Skip to content

CS Executive · Setting Up of Business, Industrial and Labour Laws · Financial Services Organization

An advisor states that the IFSC carve-out from the Reserve Bank of India Act, 1934 covers all activities of any bank anywhere in India once it has one branch in an IFSC. Which response is correct under the Act?

The advisor is wrong. Section 57A of the RBI Act, 1934 shifts the Bank's powers to the IFSCA only for the IFSC and for financial products, services and institutions permitted there. It does not remove RBI powers over the bank's other operations elsewhere in India.

  1. ACorrect, because the IFSCA takes over the RBI's powers for the whole bank
  2. BIncorrect, because the carve-out applies only to RBI powers concerning the IFSC and the products, services and institutions permitted in itCorrect
  3. CCorrect, because the Act exempts any bank with an IFSC branch from RBI supervision
  4. DIncorrect, because the RBI Act has no provision relating to IFSCs

Explanation

Section 57A of the RBI Act, 1934 provides that the Bank's powers shall not extend to an IFSC and are exercisable by the IFSCA only in so far as regulation of financial products, services and institutions permitted in the IFSC are concerned. It is limited to the IFSC, not the bank's whole operations. Option D is wrong since section 57A exists.

Did you get it right without looking?

One question tells you little. A timed set on Financial Services Organization shows your real accuracy, how long you take and where you lose marks.

Practise Financial Services OrganizationFree diagnostic mock

More Financial Services Organization questions