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CMA Final · Corporate and Economic Laws · Foreign Exchange Management Act, 1999

Mehta Exports Ltd, resident in India, has foreign exchange due from a buyer in Germany for goods supplied. Under Section 8 of FEMA, 1999, what is the obligation of Mehta Exports Ltd?

A person resident in India to whom foreign exchange is due or has accrued must take all reasonable steps to realise and repatriate it to India. The period and manner are those specified by the Reserve Bank, not left to the exporter's choice.

  1. AIt may hold the amount abroad indefinitely since Section 4 allows holding foreign exchange
  2. BIt must take all reasonable steps to realise and repatriate the foreign exchange within the period and in the manner specified by the Reserve BankCorrect
  3. CIt must repatriate the amount within a period fixed by the Central Government in the Act itself
  4. DIt must repatriate only if the Reserve Bank issues a special notice for that transaction

Explanation

Section 8 requires a resident to whom foreign exchange is due or has accrued to take all reasonable steps to realise and repatriate it within such period and manner as the Reserve Bank specifies. Section 4 prohibits holding foreign exchange by residents unless otherwise provided, so it does not permit indefinite holding.

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