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CS Professional · Banking and Insurance - Laws and Practice · Control over Organization of Banks

During a moratorium on Kaveri Bank Ltd, a depositor demands full withdrawal of Rs 8 lakh. The Central Government's order contains no special directions on payments. What is the legal position under Section 45?

The bank cannot pay the depositor. Under Section 45(3), during the moratorium it must not pay any depositor or discharge obligations to other creditors, except as permitted by directions of the Central Government in its order or later.

  1. AThe bank must pay since deposits are always repayable on demand
  2. BThe bank may pay only depositors, not other creditors
  3. CThe bank may not pay any depositor or discharge liabilities to other creditors unless the order directs otherwiseCorrect
  4. DThe bank may pay up to half of the deposit

Explanation

Section 45(3) bars the bank from making any payment to depositors or discharging liabilities to other creditors during the moratorium, except as the Central Government's directions provide. No directions exist here, and the provision covers depositors and other creditors alike.

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