A banking company can function in India if it holds a licence issued by the Reserve Bank of India in that behalf. Before granting any licence, 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 : (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 conducted or are not likely to be conducted in a manner detrimental to the interest 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 of its present or future 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 banks already in existince 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. Similarly, prior permission of the Reserve Bank of India is necessary to open a new place of business in India or to change the existing place of business situated in India. Also, no bank-ing company incorporated in India can open a place of business outside India or change the existing place of business without prior permission of the Reserve Bank of India.
LICENSING OF BANKING COMPANIES
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