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      Question

      Section 7(2) of the Banking Regulation Act, 1949

      prohibits a firm, individual or group of individuals from using as part of their name the words “bank”, “banking” or “banking company” for carrying on any business. Section 7(3) provides that nothing in Section 7 shall apply to certain entities. Which of the following is one such exemption expressly provided in Section 7(3)?
      A A government-owned financial institution registered under a special Act Correct Answer Incorrect Answer
      B An RBI-authorised payment system operator Correct Answer Incorrect Answer
      C A company engaged exclusively in agricultural lending Correct Answer Incorrect Answer
      D A non-banking financial company registered with the RBI Correct Answer Incorrect Answer
      E An association of banks formed for the protection of their mutual interests and registered under section 25 of the Companies Act, 1956 Correct Answer Incorrect Answer

      Solution

      Section 7(3) provides two express exceptions to the naming restrictions: first, a subsidiary of a banking company formed for the purposes mentioned in Section 19(1) whose name indicates it is a subsidiary of that banking company; and second, any association of banks formed for the protection of their mutual interests and registered under Section 25 of the Companies Act, 1956. The second exception recognises that industry bodies like the Indian Banks’ Association may legitimately use banking-related words without being themselves banking companies. The other listed entities (government financial institutions, payment operators, agricultural lenders, NBFCs) receive no such express exemption under Section 7(3).

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