CS Executive · Economic, Commercial and Intellectual Property Laws · Foreign Direct Investments - Regulations and Policy
Bharat Forge-like firm Sundaram Engineering Ltd has an overseas loan under which it must remit instalments of principal. A fresh restriction on drawal of foreign exchange is proposed. Under section 6 of FEMA, 1999, what is the position on drawal of foreign exchange for amortisation of loans and depreciation of direct investments in the ordinary course of business?
Neither the Reserve Bank nor the Central Government may impose any restriction on drawal of foreign exchange for payments due on amortisation of loans or for depreciation of direct investments in the ordinary course of business. The proviso to section 6(2) expressly bars such restrictions.
- AThe Reserve Bank may restrict it with Central Government approval
- BThe Central Government may restrict it by rule only
- CNeither the Reserve Bank nor the Central Government may impose restrictions on such drawalCorrect
- DRestriction is allowed only for amounts above a prescribed limit
Explanation
The proviso to section 6(2) states that the Reserve Bank or the Central Government shall not impose any restrictions on drawal of foreign exchange for payment due on amortisation of loans or for depreciation of direct investments in the ordinary course of business. Options A, B and D wrongly permit some restriction.
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