1[16. Prohibition of common directors.--2[(1) No banking company incorporated in India shall have as a director in its Board of directors any person who is a director of any other banking company.
(1A) No banking company referred to in sub-section (1) shall have in its Board of directors, more than three directors who are directors of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent.of the total voting rights of all the shareholders to that banking company.]
(2) If immediately before the commencement of the Banking Companies (Amendment) Act, 1956 (95 of 1956), any person holding office as a director of a banking company is also a director of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent. of the total voting rights of all the share-holders of the banking company, he shall, within such period from such commencement as the Reserve Bank may specify in this behalf--
(a) either resign his office as a director of the banking company; or
(b) choose such number of companies as among themselves are not entitled to exercise voting rights in excess of twenty per cent. of the total voting rights of all the share-holders of the banking company as companies in which he wishes to continue to hold the office of a director and resign his office as a director in the other companies.]
3[(3) Nothing in sub-section (1) shall apply to, or in relation to, any director appointed by the Reserve Bank.]
(1A) No banking company referred to in sub-section (1) shall have in its Board of directors, more than three directors who are directors of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent.of the total voting rights of all the shareholders to that banking company.]
(2) If immediately before the commencement of the Banking Companies (Amendment) Act, 1956 (95 of 1956), any person holding office as a director of a banking company is also a director of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent. of the total voting rights of all the share-holders of the banking company, he shall, within such period from such commencement as the Reserve Bank may specify in this behalf--
(a) either resign his office as a director of the banking company; or
(b) choose such number of companies as among themselves are not entitled to exercise voting rights in excess of twenty per cent. of the total voting rights of all the share-holders of the banking company as companies in which he wishes to continue to hold the office of a director and resign his office as a director in the other companies.]
3[(3) Nothing in sub-section (1) shall apply to, or in relation to, any director appointed by the Reserve Bank.]
Source footnotes
1. Subs. by Act 95 of 1956, s. 5, for s. 16 (w.e.f. 14-1-1957).2. Subs. by Act 20 of 1994, s. 7, for sub-section (1) (w.e.f. 31-1-1994).
3. Ins. by Act 58 of 1968, s. 4 (w.e.f. 1-2-1969).
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Section 1 · Short title, extent and commencement.Section 2 · Application of other laws not barred.Section 3 · Act not to apply to certain co-operative societies.Section 4 · Power to suspend operation of Act.Section 5 · Interpretation.Section 5A · Act to override memorandum, articles, etc.Section 6 · Form of business in which banking companies may engage.Section 7 · Use of words "bank", "banker", "banking" or "banking company".India Code, Government of India. Text fetched 15 Oct 2026. Source metadata reports last modification: 2026-01-06. Check the linked official text and subsequent notifications when applying a provision.