Section 7 of the Banking Regulation Act, 1949: Use of "Bank", "Banker", "Banking" or "Banking Company"

Meaning and purpose of Section 7

The section restricts the use of specified banking expressions so that a person or business does not present itself as a bank or banking company without falling within the statutory framework. It also imposes a naming requirement on a company that actually carries on the business of banking in India.

Section 7 should therefore be read together with the definitions in Section 5 of the Banking Regulation Act, 1949, particularly the definitions of "banking" and "banking company".

Key statutory definitions relevant to Section 7

Section 7 - Use of words "bank", "banker", "banking" or "banking company"

Note: The provision above is presented in reader-friendly formatting. For authoritative wording, amendments and footnotes, consult the official India Code text linked below.

Section 7 explained

1. Restriction on companies that are not banking companies

A company that is not a banking company cannot ordinarily use "bank", "banker" or "banking" as part of its name or in connection with its business. The rule is directed at preventing non-banking businesses from using terminology that may convey the status or character of a regulated banking company.

2. Naming requirement for a company carrying on banking business

A company carrying on the business of banking in India must use at least one of the prescribed banking expressions as part of its name. The provision therefore operates both as a prohibition and as a positive naming requirement.

3. Restriction on firms and individuals

Section 7(2) separately applies to a firm, an individual or a group of individuals. For the purpose of carrying on business, they cannot use "bank", "banking" or "banking company" as part of the business name, subject to the statutory exceptions.

4. Section 7 does not itself define banking activity

Whether an activity is the business of "banking" is determined primarily by Section 5(b). Section 7 governs the use of specified words, but the character of the underlying activity must be tested against the statutory definition and the wider regulatory scheme.

Exceptions under Section 7(3)

The prohibition does not apply to a qualifying subsidiary of a banking company formed for one or more of the purposes referred to in Section 19(1), provided the subsidiary's name indicates that relationship.

The text also contains an exception for an association of banks formed to protect their mutual interests and registered under Section 25 of the Companies Act, 1956.

Legislative notes

Section 7 was substituted by Act 55 of 1963 with effect from 1 February 1964. The words extending the restriction to use "in connection with its business" were inserted by Act 1 of 1984 with effect from 15 February 1984.

Official legal sources

Related provisions

Readers may also refer to Section 5 - Interpretation, Section 6 - Forms of business in which banking companies may engage, Section 8 - Prohibition of trading and the main Banking Regulation Act, 1949 page.