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    Question

    Under the Banking Companies (Acquisition and Transfer of

    Undertakings) Act, 1970, what is the restriction on shareholding by a company in a corresponding new bank (nationalised bank)?
    A No company can hold more than 10% of the paid-up capital of a corresponding new bank at any time Correct Answer Incorrect Answer
    B No company can hold or acquire shares in a corresponding new bank such that its aggregate investment exceeds the percentage, not being more than 20% of the paid-up capital, as specified by the Central Government Correct Answer Incorrect Answer
    C Foreign companies are prohibited entirely from holding any shares in corresponding new banks Correct Answer Incorrect Answer
    D No individual or company can hold more than 5% of paid-up capital without prior approval from the RBI and Central Government Correct Answer Incorrect Answer

    Solution

    The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 provides that no company shall hold or acquire shares in a corresponding new bank such that its aggregate investment exceeds the percentage not being more than 20% of the paid-up capital as specified by the Central Government by notification in the Official Gazette. This restriction ensures that no single corporate entity can acquire a dominant stake in a nationalised bank. The Central Government holds a majority stake in all corresponding new banks established under this Act.

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