Banking and Insurance - Laws and Practice · Banking Operations

Branch Licensing and Change of Location of Banks under Section 23

Updated 11 October 2026 · Fact-checked

Under Section 23 of the Banking Regulation Act, 1949, a banking company needs prior RBI permission to open a new place of business or to move an existing one outside its city, town or village. This is separate from the Section 22 banking licence. Answer by stating the rule, applying it to the facts, and concluding.

Understand Branch Licensing and Change of Location

A banking licence under Section 22 lets a company carry on banking business in India. It is the entry ticket. A branch permission under Section 23 is a second, separate control. It governs where the bank does business.

So a bank that already holds a licence cannot simply open branches as it likes. Section 23(1)(a) says that without prior permission of the Reserve Bank, no banking company shall open a new place of business in India. It also cannot change the location of an existing place of business, unless the move is within the same city, town or village.

Section 23(1)(b) covers banks incorporated in India that want to open a place of business outside India. They too need prior RBI permission. Moving an existing foreign place of business within the same city, town or village of that country or area is free of this requirement.

Place of business is defined widely in Section 23(5). It includes any sub-office, pay office, sub-pay office, and any place where deposits are received, cheques cashed or moneys lent. So the rule is not limited to full branches.

The RBI can inspect the bank under Section 35 or otherwise before granting permission. It looks at financial condition and history, the general character of management, adequacy of capital structure and earning prospects, and whether public interest will be served. It may attach conditions, and can revoke permission after a show-cause opportunity if conditions are breached.

Key rules to remember

General rule, Section 23(1)(a): New place of business in India OR change of location (not within same city/town/village) = prior RBI permission; Applies to every banking company. Permission must be taken before the act, not after.
Overseas places, Section 23(1)(b): Indian-incorporated bank + new place of business outside India = prior RBI permission; A shift within the same city, town or village in that country or area is exempt.
Temporary place proviso: Temporary place ≤ 1 month + within city/town/village (or environs) where bank already has a place + for an exhibition, conference, mela or like occasion = no permission; All conditions must be met. The bank must already have a place of business there.
RBI's satisfaction, Section 23(2): Financial condition and history + character of management + capital structure and earning prospects + public interest; RBI may require satisfaction by inspection under Section 35 or otherwise.
Conditions and revocation, Section 23(3) and (4): Permission may carry conditions; on failure to comply, RBI may revoke by written order after reasonable opportunity to show cause; Revocation needs a written order and a show-cause opportunity.
Regional rural banks, Section 23(4A): RRB applies through NABARD, with an advance copy sent directly to RBI; NABARD gives comments on merits and forwards the application to RBI.
Place of business, Section 23(5): Includes sub-office, pay office, sub-pay office, and any place where deposits are received, cheques cashed or moneys lent; Wide definition. It is not limited to full branches.

How to solve Branch Licensing and Change of Location questions

Use this order for any problem or theory question on branch opening or relocation.

1Identify whether the entity is a banking company and whether it already holds a Section 22 licence.
2Decide whether the act is a new place of business or a change of location of an existing one.
3Check the place: in India, or outside India (Section 23(1)(b) applies only to Indian-incorporated banks).
4For relocation, test whether the move is within the same city, town or village. If yes, no permission is needed.
5Test whether the temporary-place proviso applies: up to one month, existing presence in that area, and an exhibition, conference, mela or like occasion.
6If permission is needed, state what RBI examines under Section 23(2) and that it may impose conditions under Section 23(3).
7Add consequences: revocation under Section 23(4) after show cause for breach of conditions. Mention the RRB route if relevant.
8Conclude clearly: permission needed or not, and from whom.

Quickest way: Three-question filter

When to use it: For short case questions when time is tight.

Is it a new place or a shift out of the same city, town or village? If neither, no permission.
Is it a temporary stall of up to one month at an occasion, in an area where the bank already operates? If yes, no permission.
Otherwise, prior RBI permission is required. Write Section 23, then the RBI's checks and its power to impose conditions.

Common mistakes in Branch Licensing and Change of Location

Treating the Section 22 licence as enough to open any branch.
Students merge the two provisions as one licensing idea.
Fix: State that Section 22 allows banking business, while Section 23 separately controls places of business. Both are needed.
Saying permission is needed for every shift of a branch.
The exception for the same city, town or village is forgotten.
Fix: Check the location first. A move within the same city, town or village needs no permission under Section 23(1).
Applying the one-month temporary place exemption without its conditions.
Students remember only the one-month period.
Fix: Add the other conditions: the bank already has a place of business there, and the purpose is an exhibition, conference, mela or like occasion.
Limiting 'place of business' to full branches.
Everyday usage of the word branch.
Fix: Quote Section 23(5): sub-office, pay office, sub-pay office and any place where deposits are received, cheques cashed or moneys lent.
Applying the overseas rule to foreign banks.
Section 23(1)(b) is read loosely.
Fix: Remember that clause (b) covers banking companies incorporated in India opening places outside India.
Saying RBI can cancel the permission without notice.
Confusion with licence cancellation.
Fix: Section 23(4) needs a written order and reasonable opportunity to show cause, and applies where conditions were breached.

Worked examples

Example 1

Sunrise Bank Ltd, a licensed banking company, wants to shift its branch from Nashik city to a town in another district. Does it need RBI permission? Advise.

Show the solution

Provision: Section 23(1)(a) requires prior RBI permission to change the location of an existing place of business, other than within the same city, town or village.
Facts: the shift is from Nashik city to a different town. It is not within the same city, town or village.
Analysis: no exception applies, so the relocation falls within the restriction.
Process: RBI may check financial condition and history, management, capital structure, earning prospects and public interest under Section 23(2). It may impose conditions under Section 23(3).

Answer: Yes. Sunrise Bank must obtain prior RBI permission before shifting the branch to the other town.

Example 2

Green Valley Bank Ltd has a branch in Pune. It sets up a counter for 20 days at a trade exhibition in Pune. It also moves its Pune branch to another locality in Pune. Is RBI permission needed for either?

Show the solution

Counter: Section 23(1) proviso exempts a temporary place of business for up to one month, in a city where the bank already has a place of business, for an exhibition, conference, mela or like occasion.
Facts: 20 days is within one month, the bank already has a Pune branch, and the occasion is an exhibition. All conditions are met.
Relocation: Section 23(1)(a) exempts a change of location within the same city, town or village.
Facts: the branch moves within Pune, so the same-city exception applies.
Conclusion: neither act needs permission under Section 23.

Answer: No permission is needed for either: the exhibition counter fits the temporary-place proviso, and the shift within Pune is within the same city.

Exam tips

Quote the section number and the words 'prior permission of the Reserve Bank'. Examiners look for the word prior.
In a case, always test the three exemptions: same city, town or village; temporary place of up to one month; and for overseas, whether the bank is Indian-incorporated.
Contrast Section 22 (licence to carry on banking business) with Section 23 (permission for places of business) in one or two lines. This is a favourite short-answer point.
Mention Section 23(2) factors and Section 23(3) conditions to make the answer complete, then end with a clear conclusion.

Practice questions from Banking Operations

Branch Licensing and Change of Location: frequently asked questions

What is the difference between a banking licence and a branch licence?

A banking licence under Section 22 allows a company to carry on banking business in India. Branch permission under Section 23 is needed to open a new place of business or shift an existing one. A bank needs the licence first and then branch permission as required.

Does a bank need RBI approval to shift a branch within the same city?

No. Section 23(1) restricts a change of location only when it is other than within the same city, town or village. A shift within the same city does not need permission under that section.

Can RBI cancel permission to open a branch?

Yes. Under Section 23(4), if a bank fails to comply with conditions imposed, RBI may revoke the permission by written order. It must first give the bank a reasonable opportunity to show cause.

What does 'place of business' include?

Section 23(5) says it includes any sub-office, pay office, sub-pay office, and any place where deposits are received, cheques cashed or moneys lent.