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part 6 Flashcards

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1
Q

45A.

A

Definitions.

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2
Q

The term “banking company” is primarily defined in

A

Section 5 of the Banking Regulation Act, 1949.

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3
Q

Inclusion of Specific Entities banking companies :

A

State Bank of India (SBI): The largest public sector bank in India, which plays a crucial role in the banking sector.
Subsidiary Banks: As defined by the State Bank of India (Subsidiary Banks) Act, 1959, these are banks that are subsidiaries of the State Bank of India.
Corresponding New Banks: Established under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, these banks were formed following the nationalization of certain banks.
Other Financial Institutions: The Central Government has the authority to notify additional financial institutions that may fall under this definition.

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4
Q

borrower

A

is any person or entity that has been sanctioned a credit limit by a banking company, regardless of whether that credit limit has been utilized.

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5
Q

definition extends to various categories of borrowers, including

A

Companies or Corporations:
Includes their subsidiaries. This means if a parent company has a credit limit, its subsidiaries are also considered borrowers under the same limit.
Hindu Undivided Family (HUF):
This includes any member of the HUF or any firm in which that member is a partner. This provision recognizes the traditional structure of HUFs in India and how financial liabilities are shared within them.
Firms:
In the case of a firm, any partner of that firm is considered a borrower, as well as any other firm in which that partner holds a partnership. This aspect ensures that partners in a firm can be held accountable for borrowing activities.
Individuals:
For individual borrowers, any firm in which the individual is a partner is also included, reflecting the interconnected nature of partnerships and individual liabilities.

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6
Q

45B.

A

Power of Bank to collect credit information.

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7
Q

45C.

A

Power to call for returns containing credit information

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8
Q

45D.

A

Procedure for furnishing credit information to banking companies.

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9
Q

The Bank may levy a fee for processing each application for credit information. The maximum fee is capped at

A

twenty-five rupees.

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10
Q

45E.

A

Disclosure of information prohibited

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11
Q

Any credit information provided by a banking company under _______________- is treated as confidential.

A

section 45C or furnished by the Bank under section 45D

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12
Q

Disclosures made under the ____________________ are also exempt from the confidentiality provisions, indicating that such disclosures are governed by their specific regulatory framework.

A

Credit Information Companies (Regulation) Act, 2005

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13
Q

No court, tribunal, or authority can compel the Bank or any banking company to produce statements submitted under _______________-

A

section 45C or disclose credit information given under section 45D.

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14
Q

45F.

A

Certain claims for compensation barred

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15
Q

45H.

A

Chapter IIIB not to apply in certain cases.

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16
Q

Chapter IIIB not to apply in certain cases.

A

State Bank:

Banking Company (as defined in Section 5 of the Banking Regulation Act, 1949):
Corresponding New Bank: Refers to banks that came into existence after nationalization, as defined in Section 5(da) of the Banking Regulation Act.
Subsidiary Bank
Regional Rural Bank:
Co-operative Bank:
Primary Agricultural Credit Society and Primary Credit Society:

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17
Q

____________________, despite its financial activities, is not exempted and must adhere to the provisions of the chapter IIIB.

A

Tamil Nadu Industrial Investment Corporation Limited

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18
Q

45I.

A

Definitions.

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19
Q

Exclusions of deposit definitions

A

(i) Amounts raised by way of share capital: This refers to money received by issuing shares in a company. These funds represent ownership stakes, not deposits or loans.

(ii) Amounts contributed as capital by partners of a firm: Contributions made by partners in a partnership firm as capital are not deposits.

(iii) Amounts received from banks: Money received from scheduled banks, cooperative banks, or any other banking companies under the Banking Regulation Act, 1949 are excluded from the definition of deposits.

(iv) Amounts received from specific financial institutions:

(b) State Financial Corporation: These are state-run financial institutions.
**(c) Financial institutions under the Industrial Development Bank of India (IDBI) Act, 1964.
(d) Any other institution specified by the Reserve Bank of India (RBI).
(v) Amounts received in the ordinary course of business:

(a) Security deposit: Deposits given as security (e.g., rental deposits).
(b) Dealership deposit: Deposits paid by a dealer to a company for dealership rights.
(c) Earnest money: Money paid in advance to demonstrate intent to complete a transaction.
(d) Advance against orders: Advances received for goods, property, or services.
(vi) Amounts received from non-corporate entities involved in money lending: This applies to individuals, firms, or associations registered under money-lending laws.

(vii) Subscriptions in respect of a chit: Money received for participation in a chit fund, a type of savings and credit scheme.

20
Q

credit given by a seller to a buyer in a property sale (movable or immovable) is not considered a

A

deposit

21
Q

Specifies that amounts accepted by a co-operative society from its members or shareholders are deemed to be ________________, except when received as share capital. However, this only applies if those members or shareholders are nominal or associate members who do not have full voting rights in the co-operative’s meetings.

A

deposits

22
Q

Activities that Qualify as Financial Institution Operations:

A

Financing Activities:

Lending: Providing loans, advances, or other financial support to activities or businesses other than the institution’s own.
Acquisition of Securities:

Investing in shares, stocks, bonds, debentures, or government and local authority-issued securities, or any other marketable securities.
Hire-Purchase Business:

Letting or delivering goods under a hire-purchase agreement, where goods are leased to a hirer with an option to purchase after making installment payments. This is defined under the Hire-Purchase Act, 1972.
Insurance Business:

Engaging in any form of insurance—underwriting risks and issuing insurance policies.
Managing Chits or Similar Businesses:

Managing, conducting, or supervising chit funds or kuries, which are financial schemes where a group pools funds and rotates the distribution of those funds among the group members, typically regulated by state laws.
Collecting Monies for Schemes or Arrangements:

Collecting money under any scheme or arrangement (e.g., through subscriptions, unit sales, etc.) and distributing prizes, gifts, or other forms of disbursement to those from whom money is collected or to others.

23
Q

Exclusions from the Definition of Financial Institution:

A

(a) Agricultural operations: Engaging primarily in farming or other agricultural activities.
(aa) Industrial activity: Engaging in manufacturing or other industrial operations, as defined under the Industrial Development Bank of India Act, 1964 (sub-clauses (i) to (xviii) of Section 2(c)).
(b) Trading in goods or services: Businesses involved primarily in the purchase or sale of goods (other than securities) or in providing services.
(c) Real Estate Business: Engaging in the purchase, construction, or sale of immovable property. However, this exclusion only applies if the institution does not derive income from financing such real estate transactions for others.

24
Q

45IA.

A

Requirement of registration and net owned fund.

25
Q

An NBFC must have a minimum net owned fund (NOF)

A

₹25 lakh (₹2.5 million) or an amount that does not exceed ₹100 crore (₹1 billion),

26
Q

NBFCs that were operating before the 1997 Amendment must apply within _________________ months of the amendment’s commencement but are allowed to continue their business until they receive a decision (approval or rejection) from the RBI.

A

six

27
Q

NBFCs in existence before the 1997 Amendment with a net owned fund below ₹25 lakh can continue their operations for up to ________________- years to meet the NOF requirement.

A

three

28
Q

Even with extensions, the total period during which the NBFC can operate without meeting the NOF requirement cannot exceed

A

six years.

29
Q

Once the NBFC meets the ₹25 lakh NOF requirement, it must notify the RBI within ___________________ months of reaching the required fund level.

A

three

30
Q

Before granting registration to an NBFC, the RBI needs to ensure the following:

A

The NBFC can meet its obligations to depositors.
Its business practices are not detrimental to depositors’ interests.
The management is not prejudicial to public or depositors’ interests.
The NBFC has adequate capital and earning prospects.
Public interest and the broader financial sector’s stability are considered.
The RBI may impose additional conditions to safeguard public and depositor interests.

31
Q

If the NBFC has been prohibited from accepting deposits by an RBI order, and that order has been in effect for at least

A

three months

32
Q

The RBI can cancel the registration of an NBFC if it:

A

Ceases to carry on business.
Fails to comply with the conditions of registration or legal/RBI directives.
Fails to maintain accounts or submit them for inspection.
Is prohibited from accepting deposits for more than three months.

33
Q

If an NBFC’s registration application is rejected or its certificate is cancelled, it can appeal to _________________________

A

the Central Government within 30 days.

34
Q

The ________________ is final if an appeal is made; otherwise, the RBI’s decision stands.

A

Central Government’s decision

35
Q

The net owned fund (NOF) is a key financial measure for the NBFC, representing its

A

equity and reserves minus certain deductions for investments in subsidiaries and group companies.

36
Q

The deductions for the above should be made only if the investment or loan exceeds __________________ of the NOF calculation.

A

10%

37
Q

45IB.

A

Maintenance of percentage of assets

38
Q

NBFCs must maintain investments in unencumbered approved securities within India at a value of at least

A

5% of their outstanding deposits

39
Q

NBFCs must maintain investments in unencumbered approved securities within India at a value of at least ________________ of their outstanding deposits, with the RBI having the authority to increase this requirement up to ________________

A

5%

25%.

40
Q

If an NBFC fails to maintain the required level of investment in unencumbered approved securities, it will incur a penal interest at a rate of

A

3% per annum above the bank rate on the shortfall.

41
Q

If an NBFC fails to maintain the required level of investment in unencumbered approved securities, it will incur a penal interest at a rate of 3% per annum above the bank rate on the shortfall. If the shortfall continues in subsequent quarters, the penalty will increase to

A

5% per annum above the bank rate for each subsequent quarter.

42
Q

If an NBFC fails to pay the penal interest within __________________ days of receiving a notice from the RBI, the RBI can apply to the relevant civil court to enforce payment.

A

14

43
Q

45IC.

A

Reserve fund.

44
Q

Every non-banking financial company must create a reserve fund and allocate at least ______________ of its net profit each year to this fund, prior to declaring dividends.

A

20%

45
Q

Non-banking financial companies are only allowed to withdraw from their reserve funds for purposes specified by the Reserve Bank of India and must report such withdrawals within

A

twenty-one days.

46
Q

The Central Government, based on the RBI’s recommendation, can exempt an NBFC from reserve fund requirements if

A

the company’s paid-up capital and reserves meet certain criteria

47
Q
A

rbi act (6 decks)

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