law: Banking Regulation Act, 1949
  20. Restrictions on loans and advances
  (1) Notwithstanding anything to the contrary
  
  contained in section 77 of the Companies Act, 1956 (1 of 1956), no banking
  
  company shall-
  (a) grant any loans or
  
  advances on the security of its own shares, or
  (b) enter into any
  
  commitment for granting any loan or advance to or on behalf of-
  (i) any of its
  
  Directors,
  (ii) any firm in which
  
  any of its Directors is interested as Partner, Manager, Employee or Guarantor,
  
  or
  (iii) any company (not
  
  being a subsidiary of the banking company or a company registered under section
  
  25 of the Companies Act, 1956 (1 of 1956), or a government company, of which
  
  15[or the subsidiary or the holding company of which] any of the Directors of
  
  the banking company is a Director, Managing Agent, Manager, Employee or
  
  Guarantor or in which he holds substantial interest, or
  (iv) any individual in
  
  respect of whom any of its Directors is a partner or guarantor.
  (2) Where any loan or advance granted by a
  
  banking company is such that a commitment for granting it could not have been
  
  made if clause (b) of sub-section (1) had been in force on the date on which
  
  the loan or advance was made or is granted by a banking company after the
  
  commencement of section 5 of the Banking Laws (Amendment) Act, 1968 (58 of
  
  1968), but in pursuance of a commitment entered into before such commencement,
  
  steps shall be taken to recover the amounts due to the banking company on
  
  account of the loan or advance together with interest, if any, due thereon
  
  within the period stipulated at the time of the grant of the loan or advance,
  
  or where no such period has been stipulated, before the expiry of one year from
  
  the commencement of the said section 5:
  PROVIDED that the Reserve Bank may, in any
  
  case, on an application in writing made to it by the banking company in this
  
  behalf, extend the period for the recovery of the loan or advance until such
  
  date; not being a date beyond the period of three years from the commencement
  
  of the said section 5, and subject to such terms and conditions, as the Reserve
  
  Bank may deem fit:
  PROVIDED FURTHER that this sub-section
  
  shall not apply if and when the Director concerned vacates the office of the
  
  Director of the banking company, whether by death, retirement, resignation or
  
  otherwise.
  (3) No loan or advance, referred to in
  
  sub-section (2), or any part thereof shall be remitted without the previous
  
  approval of the Reserve Bank, and any remission without such approval shall be
  
  void and of on effect.
  (4) Where any loan or advance referred to in
  
  sub-section (2), payable by any person, has not been repaid to the banking
  
  company within the period specified in that sub-section, then, such person
  
  shall, if he is a Director of such banking company on the date of the expiry of
  
  the said period, be deemed to have vacated his office as such on the said date.
  
  
  Explanation: In this section-
  (a) "loan or advance" shall not
  
  include any transaction which the Reserve Bank may, having regard to the nature
  
  of the transaction, the period within which, and the manner and circumstances
  
  in which, any amount due on account of the transaction is likely to be realized,
  
  the interest of the depositors and other relevant considerations, specify by
  
  general or special order as not being a loan or advance for the purpose of this
  
  section;
  (b) "Director" includes a member of
  
  any board or committee in India constituted by a banking
  
  company for the purpose of managing, or for the purpose of advising it in
  
  regard to the management of, all or any of its affairs.
  (5) If any question arises whether any
  
  transaction is a loan or advance for the purposes of this section, it shall be
  
  referred to the Reserve Bank, whose decision thereon shall be final.]