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CS Executive · Economic, Commercial and Intellectual Property Laws · Law relating to Foreign Exchange Management

Sahyadri Forex Pvt Ltd, an authorised person, receives a written direction from the Reserve Bank on how it must make certain foreign exchange payments. Which provision of FEMA empowers the Reserve Bank to give such a direction?

Under Section 11(1) of FEMA, the Reserve Bank may give authorised persons directions about making payments or doing or desisting from acts relating to foreign exchange or foreign security, in order to secure compliance with the Act, rules, regulations, notifications and directions.

  1. AAuthorised persons can be directed on payments or on desisting from acts relating to foreign exchange, to secure compliance with the ActCorrect
  2. BThe Reserve Bank may direct only residents who are not authorised persons
  3. CThe Reserve Bank may direct authorised persons only on capital account transactions
  4. DThe Reserve Bank may issue directions only after the Central Government consents in writing

Explanation

Section 11(1) allows the Reserve Bank, to secure compliance with the Act and rules, regulations, notifications or directions, to give authorised persons any direction on making payment or doing or desisting from any act relating to foreign exchange or foreign security. It is not limited to capital account transactions and needs no Central Government consent.

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