Banking Companies

Definition

Banking Companies in India are governed by the Banking Regulation Act, 1949. Section 5(b) of this Act defines banking as "accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise." Further, Section 5(c) of the Banking Regulation Act defines a banking company as "any company which transacts the business of banking in India."

Licensing of Banking Companies

According to Sec.22 of Banking Regulation Act, no company shall carry on Banking Business in India unless it holds a license issued by Reserve Bank of India. If the following conditions are satisfied, the Reserve Bank of India may grant a license -

• "that the company is or will be in a position to pay its present and future depositors in full as their claims accrue ;
• that the affairs of the company are not being or are not likely to be conducted in a manner detrimental to the interest of its present or future depositors ;
• that, in the case of a foreign banking company, the carrying on of a banking business by such company in India will be in the public interest, that the Government or the law of the country of its origin does not discriminate against Indian banking companies carrying on business in that country, and that it complies with all the requirements of law applicable to it."

Cancellation of licence

The RBI may cancel a licence if :

• the company ceases to carry on banking business in India ;
• the company at any time fails to comply with any of the conditions on which licence was granted, or
• at any time, any of the conditions on the satisfaction of which the Reserve bank of India granted the licence, has not been fulfilled.