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CA Intermediate · Corporate and Other Laws · The Foreign Exchange Management Act, 1999

Mr. Raghav Menon, a person resident in India, wants to open a foreign currency account with a bank outside India while on a short holiday abroad, without any permission from the RBI. Under FEMA, which statement reflects the correct general legal position?

A resident in India is generally barred from acquiring or holding foreign exchange, foreign security or foreign immovable property, except as FEMA, its rules or RBI regulations permit. The prohibition is not absolute, because permitted exceptions exist, so he needs to fall within them.

  1. AHe may do so freely, as FEMA places no restriction on any resident holding foreign accounts
  2. BHe cannot hold or own any foreign exchange, foreign security or immovable property outside India without exception
  3. CHe is generally restricted from holding foreign exchange or foreign security except as permitted by FEMA, rules or RBICorrect
  4. DHe may do so only if he is a non-resident Indian citizen

Explanation

FEMA provides that, except as provided in the Act, rules or regulations, no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or immovable property situated outside India. Option B is wrong because the restriction is subject to exceptions permitted by the Act, rules and regulations.

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