CS Professional · Banking and Insurance - Laws and Practice · Banking Operations
Sahyadri Finserve Ltd., a newly incorporated Indian company, plans to open deposit-taking branches in Pune. Its directors ask when they must apply to the Reserve Bank for a banking licence. Under the Banking Regulation Act, 1949, what is the correct position?
A new company must apply in writing to the Reserve Bank for a licence before it commences banking business in India. The six-month period was available only to banking companies already in existence when the Act commenced, not to newly formed companies.
- AIt must apply in writing to the RBI before commencing banking business in IndiaCorrect
- BIt may start accepting deposits and apply within six months of commencement
- CIt need apply only if its paid-up capital exceeds a prescribed limit
- DIt must apply only after receiving a notice from the RBI
Explanation
Section 22(2) requires every company, other than a banking company already existing at the commencement of the Act, to apply in writing to the RBI for a licence before commencing banking business in India. The six-month window applied only to banking companies already existing when the Act commenced, so option B is wrong.
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