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CS Professional · Banking and Insurance - Laws and Practice · Banking Operations

Before granting a licence to Kaveri Banking Co. Ltd, the Reserve Bank examines its proposed directors and finds their general character of management may prejudice depositors' interests. Which condition under Section 22(3) is directly in issue?

The condition in issue is that the general character of the proposed management must not be prejudicial to the public interest or the interest of depositors. This is a distinct licensing condition under Section 22(3), separate from capital adequacy, depositor payment capacity and banking system considerations.

  1. AThat the company has adequate capital structure and earning prospects
  2. BThat the general character of the proposed management will not be prejudicial to public interest or depositors' interestCorrect
  3. CThat the company can pay present or future depositors in full as claims accrue
  4. DThat the grant would not prejudice the operation and consolidation of the banking system in the area

Explanation

Section 22(3)(c) specifically deals with the general character of the proposed management not being prejudicial to public interest or depositors' interest. The other options are separate conditions: (a) payment of depositors, (d) capital and earnings, (f) banking system consolidation.

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