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Corporate and Economic Laws · Laws and Regulations related to Banking Sector

Section 45NAA RBI Act: Power Over NBFC Group Companies

Updated 11 October 2026 · Fact-checked

Section 45NAA of the RBI Act, 1934 lets the RBI direct an NBFC to annex or furnish statements and information about any of its group companies. It also lets the RBI inspect or audit a group company and its books, despite the Companies Act, 2013. To solve questions, identify the relationship, then apply sub-section (1) or (2).

Understand Power in Respect of Group Companies (Section 45NAA)

A non-banking financial company (NBFC) often sits inside a larger group. Money and risk can move between the NBFC and other group entities. If the RBI could see only the NBFC, it could miss problems that start elsewhere in the group. Section 45NAA closes that gap.

The section has two powers. Under sub-section (1), the RBI may, at any time, direct an NBFC to annex to its financial statements, or furnish separately, statements and information about the business or affairs of any group company. The RBI sets the time and the intervals. The information must be what the RBI considers necessary or expedient for the purposes of the Act. The direction goes to the NBFC, not to the group company.

Under sub-section (2), the RBI may, at any time, cause an inspection or audit of any group company of an NBFC and its books of account. This applies notwithstanding anything to the contrary in the Companies Act, 2013. So a group company cannot rely on company law provisions to resist it.

The Explanation defines group company. It means an arrangement involving two or more entities related through any of these relationships: subsidiary-parent, joint venture, associate (each as notified by the RBI in accordance with Accounting Standards), promoter-promotee (under the SEBI Act, 1992 or its rules and regulations, for listed companies), related party, common brand name, or investment in equity shares of twenty per cent and above in the entity.

"Accounting Standards" means those notified by the Central Government under section 133, read with section 469, of the Companies Act, 2013 and sub-section (1) of section 210A of the Companies Act, 1956. The section was inserted by Act 23 of 2019 with effect from 9 August 2019.

Related provisions sit nearby. Section 45N of the RBI Act deals with inspection of non-banking institutions, and section 45NB makes information obtained through audit or inspection confidential, with listed exceptions. Do not mix these up with 45NAA.

Key rules to remember

Information power
Section 45NAA(1): RBI directs NBFC → NBFC annexes to its financial statements or furnishes separately statements and information on any group company
The RBI may do this at any time and fixes the time and intervals. The direction is addressed to the NBFC.
Inspection and audit power
Section 45NAA(2): RBI may at any time inspect or audit any group company of an NBFC and its books of account
Applies notwithstanding anything to the contrary in the Companies Act, 2013.
Meaning of group company
Two or more entities related by: subsidiary-parent | joint venture | associate | promoter-promotee | related party | common brand name | equity investment of 20% and above
Subsidiary-parent, joint venture and associate are as notified by the RBI in accordance with Accounting Standards. Common brand name means use of a registered brand name of an entity by another entity for business purposes.
Purpose test
Information the RBI considers necessary or expedient for the purposes of the Act
This is the standard for the information direction in sub-section (1).

How to solve Power in Respect of Group Companies (Section 45NAA) questions

Use this method for any scenario question on RBI powers over group companies of an NBFC.

  1. 1Confirm the main entity is a non-banking financial company. Section 45NAA works through an NBFC.
  2. 2Identify the other entity and test whether it is a group company using the seven relationships in the Explanation.
  3. 3For the 20% test, check that the equity investment is twenty per cent and above, not below.
  4. 4Decide which power is asked about: furnishing statements and information (sub-section 1) or inspection and audit (sub-section 2).
  5. 5For sub-section (1), note that the RBI directs the NBFC, fixes time and intervals, and the information must be what it considers necessary or expedient for the Act.
  6. 6For sub-section (2), note that the RBI may inspect or audit the group company and its books despite the Companies Act, 2013.
  7. 7If confidentiality or disclosure is asked, bring in section 45NB. If inspection of the NBFC itself is asked, bring in section 45N.
  8. 8State a clear conclusion in one line, citing section 45NAA.

Quickest way: Three-check method for 45NAA questions

When to use it: Use it for MCQs and short case questions where you have under two minutes.

  1. Check one: is there an NBFC and a related entity linked by one of the seven listed relationships?
  2. Check two: is the action an information direction (to the NBFC) or an inspection/audit (of the group company)?
  3. Check three: does any option wrongly add a limit, such as needing the group company's consent, or wrongly restrict the RBI to listed companies? Reject it.

Common mistakes in Power in Respect of Group Companies (Section 45NAA)

  • Saying the RBI directs the group company to furnish information under sub-section (1).

    Students assume the power targets the entity whose affairs are in question.

    Fix: Remember the direction is to the NBFC, which annexes or furnishes the group company information.

  • Thinking the Companies Act, 2013 can block inspection of a group company.

    Students forget the non-obstante wording in sub-section (2).

    Fix: Recall that the power applies notwithstanding anything to the contrary in the Companies Act, 2013.

  • Treating a 20% shareholding as insufficient and requiring a majority.

    Group is confused with subsidiary control.

    Fix: The test is investment in equity shares of twenty per cent and above. Control is not needed.

  • Leaving out relationships such as common brand name or related party.

    Students memorise only subsidiary, associate and joint venture.

    Fix: Learn all seven relationships, using a list in your notes.

  • Confusing section 45NAA with section 45N or 45NB.

    All three deal with RBI oversight of non-banking entities.

    Fix: 45NAA covers group companies, 45N covers inspection of non-banking institutions, and 45NB covers confidentiality of information.

Worked examples

Example 1

Shreya Finserv Ltd is an NBFC. The RBI directs it to furnish, within 30 days, statements on the business of Shreya Realty Ltd, in which Shreya Finserv holds 25% of the equity shares. Shreya Realty argues it is not a group company because Shreya Finserv has no control. Is the RBI direction valid?

Show the solution
  1. Shreya Finserv is an NBFC, so section 45NAA can apply.
  2. Group company includes an entity in which there is investment in equity shares of twenty per cent and above.
  3. 25% is above 20%, so Shreya Realty is a group company. Control is not required.
  4. Under section 45NAA(1), the RBI may direct the NBFC to furnish statements and information on any group company, within the time it specifies, if it considers this necessary or expedient for the purposes of the Act.
  5. The direction is addressed to Shreya Finserv, which must obtain and furnish the information.

Answer: Yes. Shreya Realty is a group company because of the 25% equity investment, and the RBI may direct Shreya Finserv to furnish the information under section 45NAA(1).

Example 2

Kaveri Capital Ltd, an NBFC, shares a registered brand name with Kaveri Traders Pvt Ltd, which is not listed and has no shareholding link with Kaveri Capital. The RBI wants to inspect Kaveri Traders' books. Kaveri Traders says the Companies Act, 2013 does not permit such inspection by the RBI. Advise.

Show the solution
  1. Check the relationship: usage of a registered brand name of an entity by another entity for business purposes is a listed relationship, so Kaveri Traders is a group company.
  2. The lack of shareholding or listing is irrelevant, since each relationship in the Explanation is independent.
  3. Section 45NAA(2) lets the RBI, at any time, cause an inspection or audit of any group company of an NBFC and its books of account.
  4. This applies notwithstanding anything to the contrary in the Companies Act, 2013, so the objection fails.

Answer: The RBI may inspect or audit Kaveri Traders and its books under section 45NAA(2). The common brand name makes it a group company, and the Companies Act, 2013 does not override the power.

Exam tips

  • Learn the seven relationships in the Explanation as a list. MCQs often test one of them, especially common brand name and the 20% equity test.
  • Be exact on who receives the direction: the NBFC under sub-section (1). Options that name the group company are a common trap.
  • Remember the phrase 'notwithstanding anything to the contrary in the Companies Act, 2013' for sub-section (2).
  • In case questions, write the section number, the relationship that makes the entity a group company, and your conclusion in separate lines.
  • Know the neighbours: 45N (inspection) and 45NB (confidentiality), so you can pick the right section when options are close.

Practice questions from Laws and Regulations related to Banking Sector

Power in Respect of Group Companies (Section 45NAA): frequently asked questions

What does Section 45NAA of the RBI Act cover?

It gives the RBI power over group companies of an NBFC. The RBI can direct the NBFC to annex or furnish statements and information about a group company, and it can cause an inspection or audit of a group company and its books.

Who is a group company under Section 45NAA?

It is an arrangement of two or more entities related through subsidiary-parent, joint venture, associate, promoter-promotee, related party, common brand name, or equity investment of twenty per cent and above. The first three are as notified by the RBI in accordance with Accounting Standards.

Can the RBI inspect a group company even if the Companies Act, 2013 says otherwise?

Yes. Sub-section (2) applies notwithstanding anything to the contrary in the Companies Act, 2013. The RBI may inspect or audit the group company and its books of account at any time.

Does the RBI need the NBFC to hold a majority stake for a company to be a group company?

No. An equity investment of twenty per cent and above is enough, and several other relationships such as related party or common brand name also qualify.