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

Meridian Bank Plc, incorporated in a foreign country, applies for a licence to operate in India. The RBI finds that the foreign country's law discriminates against banking companies registered in India. What is the effect under the Banking Regulation Act, 1949?

The RBI may require satisfaction that the foreign government or law does not discriminate against Indian-registered banking companies, in addition to the ordinary Section 22(3) conditions. If that is not shown, the licence need not be granted, so meeting the ordinary conditions alone is not enough.

  1. ADiscrimination is irrelevant if the Section 22(3) conditions are met
  2. BThe RBI may refuse because it may require satisfaction that the foreign country's law does not discriminate against Indian banking companiesCorrect
  3. CThe RBI must grant a licence but with a higher capital requirement
  4. DOnly the Central Government can examine discrimination, not the RBI

Explanation

Section 22(3A) lets the RBI require satisfaction, for a company incorporated outside India, that the Section 22(3) conditions are met, that its business will serve public interest, that the home country does not discriminate against Indian banking companies, and that it complies with the Act. Meeting Section 22(3) alone is therefore not sufficient.

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