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CS Executive · Economic, Commercial and Intellectual Property Laws · Overseas Direct Investment

Under the Foreign Exchange Management Act, 1999, a resident Indian company wants to invest in the equity of a foreign entity, which is a capital account transaction. Who may sell or draw foreign exchange to or from an authorised person for such a transaction, subject to the limits and conditions specified under the Act?

Any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction, subject to the limits and conditions specified under the Act. The right is general and not restricted to the RBI, exporters or companies approved by an adjudicating authority.

  1. AOnly the Reserve Bank of India, on a case-by-case basis
  2. BAny person, subject to the limits and conditions specified under the ActCorrect
  3. COnly persons who have earlier exported goods from India
  4. DOnly a company that has first obtained approval from an Adjudicating Authority

Explanation

Section 6(1) states that, subject to sub-section (2), any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction. Restrictions arise only through the limits and conditions specified. The option naming only the RBI is wrong because the right is not confined to the RBI.

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