The question (10 marks)
Distinguish the cash reserve requirement from the requirement to maintain liquid assets, identifying the statute and section for each and the consequences of a shortfall. (10 marks)
MU Module 2, head 2.4; pack chapter on the Banking Regulation Act.
Plan your answer on paper before you look at the authorities — issue first, then the rule, then apply it to these facts.
It tests Unit 2 · The Laws Governing Financial Institutions of Law of Banking and Negotiable Instruments.
Authorities you will need
- Reserve Bank of India Act 1934, s. 42
- Banking Regulation Act 1949, ss. 18, 24, 25
- Banking Regulation Act 1949, s. 24(4) to (8), on penal interest and its enforcement
How an answer is marked
A full-marks answer names the issue in one line, states the rule with its section, cites the authority, applies it to these facts and concludes — in that order. The app's model answer for this question is written in exactly that shape, with a checklist to mark your own attempt against.