Section 42H: Bridge bank

42H. Bridge bank.__ (1) The State Bank may, prior to or during the Resolution of a banking company, establish a bridge bank as defined in clause (da) of sub-section (1) of section 5, and in exercise of the powers under clause (g) of sub-section (1) of section 42E to: (a) transfer those of the assets and liabilities of the banking company concerned as determined by the State Bank for orderly Resolution; and (b) initiate the process for liquidation of the banking company concerned. (2) The value of the liabilities transferred to a bridge bank shall not exceed the total value of the assets transferred from the banking company under resolution or funds provided by the Deposit Protection Corporation under clause (a) of sub-section (1) of section 22C of the Deposit Protection Corporation Act, 2016 (XXXVII of 2016), or otherwise, from temporary public funding obtained under section 42I. (3) Notwithstanding anything contained in the Companies Act, 2017 (XIX of 2017) or any other law for the time being in force regarding the incorporation of companies, issuance of shares of other instruments of ownership, Memorandum and Articles of association of the companies, listing of companies, and payment of any fees, duties and taxes for these purposes, the bridge bank shall be incorporated, its share capital issued and allotted, and business commenced, by the order of the State Bank. (4) The bridge bank shall be a member of the Deposit Protection Corporation. (5) The funding for a bridge bank including its capital shall be secured under section 42I from, and its shares shall be allotted to, the Federal Government. (6) The State Bank may prepare a scheme for the establishment of, transfer of all or part of the assets and liabilities to, and the management of the bridge bank, and the exit of the bridge bank from public control and the provisions of section 42G shall apply mutatis mutandis to such a scheme. (7) The State Bank may exempt the bridge bank from compliance with any regulatory and supervisory requirement including capital requirements, as may be necessary, for a period of up to six months, which can be extended once for up to a further six months if deemed necessary by the State Bank, to facilitate business of the bridge bank or to maintain the stability of the financial system. (8) The State Bank shall appoint a person meeting its fit and proper test as an administrator to manage the bridge bank and shall specify the responsibilities and remuneration of such person, who shall be subject to the instructions issued to him by the State Bank: Provided that no State Bank Official can be appointed as an administrator of the bridge bank. (9) Within a period of three years from the establishment of a bridge bank under sub- section (1), the State Bank shall take all possible measures to utilize one of the following options: (a) merger of the bridge bank with another banking company; (b) sale of majority shareholding of the bridge bank to one or more persons; (c) transfer whole or substantial part of the assets and liabilities of the bridge bank to one or more banking companies: Provided that the State Bank shall be at liberty to delay utilization of the options provided under this sub-section beyond the said period of three years where it is satisfied that the delay_ would be in the interests of its Resolution objectives, for such period as it thinks fit, in which instance the State Bank shall publish on its website the reasons for such extension; so however the period of each extension shall not exceed one year; (10) Where in the opinion of the State Bank, none of the options given under sub-section (9) is possible, or where no further extension in term of the bridge bank is warranted, the bridge bank shall be wound up under section 59 or otherwise under section 49.

Effective date: 1962-06-07

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