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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 entity wants to pay for the purchase of a foreign company's debt instruments. Who specifies the classes of capital account transactions involving debt instruments that are permissible?

The Reserve Bank, in consultation with the Central Government, specifies the permissible classes of capital account transactions involving debt instruments, together with the limits up to which foreign exchange is admissible and any conditions. Authorised persons and enforcement officers have no such power to specify classes.

  1. AThe Central Government in consultation with the Adjudicating Authority
  2. BThe Reserve Bank, in consultation with the Central GovernmentCorrect
  3. CThe Director of Enforcement, in consultation with the Reserve Bank
  4. DAny authorised person, at its discretion

Explanation

Section 6(2) lets the Reserve Bank, in consultation with the Central Government, specify permissible classes of capital account transactions involving debt instruments, along with limits and conditions. The Central Government alone has the role in section 6(2A) for non-debt transactions, so the other options misplace the authority.

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