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

Under Section 22(4) of the Banking Regulation Act, 1949, the RBI finds that Deccan Union Bank Ltd has failed to fulfil a Section 22(3) condition. Which statement about the RBI's power to cancel the licence is correct?

The RBI may cancel at once without giving time to comply if it is of opinion that delay would prejudice depositors or the public. Otherwise, the Section 22(4) proviso requires it to give the bank an opportunity to meet the unfulfilled condition first.

  1. AIt must always give the bank an opportunity to fix the shortfall, with no exception
  2. BIt may cancel immediately without any opportunity if it considers that delay would prejudice depositors or the publicCorrect
  3. CIt cannot cancel a licence for failure of a Section 22(3) condition, only for ceasing business
  4. DIt can cancel only after obtaining prior consent of the Central Government

Explanation

Section 22(4) permits cancellation if any Section 22(3) condition is not fulfilled. The proviso requires RBI to give an opportunity to comply on specified terms unless it is of opinion that delay will be prejudicial to depositors or the public. Option A ignores this exception; option C is wrong because clause (iii) covers unfulfilled conditions; option D adds a consent requirement not in the Act.

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