Law relating to Banking and Negotiable Instruments
Master of Laws
Year / Semester: 
1st Year

Banking system occupies an important place in a nation’s economy. It is indispensable in a modern society. It plays a pivotal role in the economic development of a country and forms the core of the money market in a country. Banking industry in India has traversed a long path to assume its present stature. A spirit of cooperation and partnership between the IT and banking industries will result in a strong and modern financial system comparable to the best in the world. The aim of this course is to provide in-depth knowledge of the banking system and banking law in India and also recent trends of banking system in India.
Modern financial and economic system is based upon the transferability of negotiable instruments. No commercial activity can be done without it. The doctrine of negotiation posses three essential qualities – transferability, bona fide intension and must contain right of action. The proposed course provided comprehensive knowledge of negotiable instruments and mode of their transfer and to equip student with in-depth knowledge of law relating to negotiable instrument.


Block– I: Law Relating to Banking Companies in India

1.1 Objects, Reasons and Application

1.1.1 Statement of Objects and Reasons

1.1.2 Application of other laws not barred

1.1.3 Power to suspend operation to Act

1.1.4 Forms of business in which banking companies may engage

1.1.5 Prohibition of Trading

1.2 Organizational Structure in the Banking System

1.2.1 Board of directors to include persons with professional or other experience

1.2.2 Requirement as to minimum paid-up capital and reserves

1.2.3 Restriction on nature of subsidiary companies

1.3 Power of the Reserve Bank

1.3.1. Power of Reserve Bank to control advances by banking companies

1.3.2 Licensing of banking companies

1.3.3 Submission of returns

1.3.4 A. Production of documents of confidential nature

1.4 Control of the Reserve Bank

1.4.1 Power of the Reserve Bank to give Directions

1.4.2 Control over Management

1.4.3. Acquisition of the undertakings of Banking Companies in certain cases

1.4.4. Suspension of Business and Winding up of Banking Companies

Block – II: The Central bank

2.1. Incorporation, Capital, Management & Business

2.1.1 Establishment & Incorporation of Reserve Bank

2.1.2 Composition of Central Boards & Local Boards

2.1.3. Disqualification & Removal

2.1.4. Business which the Bank may transact

2.2. Central Bank Functions

2.2.1. Validity of loan or advance not to be questioned

2.2.2. Central Bank Functions

2.2.3. Collection & Furnishing of Information’s

2.2.4. Provisions relating to non-banking institutions

2.3. Registration

2.3.1. Requirement of Registration & net owned fund

2.3.2. Maintenance of percentage of assets

2.3.3. Reserve fund

2.3.4. Power of Bank to determine policy & issue directions

2.4. Powers of Central Bank

2.4.1. Power of Bank to prohibit acceptance of deposit & alienation of assets

2.4.2. Power of Bank to file winding up petition

2.4.3. Prohibition of acceptance of Deposits by unincorporated bodies

2.4.4. Power of the Central Board to make regulations

2.4.5 Penalties

Block– III: Reforms and Recent Trends of banking System in India

3.1. Recent Development of Banking System in India

3.1.1. Control of Reserve Bank of India

3.1.1. Loan Mela

3.1.3. Working of Reserve Bank of India

3.1.4. Rate of Interest

3.2 Bank Customers & Banking Services

3.2.1. Matter of Definition

3.2.2. Characterizing the Banker – Customer Relationship

3.3 Banking Contracts

3.3.1. Identifying the Customer

3.3.2. Validity of a Banking Contract Authority & Capacity

3.3.3. The Bank’s Mandate

3.4 Regulating Banking Contracts

3.4.1. The Common Law

3.4.2. UCTA

3.4.3. The Unfair Terms in Consumer Contracts Directives

3.4.4. The Banking Code & Banking Ombudsman

3.4.5. The Bank is Depository the Account

Block –IV: Law Relating to Negotiable Instruments

4.1 Promissory Note

4.1.1. Promise to pay on demand creates promissory note

4.1.2. When a document is a promissory note

4.1.3. When a document is not a promissory note.

4.2 Consideration – presumption

4.2.1. Burden is on the defendant

4.2.2. Presumption is Rebutiable

4.2.3. Unstamped promote is admissible.

4.3 Holder in Due course

4.3.1. Holder is due course and holder for collection (difference)

4.3.2. Holder is due course

4.3.3 Cheque-Holder is due course – proof of

4.4 Pronote bond and suits

4.4.1. Pronote and bond (distinction)

4.4.2. Suits.

4.4.3. Miscellaneous Provision

4.4.3. a) Section 131

4.4.3. b) Section 138

Suggested Readings: 
  1. Basu, A. Review of Current Banking Theory and Practise (1998) Mac millan
  2. L.C. Goyle, The Law of Banking and Bankers (1995) Eastern
  3. M.L. Tannan, Tannan's Banking Law and Practice in India (1997) India Law House, New Delhi, 2 volumes
  4. K.C. Shekhar, Banking Theory and Practice (1998) UBS Publisher Distributors Ltd. New Delhi.
  5. K. Subrahmanyan, Banking Reforms in India (1997) Tata Maigraw Hill, New Delhi.
  6. Subodh Markandeya and Chitra Markandeye, Law Relating to Foreign Trade in India
  7. M.A. Mir, The Law Relating to Bank Guarantee in India (1992), Metropolitan Book, New Delhi.
  8. Mitra, The Law Relating to Bankers' Letters of Credit and Allied Laws, (1998) University Book Agency, Allahabad.
  9. R.K. Talwar, Report of Working Group on Customer Service in Banks
  10. Janakiraman Committee Report on Securities Operation of Banks and Financial Institution (1993)
  11. Narasimham Committee report on the Financial System (1991)- Second Report (1999)
  12. [email protected] Law, Dr. R.B. Jaisal, Central law Publication.(Hindi)

NOTE: The minimum number of marks required to pass the examination i.e. previous as well as final, shall be 50% in each written paper/dissertation.