Chapter II — Incorporation, Capital, Management and Business

Section 4: Capital of the Bank

Reviewed by CA Nikhil Gupta · Last reviewed 18 September 2026

Section 4 fixes the statutory capital of the Reserve Bank of India at five crore rupees.

Operative provisionOfficial sources mappedProvision-specific decode

Finin2min - Section 4 in 2 minutes

Legal effectSection 4 fixes the statutory capital of the Reserve Bank of India at five crore rupees.

Operative ruleThe provision is a capital-constitution rule for RBI itself; it is not a prudential capital requirement for banks or NBFCs.

Connected lawDo not confuse Section 4 with bank capital adequacy, NBFC net owned fund or RBI reserve funds under later provisions.

File evidenceFor institutional or exam analysis, separate 'capital of the Bank' under Section 4 from the Reserve Fund under Section 46 and surplus allocation under Section 47.

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 provision is a capital-constitution rule for RBI itself

Rule 2

it is not a prudential capital requirement for banks or NBFCs.

Connected rule

Do not confuse Section 4 with bank capital adequacy, NBFC net owned fund or RBI reserve funds under later provisions.

Worked practical example

Facts. If a question asks whether Section 4 controls an NBFC's minimum capital, the answer is no: the section concerns RBI's own statutory capital and the NBFC analysis belongs in Chapter IIIB/current RBI Directions.

Compliance points and common mistakes

Do not decide the issue from the heading alone. Map the facts to the operative words of Section 4 and to each relevant subsection, clause, proviso or explanation shown above.
Keep the statutory question separate from the operational overlay. Do not confuse Section 4 with bank capital adequacy, NBFC net owned fund or RBI reserve funds under later provisions.
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Where the provision is historical, omitted or repealed, state that status prominently and do not present it as a current compliance obligation.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 4 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 4?

Capital of the Bank: Section 4 fixes the statutory capital of the Reserve Bank of India at five crore rupees.

Which statutory limb should be checked first?

Rule 1 - The provision is a capital-constitution rule for RBI itself

What is the next legal boundary?

Rule 2 - it is not a prudential capital requirement for banks or NBFCs.

What record should support the conclusion?

Section 4 file evidence: For institutional or exam analysis, separate 'capital of the Bank' under Section 4 from the Reserve Fund under Section 46 and surplus allocation under Section 47.

Primary sources

Source control for Section 4: 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.