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

Two small banking companies, Kaveri Bank Ltd. and Godavari Bank Ltd., jointly request the RBI to help them prepare a proposal for amalgamation. Which statement best reflects the RBI's power under Section 36(1) of the Banking Regulation Act, 1949, and its limits?

Under Section 36(1)(b), the RBI may assist as intermediary or otherwise in amalgamation proposals, but only on a request by the companies concerned and subject to section 44A. It cannot use this clause to compel a merger, and loan assistance is a separate power.

  1. AThe RBI may assist as intermediary or otherwise in the proposal, on a request by the companies concerned and subject to section 44ACorrect
  2. BThe RBI may compel the amalgamation without any request from the companies
  3. CThe RBI may assist only if the Central Government first approves the request
  4. DThe RBI may assist only by granting a loan under section 18 of the RBI Act

Explanation

Section 36(1)(b) allows the RBI, on a request by the companies concerned and subject to section 44A, to assist as intermediary or otherwise in amalgamation proposals. It is request-based, so compulsion is not the power here. Loan assistance is a separate power in clause (c).

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