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CS Executive · Setting Up of Business, Industrial and Labour Laws · Financial Services Organization

Under the Reserve Bank of India Act, 1934, the Bank may frame a scheme for a distressed non-banking financial company (NBFC) if it is satisfied, upon inspecting its books, that it is in public interest or the interest of financial stability. Which of the following may the scheme provide for?

The scheme may split the NBFC into units and set up Bridge Institutions to preserve activities critical to the financial system. Officers whose pay is cut and shareholders whose shares are cancelled get no compensation under the scheme.

  1. ASplitting the NBFC into units and setting up Bridge Institutions to preserve critical activitiesCorrect
  2. BCompensating the chairman for any reduction in pay under the scheme
  3. CCompensating shareholders whose shares are cancelled under the scheme
  4. DTransferring the scheme's approval to the Central Government before it can take effect

Explanation

Section 45MBA(1)(c) allows splitting the NBFC into units and establishing Bridge Institutions to keep critical activities running. Under section 45MBA(3), officers whose pay is reduced and shareholders whose shares are cancelled are not entitled to any compensation, so the compensation options are wrong. The last option is not in the text.

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