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

Under Section 45MBA of the RBI Act, 1934, the RBI frames a scheme for a distressed NBFC, Bharat Finserv Ltd. The scheme cancels shares held by its managing director. What is the position on compensation to him?

He is not entitled to any compensation. Section 45MBA(3) provides that senior management whose pay is reduced or shareholders whose shares are cancelled under a resolution scheme for an NBFC receive no compensation.

  1. AHe gets compensation at book value of the shares
  2. BHe gets compensation only if the scheme is later set aside
  3. CHe gets compensation fixed by the Central Government
  4. DHe is not entitled to any compensationCorrect

Explanation

Section 45MBA(2)(b) allows cancellation of shares held by the CEO, managing director, chairman or senior management, and 45MBA(3) says they are not entitled to any compensation. Book value payment is therefore wrong.

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