Skip to content

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

Sagar Finserve Ltd, a newly incorporated company, plans to start accepting deposits and lending to the public as a bank. It has not yet approached the Reserve Bank. Under Section 22 of the Banking Regulation Act, 1949, what must it do?

The company must apply in writing to the Reserve Bank for a licence before it commences banking business in India. Section 22 bars any company from banking without an RBI licence; the six-month window applied only to companies existing at the Act's commencement.

  1. AApply in writing to the Reserve Bank for a licence before commencing banking business in IndiaCorrect
  2. BBegin operations and apply for a licence within six months of starting
  3. CObtain a licence from the Central Government before commencing banking business
  4. DRegister under the Companies Act alone, which is sufficient to carry on banking business

Explanation

Section 22(2) requires every company, other than one in existence at the Act's commencement, to apply in writing to the Reserve Bank for a licence before commencing banking business in India. The six-month window applied only to banking companies already existing at commencement, so starting first is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Banking Operations shows your real accuracy, how long you take and where you lose marks.

Practise Banking OperationsFree diagnostic mock

More Banking Operations questions