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CS Executive · Economic, Commercial and Intellectual Property Laws · Foreign Direct Investments - Regulations and Policy

A foreign fund wants to invest in an Indian start-up through an instrument that is classified as a debt instrument. Which authority specifies the permissible classes, limits and conditions for such capital account transactions under FEMA?

The Reserve Bank, in consultation with the Central Government, specifies permissible classes, limits and conditions for capital account transactions involving debt instruments. The Central Government's separate power under section 6(2A) applies only to transactions that do not involve debt instruments.

  1. AThe Central Government alone, without consulting the Reserve Bank
  2. BThe Reserve Bank, in consultation with the Central GovernmentCorrect
  3. CThe start-up's board of directors
  4. DThe Registrar of Companies, in consultation with the Reserve Bank

Explanation

Under section 6(2), the Reserve Bank, in consultation with the Central Government, specifies permissible classes of capital account transactions involving debt instruments, the admissible limits and any conditions. The Central Government alone acts for non-debt instruments under section 6(2A), which makes option A wrong here.

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