Clause 35

The Commissioner may from time to time require banks to maintain minimum cash balances on deposit with the Accountant-General as reserves against their deposit and other liabilities:Provided that such balances shall not exceed thirty per centum of each bank’s deposit and other liabilities.

Subject to the limit specified in subsection (1) of this section, the Commissioner may prescribe different ratios for different types of liabilities and may further prescribe the method of computing the amount of the required reserves, provided that the ratios shall be uniform for all banks.

Any prescription of, or change in, the minimum reserve requirements under subsection (1) or (2) of this section shall take effect only after the expiration of thirty days’ notice to the banks of the Commissioner’s intention to take such action.

Where a bank (in this section referred to as “the defaulting bank”) has failed to maintain sufficient minimum cash balances required under subsection (1) of this section the Commissioner may by order in writing direct the defaulting bank to make good the deficiency within the period specified in the order and the defaulting bank shall comply with the requirements of such order.

If the defaulting bank fails to make good the deficiency within the period specified in the order referred to in subsection (4) of this section it shall be lawful, notwithstanding the provisions of any other written law, for the Commissioner to serve a notice in writing upon any other bank with which the defaulting bank has a credit balance, whether in current or deposit account, directing that bank to transfer to the Accountant-General such amount as is specified in the notice as being equivalent to the amount of the deficiency in the minimum cash balances of the defaulting bank required under subsection (1) of this section and such other bank shall immediately comply with the requirements of that notice.

No action shall lie against, and no liability shall attach to, any bank that complies with the requirements of a notice referred to in subsection (5) of this section for any loss or damage suffered by the defaulting bank as a result of such other bank taking action in compliance with the requirements of that notice.

The Commissioner may, in addition to any action taken under subsections (4) and (5) of this section, impose on any bank which fails to maintain sufficient minimum cash balances required under subsection (1) of this section a penalty interest charge of not more than one-tenth of one per centum per day on the amount of the deficiency for every day during which the deficiency continues.

Any bank that fails or refuses to pay a penalty interest charge under subsection (7) of this section shall be guilty of an offence under this Act.