Legal Aspects of Banking and Insurance Syllabus - BBA-BI (PU)

Course Objectives

The aim of this course is to familiarize students with the legal environment and framework in which banking and insurance companies operate. Specifically, the course enables students to comply with banking and insurance regulations while working in banks and insurance industries.

Course Description

This course provides an understanding of the legal framework in which banks and insurance companies operate. It introduces the nature of banking and insurance regulations and regulators and discusses regulations related to bank establishment and bank operation, laws relating to capital requirements and reporting. Similarly, the course also covers insurance laws related to insurance contract, tariff setting and claim settlement process. Finally, it deals with corporate governance of banks and insurance companies and important provisions of acts related to the conduct of banking and insurance businesses.

Course Outcomes

On successfully completing this course, students will be able to: understand the nature and development of banking and insurance laws; apply the rules and regulations in the establishment of banking and insurance companies; assess capital requirements of banks and insurance companies comply with the reporting requirements of regulators and other stakeholders;  fulfill duty of disclosure and understand the effects of non-disclosure; apply due process in claim settlements and understand semi judiciary role of Insurance Board in claim settlement; explain basic principles of corporate governance; and demonstrate the knowledge of understanding of important provisions of major acts related to banking and insurance businesses and the role of Nepal Rastra Bank and Insurance Board in regulating banks and insurance companies.

Course Contents

Unit I: Introduction to Banking and Insurance Laws : 3 hours

The need of regulation in banks and insurance companies; development of banking and  insurance laws in Nepal.

Unit II: Registration of Bank and Insurance Companies : 8 hours

Bank and insurance companies as legal personality; memorandum of association; articles of association; application for registration; capital requirements; categorization of banks and insurance companies; Relevant provisions of Banks and Financial Institutions Act and Insurance Act in the registration of banks and insurance companies.

Unit III: Corporate Affairs, Accounting and Reporting : 10 hours

Corporate reporting; directors’ meetings; provisions relating to maintenance of accounts and auditing, applications of accounting standards to banks and insurance companies; and reporting to shareholders and regulators.

Unit IV: Bank Operations : 5 hours

Laws relating to deposit, lending, international trade, remittance and ancillary services; negotiable instruments; capital adequacy ratio; prudential norms relating to capital; and consequences of non-compliance.

Unit V: Legal Framework of Insurance  : 3 hours

Insurance and the law of contract: general requirements of an enforceable contract; void and voidable; special legal characteristics of insurance contract: insurance as a contract of indemnity, insurance as a personal contract, insurance as a unilateral contract, insurance as a conditional contract, insurance as a contract of adhesion, insurance as a aleatory contract, and insurance as a contract of utmost good faith.

Unit VI: Regulation of Insurance Industry : 6 hours

Goals of insurance regulation; current regulatory structure; federal versus state regulation; areas of regulation: solvency regulation, market regulation, regulation of rates; claim procedures and settlement; breach of contract; disputes of insurance; semi judiciary role of Insurance Board in claim settlement; and ombudsman.

Unit VII: Corporate Governance in Banks and Insurance Companies : 3 hours

Principles of corporate governance; Nepal Rastra Bank’s directives to banks on corporate governance; and Insurance Board’s directives to insurance companies on corporate governance.

Unit VIII: Major Regulations and Regulators of Banking and Insurance : 10 hours

Features and coverage of Banks and Financial Institutions Act 2006; features and coverage of Insurance Act 1992; features and coverage of NRB Act; features and coverage of debt recovery act and banking offence act; role of Nepal Rastra Bank in regulating banks, and role of Insurance Board in regulating insurance companies.

Basic Texts

1. Indian Institute of Banking and Finance. Legal and regulatory aspects of banking. New Delhi: McMillan India.
2. Gupta, P. K. Legal aspects of insurance, Bombay: Himalayan Publishing House.

References

1. Gordon, E. Banking theory law and practice. Bombay: Himalaya Publishing House.
2. Vaughan, E. J. & Vaughan, T. M. Fundamentals of risk and insurance. John Willey
3. Regda, E. George. Principles of Risk Management and Insurance. New Delhi: Pearson Education.
4. Government of Nepal. Banks and Financial Institutions Act, 200.
5. Government of Nepal. Insurance Act 1992.
6. Government of Nepal. Securities Act 200.
7. Government of Nepal. Nepal Rastra Bank Act 2002.
8. Nepal Rastra Bank. NRB Unified directives and guidelines – updated versions.