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

Narmada Bank Ltd's licence was cancelled by RBI. It did not appeal. Later it repaid all its deposits in full. Which statement reflects the Banking Regulation Act, 1949?

RBI may, once satisfied that deposits are repaid or adequately provided for, publish a gazette notice declaring that the company has ceased to be a banking company. The Act then stops applying to it, except for things done or omitted before the notice. Cessation is not automatic.

  1. ARBI may, by notice in the Official Gazette, notify that it has ceased to be a banking company, after which the Act stops applying except to past acts or omissionsCorrect
  2. BThe bank automatically ceases to be a banking company on repaying deposits, without any notice
  3. CThe cancellation decision is reviewable by RBI at any time since it is not final
  4. DSections 11 and 12(1) continue to apply to it until the Central Government directs otherwise

Explanation

Cancelled-licence banks are exempt from sections 11, 12(1), 17, 18, 24 and 25 under section 36A(1)(b). Under 36A(2), once RBI is satisfied deposits are repaid or adequately provided for, it may notify in the Official Gazette that the company has ceased to be a banking company. The Act then ceases to apply except for earlier acts or omissions. Automatic cessation is wrong because notification is required.

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