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

Meera Textiles Pvt Ltd wants to know which authority prescribes the permissible classes of capital account transactions that do NOT involve debt instruments, such as equity investment by non-residents in an Indian company. Under FEMA, 1999, who prescribes these?

The Central Government prescribes them, in consultation with the Reserve Bank. Section 6(2A) of FEMA gives it power over capital account transactions not involving debt instruments, including their permissible classes, limits of foreign exchange and conditions. The Reserve Bank's own specifying power covers only debt instruments.

  1. AThe Central Government, in consultation with the Reserve BankCorrect
  2. BThe Reserve Bank alone, without consulting anyone
  3. CThe Securities and Exchange Board of India, in consultation with the Reserve Bank
  4. DThe Adjudicating Authority, in consultation with the Special Director (Appeals)

Explanation

Section 6(2A) empowers the Central Government, in consultation with the Reserve Bank, to prescribe permissible classes of capital account transactions not involving debt instruments, along with limits and conditions. The Reserve Bank alone has this power only for debt instruments, so option 2 is wrong.

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