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

The Central Government ordered a moratorium on Lakshmi Bank Ltd. for three months and later extended it twice, by two months each time. Is the second extension valid under Section 45?

The second extension is not valid, because the total moratorium would become seven months. Section 45(2) permits extensions from time to time, but the total period of moratorium cannot exceed six months.

  1. ANo, the total would be seven months, exceeding the six-month limitCorrect
  2. BYes, because the Central Government may extend without any limit
  3. CYes, because the six-month limit applies to each extension separately
  4. DNo, because a moratorium cannot be extended even once

Explanation

The initial period is 3 months. After the first extension it is 3+2 = 5 months. The second extension would make 7 months. Section 45(2) allows extensions but the total moratorium cannot exceed six months, so the second extension as stated is beyond the limit.

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