Section 26A: Deposits

1[26A. Deposits.--(1) Deposits of money may be accepted by a banking company on the following basis: (i) on participation in profit and loss of the banking company; (ii) free of interest or return in any form, and (iii) until such time as the Federal Government determines and notifies, by publication in the official Gazette, that the domestic operations of the banking companies have become free of interest, on interest. (2) Every banking company receiving deposits on the basis of participation in profit and loss shall maintain separate account in respect thereof as also of investments made, finances provided out of the amount of such deposits, cash reserves and liquid assets maintained there against and all income and expenditure relating thereto. (3) Deposits received on the basis of participation in profit and loss shall be invested or employed, at the absolute discretion of the banking company, only in transactions or business the return on which does not accrue to the banking company by way of interest. (4) A person depositing money with a banking company on the basis of participation in profit and loss shall be entitled, subject to such general directions as the State Bank may give from time to time in the interest of monetary stability, to receive periodically such share of the profit of the banking company arising out of such transactions as may be determined by it and, in the event of loss incurred by the banking company, shall be liable to bear proportionate loss.] 2[(5) Where the State Bank has determined that a banking company,-- (a) is carrying on its business in a manner detrimental to the interest of its depositors; or (b) is materially unable to discharge its financial obligations or continue its operations; or (c) has failed to meet 3[specified] capital requirements or cash and liquidity requirements or provisioning requirements or any condition specified in the license or any preventive or remedial measure 3[specified] by the State Bank, the State Bank, by an order in writing stating reasons, may impose conditions or restrictions on the banking company on accepting deposits from any class of depositors or type of deposits for such period as may be specified in the order and the State Bank shall exercise the power reasonably, fairly and justly. (6) No order shall be made unless the banking company concerned has been given an opportunity of making a representation to the State Bank and if the State Bank is of the opinion that any delay would be detrimental to the public interest or the interest of the banking company or its depositors, the State Bank may, at the time of giving the opportunity aforesaid or at any time thereafter and pending the consideration of the representation aforesaid, if any, may make an appropriate interim order.]

Effective date: 1962-06-07

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