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CMA Final · Risk Management in Banking and Insurance · Management of Non-Performing Assets (NPAs)

Under Section 29A, which of the following entities qualifies as a 'financial entity' (subject to criteria notified by the Central Government), so that the NPA-related bar does not apply if it is not a related party of the corporate debtor?

An asset reconstruction company registered with the Reserve Bank of India is a listed financial entity under Explanation II to Section 29A. Unregistered moneylenders, trading companies and promoter trusts are not listed, so they cannot use the financial entity exemption.

  1. AAn asset reconstruction company registered with the Reserve Bank of IndiaCorrect
  2. BA non-registered private moneylender
  3. CA trading company with a large bank balance
  4. DA promoter's family trust

Explanation

Explanation II to Section 29A lists financial entities, including a scheduled bank, an Alternate Investment Fund registered with SEBI and an asset reconstruction company registered with the RBI. A moneylender, trading company or family trust is not listed.

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