Multiple choice

A bank can invest in the shares of a company as pledge, mortgage or absolute owner maximum to the extent of

  1. 30% of the paid-up capital of the bank or 30% of the paid-up capital of the company, whichever is lower

  2. 30% of the paid-up capital of the bank or 30% of the paid-up capital and reserves of the company, whichever is lower

  3. 30% of the paid-up capital and reserves of the bank or 30% of the paid-up capital of the company, whichever is lower

  4. 30% of the paid-up capital of the bank or 30% of the paid-up capital of the company, whichever is higher
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In terms of Section 19(2) of the Banking Regulation Act, 1949, banks should not hold shares in any company except as provided in Sub-section (1) whether as pledgee, mortgagee or absolute owner of an amount exceeding 30% of the paid-up share capital of that company or 30% of its own paid-up share capital and reserves, whichever is less.

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