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National Bank for Agriculture and Rural Development Act, 1981


37A. Prohibited business.-

1.     The National Bank shall not make any loans or advances under section 30 or make any grants under this Act to any person or body of persons of which any of the directors of the National Bank is a proprietor, partner, director, manager, agent, employee or guarantor or in which one or more directors of the National Bank together hold substantial interest :

Provided that this sub-section shall not apply to any borrower if any director of the National Bank-

a.     is nominated as director of the Board of such borrower by the Government or a Government company as defined in section 617 of the Companies Act, 1956 or by a corporation established by any other law,

b.    is elected on the Board of such borrower by virtue of shares held in the borrower organisation by the Government, or a Government company as defined in section 617 of the Companies Act, 1956 or by a corporation established by any other law, by reason only of such nomination or election, as the case may be.

Explanation.- For the purposes of this sub-section, “substantial interest”, in relation to a borrower, means the beneficial interest held by one or more of the directors of the National Bank or by any relative of such director as defined in clause (41) of section 2 of the Companies Act, 1956, whether singly or taken together, in the shares of the borrower, the aggregate amount paid-up on which either exceeds five lakhs of rupees or five percent of the paid-up share capital of the borrower, whichever is lesser.

2.     The provisions of sub-section (1) -

a.     shall not apply to any borrower, if the National Bank is satisfied that it is necessary in the public interest to enter into business with that borrower and entering into any kind of business with such borrower shall be in accordance with and subject to such conditions and limitations, as may be approved by the Board;

b.    shall not apply to any transaction relating to the business entered into prior to the commencement of the National Bank for Agriculture and Rural Development (Amendment)Act, 2000, and all such business and any transaction in relation thereto may be implemented or continued as if that Act had not come into force;

c.     shall apply only so long as the conditions precedent to such disability as set out in the said sub-section continue.



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