Skip to content

CS Professional · Banking and Insurance - Laws and Practice · Overview of Indian Banking System

The Reserve Bank finds that Orient Bank Ltd no longer meets one of the Section 22(3) conditions and proposes to cancel its licence on that ground. The Reserve Bank does not believe that delay would harm depositors or the public. What must it do before cancelling?

The Reserve Bank must first give the company, on terms it specifies, an opportunity to take the steps needed to fulfil the condition. This is required by the proviso to Section 22(4) unless the Reserve Bank thinks delay would prejudice depositors or the public, which is not the case here.

  1. ACancel immediately, since a failed condition automatically ends the licence
  2. BObtain prior approval from the Central Government
  3. CGrant the company, on terms it specifies, an opportunity to take the steps needed to fulfil the conditionCorrect
  4. DSeek the consent of a majority of depositors

Explanation

The proviso to Section 22(4) requires the Reserve Bank, before cancelling under clause (ii) or (iii) for failure to comply with or fulfil a condition, to give the company an opportunity on specified terms to take necessary steps. The only exception is where it considers that delay would prejudice depositors or the public. Here no such opinion exists, so the opportunity must be given.

Did you get it right without looking?

One question tells you little. A timed set on Overview of Indian Banking System shows your real accuracy, how long you take and where you lose marks.

Practise Overview of Indian Banking SystemFree diagnostic mock

More Overview of Indian Banking System questions