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CS Executive · Economic, Commercial and Intellectual Property Laws · Law relating to Foreign Exchange Management

A unit in an International Financial Services Centre set up under the Special Economic Zones Act, 2005 deals in foreign exchange. Which statement is correct as regards the Reserve Bank's powers under FEMA over this unit?

Section 44A provides that the Reserve Bank's powers under FEMA do not extend to an International Financial Services Centre set up under the Special Economic Zones Act, 2005; instead, those powers are exercisable by the International Financial Services Centres Authority.

  1. AThe Reserve Bank's powers extend to the IFSC and are shared equally with the IFSCA
  2. BThe Reserve Bank's powers do not extend to the IFSC and are exercisable by the International Financial Services Centres AuthorityCorrect
  3. CThe Reserve Bank's powers apply only to capital account transactions in the IFSC
  4. DThe Reserve Bank's powers continue in the IFSC until the Central Government notifies otherwise

Explanation

Section 44A states that, notwithstanding any other law, the Reserve Bank's powers under FEMA shall not extend to an IFSC set up under section 18(1) of the SEZ Act, 2005, and shall be exercisable by the IFSCA. There is no shared or capital-account-only arrangement.

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