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

Sunrise Fintech Pvt Ltd, a Mumbai company, plans to set up a unit in an International Financial Services Centre (IFSC) established under the Special Economic Zones Act, 2005. A promoter asks whether the powers of the Reserve Bank under the Reserve Bank of India Act, 1934 will apply to this IFSC unit. Which statement is correct?

The Reserve Bank's powers under the RBI Act do not extend to an IFSC set up under the Special Economic Zones Act, 2005. Instead, the International Financial Services Centres Authority exercises them for financial products, services and institutions permitted in the IFSC, as provided by section 57A.

  1. AThe Reserve Bank's powers under the Act continue to apply in full to the IFSC
  2. BThe Reserve Bank's powers under the Act do not extend to the IFSC; the IFSC Authority exercises them for products, services and institutions permitted thereCorrect
  3. CThe Reserve Bank's powers are exercised by SEBI in the IFSC
  4. DThe Reserve Bank's powers are exercised by the Central Government through the State Government in the IFSC

Explanation

Section 57A of the RBI Act provides that the Bank's powers under the Act do not extend to an IFSC and are exercisable by the International Financial Services Centres Authority, so far as regulation of financial products, services and institutions permitted in the IFSC is concerned. Option A ignores this carve-out. SEBI is not named as the substitute authority.

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