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CS Executive · Economic, Commercial and Intellectual Property Laws · Foreign Direct Investments - Regulations and Policy

Zenith Robotics Inc, a US company, wants to set up a branch office in India for business activity. Which statement is correct under FEMA, 1999 as given in the text?

The Reserve Bank may, by regulation, prohibit, restrict or regulate the establishment in India of a branch, office or other place of business by a person resident outside India. Section 6(6) gives this power expressly, so a foreign company's branch setup is subject to Reserve Bank regulation.

  1. AThe Reserve Bank may, by regulation, prohibit, restrict or regulate the establishment in India of a branch, office or other place of business by a person resident outside IndiaCorrect
  2. BOnly the Central Government may regulate such establishment, never the Reserve Bank
  3. CA person resident outside India may freely establish any branch with no regulation possible
  4. DRegulation applies only to subsidiaries and not to branches or offices

Explanation

Section 6(6) states that, without prejudice to the rest of section 6, the Reserve Bank may by regulation prohibit, restrict or regulate establishment in India of a branch, office or other place of business by a person resident outside India, for any activity relating to it. The option excluding the Reserve Bank contradicts this, and the text does not make such establishment free of regulation.

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