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

RBI decides to cancel the licence of Sagar Finance Bank Ltd because it failed to comply with a condition imposed on it when the licence was issued. Ordinarily, what must RBI do before cancelling?

RBI must ordinarily give the bank an opportunity, on terms it specifies, to take the necessary steps to comply with the condition before cancelling. The only exception is where RBI believes delay would prejudice depositors or the public. No court order or waiting period applies.

  1. AGive the bank an opportunity, on terms RBI specifies, to take steps to comply with the conditionCorrect
  2. BObtain a High Court order authorising cancellation
  3. CWait three years from the date of the default
  4. DPublish the decision in the Official Gazette for objections

Explanation

The proviso to section 22(4) requires RBI to give an opportunity to take necessary steps to comply before cancelling under clause (ii) or (iii). The exception is where RBI thinks delay would harm depositors or the public. No court order, waiting period or gazette objection step is required.

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