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      Question

      Section 36AB of the Banking Regulation Act, 1949

      empowers the Reserve Bank to appoint additional directors on the Board of a banking company. Under sub-section (2), a person so appointed as additional director shall hold office during the pleasure of the Reserve Bank and, subject thereto, for an initial period not exceeding three years. Section 36AB further provides that an additional director so appointed shall not be required to hold qualification shares and shall:
      A Not be taken into account when reckoning any proportion of the total number of directors of the banking company Correct Answer Incorrect Answer
      B Automatically be counted for the purpose of reckoning the total number of directors Correct Answer Incorrect Answer
      C Receive remuneration equal to that of the highest-paid independent director Correct Answer Incorrect Answer
      D Vacate office as soon as the Reserve Bank’s concern that prompted the appointment is resolved Correct Answer Incorrect Answer
      E Be required to hold qualification shares within six months of appointment Correct Answer Incorrect Answer

      Solution

      Section 36AB(2) provides that a person appointed as additional director shall: (a) hold office during the pleasure of the Reserve Bank for a period not exceeding three years, extendable in further periods not exceeding three years at a time; (b) not incur any obligation or liability by reason only of being a director or for anything done in good faith; and (c) not be required to hold qualification shares in the banking company. Crucially, Section 36AB(3) provides that for the purpose of reckoning any proportion of the total number of directors of the banking company, any additional director appointed under this section shall NOT be taken into account. This means their appointment does not dilute proportions such as the minimum of two directors with agricultural or rural economy expertise required under Section 10A’s proviso.

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