Banking Law, Ethics and Regulatory Framework
This domain tests statute-to-rule matching and ethical judgement in realistic branch dilemmas.
Statutes to know
RBI Act, 1934; Banking Regulation Act, 1949 (licensing, capital, management, statutory reserve); Negotiable Instruments Act, 1881 (cheques, bills, Section 138 for dishonour); FEMA, 1999; Prevention of Money Laundering Act, 2002 (KYC, reporting); Credit Information Companies Act, 2005; Insolvency and Bankruptcy Code, 2016; Consumer Protection Act, 2019.
Regulators
RBI regulates banks and payment systems; SEBI the securities market; IRDAI insurance; PFRDA pensions; the FSDC coordinates them.
Ethics in the bank
Confidentiality of customer data, no misuse of position, fair dealing, avoiding conflict of interest, refusing gifts that influence decisions, honest reporting of fraud, and no mis-selling of insurance-linked products. Wilful default, diversion of funds and money laundering are legal failures, not merely ethical ones.
Worked example
A clerk is asked by a relative to reveal a customer's balance. Reasoning: refuse. Secrecy is an implied duty of the banker, with exceptions only under law, court order, RBI direction, or with the customer's consent. Breach invites disciplinary and legal action; family relationship is not an exception.
Traps that cost marks
Quoting the wrong Act for a rule; assuming Section 138 applies to every cheque return regardless of reason; confusing limited with unlimited liability; ignoring the three-year limitation for money recovery; treating the Ombudsman as a court with appeals.