Section 42(1) in The Reserve Bank of India Act, 1934
(1)Every bank included in the Second Schedule shall maintain with the Bank an average daily balance the amount of which shall not be less thansuch per cent. of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section (2), as the Bank may from time to time, having regard to the needs of securing the monetary stability in the country, notify in the Gazette of India.***Explanation.— For the purposes of this section,—(a)“average daily balance” shall mean the average of the balances held at the close of business of each day of a fortnight;(b)“fortnight” shall mean the period from Saturday to the second following Friday, both days inclusive;(c)“liabilities” shall not include—(i)the paid-up capital or the reserves or any credit balance in the profit and loss account of the bank;(ii)the amount of any loan taken from the Bank or from the Exim Bank or from the Reconstruction Bank or from the National Housing Bank or from the National Bank or from the Small Industries Bank ;(iii)in the case of a State co-operative bank, also any loan taken by such bank from a State Government or from the National Co-operative Development Corporation established under the National Co-operative Development Corporation Act, 1962 (26 of 1962) and any deposit of money with such bank representing the reserve fund or any part thereof maintained with it by any co-operative society within its area of operation;(iv)in the case of a State co-operative bank, which has granted an advance against any balance maintained with it, such balance to the extent of the amount outstanding in respect of such advance;(v)in the case a Regional Rural Bank, also any loan taken by such bank from its Sponsor Bank;(d)the aggregate of the liabilities” of a Scheduled bank which is not a State co-operative bank, to,—(i)the State Bank;(ii)a subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);(iii)a corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970);(iiia)a corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);(iv)a banking company as defined in clause (c) section 5 of the Banking Regulation Act, 1949 (10 of 1949);(v)a co-operative bank; or(vi)any other financial institution notified by the Central Government in this behalf,shall be reduced by the aggregate of the liabilities of all such banks and institutions to the scheduled bank;(e)the aggregate of the “liabilities” of a scheduled bank which is a State co-operative bank, to,—(i)the State Bank;(ii)a subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);(iii)a corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970);(iiia)a corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);(iv)a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); or(v)any other financial institution notified by the Central Government in this behalf,shall be reduced by the aggregate of the liabilities of all such banks and institutions to the State co-operative bank.
