Banks have full autonomy to adopt any lending practices. They may provide loans and advances to any Sector or any Industry. Write a brief note on statutory restrictions on lending under Banking Regulation Act, 1949.

Under Banking Regulation Act, 1949, there are statutory restrictions on banks for lending. Brief of such restrictions are as under: Advances against bank's own shares: In terms of Section 20(1) of the Banking Regulation Act, 1949, a bank cannot grant any loans and advances on the security of its own shares. Advances to bank's Directors: Section 20(1) of the Banking Regulation Act, 1949 lays down the restrictions on loans and advances to the Directors and the firms in which they hold substantial interest. Advances to Companies for Buy-back of their Securities: As per provisions of the Companies Act, 2013, companies are permitted to purchase their own shares or other specified securities out of their free reserves / securities premium account or from the proceeds of any shares or other specified securities subject to compliance of statutory conditions. In view of the above, banks should not provide loans to companies for buy-back of shares / securities. Granting loans and advances to relatives of Directors: Without prior approval of the Board or without the knowledge of the Board, no loans and advances should be granted to relatives of the bank's Chairman/Managing Director or other Directors, Directors (including Chairman / Managing Director) of other banks and their relatives, Directors of Scheduled Co-operative Banks and their relatives, Directors of Subsidiaries / Trustees of Mutual Funds / Venture Capital Funds set up by the financing banks or other banks. Restrictions on Grant of Financial Assistance to Industries Producing / Consuming Ozone Depleting Substances (ODS): Banks should not extend finance for setting up of new units consuming / producing the Ozone Depleting Substances (ODS). No financial assistance should be extended to small/medium scale units engaged in the manufacture of the aerosol units using Chlorofluorocarbons (CFC) and no refinance would be extended to any project assisted in this sector. Restrictions on Advances against Sensitive Commodities under Selective Credit Control (SCC): With a view to prevent speculative holding of essential commodities with the help of bank credit and the resultant rise in their prices. Reserve Bank of India issues directives from time to time to all commercial banks, stipulating specific restrictions on bank advances against specified sensitive commodities. Banks and their subsidiaries should not undertake financing of 'Badla' transactions. Banks should not extend bridge loans against amounts receivable from Central / State Governments by way of subsidies, refunds, reimbursements, capital contributions, etc. subject to certain exemptions like financing against receivables from Government by exporters (viz. Duty Draw Back and IPRS).