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CS Executive · Setting Up of Business, Industrial and Labour Laws · Setting up of Business outside India and Issues Relating thereto

Who has the power under section 6 of FEMA to specify the classes of capital account transactions not involving debt instruments that are permissible, such as many overseas equity investments by Indian firms?

The Central Government, in consultation with the Reserve Bank, prescribes permissible classes of capital account transactions not involving debt instruments, along with the limits and conditions. The Reserve Bank's own specification power in consultation with the Government covers transactions involving debt instruments.

  1. AThe Reserve Bank acting alone, without consulting anyone
  2. BThe Central Government, in consultation with the Reserve BankCorrect
  3. CThe Appellate Tribunal, in consultation with the Competent Authority
  4. DThe Authorised Officer prescribed under section 37A

Explanation

Section 6(2A) says the Central Government may, in consultation with the Reserve Bank, prescribe permissible classes of capital account transactions not involving debt instruments, along with limits and conditions. Section 6(2) gives the Reserve Bank a role, in consultation with the Central Government, only for transactions involving debt instruments. So the Reserve Bank acting alone is wrong.

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