Licensing of banking companies
Section 22 of the Banking Regulation Act, 1949 deals with licensing of banking companies. Save as hereinafter provided, no company shall carry on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any such licence may be issued subject to such conditions as the Reserve Bank may think fit to impose.] (2) Every banking company in existence on The Act came into force on 16 Mar 1949.
1[(1) Save as hereinafter provided, no company shall carry on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any such licence may be issued subject to such conditions as the Reserve Bank may think fit to impose.]
(2) Every banking company in existence on the commencement of this Act, before the expiry of six months from such commencement, and every other company before commencing banking business 2[in India], shall apply in writing to the Reserve Bank for a licence under this section:
Provided that in the case of a banking company in existence on the commencement of this Act, nothing in sub-section (1) shall be deemed to prohibit the company from carrying on banking business until it is granted a licence in pursuance of 3[this section] or is by notice in writing informed by the Reserve Bank that a licence cannot be granted to it:
Provided further that the Reserve Bank shall not give a notice as aforesaid to a banking company in existence on the commencement of this Act before the expiry of the three years referred to in subsection (1) of section 11 or of such further period as the Reserve Bank may under that sub-section think fit to allow.
(3) Before granting any licence under this section, the Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise 4*** that the following conditions are fulfilled, namely:--
5[(a) that the company is or will be in a position to pay its present or future depositors in full as their claims accrue;
(b) that the affairs of the company are not being, or are not likely to be conducted in a manner detrimental to the interests of its present or future depositors;]
6[(c) that the general character of the proposed management of the company will not be prejudicial to the public interest or the interest of its depositors;
(d) that the company has adequate capital structure and earning prospects;
(e) that the public interest will be served by the grant of a licence to the company to carry on banking business in India;
(f) that having regard to the banking facilities available in the proposed principal area of operations of the company, the potential scope for expansion of banks already in existence in the area and other relevant factors the grant of the licence would not be prejudicial to the operation and consolidation of the banking system consistent with monetary stability and economic growth;
(g) any other condition, the fulfilment of which would, in the opinion of the Reserve Bank, be necessary to ensure that the carrying on of banking business in India by the company will not be prejudicial to the public interest or the interests of the depositors.]
7[(3A) Before granting any licence under this section to a company incorporated outside India, the Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise that the conditions specified in sub-section (3) are fulfilled and that the carrying on of banking business by such company in India will be in the public interest and that the Government or law of the country in which it is incorporated does not discriminate in any way against banking companies registered in India and that the company complies with all the provisions of this Act applicable to banking companies incorporated outside India.]
8[(4) The Reserve Bank may cancel a licence granted to a banking company under this section--
(i) if the company ceases to carry on banking business in India; or
(ii) if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1); or
(iii) if at any time, any of the conditions referred to in sub-section (3) 7[and sub-section (3A)] is not fulfilled:
Provided that before cancelling a licence under clause (ii) or clause (iii) of this sub-section on the ground that the banking company has failed to comply with or has failed to fulfil any of the conditions referred to therein, the Reserve Bank, unless it is of opinion that the delay will be prejudicial to the interests of the company's depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfilling such condition.
(5) Any banking company aggrieved by the decision 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 Central Government where an appeal has been preferred to it under sub-section (5) or of the Reserve Bank where no such appeal has been preferred shall be final.]
Section 22, The Banking Regulation Act, 1949 (Act 10 of 1949).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Kerala State Co-operative Agricultural and Rural Development Bank Ltd. Kscardb vs The Assessing Officer, Trivandrum
Court's Decision & Legal Precedent
A cooperative society which is not a state cooperative bank, central cooperative bank, or primary cooperative bank as defined under NABARD Act, 1981 and which does not conduct banking business as defined in Section 5(b) of the Banking Regulation Act (i.e., does not accept deposits from the public and does not hold an RBI license) is not a co-operative bank within the meaning of Section 80P(4) of the Income Tax Act, 1961, and is therefore entitled to claim deduction of the whole of its profits and gains of business attributable to providing credit facilities to its members under Section 80P(2)(a)(i) of the Act. The determination of whether an entity is a co-operative bank depends on: (1) whether it has been declared as a state/central cooperative bank by the State Government under NABARD Act, 1981; (2) whether it conducts banking business as defined (accepting deposits from public); and (3) whether it holds an RBI license under Section 22 of the Banking Regulation Act, 1949.
On this section: Requires licensing by Reserve Bank for any company to carry on banking business in India. The court noted that the appellant does not hold such a license, indicating it does not conduct banking business as defined.
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Babulal Sharma vs State of M. P.
Court's Decision & Legal Precedent
After the Deposit Insurance & Credit Guarantee Corporation has paid insurance claims to depositors as per Section 16 of the DICGC Act, 1961 (up to Rs. 1 lakh per depositor), the Official Liquidator is statutorily obligated under Section 21(2)(a) to repay to the Corporation out of remaining liquidation proceeds the amounts that the Corporation has disbursed, and such repayment must occur before any additional distribution to depositors. The statutory language 'notwithstanding anything to the contrary contained in any other law' establishes an absolute and non-discretionary priority for DICGC repayment in liquidation proceedings, and no court has authority to direct otherwise.
On this section: Authority under which Reserve Bank cancelled the banking license of Theni Cooperative Urban Bank
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Salim Akbarali Nanji vs Union of India
Court's Decision & Legal Precedent
Writing off non-performing assets is a legitimate internal accounting procedure to clean the balance sheet of a banking company. Such write-off does not require prior approval from the Reserve Bank of India under statutory law, though banking companies customarily seek such approval as a matter of practice. The Reserve Bank of India, in its regulatory capacity, may consider the financial position of the applicant banking company before granting permission to utilize reserves for write-off purposes. The write-off does not extinguish the bank's right to proceed against borrowers to recover the dues; it is merely an accounting entry that does not affect the creditor's legal rights to pursue recovery through available legal remedies. The decision to write off bad debts, when approved by shareholders and supported by adequate reserves and maintained capital adequacy ratios, does not constitute illegal or arbitrary action by the Reserve Bank of India and is not subject to judicial review through writ jurisdiction.
On this section: Empowers RBI to cancel banking license in specified circumstances. Court found this provision irrelevant as appellant did not seek license cancellation.
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Satluj Steel Rolling Mills Pvt. Ltd. & Ors. (Vishwa Motors batch) v. Union of India
Court's Decision & Legal Precedent
Guj HC DB CJ R. Subhash Reddy & Vipul M. Pancholi JJ, SCA batch, Final Order order-1.pdf 2018-05-09 DATE VERIFIED. Petitioners attacked IDBI Transfer Act s.3(2)(a) exemption from obtaining licence under BR Act s.22. Court upheld the statutory carve-out: Parliament may deem the Company a banking company and dispense with a fresh s.22 licence for the transferred undertaking; BR Act otherwise applies to the extent not repugnant. Petitions dismissed.
On this section: Court construed BR Act s.22 licensing requirement as capable of statutory exemption when a specialised central Act deems banking-company status on transfer of undertaking.
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The Ratandeep Urban Cooperative Credit Society Ltd. v. The Reserve Bank of India & Ors.
Court's Decision & Legal Precedent
Bom HC DB D.K. Deshmukh & K.K. Tated JJ, WP 7383/2008, Final Order order-6.pdf 2009-12-09 DATE VERIFIED. Credit society challenged RBI cancellation of co-op bank banking licence under Banking Regulation Act s.22 after liquidator appointment and show-cause; liquidator itself sought withdrawal of licence. Court found no fault with liquidator appointment or RBI licence cancellation—continuing the licence would have enabled the former Board to further siphon depositor funds. Noted DICGC small-depositor payouts already made. Petition rejected; petitioner directed to lodge claim with liquidator.
On this section: Court upheld RBI power under s.22 to cancel a co-op bank banking licence where working had deteriorated and liquidator consented that the bank could not be run.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… Thus, it is argued that no scheme of amalgamation can be implemented by invoking provisions under the K.C.S Act to amalgamate with a scheduled bank listed under the RBI as the scheduled bank is regulated by the Central Legislation. The banking activity is regulated by Section 22 of the Banking Regulation Act, 1949. It is for the RBI to decide in what manner final approval can be given. No challenge would be maintainable before final approval is granted by the RBI unless there is glaring procedure of violation. As an upshot of discussions as above, all these writ petitions must fail. …
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… Thus, it is argued that no scheme of amalgamation can be implemented by invoking provisions under the K.C.S Act to amalgamate with a scheduled bank listed under the RBI as the scheduled bank is regulated by the Central Legislation. The banking activity is regulated by Section 22 of the Banking Regulation Act, 1949. It is for the RBI to decide in what manner final approval can be given. No challenge would be maintainable before final approval is granted by the RBI unless there is glaring procedure of violation. As an upshot of discussions as above, all these writ petitions must fail. …
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… Thus, it is argued that no scheme of amalgamation can be implemented by invoking provisions under the K.C.S Act to amalgamate with a scheduled bank listed under the RBI as the scheduled bank is regulated by the Central Legislation. The banking activity is regulated by Section 22 of the Banking Regulation Act, 1949. It is for the RBI to decide in what manner final approval can be given. No challenge would be maintainable before final approval is granted by the RBI unless there is glaring procedure of violation. As an upshot of discussions as above, all these writ petitions must fail. …
Made under this section, and citing it
1 instrument names this provision in its title or its text without being made under it.
Questions about Section 22
What have the courts held on Section 22 of the Banking Regulation Act?
Kerala State Co-operative Agricultural and Rural Development Bank Ltd. Kscardb vs The Assessing Officer, Trivandrum (14 Sep 2023) is the leading judgment on this section among those set out below: Requires licensing by Reserve Bank for any company to carry on banking business in India. The court noted that the appellant does not hold such a license, indicating it does not conduct banking business as defined. Another 4 judgments on this section are set out below, 3 of them from the Supreme Court. They run from 2006 to 2023.
How do I find court cases under Section 22 of the Banking Regulation Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Banking Regulation Act 1949 22, section 22 Banking Regulation Act 1949, section 22 of the Banking Regulation Act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 5 reported judgments on this section are set out on this page, beginning with Kerala State Co-operative Agricultural and Rural Development Bank Ltd. Kscardb vs The Assessing Officer, Trivandrum (14 Sep 2023).
What should I read with Section 22 of the Banking Regulation Act, and has it changed?
Its own text turns on section 11 (Requirement as to minimum paid-up capital and reserves), so none of them can safely be read on its own. 3 other provisions in this corpus refer back to it. One instrument names it without being made under it, most recently Banking Regulation (Companies) Rules 1949 (1949).
When did Section 22 of the Banking Regulation Act come into force?
Section 22 of the Banking Regulation Act, cited as Banking Regulation Act 1949 22, came into force on 16 Mar 1949, having been enacted on 10 Mar 1949. It is in force as at the date shown on this page.
Other sections of this Act
- 56. Act to apply to co-operative societies subject to modifications5544 words
- 45. Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution or amalgamation2310 words
- 10B. Banking company to be managed by whole time chairman1171 words
- 5. Interpretation1164 words
- 43A. Preferential payments to depositors1031 words
- 11. Requirement as to minimum paid-up capital and reserves988 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 14 Oct 2026. This page is not a substitute for legal advice.