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      Question

      Section 8 of the Banking Regulation Act, 1949 prohibits

      a banking company from directly or indirectly dealing in the buying, selling or bartering of goods. For the purposes of this section, the Explanation defines “goods” as every kind of moveable property other than which of the following?
      A Only immovable property and buildings Correct Answer Incorrect Answer
      B Only foreign currency and bullion Correct Answer Incorrect Answer
      C Actionable claims, stocks, shares, money, bullion and specie, and the instruments referred to in Section 6(1)(a) Correct Answer Incorrect Answer
      D Only agricultural produce and perishables Correct Answer Incorrect Answer
      E Only gold coins that are legal tender Correct Answer Incorrect Answer

      Solution

      The Explanation to Section 8 states that “goods” means every kind of moveable property, other than actionable claims, stocks, shares, money, bullion and specie, and all instruments referred to in clause (a) of sub-section (1) of Section 6. The exclusions are important because they cover precisely the financial instruments and securities a bank legitimately deals in under Section 6. The prohibition on trading exists to prevent banks from assuming commercial trading risk that could endanger depositors. The section, however, permits dealing in goods in connection with the realisation of security, and the proviso exempts business specified under Section 6(1)(o).

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