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

The Joint Committee under Section 45Y of the RBI Act decides that a composite instrument falls under SEBI's jurisdiction. The RBI argues that its own earlier circular treated it as a money market instrument and refuses to follow the decision. Which statement is correct?

The decision binds the RBI, SEBI, IRDAI and PFRDA. Section 45Y(5) makes the Joint Committee's decision binding on all four regulators, and the section operates notwithstanding other laws, so the RBI cannot rely on its earlier circular to refuse compliance.

  1. AThe RBI may decline since its circular was issued earlier
  2. BThe decision binds the RBI only if the Central Government ratifies it
  3. CThe decision binds the RBI, SEBI, IRDAI and PFRDACorrect
  4. DThe decision binds only the regulator that made the reference

Explanation

Section 45Y(5) states the Joint Committee's decision is binding on the RBI, SEBI, IRDAI and PFRDA. The section applies notwithstanding anything in any other law, so an earlier circular cannot prevail. No ratification is required by the section.

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