The Tax PublishersBanking Companies, Financial Institutions and Intermediaries--Related Provisions1. Banking companies, Financial institutions and intermediaries to maintain records

Every banking company, financial institution and intermediary is required to --

(i) maintain a record of all transactions, the nature and value of which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions take place within a month;

(ii) furnish information of transactions referred to in clause (a) to the Director within such time as may be prescribed;

(iii) verify and maintain the records of the identity of all its clients, in such manner as may be prescribed. [Section 12(1)]

However, where the principal officer of a banking company or financial institution or intermediary, as the case may be, has reason to believe that a single transaction or series of transactions integrally connected to each other have been valued below the prescribed value so as to defeat the provisions of this section, such officer shall furnish information in respect of such transactions to the Director within the prescribed time. [Proviso to section 12(1)]

The records referred to in sub-section (1) shall be maintained for a period of ten years from the date of cessation of the transactions between the clients and the banking company or financial institution or intermediary, as the case may be. [Section 12(2)]

2. Powers of director to impose fine

(i) The Director may, either of his own motion or on an application made by any authority, officer or person, call for records referred to in sub-section (1) of section 12 and may make such inquiry or cause such inquiry to be made, as he thinks fit. [Section 13(1)]

(ii) If the Director, in the course of any inquiry, finds that a banking company, financial institution or an intermediary or any of its officers has failed to comply with the provisions contained in section 12, then, without prejudice to any other action that may be taken under any other provisions of this Act, he may, by an order, levy a fine on such banking company or financial institution or intermediary which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure. [Section 13(2)]

(iii) The Director shall forward a copy of the order passed under sub-section (2) to every banking company, financial institution or intermediary or person who is a party to the proceedings under that sub-section. [Section 13(3)]

3. No civil proceedings against banking companies, financial institutions, etc., in certain cases

According to section 14 of the Act, save as otherwise provided in section 13, the banking companies, financial institutions, intermediaries and their officers shall not be liable to any civil proceedings against them for furnishing information under clause (b) of sub-section (1) of section 12.

4. Procedure and manner of furnishing information by banking company, financial institution and intermediary

The Central Government may, in consultation with the Reserve Bank of India, prescribe the procedure and the manner of maintaining and furnishing information under sub-section (1) of section 12 for the purpose of implementing the provisions of this Act.

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