Section 22 of the Banking Regulation Act, 1949: Licensing of Banking Companies

Section 22 is the principal licensing provision for banking companies under the Banking Regulation Act, 1949. In substance, a company cannot carry on banking business in India unless it holds a licence issued by the Reserve Bank of India (RBI), subject to the statutory conditions and any conditions imposed by RBI.

Updated: 13 September 2026 | Act No. 10 of 1949

What Section 22 covers:

Mandatory RBI licence for carrying on banking business in India.
Application for licence before commencement of banking business.
Conditions RBI may examine before granting a licence.
Additional requirements for companies incorporated outside India.
Grounds and procedure for cancellation of a banking licence.
Appeal to the Central Government against cancellation.

Meaning and scope of Section 22

Section 22(1) creates the core prohibition: no company may carry on banking business in India without a licence issued by RBI. The licence may be made subject to conditions considered appropriate by RBI.

Section 22(2) requires an eligible company to apply in writing to RBI for a licence. The historical provisos deal with banking companies that were already in existence when the Act commenced.

Section 22(3) sets out matters RBI may consider before granting a licence, including the company's ability to meet depositor claims, protection of depositor interests, management quality, capital structure, earning prospects, public interest and the effect of the licence on the banking system.

Section 22(3A) adds requirements for a company incorporated outside India, including public-interest considerations, reciprocal non-discrimination and compliance with provisions applicable to foreign banking companies.

Section 22(4) authorises RBI to cancel a licence on specified grounds. Except where delay would be prejudicial to depositors or the public, the provision requires an opportunity to take corrective steps before cancellation for non-compliance with licensing conditions.

Sections 22(5) and 22(6) provide for an appeal to the Central Government within thirty days from communication of RBI's cancellation decision and prescribe finality of the appellate decision or RBI's decision where no appeal is filed.

Official verification: The statutory text below has been retained from the existing page and checked against the current India Code publication of the Banking Regulation Act, 1949. For regulatory practice and licensing guidance, refer to RBI's official materials linked in the sidebar.

Section 22 - Licensing of banking companies

(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 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 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 sub-section (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 that the following conditions are fulfilled, namely:-

(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;

(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.

(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.

(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) 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.

Important statutory points

The licence requirement applies before a company commences banking business in India.
RBI may inspect the company's books or otherwise satisfy itself that the statutory conditions are met.
Depositor protection, management quality, capital adequacy, earning prospects, public interest and systemic considerations are expressly relevant.
A foreign-incorporated banking company is subject to the additional tests in sub-section (3A).
Cancellation can be followed by a statutory appeal to the Central Government within thirty days.

Amendment notes retained from the source text

Sub-section (1) was substituted by Act 33 of 1959, section 13, with effect from 1 October 1959.

In sub-section (2), the expression referring to banking business in India was substituted by Act 20 of 1950, section 3, with effect from 18 March 1950. Related wording was later substituted by Act 33 of 1959.

Changes to sub-section (3), insertion of sub-section (3A), and related amendments were made by Act 1 of 1984 with effect from 15 February 1984.

Sub-sections (4) and (5) were substituted by Act 33 of 1959, section 13, with effect from 1 October 1959.

Related provisions

Section 22 should be read with other relevant provisions of the Banking Regulation Act, 1949, including provisions dealing with minimum capital requirements, RBI control over advances, opening or transfer of places of business, maintenance of assets, returns, accounts and audit.

This page is an informational reproduction and explanation of the statutory provision. For authoritative use, consult the latest official text, notifications, directions and regulatory materials issued by the Government of India and RBI.