Skip to content

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

A foreign investor proposes an equity investment in an Indian company, which is a capital account transaction not involving debt instruments. Through which instrument does the Central Government exercise its power to prescribe permissible classes, limits and conditions for such transactions under FEMA, 1999?

The Central Government acts through rules made under section 46. Section 46(2)(ab) allows rules on permissible classes of capital account transactions under section 6(2A), their limits of admissibility, and their prohibition, restriction or regulation, whereas Reserve Bank regulations under section 47 cover debt-instrument transactions.

  1. ARegulations made by the Reserve Bank under section 47
  2. BRules made by the Central Government under section 46Correct
  3. CCirculars issued by authorised persons
  4. DOrders of the Adjudicating Authority

Explanation

Section 46(2)(ab) lets the Central Government make rules on permissible classes of capital account transactions under section 6(2A), their limits of admissibility and prohibition, restriction or regulation. Section 47 regulations cover debt-instrument transactions, so option A is the key distractor.

Did you get it right without looking?

One question tells you little. A timed set on Foreign Direct Investments - Regulations and Policy shows your real accuracy, how long you take and where you lose marks.

Practise Foreign Direct Investments - Regulations and PolicyFree diagnostic mock

More Foreign Direct Investments - Regulations and Policy questions