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Indian Economy

Budget Widens RBI’s Autonomy

  • 08 Jul 2019
  • 2 min read

The Union budget 2019-20 has expanded the Reserve Bank of India’s powers by bringing Housing Finance Companies (HFCs) under its ambit and deepening its governance over Non-Banking Finance Companies (NBFCs).

Wider Regulatory Powers: The Union budget 2019-20 has proposed to amend the RBI Act 1934, in order to strengthen the central bank’s autonomy and regulatory powers in following domains:

  • It can supersede the board of NBFCs (other than those owned by the government) in the public interest or to prevent the affairs of NBFC being conducted in a manner detrimental to the interests of the depositor or creditor.
  • It can remove and can further appoint the director of a board of NBFC.
  • The proposed amendment to the RBI act will allow it to frame schemes for amalgamating, splitting and reconstructing an NBFC that will enable resolution of financially troubled NBFCs through a merger or by splitting them into viable and non-viable units called bridge institutions.
  • RBI can also remove auditors, call for audit of any group company of an NBFC, and have control over the compensation of senior management.
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