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    Question

    Which of the following is correct relating to the

    licensing of the banking companies?
    A Issued by the RBI Correct Answer Incorrect Answer
    B Company may have adequate capital structure and earning prospects Correct Answer Incorrect Answer
    C Company is or will be in a position to pay its present or future depositors in full as their claims accrue Correct Answer Incorrect Answer
    D All a b & c Correct Answer Incorrect Answer
    E Both a & c Correct Answer Incorrect Answer

    Solution

    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. (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. Option D is not the correct answer as the word may is being used in that, however, the provision is stating it should be.

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