Section 45-IE of RBI Act : Section 45-Ie: Supersession Of Board Of Directors Of Non-Banking Financial Company (Other Than Government Company)

Explanation using Example

An example application of Section 45-IE of The Reserve Bank of India Act, 1934, could be as follows:

Imagine a non-banking financial company (NBFC), "QuickLoans Pvt. Ltd.," which has been conducting its business in a way that is harmful to its depositors and creditors. The Reserve Bank of India (RBI) receives numerous complaints that QuickLoans is engaging in risky financial practices, not maintaining the required level of liquidity, and possibly engaging in fraudulent activities.

After a thorough investigation, the RBI is satisfied that it is in the public interest to intervene. To protect the depositors, creditors, and ensure financial stability, the RBI decides to use its powers under Section 45-IE. It records the reasons for its action in writing and issues an order to supersede QuickLoans' Board of Directors for a period of one year.

The RBI then appoints an experienced financial professional, Mr. Sharma, as the Administrator to manage the affairs of QuickLoans. Mr. Sharma is given specific directions by the RBI to restore the financial health of the company.

With the order in effect, the current chairman, managing director, and other directors of QuickLoans vacate their offices. Mr. Sharma assumes all their powers and duties, and a committee of experts in law, finance, and banking is formed to assist him.

The salary for Mr. Sharma and the committee members is determined and paid by QuickLoans as specified by the RBI. Over the course of the year, Mr. Sharma takes necessary actions to restructure the company. As the period of supersession comes to an end, he works on reconstituting the Board of Directors with competent individuals to lead QuickLoans responsibly in the future.