CS Professional · Banking and Insurance - Laws and Practice · Banking Operations
While considering the licence application of Kaveri Finance Bank Ltd, the RBI finds that the promoters' proposed management has a record that would be prejudicial to depositors' interests. Which Section 22(3) condition is most directly in question?
The relevant condition is that the general character of the proposed management must not be prejudicial to the public interest or the interest of depositors. This is Section 22(3)(c). Capital adequacy and area-based banking system considerations are separate conditions and do not address concerns about the promoters' management.
- AThat the company has adequate capital structure and earning prospects
- BThat the general character of the proposed management will not be prejudicial to the public interest or the interest of its depositorsCorrect
- CThat the grant of licence would not prejudice the operation and consolidation of the banking system in the area
- DThat the company is in a position to pay its present or future depositors in full as their claims accrue
Explanation
Section 22(3)(c) requires satisfaction that the general character of the proposed management will not be prejudicial to the public interest or the depositors' interest. Capital structure is clause (d), and the area and banking system test is clause (f), so those do not address the management issue.
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