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

Lotus Bank Ltd, a banking company, was refused a licence under section 22 and is now prohibited from accepting fresh deposits. It has repaid all deposits in full. The Reserve Bank is satisfied about this. What can the Reserve Bank do under section 36A?

The Reserve Bank may publish a notice in the Official Gazette declaring that the company has ceased to be a banking company. Once deposits are repaid or adequately provided for, the Act's provisions stop applying to it, except for things done or omitted before the notice.

  1. ARestore its licence automatically
  2. BNotify in the Official Gazette that it has ceased to be a banking company, after which the Act's provisions cease to apply except for earlier acts or omissionsCorrect
  3. CRequire it to continue as a banking company for three more years
  4. DTransfer its business to the Central Government

Explanation

Under section 36A(2), where the Reserve Bank is satisfied that deposits have been repaid in full or adequately provided for, it may by Gazette notice declare that the company has ceased to be a banking company. Thereafter the Act's provisions applicable to it cease, except for things done or omitted before the notice. Nothing in the section restores a licence.

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