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CS Professional · Banking and Insurance - Laws and Practice · Banking Operations

Lakshmi Co-banking Ltd, an Indian banking company, had its licence cancelled under Section 22 and later repaid all its deposits in full. Which statement correctly describes the effect under Section 36A?

Once the Reserve Bank is satisfied that deposits have been repaid or provided for, it may publish a Gazette notice that the company has ceased to be a banking company. The Act's provisions then stop applying to it, except for things done or omitted earlier. Cessation is not automatic.

  1. ASections 11, 12(1), 17, 18, 24 and 25 continue to apply to it until it is wound up
  2. BThe Reserve Bank may, by notice in the Official Gazette, notify that it has ceased to be a banking company, after which the Act's provisions applicable to it cease, except for things done earlierCorrect
  3. CThe Central Government alone may declare it to have ceased to be a banking company
  4. DIt automatically ceases to be a banking company on repayment, without any notice

Explanation

Under Section 36A(1) the listed provisions do not apply to a company whose licence was cancelled. Under 36A(2), once the Reserve Bank is satisfied that deposits are repaid or adequately provided for, it may notify in the Official Gazette that the company has ceased to be a banking company; thereafter the Act's provisions cease to apply except for earlier acts. Cessation is not automatic.

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