The cab driver was arrested for rash driving and his license was [fill-regular] by the police.

Let’s understand the meaning of the given options with the assistance of the hint:
a)Impounded- It refers to the confiscation of official documents or vehicles by the legal authorities thanks to the violation of the law. It may be utilized in the above content. Hence, it's the proper option.
Example- The police have impounded all the vehicles that were parked behind the park.
b)Prescribed- It refers to the principles imposed or established by the official authority. It can't be employed in the above context. Hence, it's an incorrect option.
Example- the govt has prescribed some rules associated with education.
c)Suspended- It refers to the sentence imposed by a judge for a specified period of your time. It can't be employed in the above context. Hence, it's an incorrect option.

Example- The criminal was given a suspended jail term of 12 months.
d)Penalised- It refers to facing punishment or a penalty. It can't be utilized in the above context. Hence, it's an incorrect option.
Example- All the non-tax payers are going to be penalised.
The correct answer is Option ‘a’.

Note: try and understand the meaning of the words and therefore the context during which they're used.