in the world. Be it credit, market or liquidity risk studies and surveys, they all suggest Indian banks have withstood the global downturn efficiently and can recover quickly from difficult conditions. India is said to be one of the fastest growing economies in the world.

The digital payment evolved overnight after the Prime Minister’s measure of Demonetisation in 2016. According to FSI reports, India developed the most in the 25 countries with India’s Immediate Payment Services (“IMPS”) being the only one which is placed at Level 5 in the Faster Payments Innovation Index (“FPII”). Also, RBI has allowed more features such as unlimited fund transfers between wallets and bank accounts, these wallets are expected to become really strong players in the financial ecosystem. The unorganised retail sector has a huge untapped potential of adopting digital mobile wallets for payments, as per a report by the Centre for Digital Financial Inclusion. Around 63 per cent of retailers are interested in using digital modes of payment.

In 2017, Global rating agency Moody’s announced that the Indian Banking system was stable. They also upgraded four Indian banks from Baa3 to Baa2. Under the union budget 2018, the government has allocated Rs 3 trillion towards Mudra scheme, which provides financial assistance to small businessmen who want to grow their business. The government has also invested Rs 3,794 crores towards credit support, capital and interest subsidy to MSMEs.

The government and regulator have undertaken several measures to strengthen the Indian Banking sector. Such as a two-year plan to strengthen the public sector banks through reforms and capital infusion of Rs 2.11 lakh crore that will let the banks play a large role in the financial system by giving a boost to the MSME sector. Lok Sabha has also approved Rs 80,000 crores of recapitalisation bonds for public sector banks.

Prevailing acts are as follows:

• Reserve Bank of India Act,1934


• Banking Regulation Act, 1949


• Prevention of Money Laundering Act, 2002


• Foreign Exchange Management Act, 1999


• Limitation Act, 1963


• Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“DRT Act”)


• Lok Adalats under Legal Services Authority Act


• SARFAESI Act, 2002


• The Consumer Protection Act, 1986

Insurance business has been fast growing sector in India since Independence. The laws regulating the Insurance Sector came with the establishment of British entity Oriental Life Insurance Company in 1818 in Calcutta. But at that stage, subjects of Insurance were very limited.

In this paper, author has focused on step-by-step progresses brought in the field of Insurance sector. This started with the Ancient Historical and British times, where the British Companies and some other overseas companies were in the dominating positions.

In the 1956, Nationalisation of business sector started and all the companies relating of Insurance business was taken over by Central Government. The Life Insurance Corporation Act was enacted in the year 1956 with an exclusive business of Life Insurance.

In 1993, eight member committee under the Chairmanship of M.N. Malhotra, was formed to give recommendations for strengthening the regulatory system. The major recommendations were privatisation of Insurance Sector and setting up of Insurance Regulatory Authority. The Insurance Regulatory and Development Authority Act was passed with the aim to protect the interest of Insurance policy.

So, the concern of Legislature can be seen by their effective enactments regulating and promoting Insurance business in India. There is a rapid change in this sector after the Independence. Since Liberalisation and Nationalisation, the Insurance sector has been brought in a very controlled environment under the regulation of IRDA and other authoritative bodies.

Prevailing Insurance Laws:

• The Insurance Act, 1938


• Insurance Regulatory and Development Authority Act of 1999


• The Life Insurance Corporation Act, 1956


• The General Insurance Business (Nationalization) Act, 1972


• The Marine Insurance Act, 1963


• The Motor Vehicles Act, 1988