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

During a valid moratorium on Kaveri Bank Ltd., a depositor, Mr. Iyer, demands full repayment of his fixed deposit of Rs 4,00,000. No directions were given by the Central Government in the moratorium order. What is the position under Section 45?

The bank cannot pay him. During the moratorium, Section 45(3) prohibits payments to depositors and discharge of obligations to other creditors, except as the Central Government's order or later directions permit. Without such directions, the Rs 4,00,000 deposit cannot be repaid.

  1. AThe bank must pay him because deposits are always protected
  2. BThe bank must pay him within 30 days or face winding up
  3. CThe bank may pay only up to half the deposit
  4. DThe bank cannot pay any depositor unless the Central Government's directions allow itCorrect

Explanation

Section 45(3) bars the banking company from making any payment to depositors or discharging liabilities to other creditors during the moratorium, except as directed by the Central Government in its order or later. No such directions exist, so no payment may be made.

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