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Reserve Bank of India Act, 1934 – Part-VII – Section 45S to 45Y

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the seventh article in the series. 

Chapter IIIC – Prohibition of Acceptance of Deposits by Unincorporated Bodies

Section 45S – Interpretation

An individual / firm / unincorporated association of individuals shall not accept any deposits if –

  • his / its business wholly or partly includes the activities specified in Section 45-I.
  • his / its principal business is that of receiving deposits, or lending in any manner.

Section 45T – Power to issue search warrants

On an application by RBI / State Government, the Court to issue search warrant for the documents relating to acceptance of deposits in contravention of the provisions of Section 45S.

Chapter IIID – Regulation of Transactions in Derivatives, Money Market Instruments, Securities, etc.

Section 45V – Transactions in derivatives

  • Transactions in derivatives shall be valid if at least one of the parties to the transaction is RBI, a scheduled bank, or other agency regulated by RBI / any other Act.
  • Transactions in derivatives shall be deemed always to have been valid.

Section 45W – Power to regulate transactions in derivatives, money market instruments, etc.

  • RBI may determine the policy relating to interest rates or interest rate products and give directions in that behalf to agencies dealing in securities, money market instruments, foreign exchange, derivatives, or other instruments of like nature. The directions shall not relate to the procedure for execution / settlement of the trades on the Stock Exchanges. 
  • RBI may call for any information / statements or inspect such agencies.

Section 45X – Duty to comply with directions and furnish information

The agencies referred to in Section 45W to comply with the directions given by RBI and to submit information / statements called for under Section 45W.

Chapter IIIE – Joint Mechanism

Section 45Y – Joint Mechanism

  • In case of hybrid / composite instrument, having a component of money market investment / securities market instrument / insurance, etc. if any difference of opinion arises as to whether it will fall under Reserve Bank of India (RBI) / Securities and Exchange Board of India (SEBI) / Insurance Regulatory and Development Authority (IRDA) / Pension Fund Regulatory and Development Authority (PFRDA), it shall be referred to a Joint Committee consisting of –
    1. Union Finance Minister (chairperson)
    2. Governor – RBI (vice-chairperson)
    3. Secretary, Department of Economic Affairs in the Ministry of Finance, Government of India (member)
    4. Secretary, Department of Financial Services in the Ministry of Finance, Government of India (member)
    5. Chairperson, SEBI (member)
    6. Chairperson, IRDA (member)
    7. Chairperson, PFRDA (member)

  • The Secretary, Department of Financial Services in the Ministry of Finance, Government of India shall be the convener of the meetings of the Joint Committee.
  • In case of any difference of opinion, any member of the Joint Committee (i.e. RBI / SEBI / IRDA / PFRDA) may make a reference to the Joint Committee.
  • The Joint Committee shall give its decisions to the Central Government within 3 months of the reference.
  • The decision of the Joint Committee shall be binding on RBI, SEBI, IRDA and PFRDA.


References

Reserve Bank of India. (2022, August 29). 'The Reserve Bank of India Act, 1934'. Retrieved from https://rbi.org.in/Scripts/OccasionalPublications.aspx?head=Reserve%20Bank%20of%20India%20Act


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