The cab driver was arrested for rash driving and his license was ______ by the police.

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Impounded

answer is A.

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Impounded- It means to the confiscation of vehicles or official documents by legal authorities due to the violation of the law. It is the required answer, so it is a correct answer.
Example- The police have impounded all the cars that were parked in the park.
Option B: Prescribed- It refers to the principles established or imposed by the official authority. It is not a required answer.
Example- The govt has prescribed some rules about vehicles.
Option C: Suspended- It means to the sentence stated by a higher authority or by judge for a particula period time. It is not the required answer.
Example- The suspect of robbery was given a suspended jail term of 9 months.
Option D: Penalised- It means to facing penalty or punishment. It is not the required answer.
Example- All the latecommers are going to be penalised.
Hence, option A is the correct answer.