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

Ganga Bank Ltd is asked to register a transfer of 7% of its shares to Vistara Holdings. The RBI had already approved the acquisition subject to the condition that any further acquisition needs its prior approval. Before registering the transfer, what must the bank do under Section 12B(5)?

The bank must ensure that sub-section (1) is complied with and, because the acquisition has RBI approval, that the conditions attached under sub-section (4) are fulfilled. Section 12B(5) places this duty on the banking company before issuing, allotting or registering transfers.

  1. AEnsure compliance with sub-section (1) and, as the acquisition is approved, that the conditions imposed under sub-section (4) are fulfilledCorrect
  2. BEnsure only that the transferee pays the stamp duty
  3. CObtain a fresh approval from shareholders by special resolution
  4. DEnsure only that sub-section (1) is complied with; approval conditions are RBI's concern alone

Explanation

Section 12B(5) obliges the banking company, before issuing, allotting or registering transfer of shares, to ensure the requirements of sub-section (1) are met and, where approval was given, that conditions under sub-section (4) are fulfilled. The last option omits the second duty.

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