Chapter III — Central Banking Functions

Section 21B: Effect of agreements made between the Bank and certain States before 1 November 1956

Reviewed by CA Nikhil Gupta · Last reviewed 18 September 2026

Section 21B preserves the effect of specified pre-reorganisation agreements between RBI and certain States notwithstanding constitutional/territorial changes associated with the States Reorganisation era.

Operative provisionOfficial sources mappedProvision-specific decode

Finin2min - Section 21B in 2 minutes

Legal effectSection 21B preserves the effect of specified pre-reorganisation agreements between RBI and certain States notwithstanding constitutional/territorial changes associated with the States Reorganisation era.

Operative ruleIt is a transitional continuity provision designed to prevent older Government-business agreements from failing merely because of the 1956 reorganisation.

Connected lawUse it only when the historical agreement and successor State context are relevant; routine current Government banking is ordinarily analysed under Sections 21 and 21A.

File evidenceA legal-history file should identify the predecessor State, the pre-1 November 1956 agreement and the successor arrangement before relying on Section 21B.

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.

Scope

Operative limb

It is a transitional continuity provision designed to prevent older Government-business agreements from failing merely because of the 1956 reorganisation.

Legal boundary

Use it only when the historical agreement and successor State context are relevant; routine current Government banking is ordinarily analysed under Sections 21 and 21A.

Worked practical example

Facts. Where an archival State debt-management agreement predates reorganisation, Section 21B may explain continuity, but it should not be used as a substitute for the current operating agreement.

Compliance points and common mistakes

Do not decide the issue from the heading alone. Map the facts to the operative words of Section 21B and to each relevant subsection, clause, proviso or explanation shown above.
Keep the statutory question separate from the operational overlay. Use it only when the historical agreement and successor State context are relevant; routine current Government banking is ordinarily analysed under Sections 21 and 21A.
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 21B 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 21B?

Effect of agreements made between the Bank and certain States before 1 November 1956: Section 21B preserves the effect of specified pre-reorganisation agreements between RBI and certain States notwithstanding constitutional/territorial changes associated with the States Reorganisation era.

Which statutory limb should be checked first?

Scope - Section 21B preserves the effect of specified pre-reorganisation agreements between RBI and certain States notwithstanding constitutional/territorial changes associated with the States Reorganisation era.

What is the next legal boundary?

Operative limb - It is a transitional continuity provision designed to prevent older Government-business agreements from failing merely because of the 1956 reorganisation.

What record should support the conclusion?

Section 21B file evidence: A legal-history file should identify the predecessor State, the pre-1 November 1956 agreement and the successor arrangement before relying on Section 21B.

Primary sources

Source control for Section 21B: 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.