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

Mr. Rao, chairman of State Bank of India, is invited to serve as a director of an institution approved by the Reserve Bank. Under the proviso to Section 51(1), what is the position of the restriction in clause (c) of sub-section (1) of section 10?

The restriction in section 10(1)(c) does not apply to the SBI chairman insofar as it would stop him from being a director of, or holding office in, an institution approved by the Reserve Bank. Proviso (a) to Section 51(1) grants this specific relaxation.

  1. AThe restriction fully applies, so he cannot hold the office
  2. BThe restriction does not apply to him to the extent it prevents him from being a director of, or holding office in, an RBI-approved institutionCorrect
  3. CThe restriction applies only if the institution is a banking company
  4. DHe may hold the office only with prior Central Government approval

Explanation

Proviso (a) to Section 51(1) says clause (c) of section 10(1) does not apply to the chairman of SBI (or to a managing director of a subsidiary bank) insofar as it would preclude him from being a director of, or holding an office in, an institution approved by the Reserve Bank. Hence the restriction is relaxed for this purpose.

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