19.
Restriction on nature of subsidiary companies. —(1)
A banking company shall not form any subsidiary company except
a subsidiary company formed for one or more of the following
purposes, namely: —
(a) the undertaking of any business which, under clauses
(a) to (o) of subsection (3) of section 6, is permissible
for a banking company to undertake, or
(b) with the previous permission in writing of the Reserve
Bank, the carrying on of the business of banking exclusively
outside India, or
(c) the undertaking of such other business, which the Reserve
Bank may, with the prior approval of the Central Government,
consider to be conducive to the spread of banking in India
or to be other wise useful or necessary in the public interest.
Explanation. —For the purposes of section 8, a banking
company shall not be deemed, by reason of its forming or having
a subsidiary company, to be engaged indirectly in the business
carried on by such subsidiary company.
(2) Save as provided in sub-section (1), no banking company
shall hold shares in any company, whether as pledgee, mortgagee
or absolute owner, of an amount exceeding thirty per cent
of the paid-up share capital of that company or thirty per
cent of its own paid-up share capital and reserves, whichever
is less:
Provided that any banking company which is on the date of
the commencement of this Act holding any shares in contravention
of the provisions of this sub-section shall not be liable
to any penalty therefor if it reports the matter without delay
to the Reserve Bank and if it brings its holding of shares
into conformity with the said provisions within such period,
not exceeding two years, as the Reserve Bank may think fit
to allow.
(3) Save as provided in sub-section (1) and notwithstanding
anything contained in sub-section (2), a banking company shall
not, after the expiry of one year from the date of the commencement
of this Act, hold shares, whether as pledgee, mortagagee or
absolute owner, in any company in the management of which
any managing director or manager of the banking company is
in any manner concerned or interested.
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