Section Text
1 [(1) Save as hereinafter provided, no company shall carryon banking business in India unless it holds a licence issued in that behalf bythe Reserve Bank and any such licence may be issued subject of such conditionsas the Reserve Bank may think fit to impose.]
(2) Every banking company inexistence on the commencement of this Act, before the expiry of six months fromsuch commencement, and every other company before commencing banking business 2 [in India], shall apply in writing to the Reserve Bank for alicence under this section:
Provided that in the case of abanking company in existence on the commencement of this Act, nothing insub-section (1) shall be deemed to prohibit the company from carrying onbanking business until it is granted a licence in pursuance of 3 issection] or is by notice in writing informed by the Reserve Bank that a licencecannot be granted to it:
Provided further that the ReserveBank shall not give a notice as aforesaid to a bankingcompany in existence on the commencement of this Act before the expiry of thethree years referred to in sub-section (1) of section 11 or ofsuch further period as the Reserve Bank may under thatsub-section think fit to allow.
(3) Beforegranting any licence under this section, the Reserve Bankingmay require to be satisfied by an inspection of the books of the company orotherwise that 4 [***] the following conditions are fulfilled, namely:-
5 [(a) that the company is or will be in a position to payits present or future depositors in full as their claims accrue;
(b) that the affairs of the companyare not being, or are not likely to be, conducted in a manner deterimental tothe interests of its present or future depositors;]
6 [(c) that the general character of the proposed managementof the company will not be prejudicial to the public interest or the interestof its depositors;
(d) that the company has adequatecapital structure and earning prospects;
(e) that the public interest willbe served by the grant of a licence to the company to carry on banking businessin India;
(f) that having regard to thebanking facilities available in the proposed principal area of operations ofthe company, the potential scope for expansion of banks already in existence inthe area and other relevant factors the grant of the licence would not beprejudicial to the operation and consolidation of the banking system consistentwith monetary stability and economic growth;
(g) any other condition, thefulfilment of which would, in the opinion of the Reserve Bank, benecessary to ensure that the carrying on of banking business in India by thecompany will not be prejudicial to the public interest or the interests of thedepositors.]
7 [(3A) Before granting any licence under this section to acompany incorporated outside India, the Reserve Bank mayrequire to be satisfied by an inspection of the books of the company orotherwise that the conditions specified in sub-section (3) arefulfilled and that the carrying on of banking business by such company in Indiawill be in the public interest and that the Government or law of the country inwhich it is incorporated does not discriminate in any way against bankingcompanies registered in India and that the company complies with all theprovisions of this Act applicable to banking companies incorporated outsideIndia.]
8 [(4) The Reserve Bank may cancel a licencegranted to a banking company under this section-
(i) if the company ceases tocarry on banking business in India; or
(ii) if the company at any timefails to comply with any of the conditions imposed upon it under sub-section (1); or
(iii) if at any time, any of theconditions referred to in sub-section (3) 7 [andsub-section (3A)] is not fulfilled:
Provided that before cancellinga licence under clause (ii) or clause (iii) of this sub-section on the groundthat the banking company has failed to comply with or has failed to fulfil anyof the conditions referred to therein, the Reserve Bank, unless it is ofopinion that the delay will be prejudicial to the interests of the company'sdepositors or the public, shall grant to the company on such terms as it mayspecify, an opportunity of taking the necessary steps for complying with orfulfilling such condition.
(5) Any banking company aggrieved by thedecision of the Reserve Bank cancelling a licence under this section may,within thirty days from the date on which such decision is communicated to it,appeal to the Central Government.
(6) The decision of the CentralGovernment where an appeal has been preferred to it under sub-section (5) or ofthe Reserve Bank where no such appeal has been preferred shall be final.]
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1. Subsituted by Act 33 of 1959, Section 13, for sub-section (1)w.e.f. 1-10-1959.
2. Subsituted by Act 20 of 1950, Section 3, for "in any state".
3. Subsituted by Act 33 of 1959, Section 13, for "sub-section" (2)"w.e.f. 1-10-1959.
4. The words "all or any of" omitted by Act 1 of1984, Section 25 w.e.f. 15-2-1984.
5. Subsitutedby Act 33 of 1959, Section 13, for clauses (a) and (b) w.e.f. 1-10-1959.
6. Subsitutedby Act 1 of 1984, Section 25, for clause ( c) w.e.f. 15-2-1984.
7. Insertedby Act 1 of 1984, Section 25 w.e.f. 15-2-1984.
8. Subsituted by Act 33 of 1959, Section 13, for sub-sections (4) and(5) w.e.f. 1-10-1959.