Page 64 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 3: FEMA Act, 1999

3. To open NRO, NRE, NRNR, NRSR and FCNR accounts. Notes

4. To sell or purchase foreign exchange for current account transactions. [Sec.5]
5. To sell or purchase foreign exchange for permissible capital account transactions. [Sec.6].
Bank’s Powers to issue Directions to Authorised Persons (Sec.11)

The Reserve Bank may, for the purpose of securing compliance with the provisions of this Act

and of any rules, regulations, notifications or directions made thereunder, give to the authorised
persons any direction in regard to making of payment or the doing or desist from doing any act
relating to foreign exchange or foreign security.

Task Who is the authorized person according to comply with RBI directions?

3.3 Regulation and Management of Foreign Exchange

Secs.3-9 deal with regulation and management of foreign exchange.

Dealings in Foreign Exchange etc. (Sec.3)

It prohibits any person other than an authorised person from (a) dealing in or transferring any
foreign exchange or foreign security to any person or (b) making any payment to or for the
credit of any person resident outside India in any manner; or (c) receive otherwise than through
an authorised person any payment by order or on behalf of any person resident outside India

in any manner. (d) entering into any financial transaction in India as consideration for or in
association with acquisition or creation or transfer of a right to acquire, any asset outside India
by any person.

Holding of Foreign Exchange etc.

Sec.4 provides that except as otherwise provided in the Act; no person resident in India shall
acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable
property situated outside India.

Note Portfolio Investment Scheme for NRI

A non-resident Indian (NRI) may purchase/ sell shares and/or convertible debentures of
an Indian company, through a registered broker on a recognised stock exchange, subject to
the following conditions:
(i) The NRI designates a branch of an authorised dealer for routing his/her transactions
relating to purchase and sale of shares/convertible debentures under this Scheme,
and routes all such transactions only through the branch so designated.
(ii) The paid up value of shares of an Indian company, purchased by each NRI both on
repatriation and on non-repatriation basis, does not exceed 5 per cent of the paid up
value of shares issued by the company concerned.
(iii) The paid up value of each series of convertible debentures purchased by each NRI
both on repatriation and on non-repatriation basis, does not exceed 5 per cent of
Contd...

LOVELY PROFESSIONAL UNIVERSITY 59