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

Suraksha Finserve Ltd. plans a banking-type unit inside an International Financial Services Centre (IFSC) set up under the Special Economic Zones Act, 2005. A promoter asks which authority exercises the powers that the Reserve Bank has under the Banking Regulation Act, 1949, for financial products, services and institutions permitted in the IFSC. Which is correct?

The International Financial Services Centres Authority exercises the powers. Section 51A of the Banking Regulation Act, 1949 provides that the Reserve Bank's powers do not extend to an IFSC and are exercisable by that Authority for products, services and institutions permitted in the IFSC.

  1. AThe Reserve Bank of India continues to exercise them without change
  2. BThe International Financial Services Centres Authority exercises them for matters permitted in the IFSCCorrect
  3. CThe Insurance Regulatory authority exercises them
  4. DThe State Government of the State hosting the IFSC exercises them

Explanation

Section 51A says the Reserve Bank's powers under the Banking Regulation Act do not extend to an IFSC and are exercisable by the International Financial Services Centres Authority for financial products, services and institutions permitted there. The RBI option ignores this carve-out.

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