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

The RBI finds that a systemically important NBFC, Bharat Urban Credit Ltd, has a viable lending business and a non-viable legacy book. To preserve activities critical to the financial system, it frames a scheme under section 45MBA of the RBI Act, 1934 and splits the company into two units. What is the temporary institution created to carry the critical activities called?

It is called a Bridge Institution. Section 45MBA(1)(c) lets the RBI split an NBFC and set up Bridge Institutions as temporary arrangements to preserve continuity of activities critical to the functioning of the financial system.

  1. AAdministrator Committee
  2. BBridge InstitutionCorrect
  3. CResolution Trust
  4. DHolding Entity

Explanation

Section 45MBA(1)(c) permits splitting an NBFC into units, vesting viable and non-viable businesses separately, and establishing 'Bridge Institutions'. The Explanation defines them as temporary arrangements preserving continuity of critical activities. The other names are not used in the section.

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