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CS Professional · Banking and Insurance - Laws and Practice · Overview of Indian Banking System

RBI wants to stop Vikas Credit Ltd, an NBFC, from lending to a single group of companies beyond a ceiling linked to its paid-up capital, reserves and deposits. Under section 45JA(2), what may RBI do?

RBI may give directions on the maximum amount of advances, other financial accommodation or investments in shares and securities that an NBFC can make to any person, company or group of companies, considering its paid-up capital, reserves and deposits. This is in addition to its power to bar advances for specified purposes.

  1. ADirect the maximum amount of advances or investments the NBFC may make to a person, company or group of companiesCorrect
  2. BCancel the shares held by the chairman of the NBFC
  3. CAppoint an Administrator to run the NBFC for up to ten years
  4. DDirect only the purposes for which advances may not be made, and not the maximum amount

Explanation

Section 45JA(2)(b) allows RBI to fix the maximum amount of advances, financial accommodation or investment in shares and securities to any person, company or group, having regard to paid-up capital, reserves and deposits. Option D ignores clause (b); clause (a) covers prohibited purposes in addition.

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