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

Zephyr Holdings, a Singapore entity, wants to know who decides which instruments count as 'debt instruments' for the purposes of capital account transactions under FEMA. Which statement is correct?

The Central Government determines which instruments are debt instruments, after consulting the Reserve Bank, under section 6(7) of FEMA. This definition then decides whether the Reserve Bank or the Central Government regulates the capital account transaction involved.

  1. AThe Central Government determines them in consultation with the Reserve BankCorrect
  2. BThe Reserve Bank determines them in consultation with SEBI
  3. CEach authorised dealer determines them for its customers
  4. DThe company's board determines them in its articles

Explanation

Section 6(7) says 'debt instruments' means such instruments as may be determined by the Central Government in consultation with the Reserve Bank. The other options name bodies with no such power under the section.

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