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CS Professional · Banking and Insurance - Laws and Practice · Banking Operations

Bharat Mercantile Ltd, a newly incorporated Indian company, has raised capital and hired staff. It plans to start accepting deposits and lending from next month. Under Section 22 of the Banking Regulation Act, 1949, what must it do before commencing banking business in India?

The company must apply in writing to the Reserve Bank for a licence before it starts banking business. No company may carry on banking business in India without an RBI licence, and the six-month window was only for banking companies already existing when the Act commenced.

  1. AApply in writing to the Reserve Bank for a licenceCorrect
  2. BObtain approval from the Central Government only
  3. CBegin business and apply to the Reserve Bank within six months
  4. DRegister with the Registrar of Companies as a bank, which suffices

Explanation

Section 22(1) bars any company from carrying on banking business in India unless it holds an RBI licence, and Section 22(2) requires every other company to apply in writing to the Reserve Bank before commencing banking business. The six-month window applies only to companies already existing at commencement of the Act.

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