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CS Professional · Banking and Insurance - Laws and Practice · Overview of Indian Banking System

Sahyadri Finserve Pvt Ltd, a company incorporated in India, intends to start accepting deposits and lending as a bank. It has not yet begun any banking business. Under 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 and may carry on banking business only after holding it. The Act bars any company from banking without an RBI licence; the six-month grace applied only to banks existing at commencement.

  1. AApply in writing to the Reserve Bank for a licence and carry on banking business only after holding oneCorrect
  2. BSimply register with the Registrar of Companies and then begin operations
  3. CBegin operations and apply for a licence within six months of starting
  4. DObtain approval from the Central Government, which then issues the licence

Explanation

Section 22 says no company shall carry on banking business in India unless it holds an RBI licence, and every other company must apply in writing to the Reserve Bank before commencing banking business. Applying after starting (option C) is wrong because the six-month window applied only to companies existing at the Act's commencement.

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