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

Sarvodaya Finserve Bank Ltd, a banking company, stops carrying on banking business in India altogether after transferring its customers to another bank. Under the Banking Regulation Act, 1949, what is the position regarding its licence?

The Reserve Bank may cancel the licence because the company has ceased to carry on banking business in India. This is an independent ground under section 22(4)(i), and the opportunity to comply required for other grounds does not apply to it.

  1. AThe Reserve Bank may cancel the licence because the company has ceased to carry on banking business in IndiaCorrect
  2. BThe licence can be cancelled only by the Central Government
  3. CThe licence lapses automatically after thirty days without any order
  4. DThe Reserve Bank must first give the company an opportunity to resume banking business before cancelling

Explanation

Section 22(4)(i) lets the Reserve Bank cancel a licence if the company ceases to carry on banking business in India. The opportunity-to-comply proviso applies only to cancellation under clauses (ii) and (iii), so option 3 is wrong. The Central Government hears appeals but does not cancel licences.

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