CAIIB BRBL Important Banking Laws, Sections and Case-Based Questions

1. A banking company wants to start a wholly owned subsidiary for undertaking equipment leasing, which is one of the activities permitted to banking companies. The compliance team asks whether the parent bank can lawfully engage in such business. Which provision of the Banking Regulation Act, 1949 is most directly relevant?

2. A bank acquires an immovable property in satisfaction of a large defaulted loan. Seven years pass and the property has still not been disposed of. The bank seeks additional time from RBI. What is the legally correct position under the Banking Regulation Act?

3. The board of a banking company is being reconstituted. Only 40% of directors have special knowledge or practical experience in fields such as accountancy, agriculture, banking, economics, finance or law. What is the principal compliance issue?

4. A banking company proposes to grant an unsecured personal loan to one of its directors. The credit committee argues that normal credit appraisal is sufficient. Which legal position is correct?

5. A newly incorporated company has adequate capital and infrastructure but begins accepting deposits and carrying on banking business without obtaining RBI approval. Which requirement has been breached?

6. A bank wishes to open a new place of business in another city and shift an existing branch outside the same city. Management assumes its banking licence automatically covers these actions. What is the correct legal view?

7. During inspection, RBI finds that a bank’s loan appraisal practices are exposing depositors to serious risk. RBI decides to issue binding directions in public interest and in the interest of banking policy. Which provision gives RBI this power?

8. An inspection team appointed by RBI seeks access to the books, accounts and documents of a banking company. The bank refuses, stating that only its statutory auditor may inspect such records. Which provision is most relevant?

9. A scheduled bank’s average daily balance with RBI falls below the cash reserve requirement prescribed by RBI. Under which statute is the scheduled bank’s CRR obligation principally governed?

10. A private company issues instruments payable to bearer on demand and markets them to the public as substitutes for currency notes. Which RBI Act provision is directly attracted?

11. A customer deposits an old high-denomination RBI banknote and argues that only RBI may issue banknotes in India. Which provision establishes RBI’s exclusive right to issue banknotes, subject to the statutory exceptions?

12. A bank has unclaimed deposit balances that have remained inoperative/unclaimed for the statutory period and asks where they must be transferred. Which mechanism under the Banking Regulation Act applies?

13. A banking company proposes to declare dividend without making the prescribed transfer out of current year’s profits to its reserve fund. Which Banking Regulation Act provision is relevant?

14. RBI considers that a bank is following excessively risky lending practices in a particular sector and prescribes margins, exposure conditions and other lending restrictions. Which provision most directly supports such control over advances?

15. RBI finds that the chief executive of a banking company is acting in a manner detrimental to depositors. RBI proposes removal after following the statutory process. Which provision deals with removal of managerial and other persons from office?

16. A bank facing severe financial stress is placed under a temporary moratorium while a scheme of reconstruction or amalgamation is considered. Which Banking Regulation Act provision contains the special framework for such moratorium and reconstruction?

17. A banking company begins buying and selling goods as a regular trading business unrelated to realization of security. Which statutory restriction is most directly implicated?

18. A scheduled bank argues that it need not maintain any liquid assets because it already maintains CRR with RBI. Which statement correctly distinguishes the obligations?

19. A shareholder in a banking company acquires a very large block of shares and assumes that voting power will always equal the percentage of shares held. Which provision is relevant to statutory limits on voting rights in a banking company?

20. A bank’s management contends that RBI can inspect only after receiving a depositor complaint. Which is the better legal position?