mcq of NBFC topic

NB is a non-banking financial company and has been operating for the last 10 years. The company is duly registered as per the requirements of the reserve bank of India. The company’s assets base has been very strong over the years due to its efficient management function. The company is also planning to get listed for which required work is going on. For the financial year ended 31 march 2019, the company has closed its books of accounts and prepared the financial statements for the purpose of statutory audit in a timely manner. The auditors of the company have started their fieldwork. It has been observed by the auditors that the company’s various term loans which have been given to various parties have become overdue in terms of instalment including interest for a period of 5 months. As per the auditors these terms loans should be considered by the company for making provision at the rate of 20% of total outstanding amount, however, the management has considered a provision at the rate of 0.30%. Please advise the auditors and the management regarding this matter considering that “non- banking financial company systemically important non-deposit taking Company and deposit taking company (reserve bank) directions, 2016” are applicable to this NBFC.

a) Provision should be made at 10%.

b) Provision should be made 0.30%

c) Provision should be made at 20%.

d) Provision should be made at 0.40%