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

The RBI proposes to cancel the licence of Tapti Bank Ltd. because its capital structure is no longer adequate (a Section 22(3) condition). No depositor risk from delay is apparent. Tapti is aggrieved if the licence is cancelled. Which statement is correct?

The RBI must ordinarily give the bank an opportunity to fulfil the unmet condition before cancelling, unless delay would prejudice depositors or the public. An aggrieved bank may appeal to the Central Government within thirty days of the decision being communicated, and that decision is final.

  1. AThe RBI may cancel at once without notice, and no appeal lies
  2. BThe RBI must normally first give the bank an opportunity to take steps to fulfil the condition; if cancelled, appeal lies to the Central Government within thirty days of communicationCorrect
  3. CThe bank may appeal to the Central Government within sixty days, and the RBI decision then remains final
  4. DThe RBI must first give an opportunity only when the breach is of a licence condition under Section 22(1), not Section 22(3)

Explanation

The proviso to Section 22(4) requires the RBI to give an opportunity to comply for breach of either licence conditions (clause ii) or Section 22(3) conditions (clause iii), unless delay would prejudice depositors or the public. Under Section 22(5) appeal lies to the Central Government within thirty days of communication, and its decision is final.

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