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

Mr Arvind, resident outside India, inherited shares of an Indian company from his father who was resident in India. He now wants to hold and transfer them. Also, which statement about the RBI's power over a foreign person's Indian presence is correct under the same section?

Mr Arvind may hold, own, transfer or invest in the inherited shares because they came from a person resident in India (Section 6(5)). Separately, the Reserve Bank may by regulation prohibit, restrict or regulate a non-resident's branch, office or other place of business in India under Section 6(6).

  1. AHe cannot hold them because only residents may hold Indian securities, and RBI cannot regulate branches of non-residents
  2. BHe may hold, own, transfer or invest in them as they were inherited from a person resident in India, and RBI may by regulation prohibit, restrict or regulate a non-resident's branch, office or other place of business in IndiaCorrect
  3. CHe may hold them only with prior RBI approval, and RBI has no power over branches
  4. DHe may hold them, but RBI may regulate only the branches of residents

Explanation

Section 6(5) allows a person resident outside India to hold, own, transfer or invest in Indian security acquired when resident in India or inherited from a person resident in India. Section 6(6) lets the Reserve Bank by regulation prohibit, restrict or regulate a non-resident's branch, office or other place of business in India. Hence only the second option is correct.

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