Section 38(3)(b) of the Banking Regulation Act, 1949

Solution

Section 38(3)(b)(iii) provides that the Reserve Bank may make a winding-up application if, in its opinion, the continuance of the banking company is prejudicial to the interests of its depositors. This is a broadly framed ground that gives the Reserve Bank supervisory discretion to initiate winding up where ongoing operation itself is harmful — even if no specific regulatory breach has been identified. The other grounds under Section 38(3)(b) include: where a court-sanctioned compromise cannot be worked satisfactorily (clause (b)(i)), and where returns or information furnished disclose that the company is unable to pay its debts (clause (b)(ii)). Section 38(3)(a) separately lists specific regulatory failures — such as non-compliance with Section 11, loss of licence, prohibition from receiving deposits, or continuing contraventions — as grounds on which the RBI may apply.