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

A bank launches a deposit product with an embedded equity-linked payout. The RBI and SEBI disagree on whether it is a hybrid instrument falling within their respective jurisdictions. Under the Joint Mechanism in Section 45Y of the RBI Act, 1934, where is the difference of opinion to be referred?

The difference goes to the Joint Committee under Section 45Y of the RBI Act, 1934, whose ex officio Chairperson is the Union Finance Minister. The Committee exists to settle regulator disputes over hybrid or composite instruments, so neither the RBI Board nor a tribunal decides it.

  1. ATo the Joint Committee chaired by the Union Finance MinisterCorrect
  2. BTo the Securities Appellate Tribunal
  3. CTo the Supreme Court of India directly
  4. DTo the RBI Board for a final ruling

Explanation

Section 45Y(1) of the RBI Act provides that a difference of opinion on whether an instrument is hybrid or composite, and which regulator's jurisdiction it falls under, goes to a Joint Committee. The Union Finance Minister is its ex officio Chairperson. The RBI Board has no overriding power, since the matter involves several regulators.

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