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

Zephyr Holdings, a Singapore company, wants to invest in an Indian company in a sector where the Central Government has prescribed a sectoral cap and entry conditions for non-debt capital account transactions. Under section 6(2A) of FEMA, which of the following can the Central Government prescribe for such transactions?

The Central Government can prescribe permissible classes of non-debt capital account transactions, the limit up to which foreign exchange is admissible, and any conditions attached. Sectoral caps correspond to the limit and entry conditions correspond to the conditions under section 6(2A) of FEMA.

  1. AOnly the class of permissible transactions, never the limits
  2. BOnly the conditions, never the class of transactions
  3. CThe permissible classes, the limit up to which foreign exchange is admissible, and any conditionsCorrect
  4. DOnly the penalty for contravention by the investor

Explanation

Section 6(2A) has three clauses: (a) permissible classes of transactions, (b) the limit up to which foreign exchange is admissible, and (c) conditions on such transactions. Sectoral caps and entry conditions fit these clauses. The options restricting power to only one element are incomplete, and penalties are not mentioned in this provision.

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