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CS Professional · Banking and Insurance - Laws and Practice · Regulatory Framework of Banks

After an MPC decision, it is found that one of the three Government-appointed Members had been defectively appointed, and a minor procedural irregularity occurred that did not affect the merits. A borrower argues that the rate decision is void. Under the RBI Act, 1934, the correct position is that:

The decision is not invalid merely on those grounds. The Act protects MPC proceedings from challenge for vacancies, defects in constitution, defects in a Member's appointment, or procedural irregularities that do not affect the merits of the case.

  1. AThe decision is invalid because the committee was defectively constituted
  2. BThe decision is invalid unless the Central Board ratifies it
  3. CThe decision is not invalid merely for these reasonsCorrect
  4. DThe decision is valid only if the Governor voted in the majority

Explanation

Section 45ZF says no act or proceeding of the MPC is invalid merely because of a vacancy or defect in constitution, a defect in the appointment of a Member, or a procedural irregularity not affecting the merits. Ratification by the Central Board is not required.

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