Section 45-I of RBI Act : Section 45-I: Definitions

Explanation using Example

Imagine a scenario where an individual, Mr. Sharma, wants to invest his savings and is considering depositing a sum of money with a company that offers attractive interest rates. Before doing so, he wishes to ensure that the company is regulated and that his deposit will be safe.

Mr. Sharma comes across XYZ Pvt. Ltd., which claims to be a non-banking financial company (NBFC) and offers high returns on fixed deposits. To verify the legitimacy of XYZ Pvt. Ltd., Mr. Sharma refers to Section 45-I of the Reserve Bank of India Act, 1934.

He notes that according to clause (f), a "non-banking financial company" is a company that primarily deals with receiving deposits or lending. Furthermore, clause (aa) clarifies that a "company" includes both Indian and foreign companies as defined in the Companies Act, 1956.

Mr. Sharma then checks the RBI's official website to see if XYZ Pvt. Ltd. is listed as an NBFC, which would mean it is subject to RBI's regulations and oversight. He finds XYZ Pvt. Ltd. on the list, confirming that it is indeed an NBFC and, thus, regulated by the RBI. This gives him the confidence that his deposit will be subject to certain regulatory safeguards.

This example demonstrates how an individual can use the definitions provided in Section 45-I of the RBI Act to understand the nature of financial entities and ensure that their investments are with regulated institutions.