Chapter I — Preliminary

Section 2: Definitions

Reviewed by CA Nikhil Gupta · Last reviewed 18 September 2026

Section 2 is the Act's definition provision and fixes the meaning of expressions used across later chapters, including the Bank, Central Board, scheduled bank, Consumer Price Index, inflation, inflation target, Monetary Policy Committee and policy rate.

Operative provisionOfficial sources mappedProvision-specific decode

Finin2min - Section 2 in 2 minutes

Legal effectSection 2 is the Act's definition provision and fixes the meaning of expressions used across later chapters, including the Bank, Central Board, scheduled bank, Consumer Price Index, inflation, inflation target, Monetary Policy Committee and policy rate.

Operative ruleThe definitions are not merely descriptive: they determine whether later provisions such as Section 42 or the monetary-policy chapter are engaged. Cross-referenced expressions may import meaning from banking, NABARD and other statutes.

Connected lawA Section 2 definition should be read before applying an operative provision. Where a definition points to another enactment or a notified list, the external source forms part of the classification exercise.

File evidenceFor current monetary-policy work, distinguish CPI Combined, inflation, inflation target and policy rate exactly as the Act defines them; for scheduled-bank issues, inclusion in the Second Schedule is decisive.

Statutory structure and clause / subsection decode

This map separates the operative limbs of this provision so thresholds, powers, conditions and exceptions are not collapsed into a single summary.

Rule 1

The definitions are not merely descriptive: they determine whether later provisions such as Section 42 or the monetary-policy chapter are engaged.

Rule 2

Cross-referenced expressions may import meaning from banking, NABARD and other statutes.

Connected rule

A Section 2 definition should be read before applying an operative provision. Where a definition points to another enactment or a notified list, the external source forms part of the classification exercise.

Worked practical example

Facts. A bank calling itself a 'scheduled bank' in marketing material is not enough for Section 42 analysis; the adviser should confirm its statutory status against the Second Schedule/current RBI notification.

Compliance points and common mistakes

Do not decide the issue from the heading alone. Map the facts to the operative words of Section 2 and to each relevant subsection, clause, proviso or explanation shown above.
Keep the statutory question separate from the operational overlay. A Section 2 definition should be read before applying an operative provision. Where a definition points to another enactment or a notified list, the external source forms part of the classification exercise.
Do not convert an exception, exemption or discretionary RBI/Government power into an automatic entitlement. Record the authority, conditions and effective date.
Where the provision is historical, omitted or repealed, state that status prominently and do not present it as a current compliance obligation.

Connected provisions and instruments

Section 2 has no universal instrument dependency in this package. Add an RBI circular or direction only when its subject, entity and effective date cover the issue being analysed.

Questions and answers

What is the purpose of Section 2?

Definitions: Section 2 is the Act's definition provision and fixes the meaning of expressions used across later chapters, including the Bank, Central Board, scheduled bank, Consumer Price Index, inflation, inflation target, Monetary Policy Committee and policy rate.

Which statutory limb should be checked first?

Rule 1 - The definitions are not merely descriptive: they determine whether later provisions such as Section 42 or the monetary-policy chapter are engaged.

What is the next legal boundary?

Rule 2 - Cross-referenced expressions may import meaning from banking, NABARD and other statutes.

What record should support the conclusion?

Section 2 file evidence: For current monetary-policy work, distinguish CPI Combined, inflation, inflation target and policy rate exactly as the Act defines them; for scheduled-bank issues, inclusion in the Second Schedule is decisive.

Primary sources

Source control for Section 2: use the official consolidated RBI Act for the statutory text and footnotes, then separately reconcile any post-Finance Act 2022 amendment, commencement notification or RBI instrument relevant to the event date.