What are the functions of RBI under FEMA?

  • Blog|FEMA & Banking|
  • < 1 minute
  • By Taxmann
  • |
  • Last Updated on 25 June, 2021
 Foreign Exchange Management Act (“FEMA”) envisages that Reserve Bank of India (“RBI”) will have a key role in management of foreign exchange. The main functions of RBI under FEMA are as follows:
a) Controlling dealings in foreign exchange by giving general or special permission for dealing in foreign exchange, excluding those cases where specific provisions have been made in Act, Rules or Regulations – Section 3.
b) RBI cannot impose any restrictions on current account transactions. These can be imposed only by Central Government in consultation with RBI – Section 5. However, in certain cases, prior approval of RBI is required for current account transactions as provided in Foreign Exchange Management (Current Account Transactions) Rules, 2000.
c) Specifying conditions for payment in respect of capital account transaction – Section 6(2).
d) Regulate/prohibit/restrict the following, by issuing Regulations:
  • Transfer or issue of foreign security to resident and Indian security to non-resident;
  • Borrowing and lending in foreign exchange or to a foreign person; 
  • Export/import of currency or currency notes;
  • Transfer of immovable property outside India;
  • Giving guarantee or surety where foreign exchange transaction is involved – Section 6(3)
e) Specify (by regulation) period and manner in which foreign exchange due from export of goods and services should be received – Section 8.
f) To grant exemption from realisation and repatriation in cases specified under Section 9.
g) Granting authorisation to ‘Authorised Person’ to deal in foreign exchange, to give directions to them and to inspect the authorised person – Sections 10, 11 & 12.

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