MCQ for the day - Kinfin Private Limited had taken overdrafts from three banks (Bank A, Bank B and B

MCQ for the day -

Kinfin Private Limited had taken overdrafts from three banks (Bank A, Bank B and Bank C) with a
limit of ₹ 40 lacs each against the security of fixed deposit it had with those banks and an
unsecured overdraft from a financial institution (Financial Institution X) of ₹ 36 lacs. As on 30th
October 2020, the management used the overdraft fully of the A & C bank to the tune of ₹ 40 lacs
each. However, the overdraft of second bank (Bank B) was not used until 31st December 2021. On
31st December 2021, Management took overdraft of B bank and very next day management paid
the overdraft of C bank as the rate of interest charged by Bank C on overdraft facility was 15%
whereas, the rate of interest charged by Bank B was 12%. As at 31st March 2022 only overdraft of
Bank A and Bank B were used fully, overdrafts of Bank C and Financial Institution X were unused.
The paid-up capital and reserves of the company as at that date was ₹ 85 lacs and its revenue for
the financial year ended on 31st March 2022 was ₹ 8.95 crore. The management of the company is
of the opinion that CARO, 2020 is not applicable to it because turnover and paid-up capital were
within the limits prescribed. With respect to the loans, management was of the view that the total
outstanding as at 31st March 2022 is less than the prescribed limit. The company further
contended that loan limit is to be reckoned per bank or financial institution and not cumulatively.
Comment.

a) The CARO 2020 is applicable to the company as the turnover of the company exceeds the
prescribed limit.

B) The CARO 2020 is not applicable to the company as the turnover of the company does not
exceeds the prescribed limit.

C) The CARO 2020 is not applicable to the company as the borrowing of the company does not
exceeds the prescribed limit.

D) The CARO 2020 is applicable to the company as the borrowing of the company exceeds the
prescribed limit