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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 one of the relationships through which two or more entities form a 'group company' arrangement in relation to a non-banking financial company?

An investment in equity shares of twenty per cent. and above in the entity is a listed relationship for a group company under Section 45NAA. A five per cent. holding, a shared auditor or shared bankers do not appear in the statutory list of relationships.

  1. AInvestment in equity shares of twenty per cent. and above in the entityCorrect
  2. BInvestment in equity shares of five per cent. in the entity
  3. CMere common auditor appointed for both entities
  4. DCommon bankers extending credit to both entities

Explanation

The Explanation to Section 45NAA lists the relationships that make a group company: subsidiary-parent, joint venture, associate, promoter-promotee, related party, common brand name, and investment in equity shares of twenty per cent. and above. A five per cent. holding, a common auditor or common bankers are not in the list.

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