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

While considering a licence application from Bharat Mercantile Ltd, the RBI inspects its books. Which of the following findings would NOT, by itself, be one of the conditions the Reserve Bank may require to be satisfied under Section 22(3) of the Banking Regulation Act, 1949?

Promoters holding majority shares in ten other listed companies is not a listed condition. Section 22(3) lists depositor payment ability, non-detrimental affairs, management character, adequate capital and earning prospects, public interest and banking system consolidation, plus any other condition RBI considers necessary.

  1. AThe company has adequate capital structure and earning prospects
  2. BThe company is, or will be, in a position to pay its present or future depositors in full as claims accrue
  3. CThe company's promoters hold a majority of shares in at least ten other listed companiesCorrect
  4. DThe general character of the proposed management will not be prejudicial to the public interest or depositors' interest

Explanation

Section 22(3) lists conditions such as ability to pay depositors in full, affairs not detrimental to depositors, non-prejudicial management, adequate capital and earning prospects, public interest, and no prejudice to the banking system. Promoter shareholding in other listed companies is not a listed condition, though clause (g) lets RBI add other conditions in its opinion; as a standalone item it is not one of them.

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