Question

Under Section 45-IC of the RBI Act, every NBFC must transfer to its reserve fund a sum not less than what percentage of net profit?

Q: Answer-Under Section 45-IC of the RBI Act, every NBFC must transfer to its reserve fund a sum not less than...

Section 45-IC of the Reserve Bank of India Act requires every Non-Banking Financial Company to create a reserve fund and transfer to it a sum not less than 20 of its net profit every year before any dividend is declared. No appropriation from the fund is allowed except for purposes specified by the RBI. This requirement strengthens the capital base of NBFCs and builds a cushion against losses, similar to the reserve fund requirement for banks.