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

Himalaya Bank Ltd. holds an RBI licence that was granted subject to a condition imposed under Section 22(1). The bank fails to comply with that condition. The RBI sees no risk that delay would harm depositors or the public. What must the RBI do before cancelling the licence on this ground?

The RBI must first give the bank, on terms it specifies, an opportunity to take the necessary steps to comply with the condition. This is required by the proviso to Section 22(4) unless delay would prejudice depositors or the public, which is not the case here.

  1. ACancel immediately, since non-compliance with a condition permits cancellation without notice
  2. BGrant the bank, on terms it specifies, an opportunity to take the necessary steps to complyCorrect
  3. CObtain prior approval of the Central Government
  4. DWait for the bank's shareholders to pass a resolution to surrender the licence

Explanation

Under the proviso to Section 22(4), before cancelling for failure to comply with conditions (clause (ii) or (iii)), the RBI must give an opportunity to comply on specified terms, unless it thinks delay would prejudice depositors or the public. No such exception applies here, and no Central Government prior approval is needed.

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