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CMA Final · Corporate and Economic Laws · Laws and Regulations related to Banking Sector

Under the Reserve Bank of India Act, 1934, which of the following is a relationship that makes two entities a 'group company' for the purposes of the Reserve Bank's power over group companies of a non-banking financial company?

An investment in equity shares of twenty per cent. and above in the entity creates a group company relationship under Section 45NAA. The listed relationships do not include a ten per cent. holding, a common auditor or a shared office building.

  1. AInvestment in equity shares of twenty per cent. and above in the entityCorrect
  2. BInvestment in equity shares of ten per cent. in the entity
  3. CSharing of a common auditor
  4. DSharing of a common registered office building

Explanation

The Explanation to Section 45NAA lists relationships such as subsidiary-parent, joint venture, associate, promoter-promotee, related party, common brand name and investment in equity shares of twenty per cent. and above. A ten per cent. holding is below that threshold, and a common auditor or building is not listed.

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