Module: | Priority Sector, Consumer Protection & Digital Lending
Q78: If a bank persists in defaulting on its CRR maintenance after the first instance, the RBI imposes stricter penalties. Which of the following consequences is NOT prescribed for the immediate subsequent days of continued default?
✅ Correct Answer: C
The correct answer is C. When a bank persists in defaulting on its Cash Reserve Ratio (CRR) after the first instance, the RBI escalates the penal provisions.
Option A is a prescribed consequence: the penal interest rate increases from Bank Rate + 3% to Bank Rate + 5% for subsequent days of continued default.
Option B is also prescribed: directors and officers knowingly party to the default can be held personally liable and fined.
Option D is a valid regulatory action: the RBI holds the power to prohibit the defaulting bank from accepting any fresh deposits.
However, Option C is not prescribed for immediate subsequent days.
While the RBI possesses the ultimate theoretical power to cancel a banking license for chronic regulatory violations, this is an extreme "last resort" measure and is absolutely not an automatic or immediate consequence triggered simply after the 2nd day of CRR default.
Option A is a prescribed consequence: the penal interest rate increases from Bank Rate + 3% to Bank Rate + 5% for subsequent days of continued default.
Option B is also prescribed: directors and officers knowingly party to the default can be held personally liable and fined.
Option D is a valid regulatory action: the RBI holds the power to prohibit the defaulting bank from accepting any fresh deposits.
However, Option C is not prescribed for immediate subsequent days.
While the RBI possesses the ultimate theoretical power to cancel a banking license for chronic regulatory violations, this is an extreme "last resort" measure and is absolutely not an automatic or immediate consequence triggered simply after the 2nd day of CRR default.