Bank Branch Licensing in India – Section 23 BR Act

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The opening of branches by banks is governed by the provisions of Section 23 of the Banking Regulation Act, 1949 (the Act). In terms of these provisions, banks without the prior approval of the RBI, cannot open a new place of business in India or abroad or change otherwise than within the same city, town or village, the location of the existing place of business. Foreign banks are allowed to operate in India through branches only. A foreign bank desirous of opening its maiden branch in India may apply to RBI giving relevant information about the bank, its major shareholders, financial position, etc. The branch licensing falls within the ambit of RBI.

Branch Licensing

Condition for Branch Licensing

The Reserve Bank of India may grant permission for opening new branch or transfer existing place of business, if is satisfied with:

  • financial condition and history of bank
  • the general character of its management
  • the adequacy of its capital structure and earning prospects
  • public interest will be served by the opening or as the case may be

The Reserve Bank may require to be satisfied by an inspection under section 35 of Banking Regulation Act.

The regional rural bank requires the permission of the Reserve Bank shall forward its application to the Reserve Bank through the NABARD which shall give its comments on the merits of the application and send it to the Reserve Bank.

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Tags: Licensing of Banking Companies, Licensing of Banking Companies JAIIB

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