Question

Section 12(1)(i) of the Banking Regulation Act, 1949 conditions the right to carry on banking business in India on the banking company satisfying certain capital-structure requirements. Which of the following correctly states that requirement?

Q: Answer-Section 12(1)(i) of the Banking Regulation Act, 1949 conditions the right to carry on banking busine...

Section 121i requires that the subscribed capital of the banking company is not less than one-half of the authorised capital, and the paid-up capital is not less than one-half of the subscribed capital. If the capital is increased, the company must comply with these conditions within such period not exceeding two years as the Reserve Bank may allow. The provision prevents situations where a company has a nominally large authorised capital but minimal subscribed and paid-up capital, which could mislead depositors and other stakeholders about the banks financial strength. Section 121ii, substituted by the Banking Laws Amendment Act, 2012, further provides that a banking companys capital must consist only of equity shares, or of equity shares and preference shares issued in accordance with RBI guidelines.

A The paid-up capital must be not less than the authorised capital

B The subscribed capital must not be less than one-half of the authorised capital, and the paid-up capital must not be less than one-half of the subscribed capital

C The paid-up capital must equal at least twenty-five per cent of the authorised capital

D The subscribed capital must equal the authorised capital at all times

E The paid-up capital must not be less than the entire subscribed capital

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