Section 47A of the Banking Regulation Act, 1949: Power of Reserve Bank to Impose Penalty
Section 47A empowers the Reserve Bank of India (RBI) to impose monetary penalties on a banking company for specified contraventions or defaults covered by Section 46 of the Banking Regulation Act, 1949. The provision also lays down the adjudication procedure, payment period, recovery mechanism and the relationship between RBI penalty proceedings and court complaints.
Meaning and scope of Section 47A
Section 47A is an administrative penalty provision. It begins with a non-obstante clause overriding Section 46 to the extent stated in Section 47A and permits RBI to impose monetary penalties where a banking company commits a contravention or default of the kind referred to in Section 46(2), Section 46(3) or Section 46(4).
In practical terms, the amount and basis of the penalty depend on the category of contravention. Section 47A(2) requires RBI to issue a show-cause notice and provide a reasonable opportunity of being heard before adjudging the penalty.
Current text of Section 47A
47A. Power of Reserve Bank to impose penalty.
(1) Notwithstanding anything contained in section 46, if a contravention or default of the nature referred to in sub-section (2) or sub-section (3) or sub-section (4) of section 46, as the case may be, is made by a banking company, then, the Reserve Bank may impose on such banking company -
(a) where the contravention or default is of the nature referred to in sub-section (2) of section 46, a penalty not exceeding twenty lakh rupees in respect of each offence and, if the contravention or default persists, a further penalty not exceeding fifty thousand rupees for every day, after the first day, during which the contravention or default continues;
(b) where the contravention is of the nature referred to in sub-section (3) of section 46, a penalty not exceeding twice the amount of the deposits in respect of which such contravention was made;
(c) where the contravention or default is of the nature referred to in sub-section (4) of section 46, a penalty not exceeding one crore rupees or twice the amount involved in such contravention or default, where such amount is quantifiable, whichever is more, and where such contravention or default is a continuing one, a further penalty which may extend to one lakh rupees for every day, after the first day, during which the contravention or default continues.
(2) For the purpose of adjudging the penalty under sub-section (1), the Reserve Bank shall serve notice on the banking company requiring it to show cause why the amount specified in the notice should not be imposed and a reasonable opportunity of being heard shall also be given to such banking company.
(4) No complaint shall be filed against any banking company in any court of law in respect of any contravention or default in respect of which any penalty has been imposed by the Reserve Bank under this section.
(5) Any penalty imposed by the Reserve Bank under this section shall be payable within fourteen days from the date on which the notice demanding payment is served. If the banking company fails to pay within that period, recovery may be made on a direction of the principal civil court having jurisdiction where the registered office of the banking company is situated, or, for a banking company incorporated outside India, where its principal place of business in India is situated. No such direction may be made except on an application by the Reserve Bank or an officer authorised by it.
(6) The court making a direction under sub-section (5) shall issue a certificate specifying the sum payable by the banking company, and the certificate is enforceable in the same manner as a decree made by the court in a civil suit.
(7) Where a complaint has already been filed against a banking company in any court in respect of a contravention or default of the nature referred to in Section 46(3) or Section 46(4), no proceedings for imposition of a penalty on the banking company shall be taken under Section 47A for that contravention or default.
Penalty limits under Section 47A(1)
| Linked provision | Maximum penalty under Section 47A | Continuing default |
|---|---|---|
| Section 46(2) | Up to Rs. 20 lakh for each offence | Further penalty up to Rs. 50,000 for every day after the first day |
| Section 46(3) | Up to twice the amount of the deposits involved in the contravention | As provided by the statutory category concerned |
| Section 46(4) | Up to Rs. 1 crore or twice the amount involved, where quantifiable, whichever is more | Further penalty up to Rs. 1 lakh for every day after the first day |
Notice and hearing before RBI imposes penalty
Section 47A(2) expressly requires procedural fairness. RBI must serve a notice on the banking company requiring it to show cause why the proposed amount should not be imposed. The banking company must also receive a reasonable opportunity of being heard.
RBI penalty orders commonly record the contravention, the show-cause process, the bank's written reply and, where applicable, oral submissions. RBI also states in its regulatory penalty releases that such action is based on deficiencies in regulatory compliance and is not ordinarily intended to determine the validity of private transactions between a bank and its customers.
Effect of court complaints and RBI penalty proceedings
Section 47A contains safeguards against parallel treatment of the same contravention in specified circumstances. Under sub-section (4), once RBI has imposed a penalty under Section 47A, no complaint may be filed against the banking company in any court for that same contravention or default.
Conversely, sub-section (7) provides that where a complaint has already been filed in court in respect of a contravention or default falling under Section 46(3) or Section 46(4), RBI penalty proceedings under Section 47A are not to be taken for that matter.
Payment and recovery of RBI penalty
A penalty imposed under Section 47A is payable within fourteen days from service of the demand notice. If payment is not made within that period, RBI may apply to the principal civil court having jurisdiction for recovery. The court may issue a certificate for the amount due, which is enforceable in the same manner as a civil court decree.
Relationship with Section 46
Section 47A should be read together with Section 46 - Penalties, because Section 47A identifies the applicable RBI penalty by referring to the category of contravention or default described in Section 46(2), Section 46(3) or Section 46(4). For criminal cognizance provisions, see Section 47 - Cognizance of offences.
Official sources and current law
India Code - Banking Regulation Act, 1949
This page is an explanatory legal reference. For proceedings, compliance decisions or litigation, consult the latest official text, applicable RBI directions and professional legal advice.