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

Himalaya Commercial Bank Ltd is in serious difficulty. The Reserve Bank believes there is good reason to halt actions against it. Under Section 45 of the Banking Regulation Act, 1949, what is the correct first step?

The Reserve Bank applies to the Central Government for an order of moratorium. The power to make the order lies with the Central Government, which may stay actions and proceedings against the bank for a fixed period, not exceeding six months in total.

  1. AThe Reserve Bank itself issues a moratorium order for one year
  2. BThe Reserve Bank applies to the Central Government for an order of moratoriumCorrect
  3. CThe bank's Board applies to the High Court for a moratorium
  4. DThe Central Government appoints a liquidator before any moratorium

Explanation

Section 45(1) lets the Reserve Bank apply to the Central Government for a moratorium order; the Central Government, not the RBI, makes the order under sub-section (2). The total moratorium cannot exceed six months, so a one-year order is wrong.

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