Banking and Insurance - Laws and Practice · Regulatory Framework of Banks

Joint Mechanism under Section 45Y of the RBI Act, 1934

Updated 11 October 2026 · Fact-checked

Section 45Y of the RBI Act, 1934 sets up a Joint Committee to settle disputes between RBI, SEBI, IRDAI and PFRDA over whether a hybrid or composite instrument falls under one regulator's jurisdiction. The Committee decides within three months, reports to the Central Government, and its decision binds all four regulators.

Understand Joint Mechanism under Section 45Y

India has several financial regulators. RBI looks after banking, money markets and related instruments. SEBI looks after the securities market. IRDAI looks after insurance. PFRDA looks after pensions. Most products fit neatly under one regulator. Some do not.

A hybrid or composite instrument mixes features. For example, it may have a money market or securities component and also an insurance component. Two regulators may each say, 'this is ours'. Or each may say, 'this is not ours'. Section 45Y exists to settle that difference of opinion.

The section applies notwithstanding anything in the RBI Act, the SEBI Act, 1992 or any other law. It covers instruments such as derivatives, money market instruments, repo, reverse repo and securities referred to in section 45U of the RBI Act. It also covers life insurance policies and the securities and scrips listed in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (the sub-clauses named in the section).

The difference is referred to a Joint Committee. The Union Finance Minister is Chairperson and the RBI Governor is Vice-Chairperson. The other members are the Secretary, Department of Economic Affairs; the Secretary, Department of Financial Services; the Chairperson of IRDAI; the Chairman of SEBI; and the Chairperson of PFRDA. The Secretary, Department of Financial Services is the convener.

Only the RBI Governor, or the head of IRDAI, SEBI or PFRDA, can make a reference. The Committee sets its own procedure and gives its decision to the Central Government within three months of the reference. Its decision binds RBI, SEBI, IRDAI and PFRDA. This is a regulator-to-regulator dispute tool, not a remedy for customers.

Do not confuse this with section 45Y of the Banking Regulation Act, 1949. That section is different: it lets the Central Government make rules, after consulting RBI, on how long a banking company must preserve its books, accounts, documents and paid instruments.

Key rules to remember

Trigger for reference: Difference of opinion on whether a hybrid or composite instrument (with a money market, securities or insurance component) falls within the jurisdiction of RBI, SEBI, IRDAI or PFRDA; The section applies notwithstanding the RBI Act, the SEBI Act, 1992 or any other law.
Composition of Joint Committee: Chairperson: Union Finance Minister | Vice-Chairperson: RBI Governor | Members: Secretary DEA, Secretary DFS, Chairperson IRDAI, Chairman SEBI, Chairperson PFRDA; Total seven. Secretary, DFS is the convener of meetings.
Who may refer: RBI Governor, Chairperson IRDAI, Chairman SEBI or Chairperson PFRDA (clauses (b), (e), (f), (g)); The Finance Minister and the two Secretaries cannot make a reference.
Time limit: Decision within 3 months from the date of reference, given to the Central Government; Procedure is as the Committee considers expedient.
Effect of decision: Binding on RBI, SEBI, IRDAI and PFRDA; Section 45Y(5).

How to solve Joint Mechanism under Section 45Y questions

Use this order for any question on the Joint Mechanism. It follows the case-based pattern: provision, facts, conclusion.

1Identify the issue: is there a difference of opinion over whether an instrument is hybrid or composite and which regulator has jurisdiction?
2Check the instrument: does it carry a money market, securities or insurance component of the kinds named in section 45Y(1)(i) or (ii)?
3State the rule: the difference goes to the Joint Committee, notwithstanding any other law.
4Name the Committee: Finance Minister as Chairperson, RBI Governor as Vice-Chairperson, and the five other ex officio members, with the Secretary, DFS as convener.
5Check who made the reference: only the RBI Governor or the heads of IRDAI, SEBI or PFRDA can do so.
6Apply the timeline and procedure: three months from the reference, decision to the Central Government, procedure as the Committee thinks expedient.
7Conclude: the decision binds RBI, SEBI, IRDAI and PFRDA.

Quickest way: Five-point recall for Section 45Y

When to use it: Short notes or a 5-mark question where you have only a few minutes.

Purpose: settle jurisdiction disputes on hybrid or composite instruments.
Members: FM, Governor, Secretary DEA, Secretary DFS, and heads of IRDAI, SEBI and PFRDA.
Reference: made by the Governor or the heads of IRDAI, SEBI or PFRDA.
Time: three months, decision to the Central Government.
Effect: binding on all four regulators.

Common mistakes in Joint Mechanism under Section 45Y

Mixing up the two Sections 45Y.
Both the RBI Act and the Banking Regulation Act have a section numbered 45Y.
Fix: Always write the Act name. RBI Act: Joint Mechanism. Banking Regulation Act: rules on preserving bank records.
Saying the Finance Minister or a Secretary can refer a dispute.
Students assume the Chairperson has all powers.
Fix: Only the RBI Governor and the heads of IRDAI, SEBI and PFRDA can make a reference.
Leaving out PFRDA or listing only RBI, SEBI and IRDAI.
PFRDA is less familiar and was set up by a Government resolution.
Fix: Remember four regulators and seven committee members.
Writing that the Committee's decision is only advisory.
The decision is given to the Central Government, so it looks like a recommendation.
Fix: Section 45Y(5) says the decision is binding on the four regulators.
Treating it as a forum for customer or investor complaints.
The word 'dispute' suggests a general remedy.
Fix: It only resolves differences of opinion between regulators about jurisdiction over hybrid or composite instruments.

Worked examples

Example 1

A new product combines a market-linked investment component with a life insurance cover. SEBI and IRDAI each say the other should regulate it. Who can refer the matter and to whom, and what is the effect of the outcome?

Show the solution

Issue: a difference of opinion on jurisdiction over a product that has both a securities and an insurance component.
Rule: under section 45Y of the RBI Act, 1934, such a difference regarding a hybrid or composite instrument is referred to the Joint Committee, notwithstanding any other law.
Who can refer: the RBI Governor, or the Chairperson of IRDAI, the Chairman of SEBI or the Chairperson of PFRDA.
Process: the Committee follows the procedure it considers expedient and gives its decision to the Central Government within three months of the reference.
Effect: the decision is binding on RBI, SEBI, IRDAI and PFRDA.

Answer: The SEBI Chairman or the IRDAI Chairperson (or the RBI Governor or PFRDA Chairperson) can refer it to the Joint Committee. The Committee decides within three months and the decision binds all four regulators.

Example 2

State the composition of the Joint Committee under section 45Y of the RBI Act, 1934 and who convenes its meetings.

Show the solution

The Union Finance Minister is ex officio Chairperson.
The Governor, RBI is ex officio Vice-Chairperson.
The ex officio members are: the Secretary, Department of Economic Affairs; the Secretary, Department of Financial Services; the Chairperson, IRDAI; the Chairman, SEBI; and the Chairperson, PFRDA.
The Secretary, Department of Financial Services is the convener of the meetings.

Answer: The Committee has seven members: the Finance Minister (Chairperson), the RBI Governor (Vice-Chairperson) and five ex officio members. The Secretary, DFS convenes the meetings.

Exam tips

Write the full Act name every time: 'section 45Y of the RBI Act, 1934'.
Learn the seven members as a list: FM, Governor, DEA, DFS, IRDAI, SEBI, PFRDA.
In case questions, first prove there is a hybrid or composite instrument, then apply the mechanism.
Quote the three-month limit and the binding effect in your conclusion.
If asked about records, note that section 45Y of the Banking Regulation Act is a separate provision.

Practice questions from Regulatory Framework of Banks

Joint Mechanism under Section 45Y: frequently asked questions

What is the Joint Mechanism under Section 45Y of the RBI Act?

It is a Joint Committee that resolves differences between RBI, SEBI, IRDAI and PFRDA on whether a hybrid or composite instrument falls within one regulator's jurisdiction. Its decision binds all four.

Who can refer a matter to the Joint Committee?

The RBI Governor, the Chairperson of IRDAI, the Chairman of SEBI or the Chairperson of PFRDA. Other members cannot make a reference.

How long does the Joint Committee take to decide?

It must give its decision to the Central Government within three months from the date of the reference. It follows the procedure it considers expedient.

Is Section 45Y of the Banking Regulation Act the same thing?

No. That section lets the Central Government make rules, after consulting RBI, on how long a banking company must preserve its books, accounts, documents and paid instruments.