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CS Executive · Economic, Commercial and Intellectual Property Laws · Overseas Direct Investment

A tribunal-style question arises on section 6 of FEMA, 1999. Which of the following correctly states the meaning of 'debt instruments' for the purposes of that section?

Under section 6(7), debt instruments are those instruments determined by the Central Government in consultation with the Reserve Bank. The Act contains no fixed list, and this determination decides whether the Reserve Bank's power under section 6(2) or the Central Government's under section 6(2A) applies.

  1. AInstruments listed in the Act itself in a fixed schedule
  2. BInstruments determined by the Central Government in consultation with the Reserve BankCorrect
  3. CInstruments determined by the Reserve Bank alone
  4. DInstruments determined by the Adjudicating Authority in each case

Explanation

Section 6(7) says that 'debt instruments' means such instruments as may be determined by the Central Government in consultation with the Reserve Bank. The definition is not fixed in the Act, and the Reserve Bank cannot decide it alone. This definition decides whether section 6(2) or 6(2A) applies to a transaction.

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