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

Malwa Bank Ltd, an Indian banking company, wants to open a new office in Colombo, outside India, and has no prior permission. Which statement is correct under the Banking Regulation Act, 1949?

Prior RBI permission is required. Section 23(1)(b) prevents an Indian-incorporated banking company from opening a new place of business outside India without it, and a place cashing cheques still counts as a place of business.

  1. AIt may open the office and inform RBI afterwards
  2. BIt needs prior RBI permission, since a banking company incorporated in India cannot open a new place of business outside India without itCorrect
  3. CIt needs only Central Government approval
  4. DIt needs no permission if the office only cashes cheques

Explanation

Section 23(1)(b) bars a banking company incorporated in India from opening a new place of business outside India without prior RBI permission. Under Section 23(5), a place where cheques are cashed is within 'place of business', so option D is wrong.

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