CS Professional · Banking and Insurance - Laws and Practice · Banking Operations
Before granting a licence to Kaveri Banking Co. Ltd., the RBI inspects its books and finds that the promoters' general character of proposed management is doubtful and could harm depositors. Which licensing condition under Section 22(3) is directly in question?
The condition in question is that the general character of the proposed management must not be prejudicial to the public interest or to depositors' interests. This is a separate licensing test from capital adequacy, payment ability, or the effect on the banking system in the proposed area.
- AThat the company has adequate capital structure and earning prospects
- BThat the general character of the proposed management will not be prejudicial to the public interest or the interest of its depositorsCorrect
- CThat the company is in a position to pay depositors in full as claims accrue
- DThat the grant will not prejudice consolidation of the banking system in the area
Explanation
Section 22(3)(c) deals specifically with the general character of the proposed management and whether it would be prejudicial to public interest or depositors. Clause (d) concerns capital and earning prospects, clause (a) concerns ability to pay depositors, and clause (f) concerns area banking facilities.
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