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

A Singapore-based company plans to open a liaison office in Mumbai as a place of business. Under section 6 of FEMA, what power does the Reserve Bank have over this?

The Reserve Bank may, by regulation, prohibit, restrict or regulate the establishment in India of a branch, office or other place of business by a person resident outside India. Section 6(6) gives it this power for any activity relating to that office.

  1. ANone; only the Central Government can regulate such establishments
  2. BIt may, by regulation, prohibit, restrict or regulate the establishment in India of a branch, office or other place of business by a person resident outside IndiaCorrect
  3. CIt may only regulate offices of residents outside India that deal in debt instruments
  4. DIt may only impose a penalty after the office starts operating

Explanation

Section 6(6) lets the Reserve Bank, by regulation, prohibit, restrict or regulate the establishment in India of a branch, office or other place of business by a person resident outside India, for any activity relating to it. Options A, C and D are not supported by the text.

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