The Foreign Exchange Management Act, 1999

(42 of 1999)
Last Updated 20th January, 2020 [act131]

LEGISLATIVE HISTORY ▼
An Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating
external trade and payments and for promoting the orderly development and maintenance of foreign
exchange market in India  .
Be it enacted by Parliament in the Fiftieth Year of the Republic of India as follows:
FACT SHEET ▼

CHAPTER I

Preliminary
1. Short title, extent, application and commencement. - (1) This Act may be called The Foreign
Exchange Management Act , 1999.
(2) It extends to the whole of India.
(3) It shall also apply to all branches, offices and agencies outside India owned or controlled by a person
resident in India and also to any contravention thereunder committed outside India by any person to
whom this Act applies.
(4) It shall come into force on such date as the Central Government may, by notification in the Official
Gazette, appoint:
Provided that different dates may be appointed for different provisions of this Act and any reference in any
such provision to the commencement of this Act shall be construed as a reference to the coming into
force of that provision.
Object & Reasons▼
2. Definitions. - In this Act, unless the context otherwise requires,
(a) Adjudicating Authority means an officer authorised under sub-section (1) of section 16;

(b) Appellate Tribunal means the Appellate Tribunal for Foreign Exchange established under section
18;

(c) authorised person means an authorised dealer, money changer, off-shore banking unit or any
other person for the time being authorised under sub-section (1) of section 10 to deal in foreign
exchange or foreign securities;
(d) Bench means a Bench of the Appellate Tribunal;

(e) capital account transaction means a transaction which alters the assets or liabilities, including
contingent liabilities, outside India of persons resident in India or assets or liabilities in India of
persons resident outside India, and includes transactions referred to in sub-section (3) of section
6;

(f) Chairperson means the Chairperson of the Appellate Tribunal;

(g) chartered accountant shall have the meaning assigned to it in clause (b) of sub-section (1) of
section 2 of the Chartered Accountants Act, 1949 (38 of 1949);

(h) currency includes all currency notes, postal notes, postal orders, money orders, cheques, drafts,
travellers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such
other similar instruments, as may be notified by the Reserve Bank;
(i) currency notes means and includes cash in the form of coins and bank notes;

(j) current account transaction means a transaction other than a capital account transaction and
without prejudice to the generality of the foregoing such transaction includes,
(i) payments due in connection with foreign trade, other current business, services, and short-
term banking and credit facilities in the ordinary course of business,
(ii) payments due as interest on loans and as net income from investments,
(iii) remittances for living expenses of parents, spouse and children residing abroad, and
(iv) expenses in connection with foreign travel, education and medical care of parents, spouse
and children;

(k) Director of Enforcement means the Director of Enforcement appointed under sub-section (1) of
section 36;

(l) export, with its grammatical variations and cognate expressions, means,
(i) the taking out of India to a place outside India any goods,
(ii) provision of services from India to any person outside India;
(m) foreign currency means any currency other than Indian currency;

(n) foreign exchange means foreign currency and includes,

(i) deposits, credits and balances payable in any foreign currency,
(ii) drafts, travellers cheques, letters of credit or bills of exchange, expressed or drawn in Indian
currency but payable in any foreign currency,
(iii) drafts, travellers cheques, letters of credit or bills of exchange drawn by banks, institutions
or persons outside India, but payable in Indian currency;
(o) foreign security means any security, in the form of shares, stocks, bonds, debentures or any other
instrument denominated or expressed in foreign currency and includes securities expressed in
foreign currency, but where redemption or any form of return such as interest or dividends is
payable in Indian currency;
(p) import, with its grammatical variations and cognate expressions, means bringing into India any
goods or services;
(q) Indian currency means currency which is expressed or drawn in Indian rupees but does not
include special bank notes and special one rupee notes issued under section 28-A of the Reserve
Bank of India Act, 1934 (2 of 1934);

(r) legal practitioner shall have the meaning assigned to it in clause (i) of sub-section (1) of section 2
of the Advocates Act, 1961 (25 of 1961);

(s) Member means a Member of the Appellate Tribunal and includes the Chairperson thereof;
(t) notify means to notify in the Official Gazette and the expression notification shall be construed
accordingly;

(u) person includes

(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or not,
(vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and
(vii) any agency, office or branch owned or controlled by such person;
(v) person resident in India means
(i) a person residing in India for more than one hundred and eighty-two days during the course
of the preceding financial year but does not include
(A) a person who has gone out of India or who stays outside India, in either case

(a) for or on taking up employment outside India, or

(b) for carrying on outside India a business or vocation outside India, or

(c) for any other purpose, in such circumstances as would indicate his intention to stay outside India
for an uncertain period;

(B) a person who has come to or stays in India, in either case, otherwise than
(a) for or on taking up employment in India, or

(b) for carrying on in India a business or vocation in India, or

(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an
uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in India;
(w) person resident outside India means a person who is not resident in India;
(x) prescribed means prescribed by rules made under this Act;

(y) repatriate to India means bringing into India the realised foreign exchange and
(i) the selling of such foreign exchange to an authorised person in India in exchange for
rupees; or
(ii) the holding of realised amount in an account with an authorised person in India to the extent
notified by the Reserve Bank, and includes use of the realised amount for discharge of a
debt or liability denominated in foreign exchange and the expression repatriation shall be
construed accordingly;
(z) Reserve Bank means the Reserve Bank of India constituted under sub-section (1) of section 3 of
the Reserve Bank of India Act, 1934 (2 of 1934);
 (za) security means shares, stocks, bonds and debentures, Government securities as defined in the
Public Debt Act, 1944 (18 of 1944), savings certificates to which the Government Savings
Certificates Act, 1959 (46 of 1959) applies, deposit receipts in respect of deposits of securities and
units of the Unit Trust of India established under sub-section (1) of section 3 of the  [Unit Trust of
India Act, 1963 (52 of 1963)] or of any mutual fund and includes certificates of title to securities,
but does not include bills of exchange or promissory notes other than Government promissory
notes or any other instruments which may be notified by the Reserve Bank as security for the
purposes of this Act;

(zb) service means service of any description which is made available to potential users and includes
the provision of facilities in connection with banking, financing, insurance, medical assistance,
legal assistance, chit fund, real estate, transport, processing, supply of electrical or other energy,
boarding or lodging or both, entertainment, amusement or the purveying of news or other
information, but does not include the rendering of any service free of charge or under a contract of
personal service;

(zc) Special Director (Appeals) means an officer appointed under section 18;
(zd) specify means to specify by regulations made under this Act and the expression specified shall
be construed accordingly;
(ze) transfer includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of
transfer of right, title, possession or lien.

CHAPTER II

Regulation And Management Of Foreign Exchange

3. Dealing in foreign exchange, etc. - Save as otherwise provided in this Act, rules or regulations made
thereunder, or with the general or special permission of the Reserve Bank, no person shall
(a) deal in or transfer any foreign exchange or foreign security to any person not being an authorised
person;

(b) make any payment to or for the credit of any person resident outside India in any manner;
(c) receive otherwise through an authorised person, any payment by order or on behalf of any person
resident outside India in any manner;
Explanation. - For the purpose of this clause, where any person in, or resident in, India receives any
payment by order or on behalf of any person resident outside India through any other person (including
an authorised person) without a corresponding inward remittance from any place outside India, then, such
person shall be deemed to have received such payment otherwise than through an authorised person;
(d) enter 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.
Explanation. - For the purpose of this clause, financial transaction means making any payment to, or for
the credit of any person, or receiving any payment for, by order or on behalf of any person, or drawing,
issuing or negotiating any bill of exchange or promissory note, or transferring any security or
acknowledging any debt.
4. Holding of foreign exchange, etc. - Save as otherwise provided in this 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.
5. Current account transactions. - Any person may sell or draw foreign exchange to or from an
authorised person if such sale or drawal is a current account transaction:
Provided that the Central Government may, in public interest and in consultation with the Reserve Bank,
impose such reasonable restrictions for current account transactions as may be prescribed.
6. Capital account transactions. - (1) Subject to the provisions of sub-section (2), any person may sell
or draw foreign exchange to or from an authorised person for a capital account transaction.
(2) The Reserve Bank may, in consultation with the Central Government, specify
(a) any class or classes of capital account transactions which are permissible;
(b) the limit up to which foreign exchange shall be admissible for such transactions:
Provided that the Reserve Bank shall not impose any restriction on the drawal of foreign exchange for
payments due on account of amortization of loans or for depreciation of direct investments in the ordinary
course of business.
(3) Without prejudice to the generality of the provisions of sub-section (2), the Reserve Bank may, by
regulations, prohibit, restrict or regulate the following
(a) transfer or issue of any foreign security by a person resident in India;
(b) transfer or issue of any security by a person resident outside India;

(c) transfer or issue of any security or foreign security by any branch, office or agency in India of a
person resident outside India;

(d) any borrowing or lending in foreign exchange in whatever form or by whatever name called;
(e) any borrowing or lending in rupees in whatever form or by whatever name called between a
person resident in India and a person resident outside India;
(f) deposits between persons resident in India and persons resident outside India;

(g) export, import or holding of currency or currency notes;

(h) transfer of immovable property outside India, other than a lease not exceeding five years, by a
person resident in India;
(i) acquisition or transfer of immovable property in India, other than a lease not exceeding five years,
by a person resident outside India;
(j) giving of a guarantee or surety in respect of any debt, obligation or other liability incurred
(i) by a person resident in India and owed to a person resident outside India; or
(ii) by a person resident outside India.
(4) A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any
immovable property situated outside India if such currency, security or property was acquired, held or
owned by such person when he was resident outside India or inherited from a person who was resident
outside India.
(5) A person resident outside India may hold, own, transfer or invest in Indian currency, security or any
immovable property situated in India if such currency, security or property was acquired, held or owned by
such person when he was resident in India or inherited from a person who was resident in India.
(6) Without prejudice to the provisions of this section, 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 carrying on any activity relating to such branch, office or other place of
business.
7. Export of goods and services. - (1) Every exporter of goods shall
(a) furnish to the Reserve Bank or to such other authority a declaration in such form and in such
manner as may be specified, containing true and correct material particulars, including the amount
 representing the full export value or, if the full export value of the goods is not ascertainable at the
time of export, the value which the exporter, having regard to the prevailing market conditions,
expects to receive on the sale of the goods in a market outside India;
(b) furnish to the Reserve Bank such other information as may be required by the Reserve Bank for
the purpose of ensuring the realisation of the export proceeds by such exporter.
(2) The Reserve Bank may, for the purpose of ensuring that the full export value of the goods or such
reduced value of the goods as the Reserve Bank determines, having regard to the prevailing market
conditions, is received without any delay, direct any exporter to comply with such requirements as it
deems fit.
(3) Every exporter of services shall furnish to the Reserve Bank or to such other authorities a declaration
in such form and in such manner as may be specified, containing the true and correct material particulars
in relation to payment for such services.
8. Realisation and repatriation of foreign exchange. - Save as otherwise provided in this Act, where
any amount of foreign exchange is due or has accrued to any person resident in India, such person shall
take all reasonable steps to realise and repatriate to India such foreign exchange within such period and
in such manner as may be specified by the Reserve Bank.
9. Exemption from realisation and repatriation in certain cases. - The provisions of sections 4 and 8
shall not apply to the following, namely:
(a) possession of foreign currency or foreign coins by any person up to such limit as the Reserve
Bank may specify;
(b) foreign currency account held or operated by such person or class of persons and the limit up to
which the Reserve Bank may specify;
(c) foreign exchange acquired or received before the 8th day of July, 1947 or any income arising or
accruing thereon which is held outside India by any person in pursuance of a general or special
permission granted by the Reserve Bank;

(d) foreign exchange held by a person resident in India up to such limit as the Reserve Bank may
specify, if such foreign exchange was acquired by way of gift or inheritance from a person referred
to in clause (c), including any income arising therefrom;
(e) foreign exchange acquired from employment, business, trade, vocation, services, honorarium,
gifts, inheritance or any other legitimate means up to such limit as the Reserve Bank may specify;
and

(f) such other receipts in foreign exchange as the Reserve Bank may specify.

CHAPTER III

Authorised Person
10. Authorised person. - (1) The Reserve Bank may, on an application made to it in this behalf,
authorise any person to be known as authorised person to deal in foreign exchange or in foreign
securities, as an authorised dealer, money changer or off-shore banking unit or in any other manner as it
deems fit.
(2) An authorisation under this section shall be in writing and shall be subject to the conditions laid down
therein.
(3) An authorisation granted under sub-section (1) may be revoked by the Reserve Bank at any time if the
Reserve Bank is satisfied that
(a) it is in public interest so to do; or
 (b) the authorised person has failed to comply with the condition subject to which the authorisation
was granted or has contravened any of the provisions of the Act or any rule, regulation,
notification, direction or order made thereunder:
Provided that no such authorisation shall be revoked on any ground referred to in clause (b) unless the
authorised person has been given a reasonable opportunity of making a representation in the matter.
(4) An authorised person shall, in all his dealings in foreign exchange or foreign security, comply with
such general or special directions or orders as the Reserve Bank may, from time to time, think fit to give,
and, except with the previous permission of the Reserve Bank, an authorised person shall not engage in
any transaction involving any foreign exchange or foreign security which is not in conformity with the
terms of his authorisation under this section.
(5) An authorised person shall, before undertaking any transaction in foreign exchange on behalf of any
person, require that person to make such declaration and to give such information as will reasonably
satisfy him that the transaction will not involve, and is not designed for the purpose of any contravention
or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made
thereunder, and where the said person refuses to comply with any such requirement or makes only
unsatisfactory compliance therewith, the authorised person shall refuse in writing to undertake the
transaction and shall, if he has reason to believe that any such contravention or evasion as aforesaid is
contemplated by the person, report the matter to the Reserve Bank.
(6) Any person, other than an authorised person, who has acquired or purchased foreign exchange for
any purpose mentioned in the declaration made by him to authorised person under sub-section (5) does
not use it for such purpose or does not surrender it to authorised person within the specified period or
uses the foreign exchange so acquired or purchased for any other purpose for which purchase or
acquisition of foreign exchange is not permissible under the provisions of the Act or the rules or
regulations or direction or order made thereunder shall be deemed to have committed contravention of
the provisions of the Act for the purpose of this section.
11. Reserve Banks powers to issue directions to authorised person. - (1) 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.
(2) The Reserve Bank may, for the purpose of ensuring the compliance with the provisions of this Act or
of any rule, regulation, notification, direction or order made thereunder, direct any authorised person to
furnish such information, in such manner, as it deems fit.
(3) Where any authorised person contravenes any direction given by the Reserve Bank under this Act or
fails to file any return as directed by the Reserve Bank, the Reserve Bank may, after giving reasonable
opportunity of being heard, impose on the authorised person a penalty which may extend to ten thousand
rupees and in the case of continuing contravention with an additional penalty which may extend to two
thousand rupees for every day during which such contravention continues.
12. Power of Reserve Bank to inspect authorised person. - (1) The Reserve Bank may, at any time,
cause an inspection to be made, by any officer of the Reserve Bank specially authorised in writing by the
Reserve Bank in this behalf, of the business of any authorised person as may appear to it to be
necessary or expedient for the purpose of
(a) verifying the correctness of any statement, information or particulars furnished to the Reserve
Bank;
(b) obtaining any information or particulars which such authorised person has failed to furnish on
being called upon to do so;
(c) securing compliance with the provisions of this Act or of any rules, regulations, directions or
orders made thereunder.
(2) It shall be the duty of every authorised person, and where such person is a company or a firm, every
director, partner or other officer of such company or firm, as the case may be, to produce to any officer
making an inspection under sub-section (1), such books, accounts and other documents in his custody or
power and to furnish any statement or information relating to the affairs of such person, company or firm
as the said officer may require within such time and in such manner as the said officer may direct.

CHAPTER IV

Contravention And Penalties

13. Penalties. - (1) If any person contravenes any provision of this Act, or contravenes any rule,
regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes
any condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon
adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount
is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such
contravention is a continuing one, further penalty which may extend to five thousand rupees for every day
after the first day during which the contravention continues.
(2) Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks fit in
addition to any penalty which he may impose for such contravention direct that any currency, security or
any other money or property in respect of which the contravention has taken place shall be confiscated to
the Central Government and further direct that the foreign exchange holdings, if any, of the persons
committing the contraventions or any part thereof, shall be brought back into India or shall be retained
outside India in accordance with the directions made in this behalf.
Explanation. - For the purposes of this sub-section, property in respect of which contravention has taken
place, shall include
(a) deposits in a bank, where the said property is converted into such deposits;

(b) Indian currency, where the said property is converted into that currency; and
(c) any other property which has resulted out of the conversion of that property.
14. Enforcement of the orders of Adjudicating Authority. - (1) Subject to the provisions of sub-section
(2) of section 19, if any person fails to make full payment of the penalty imposed on him under section 13
within a period of ninety days from the date on which the notice for payment of such penalty is served on
him, he shall be liable to civil imprisonment under this section.
(2) No order for the arrest and detention in civil prison of a defaulter shall be made unless the
Adjudicating Authority has issued and served a notice upon the defaulter calling upon him to appear
before him on the date specified in the notice and to show cause why he should not be committed to the
civil prison, and unless the Adjudicating Authority, for reasons in writing, is satisfied
(a) that the defaulter, with the object or effect of obstructing the recovery of penalty, has after the
issue of notice by the Adjudicating Authority, dishonestly transferred, concealed, or removed any
part of his property, or
(b) that the defaulter has, or has had since the issuing of notice by the Adjudicating Authority, the
means to pay the arrears or some substantial part thereof and refuses or neglects or has refused
or neglected to pay the same.
(3) Notwithstanding anything contained in sub-section (1), a warrant for the arrest of the defaulter may be
issued by the Adjudicating Authority if the Adjudicating Authority is satisfied, by affidavit or otherwise, that
with the object or effect of delaying the execution of the certificate the defaulter is likely to abscond or
leave the local limits of the jurisdiction of the Adjudicating Authority.
(4) Where appearance is not made pursuant to a notice issued and served under sub-section (1), the
Adjudicating Authority may issue a warrant for the arrest of the defaulter.
(5) A warrant of arrest issued by the Adjudicating Authority under sub-section (3) or sub-section (4) may
also be executed by any other Adjudicating Authority within whose jurisdiction the defaulter may for the
time being be found.
(6) Every person arrested in pursuance of a warrant of arrest under this section shall be brought before
the Adjudicating Authority issuing the warrant as soon as practicable and in any event within twenty-four
hours of his arrest (exclusive of the time required for the journey):
Provided that if the defaulter pays the amount entered in the warrant of arrest as due and the costs of the
arrest to the officer arresting him, such officer shall at once release him.
Explanation. - For the purposes of this sub-section, where the defaulter is a Hindu undivided family,
the karta thereof shall be deemed to be the defaulter.
(7) When a defaulter appears before the Adjudicating Authority pursuant to a notice to show cause or is
brought before the Adjudicating Authority under this section, the Adjudicating Authority shall give the
defaulter an opportunity showing cause why he should not be committed to the civil prison.
(8) Pending the conclusion of the inquiry, the Adjudicating Authority may, in his discretion, order the
defaulter to be detained in the custody of such officer as the Adjudicating Authority may think fit or release
him on his furnishing the security to the satisfaction of the Adjudicating Authority for his appearance as
and when required.
(9) Upon the conclusion of the inquiry, the Adjudicating Authority may make an order for the detention of
the defaulter in the civil prison and shall in that event cause him to be arrested if he is not already under
arrest:
Provided that in order to give a defaulter an opportunity of satisfying the arrears, the Adjudicating
Authority may, before making the order of detention, leave the defaulter in the custody of the officer
arresting him or of any other officer for a specified period not exceeding fifteen days, or release him on his
furnishing security to the satisfaction of the Adjudicating Authority for his appearance at the expiration of
the specified period if the arrears are not satisfied.
(10) When the Adjudicating Authority does not make an order of detention under sub-section (9), he shall,
if the defaulter is under arrest, direct his release.
(11) Every person detained in the civil prison in execution of the certificate may be so detained,
(a) where the certificate is for a demand of an amount exceeding rupees one crore, up to three years,
and

(b) in any other case, up to six months:

Provided that he shall be released from such detention on the amount mentioned in the warrant for his
detention being paid to the officer-in-charge of the civil prison.
(12) A defaulter released from detention under this section shall not, merely by reason of his release, be
discharged from his liability for the arrears, but he shall not be liable to be arrested under the certificate in
execution of which he was detained in the civil prison.
(13) A detention order may be executed at any place in India in the manner provided for the execution of
warrant of arrest under the Code of Criminal Procedure, 1973 (2 of 1974).
15. Power to compound contravention. - (1) Any contravention under section 13 may, on an application
made by the person committing such contravention, be compounded within one hundred and eighty days
from the date of receipt of application by the Director of Enforcement or such other officers of the
Directorate of Enforcement and officers of the Reserve Bank as may be authorised in this behalf by the
Central Government in such manner as may be prescribed.
(2) Where a contravention has been compounded under sub-section (1), no proceeding or further
proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person
committing such contravention under that section, in respect of the contravention so compounded.

CHAPTER V

Adjudication And Appeal

16. Appointment of Adjudicating Authority. - (1) For the purpose of adjudication under section 13, the
Central Government may, by an order published in the Official Gazette, appoint as many officers of the
Central Government as it may think fit, as the Adjudicating Authorities for holding an inquiry in the manner
prescribed after giving the person alleged to have committed contravention under section 13, against
whom a complaint has been made under sub-section (3) (hereinafter in this section referred to as the said
person) a reasonable opportunity of being heard for the purpose of imposing any penalty:
Provided that where the Adjudicating Authority is of opinion that the said person is likely to abscond or is
likely to evade in any manner, the payment of penalty, if levied, it may direct the said person to furnish a
bond or guarantee for such amount and subject to such conditions as it may deem fit.
(2) The Central Government shall, while appointing the Adjudicating Authorities under sub-section (1),
also specify in the order published in the Official Gazette, their respective jurisdictions.
(3) No Adjudicating Authority shall hold an enquiry under sub-section (1) except upon a complaint in
writing made by any officer authorised by a general or special order by the Central Government.
(4) The said person may appear either in person or take the assistance of a legal practitioner or a
chartered accountant of his choice for presenting his case before the Adjudicating Authority.
(5) Every Adjudicating Authority shall have the same powers of a Civil Court which are conferred on the
Appellate Tribunal under sub-section (2) of section 28 and
(a) all proceedings before it shall be deemed to be judicial proceedings within the meaning of
sections 193 and 228 of the Indian Penal Code (45 of 1860);

(b) shall be deemed to be a Civil Court for the purposes of sections 345 and 346 of the Code of
Criminal Procedure, 1973 (2 of 1974).
(6) Every Adjudicating Authority shall deal with the complaint under sub-section (2) as expeditiously as
possible and endeavour shall be made to dispose of the complaint finally within one year from the date of
receipt of the complaint:
Provided that where the complaint cannot be disposed of within the said period, the Adjudicating Authority
shall record periodically the reasons in writing for not disposing of the complaint within the said period.
17. Appeal to Special Director (Appeals). - (1) The Central Government shall, by notification, appoint
one or more Special Directors (Appeals) to hear appeals against the orders of the Adjudicating Authorities
under this section and shall also specify in the said notification the matter and places in relation to which
the Special Director (Appeals) may exercise jurisdiction.
(2) Any person aggrieved by an order made by the Adjudicating Authority, being an Assistant Director of
Enforcement or a Deputy Director of Enforcement, may prefer an appeal to the Special Director
(Appeals).
(3) Every appeal under sub-section (1) shall be filed within forty-five days from the date on which the copy
of the order made by the Adjudicating Authority is received by the aggrieved person and it shall be in such
form, verified in such manner and be accompanied by such fee as may be prescribed:
Provided that the Special Director (Appeals) may entertain an appeal after the expiry of the said period of
forty-five days, if he is satisfied that there was sufficient cause for not filing it within that period.
(4) On receipt of an appeal under sub-section (1), the Special Director (Appeals) may after giving the
parties to the appeal an opportunity of being heard, pass such order thereon as he thinks fit, confirming,
modifying or setting aside the order appealed against.
(5) The Special Director (Appeals) shall send a copy of every order made by him to the parties to appeal
and to the concerned Adjudicating Authority.
(6) The Special Director (Appeals) shall have the same powers of a Civil Court which are conferred on the
Appellate Tribunal under sub-section (2) of section 28 and
(a) all proceedings before him shall be deemed to be judicial proceedings within the meaning of
sections 193 and 228 of the Indian Penal Code (45 of 1860);

(b) shall be deemed to be a Civil Court for the purposes of sections 345 and 346 of the Code of
Criminal Procedure, 1973 (2 of 1974).
18. Establishment of Appellate Tribunal. - The Central Government shall, by notification, establish an
Appellate Tribunal to be known as the Appellate Tribunal for Foreign Exchange to hear appeals against
the orders of the Adjudicating Authorities and the Special Director (Appeals) under this Act.
19. Appeal to Appellate Tribunal. - (1) Save as provided in sub-section (2), the Central Government or
any person aggrieved by an order made by an Adjudicating Authority, other than those referred to in sub-
section (1) of section 17, or the Special Director (Appeals), may prefer an appeal to the Appellate
Tribunal:
Provided that any person appealing against the order of the Adjudicating Authority or the Special Director
(Appeals) levying any penalty, shall while filing the appeal, deposit the amount of such penalty with such
authority as may be notified by the Central Government:
Provided further that where in any particular case, the Appellate Tribunal is of the opinion that the deposit
of such penalty would cause undue hardship to such person, the Appellate Tribunal may dispense with
such deposit subject to such conditions as it may deem fit to impose so as to safeguard the realisation of
penalty.
(2) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on
which a copy of the order made by the Adjudicating Authority or the Special Director (Appeals) is received
by the aggrieved person or by the Central Government and it shall be in such form, verified in such
manner and be accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-
five days if it is satisfied that there was sufficient cause for not filing it within that period.
(3) On receipt of an appeal under sub-section (1), the Appellate Tribunal may, after giving the parties to
the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying
or setting aside the order appealed against.
(4) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to
the concerned Adjudicating Authority or the Special Director (Appeals), as the case may be.
(5) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as
expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within one
hundred and eighty days from the date of receipt of the appeal:
Provided that where any appeal could not be disposed of within the said period of one hundred and eighty
days, the Appellate Tribunal shall record its reasons in writing for not disposing of the appeal within the
said period.
(6) The Appellate Tribunal may, for the purpose of examining the legality, propriety or correctness of any
order made by the Adjudicating Authority under section 16 in relation to any proceeding, on its own
motion or otherwise, call for the records of such proceedings and make such order in the case as it thinks
fit.
20. Composition of Appellate Tribunal. - (1) The Appellate Tribunal shall consist of a Chairperson and
such number of Members as the Central Government may deem fit.
(2) Subject to the provisions of this Act,
(a) the jurisdiction of the Appellate Tribunal may be exercised by Benches thereof;
(b) a Bench may be constituted by the Chairperson with one or more Members as the Chairperson
may deem fit;
(c) the Benches of the Appellate Tribunal shall ordinarily sit at New Delhi and at such other places as
the Central Government may, in consultation with the Chairperson, notify;
(d) the Central Government shall notify the areas in relation to which each Bench of the Appellate
Tribunal may exercise jurisdiction.
(3) Notwithstanding anything contained in sub-section (2), the Chairperson may transfer a Member from
one Bench to another Bench.
(4) If at any stage of the hearing of any case or matter it appears to the Chairperson or a Member that the
case of matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the
case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer,
to such Bench as the Chairperson may deem fit.
21. Qualifications for appointment of Chairperson, Member and Special Director (Appeals). - (1) A
person shall not be qualified for appointment as the Chairperson or a Member unless he
(a) in the case of Chairperson, is or has been, or is qualified to be, a Judge of a High Court; and

(b) in the case of a Member, is or has been, or is qualified to be, a District Judge.
(2) A person shall not be qualified for appointment as a Special Director (Appeals) unless he
(a) has been a member of the Indian Legal Service and has held a post in Grade I of that Service; or
(b) has been a member of the Indian Revenue Service and has held a post equivalent to a Joint
Secretary to the Government of India.
22. Term of office. - The Chairperson and every other Member shall hold office as such for a term of five
years from the date on which he enters upon his office:
Provided that no Chairperson or other Member shall hold office as such after he has attained,
(a) in the case of the Chairperson, the age of sixty-five years;

(b) in the case of any other Member, the age of sixty-two years.
23. Terms and conditions of service. - The salary and allowances payable to and the other terms and
conditions of service of the Chairperson, other Members and the Special Director (Appeals) shall be such
as may be prescribed:
Provided that neither the salary and allowances nor the other terms and conditions of service of the
Chairperson or a Member shall be varied to his disadvantage after appointment.
24. Vacancies. - If, for reason other than temporary absence, any vacancy occurs in the office of the
Chairperson or a Member, the Central Government shall appoint another person in accordance with the
provisions of this Act to fill the vacancy and the proceedings may be continued before the Appellate
Tribunal from the stage at which the vacancy is filled.
25. Resignation and removal. - (1) The Chairperson or a Member may, by notice in writing under his
hand addressed to the Central Government, resign his office:
Provided that the Chairperson or a Member shall, unless he is permitted by the Central Government to
relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt
of such notice or until a person duly appointed as his successor enters upon his office or until the expiry
of term of office, whichever is the earliest.
(2) The Chairperson or a Member shall not be removed from his office except by an order by the Central
Government on the ground of proved misbehaviour or incapacity after an inquiry made by such person as
the President may appoint for this purpose in which the Chairperson or a Member concerned has been
informed of the charges against him and given a reasonable opportunity of being heard in respect of such
charges.
26. Member to act as Chairperson in certain circumstances. - (1) In the event of the occurrence of
any vacancy in the office of the Chairperson by reason of his death, resignation or otherwise, the senior-
most Member shall act as the Chairperson until the date on which a new Chairperson, appointed in
accordance with the provisions of this Act to fill such vacancy, enters upon his office.
(2) When the Chairperson is unable to discharge his functions owing to absence, illness or any other
cause, the senior-most Member shall discharge the functions of the Chairperson until the date on which
the Chairperson resumes his duties.
27. Staff of Appellate Tribunal and Special Director (Appeals). - (1) The Central Government shall
provide the Appellate Tribunal and the Special Director (Appeals) with such officers and employees as it
may deem fit.
(2) The officers and employees of the Appellate Tribunal and office of the Special Director (Appeals) shall
discharge their functions under the general superintendence of the Chairperson and the Special Director
(Appeals), as the case may be.
(3) The salaries and allowances and other conditions of service of the officers and employees of the
Appellate Tribunal and office of the Special Director (Appeals) shall be such as may be prescribed.
28. Procedure and powers of Appellate Tribunal and Special Director (Appeals). - (1) The Appellate
Tribunal and the Special Director (Appeals) shall not be bound by the procedure laid down by the Code of
Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to
the other provisions of this Act, the Appellate Tribunal and the Special Director (Appeals) shall have
powers to regulate its own procedure.
(2) The Appellate Tribunal and the Special Director (Appeals) shall have, for the purposes of discharging
its functions under this Act, the same powers as are vested in a Civil Court under the Code of Civil
Procedure, 1908 (5 of 1908) while trying a suit, in respect of the following matters, namely:
 (a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits;

(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872),
requisitioning any public record or document or copy of such record or document from any office;
(e) issuing commissions for the examination of witnesses or documents;

(f) reviewing its decisions;

(g) dismissing a representation of default or deciding it ex parte;

(h) setting aside any order of dismissal of any representation for default or any order passed by it ex
parte; and

(i) any other matter which may be prescribed by the Central Government.
(3) An order made by the Appellate Tribunal or the Special Director (Appeals) under this Act shall be
executable by the Appellate Tribunal or the Special Director (Appeals) as a decree of Civil Court and, for
this purpose, the Appellate Tribunal and the Special Director (Appeals) shall have all the powers of a Civil
Court.
(4) Notwithstanding anything contained in sub-section (3), the Appellate Tribunal or the Special Director
(Appeals) may transmit any order made by it to a Civil Court having local jurisdiction and such Civil Court
shall execute the order as if it were a decree made by that Court.
(5) All proceedings before the Appellate Tribunal and the Special Director (Appeals) shall be deemed to
be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860)
and the Appellate Tribunal shall be deemed to be a Civil Court for the purposes of sections 345 and 346
of the Code of Criminal Procedure, 1973 (2 of 1974).
29. Distribution of business amongst Benches. - Where Benches are constituted, the Chairperson
may, from time to time, by notification, make provisions as to the distribution of the business of the
Appellate Tribunal amongst the Benches and also provide for the matters which may be dealt with by
each Bench.
30. Power of Chairperson to transfer cases. - On the application of any of the parties and after notice
to the parties, and after hearing such of them as he may desire to be heard, or on his own motion without
such notice, the Chairperson may transfer any case pending before one Bench, for disposal, to any other
Bench.
31. Decision to be by majority. - If the Members of a Bench consisting of two Members differ in opinion
on any point, they shall state the point or points on which they differ, and make a reference to the
Chairperson who shall either hear the point or points himself or refer the case for hearing on such point or
points by one or more of the other Members of the Appellate Tribunal and such point or points shall be
decided according to the opinion of the majority of the Members of the Appellate Tribunal who have heard
the case, including those who first heard it.
32. Right of appellant to take assistance of legal practitioner or chartered accountant and of
Government, to appoint presenting officers. - (1) A person preferring an appeal to the Appellate
Tribunal or the Special Director (Appeals) under this Act may either appear in person or take the
assistance of a legal practitioner or a chartered accountant of his choice to present his case before the
Appellate Tribunal or the Special Director (Appeals), as the case may be.
(2) The Central Government may authorise one or more legal practitioners or chartered accountants or
any of its officers to act as presenting officers and every person so authorised may present the case with
respect to any appeal before the Appellate Tribunal or the Special Director (Appeals), as the case may
be.
33. Members, etc., to be public servants. - The Chairperson, Members and other officers and
employees of the Appellate Tribunal, the Special Director (Appeals) and the Adjudicating Authority shall
be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).
34. Civil Court not to have jurisdiction. - No Civil Court shall have jurisdiction to entertain any suit or
proceeding in respect of any matter which an Adjudicating Authority or the Appellate Tribunal or the
Special Director (Appeals) is empowered by or under this Act to determine and no injunction shall be
granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any
power conferred by or under this Act.
35. Appeal to High Court. - Any person aggrieved by any decision or order of the Appellate Tribunal may
file an appeal to the High Court within sixty days from the date of communication of the decision or order
of the Appellate Tribunal to him on any question of law arising out of such order:
Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause
from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty
days.
Explanation. - In this section High Court means
(a) the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on
business or personally works for gain; and

(b) where the Central Government is the aggrieved party, the High Court within the jurisdiction of
which the respondent, or in a case where there are more than one respondent, any of the
respondents, ordinarily resides or carries on business or personally works for gain.

CHAPTER VI

Directorate Of Enforcement
36. Directorate of Enforcement. - (1) The Central Government shall establish a Directorate of
Enforcement with a Director and such other officers or class of officers as it thinks fit, who shall be called
officers of Enforcement, for the purposes of this Act.
(2) Without prejudice to the provisions of sub-section (1), the Central Government may authorise the
Director of Enforcement or an Additional Director of Enforcement or a Special Director of Enforcement or
a Deputy Director of Enforcement to appoint Officers of Enforcement below the rank of an Assistant
Director of Enforcement.
(3) Subject to such conditions and limitations as the Central Government may impose, an Officer of
Enforcement may exercise the powers and discharge the duties conferred or imposed on him under this
Act.
37. Power of search, seizure, etc. - (1) The Director of Enforcement and other officers of Enforcement,
not below the rank of an Assistant Director, shall take up for investigation the contravention referred to in
section 13.
(2) Without prejudice to the provisions of sub-section (1), the Central Government may also, by
notification, authorise any officer or class of officers in the Central Government, State Government or the
Reserve Bank, not below the rank of an Under Secretary to the Government of India to investigate any
contravention referred to in section 13.
(3) The officers referred to in sub-section (1) shall exercise the like powers which are conferred on
income-tax authorities under the Income-tax Act, 1961 (43 of 1961) and shall exercise such powers,
subject to such limitations laid down under that Act.
38. Empowering other officers. - (1) The Central Government may, by order and subject to such
conditions and limitations as it thinks fit to impose, authorise any officer of customs or any central excise
officer or any police officer or any other officer of the Central Government or a State Government to
exercise such of the powers and discharge such of the duties of the Director of Enforcement or any other
officer of Enforcement under this Act as may be stated in the order.
(2) The officers referred to in sub-section (1) shall exercise the like powers which are conferred on the
income-tax authorities under the Income-tax Act, 1961 (43 of 1961), subject to such conditions and
limitations as the Central Government may impose.

CHAPTER VII
 Miscellaneous
39. Presumption as to documents in certain cases. - Where any document
(i) is produced or furnished by any person or has been seized from the custody or control of
any person, in either case, under this Act or under any other law; or
(ii) has been received from any place outside India (duly authenticated by such authority or
person and in such manner as may be prescribed) in the course of investigation of any
contravention under this Act alleged to have been committed by any person, and such
document is tendered in any proceeding under this Act in evidence against him, or against
him and any other person who is proceeded against jointly with him, the Court or the
Adjudicating Authority, as the case may be, shall

(a) presume, unless the contrary is proved, that the signature and every other part of such document
which purports to be in the handwriting of any particular person or which the Court may reasonably
assume to have been signed by, or to be in the handwriting of, any particular person, is in that
persons handwriting, and in the case of a document executed or attested, that it was executed or
attested by the person by whom it purports to have been so executed or attested;
(b) admit the document in evidence notwithstanding that it is not duly stamped, if such document is
otherwise admissible in evidence;
(c) in a case falling under clause (i), also presume, unless the contrary is proved, the truth of the
contents of such document.
40. Suspension of operation of this Act. - (1) If the Central Government is satisfied that circumstances
have arisen rendering it necessary that any permission granted or restriction imposed by this Act should
cease to be granted or imposed, or if it considers necessary or expedient so to do in public interest, the
Central Government may, by notification, suspend or relax to such extent either indefinitely or for such
period as may be notified, the operation of all or any of the provisions of this Act.
(2) Where the operation of any provision of this Act has under sub-section (1) been suspended or relaxed
indefinitely, such suspension or relaxation may, at any time while this Act remains in force, be removed by
the Central Government by notification.
(3) Every notification issued under this section shall be laid, as soon as may be after it is issued, before
each House of Parliament, while it is in session, for a total period of thirty days which may be comprised
in one session or in two or more successive sessions, and if, before the expiry of the session immediately
following the session or the successive sessions aforesaid, both Houses agree in making any
modification in the notification or both Houses agree that the notification should not be issued, the
notification shall thereafter have effect only in such modified form or be of no effect, as the case may be;
so, however, that any such modification or annulment shall be without prejudice to the validity of anything
previously done under that notification.
41. Power of Central Government to give directions. - For the purposes of this Act, the Central
Government may, from time to time, give to the Reserve Bank such general or special directions as it
thinks fit, and the Reserve Bank shall, in the discharge of its functions under this Act, comply with any
such directions.
42. Contravention by companies. - (1) Where a person committing a contravention of any of the
provisions of this Act or of any rule, direction or order made thereunder is a company, every person who,
at the time the contravention was committed, was in charge of, and was responsible to, the company for
the conduct of the business of the company as well as the company, shall be deemed to be guilty of the
contravention and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to punishment if he
proves that the contravention took place without his knowledge or that he exercised all due diligence to
prevent such contravention.
(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions
of this Act or of any rule, direction or order made thereunder has been committed by a company and it is
proved that the contravention has taken place with the consent or connivance of, or is attributable to any
neglect on the part of, any director, manager, secretary or other officer of the company, such director,
manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be
liable to be proceeded against and punished accordingly.
Explanation. - For the purposes of this section
(i) company means any body corporate and includes a firm or other association of individuals;
and
(ii) director, in relation to a firm, means a partner in the firm.
43. Death or insolvency in certain cases. - Any right, obligation, liability, proceeding or appeal arising in
relation to the provisions of section 13 shall not abate by reason of death or insolvency of the person
liable under that section and upon such death or insolvency such rights and obligations shall devolve on
the legal representative of such person or the official receiver or the official assignee, as the case may be:
Provided that a legal representative of the deceased shall be liable only to the extent of the inheritance or
estate of the deceased.
44. Bar of legal proceedings. - No suit, prosecution or other legal proceeding shall lie against the
Central Government or the Reserve Bank or any officer of that Government or of the Reserve Bank or
any other person exercising any power or discharging any functions or performing any duties under this
Act, for anything in good faith done or intended to be done under this Act or any rule, regulation,
notification, direction or order made thereunder.
[44A. Powers of Reserve Bank not to apply to International Financial Services Centre.  -
Notwithstanding anything contained in any other law for the time being in force, the powers
exercisable by the Reserve Bank under this Act, -
(a) shall not extend to an International Financial Services Centre set up under sub-
section (1) of section 18 of the Special Economic Zones Act, 2005 (28 of 2005);
(b) shall be exercisable by the International Financial Services Centres Authority
established under sub-section (1) of section 4 of the International Financial
Services Centres Authority Act, 2019,
in so far as regulation of financial products, financial services and financial institutions that are
permitted in the International Financial Services Centres are concerned.]
45. Removal of difficulties. - (1) If any difficulty arises in giving effect to the provisions of this Act, the
Central Government may, by order, do anything not inconsistent with the provisions of this Act for the
purpose of removing the difficulty:
Provided that no such order shall be made under this section after the expiry of two years from the
commencement of this Act.
(2) Every order made under this section shall be laid, as soon as may be after it is made, before each
House of Parliament.
46. Power to make rules. - (1) The Central Government may, by notification, make rules to carry out the
provisions of this Act.
(2) Without prejudice to the generality of the foregoing power, such rules may provide for,
(a) the imposition of reasonable restrictions on current account transactions under section 5;

(b) the manner in which the contravention may be compounded under sub-section (1) of section 15;
(c) the manner of holding an inquiry by the Adjudicating Authority under sub-section (1) of section 16;

(d) the form of appeal and fee for filing such appeal under sections 17 and 19;
(e) the salary and allowances payable to and the other terms and conditions of service of the
Chairperson and other Members of the Appellate Tribunal and the Special Director (Appeals)
under section 23;
 (f) the salaries and allowances and other conditions of service of the officers and employees of the
Appellate Tribunal and the office of the Special Director (Appeals) under sub-section (3) of section
27;
(g) the additional matters in respect of which the Appellate Tribunal and the Special Director
(Appeals) may exercise the powers of a Civil Court under clause (i) of sub-section (2) of section
28;

(h) the authority or person and the manner in which any document may be authenticated under
clause (ii) of section 39; and

(i) any other matter which is required to be, or may be, prescribed.
47. Power to make regulations. - (1) The Reserve Bank may, by notification, make regulations to carry
out the provisions of this Act and the rules made thereunder.
(2) Without prejudice to the generality of the foregoing power, such regulations may provide for,
(a) the permissible classes of capital account transactions, the limits of admissibility of foreign
exchange for such transactions, and the prohibition, restriction or regulation of certain capital
account transactions under section 6;

(b) the manner and the form in which the declaration is to be furnished under clause (a) of sub-
section (1) of section 7;

(c) the period within which and the manner of repatriation of foreign exchange under section 8;
(d) the limit up to which any person may possess foreign currency or foreign coins under clause (a) of
section 9;
(e) the class of persons and the limit up to which foreign currency account may be held or operated
under clause (b) of section 9;
(f) the limit up to which foreign exchange acquired may be exempted under clause (d) of section 9;

(g) the limit up to which foreign exchange acquired may be retained under clause (e) of section 9;
() any other matter which is required to be, or may be, specified.
48. Rules and regulations to be laid before Parliament. - Every rule and regulation made under this
Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in
session, for a total period of thirty days which may be comprised in one session or in two or more
successive sessions, and if, before the expiry of the session immediately following the session or the
successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation, or
both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter
have effect only in such modified form or be of no effect, as the case may be; so, however, that any such
modification or annulment shall be without prejudice to the validity of anything previously done under that
rule or regulation.
49. Repeal and saving. - (1) The Foreign Exchange Regulation Act, 1973 (46 of 1973) is hereby
repealed and the Appellate Board constituted under sub-section (1) of section 52 of the said Act
(hereinafter referred to as the repealed Act) shall stand dissolved.
(2) On the dissolution of the said Appellate Board, the person appointed as Chairman of the Appellate
Board and every other person appointed as Member and holding office as such immediately before such
date shall vacate their respective offices and no such Chairman or other person shall be entitled to claim
any compensation for the premature termination of the term of his office or of any contract of service.
(3) Notwithstanding anything contained in any other law for the time being in force, no Court shall take
cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any
contravention under section 51 of the repealed Act after the expiry of a period of two years from the date
of the commencement of this Act.
(4) Subject to the provisions of sub-section (3) all offences committed under the repealed Act shall
continue to be governed by the provisions of the repealed Act as if that Act had not been repealed.
(5) Notwithstanding such repeal,
(a) anything done or any action taken or purported to have been done or taken including any rule,
notification, inspection, order or notice made or issued or any appointment, confirmation or
declaration made or any licence, permission, authorisation or exemption granted or any document
or instrument executed or any direction given under the Act hereby repealed shall, insofar as it is
not inconsistent with the provisions of this Act, be deemed to have been done or taken under the
corresponding provisions of this Act;

(b) any appeal preferred to the Appellate Board under sub-section (2) of section 52 of the repealed
Act but not disposed of before the commencement of this Act shall stand transferred to and shall
be disposed of by the Appellate Tribunal constituted under this Act;
(c) every appeal from any decision or order of the Appellate Board under sub-section (3) or sub-
section (4) of section 52 of the repealed Act shall, if not filed before the commencement of this Act,
be filed before the High Court within a period of sixty days of such commencement:
Provided that the High Court may entertain such appeal after the expiry of the said period of sixty days if it
is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said
period.
(6) Save as otherwise provided in sub-section (3), the mention of particular matters in sub-sections (2),
(4) and (5) shall not be held to prejudice or affect the general application of section 6 of the General
Clauses Act, 1897 (10 of 1897), with regard to the effect of repeal.
 External Commercial Borrowings (ECB) and Trade Credits
(Updated as on May 29, 2019)

PART I – EXTERNAL COMMERCIAL BORROWINGS

A. BASIC QUERIES

1. Where can one get the details of extant External Commercial Borrowings
(ECB) and Trade Credits (TC) framework?

Master Direction No. 5 on ‘External Commercial Borrowings, Trade Credits and Structured
Obligations dated March 26, 2019 may be referred to for guidance on the extant framework on
ECB and TC. ECBs and TCs raised under the prior frameworks should continue to be in
compliance with the corresponding guidelines applicable at the time of availing the ECBs and
TCs.

2. Do FCNR (B) loans given by AD Category I banks come under the ECB
framework?

No, foreign currency loans given domestically by AD Category I banks out of the proceeds of
FCNR (B) deposits do not come under the ECB framework.

3. What precautions have to be taken before raising loan from non-residents?

Borrowings from overseas have to be in compliance with the applicable ECB guidelines /
provisions contained in the Foreign Exchange Management (Borrowing and Lending in
Foreign Exchange) Regulations, 2018 issued vide Notification No. FEMA 3 (R)/2018-RB
dated December 17, 2018, as amended from time to time.

4. Whose responsibility is it to ensure compliance with ECB guidelines?

The primary responsibility for ensuring that the borrowing is in compliance with the applicable
ECB guidelines is that of the borrower concerned. Structures which bypass/ circumvent ECB
guidelines in any manner and / or raising borrowings in any other manner which is not
permitted / disguising borrowing under the wrap of other kind of transactions and / or
contravening provisions of Foreign Exchange Management (Borrowing and Lending in
Foreign Exchange) Regulations, 2018 would also invite penal action under FEMA.

B. ELIGIBILITY FOR RAISING ECB

5. Are LLPs eligible to raise ECBs?

As LLPs are not eligible to receive FDI, they cannot raise ECBs.

C. CURRENCY OF ECB
6. Can INR denominated ECB be converted into foreign currency ECB?

Any entity raising INR denominated ECB is not permitted to convert the liability arising out of
INR ECB into foreign currency liability in any manner or assuming foreign currency risk is any
manner by either entering into a derivative contract or otherwise.

D. RECOGNISED LENDERS/ INVESTORS

7. Is the minimum equity holding requirement of foreign equity holder

(direct/indirect) applicable where the end uses is other than general corporate
purpose/working capital/repayment of Rupee loans?

The foreign equity holders as defined at Paragraph 1.11 of the Master Direction No. 5 on
‘External Commercial Borrowings, Trade Credits and Structured Obligations dated March 26,
2019 (MD) are eligible to lend for the end-uses given at Paragraph 2.1.viii(d), 2.1.viii(e) and
2.1.viii(f) of the MD. For end-uses, other than those in the negative list, recognised lenders are
given at Paragraph 2.1.iv of the MD.

8. A foreign equity holder holding minimum 25% direct equity holding in the
borrowing entity or minimum indirect equity holding of 51% in the borrowing
entity is a recognised lender. Can the foreign equity holder dispose-off the
holding once ECB is contracted?

No, all ECB guidelines including those related to minimum equity holding, are to be fulfilled
during the whole tenure of the ECB and not only at the time of contracting of ECB.

9. Can Indian banks participate in the process of issuance of Rupee

denominated bonds overseas in any other manner?

Indian banks cannot subscribe to RDBs issued overseas in primary market but can be
arrangers/ underwriters/ market makers/ traders subject to compliance with prudential norms.

10. Can persons resident in India subscribe to bonds (foreign currency/INR)

issued by eligible ECB borrowers in overseas centres or IFSCs as permitted in
the ECB framework?

No. AD banks should ensure that persons resident in India do not have any exposure to
borrowings by eligible entities under this framework either directly or indirectly except foreign
branches/ subsidiaries of Indian banks abroad or any other permitted entities. Further,
establishing borrowing structures/modalities which contravene the guidelines shall render
themselves liable for penal action as prescribed under FEMA.

11. Individuals can be recognised lenders if they are foreign equity holders or
for subscription to bonds/debentures listed abroad. Should such lenders also
be from FATF/IOSCO compliant jurisdictions?

Yes.

E. AVERAGE MATURITY PERIOD

12. How is average maturity period calculated?

You may refer to https://rbidocs.rbi.org.in/rdocs/Content/PDFs/12EC160712_A6.pdf for

illustration purposes.

13. Can door-to-door maturity be used in lieu of average maturity?

No.

14. In case of an ECB raised from foreign equity holder and utilized for general
corporate purpose/working capital/repayment of Rupee loans, can repayment of
principal of ECB start before the completion of 5 years?

Yes, however, the ECB should have minimum average maturity period of 5 years.

F. LEVERAGE CRITERIA AND BORROWING LIMIT

15. Should the proposed ECB be added to all outstanding ECBs for the purpose
of ECB liability to equity ratio?

Yes, apart from ECB raised for refinancing where the proposed ECB amount may not be taken
into account to avoid double counting.

16. Does the equity in “ECB liability to Equity ratio” include non-convertible
preference capital?

No.

17. Should the proposed ECB be added to all outstanding ECBs for arriving at
the individual limit for raising of ECBs?

The individual limit for raising ECB under the automatic route will take into account all ECBs
raised in the financial year including the proposed one. However, refinancing of ECB amount
will not be considered for arriving at individual limit per financial year. Also, the limit will be
restored at the beginning of new financial year.

18. Is the debit balance in the profit and loss account for losses incurred by the
Eligible Borrower, if any, required to be deducted from the free reserve while
calculating the ECB liability-equity ratio?

Yes. Any debit balance in the profit and loss account as per the latest audited balance sheet of
the Eligible Borrower should be deducted from the equity for computing the ECB liability-
equity ratio.

19. Can an eligible borrower simultaneously raise both Foreign Currency and
INR denominated ECBs?

Yes, as long as the ECBs are in compliance with the ECB guidelines for the respective
currencies as per RBI guidelines. The individual limit will include all ECBs raised, whether in
foreign currency or INR.

20. Is the enhancement of ECB amount permitted under the delegated powers?

Yes, provided the enhanced amount does not breach the applicable annual limit for the
automatic route for the current financial year and the other parameters of the ECB are in
compliance with the existing ECB guidelines also. Since this would be considered as change in
terms for the same ECB, no separate LRN is required for the enhanced amount.

G. ALL-IN-COST

21. Does all-in-cost ceiling apply on a continuous basis or can it be calculated

even on an average basis?

All-in-cost should be within the applicable ceiling at all times, e.g., breach of all-in-cost ceiling
in the first year and a much lower all-in-cost in the second year so as to comply on an average,
is not permitted.

22. Can interest during construction stage be paid out of ECB borrowings?

The definition of all-in-cost prohibiting use of ECB proceeds for payment of interest/charges is
not applicable to ECBs raised for project finance and utilised for payment of guarantee fees
(like ECA Premium) and interest during construction, provided the said components are part of
project cost and capitalised by the borrower.

G. END-USES

23. Is the reimbursement of expenditure incurred in the past a permissible end-

use under the ECB framework?

The reimbursement of expenditure incurred in the past is not a permissible end-use under the
ECB framework.

24. Can ECB be availed of for making equity investment domestically or buying
goodwill?

No. Equity investment either directly or indirectly (through purchase of goodwill) is not
permitted.

25. Can ECB be availed of for making contribution in an LLP?

No, it is not permitted.

26. Can an eligible borrower raise fresh foreign currency ECB for repayment of
existing Rupee denominated ECB?

Refinancing of Rupee denominated ECB with Foreign Currency denominated ECB is not
permitted.

27. Can ECB proceeds be used by eligible resident borrowers for investment in
their overseas JV/WOS as per the extant overseas investment guidelines?

Yes. ECB proceeds can be utilized for overseas investment as permitted under the overseas
investment guidelines.

28. Is on-lending treated as working capital for borrowers who are engaged in
the business of on-lending?

For the purpose of ECB, on-lending by borrowers who are engaged in the business of on-
lending is not treated as working capital. Additionally, the borrowers shall need to adhere to the
guidelines issued by the concerned sectoral or prudential regulator in this regard.

29. Can the housing finance companies raise ECB for on-lending to individual
borrowers exclusively for flats/units in the affordable housing projects as
defined in Harmonised Master List of Infrastructure Sub-sectors notified by
Government of India?

Yes.

H. REFINANCING OF ECB

30. Can ECB raised under the earlier ECB framework be refinanced/ partially
refinanced through an ECB raised under extant ECB framework?

Yes, provided that the borrower continues to be eligible to raise ECB under the extant ECB
framework, all-in-cost is lower than the all-in-cost of existing ECB, residual maturity is not
reduced and the new ECB is in compliance with the extant ECB framework as well.

31. Can refinancing/ partial refinancing be undertaken under auto route even for
ECBs raised under approval route, subject to compliance with guidelines?

Yes.

32. Is refinancing of ECBs raised from foreign equity holders and utilised for
working capital/ general corporate purpose/ repayment of Rupee loans
permitted?

Yes. However, the new ECB lenders should also be foreign equity holders as defined in the
ECB framework and subject to applicable refinancing guidelines.

I. HEDGING UNDER ECB FRAMEWORK

33. Can an entity raising INR ECB including issuance of Rupee denominated
bonds overseas, assume foreign currency risk on account of liabilities arising
out of such ECBs?

Any entity raising INR ECB (including issuance of Rupee denominated bonds overseas) is not
permitted to convert the liability arising out of such ECBs into a foreign currency liability in
any manner or assume foreign currency risk in any manner by either entering into a derivative
contract or otherwise.

34. Can the existing hedge(s) for ECBs be rolled over to the extent of 100 per
cent of outstanding ECB exposure?

Yes. The prescription is that of a minimum mandatory hedge.

35. What are the permitted derivative products for hedging of ECB?

Users may refer to Master Direction on Risk Management and Inter-bank dealings dated July 5,
2016, as amended from time to time.

J. Reporting

36. What precautions have to be taken at the time of filing of Form ECB in
respect of an ECB?

Any draw-down in respect of an ECB should happen only after obtaining the Loan Registration
Number (LRN) from RBI by filing duly certified Form ECB to the Director, External
Commercial Borrowings Division, Department of Statistics and Information Management
(DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai – 400 051. It should be
ensured that all terms and conditions of the ECB are reported correctly in Form ECB and none
of the columns are left blank (such columns which are not applicable for the borrowing or
against which ‘nil’ information has to be given, should be suitably covered). Changes in ECB
parameters, whether under the automatic route with the approval of Authorised Dealer
Category –I banks or under the approval route with prior approval of the RBI, should also be
reported to the DSIM through revised Form ECB at the earliest, in any case not later than 7
days from the changes effected. While submitting revised Form ECB, the changes should be
specifically mentioned in the communication. Any failure to comply with reporting guidelines
in respect of Form ECB for an ECB may invite penal action under FEMA.

37. How are actual transactions of an ECB reported to RBI?

The borrowers are required to report actual ECB transactions, correctly and fully, through duly
certified Form ECB 2 through the Authorised Dealer Category-I bank to DSIM as per the
periodicity specified by the RBI. None of the columns in Form ECB 2 should be left blank
(such columns which are not applicable for the borrowing or against which ‘nil’ information
has to be given, should be suitably covered). The Form ECB 2 should reach DSIM within
seven working days from the close of month to which it relates. Changes, if any, in ECB
parameters should also be incorporated in Form ECB 2 suitably. Any failure to comply with
reporting guidelines in respect of Form ECB 2, including failure to adhere to periodicity of
reporting, may invite penal action under FEMA.

38. In light of the New ECB framework, does the borrower need to file revised
Form ECB?

No, in case no changes are made in terms and conditions of ECB, there is no need to file
revised Form ECB (erstwhile Form 83).

39. Is LSF applicable to old ECB 2 returns also?

No. LSF provisions will be applicable to ECB 2 returns submitted from February 2019
onwards i.e. Form ECB 2 submitted in the month of February for transactions conducted in the
month of January 2019.

40. Is LSF applicable for each Form ECB 2 and to nil returns as well?

Yes. LSF is applicable for non-submission of each Form ECB 2, including Nil returns.

K. MISCELLANEOUS

41. Can the interest accrued on ECB be converted into Equity under the extant
norms?

Yes. Extant norms permit both ECB principal and interest to be converted into equity subject to
applicable conditions as given under Paragraph 7.4 of the Master Direction No. 5 on ‘External
Commercial Borrowings, Trade Credits and Structured Obligations dated March 26, 2019.

42. When ECB is partially converted into equity, should the remaining ECB
amount comply with all the ECB guidelines?

Yes. The part conversion of ECB into equity will be freely permitted only when the part
amount remaining as ECB complies with all the applicable ECB norms.

43. Can fixed deposits created out of ECB proceeds, pending utilization, be
renewed after completion of maximum permitted period?

No.

PART II: TRADE CREDITS (TC)

44. Can SBLC be issued by AD banks on behalf of their customers for availing
short term trade finance from overseas lenders in foreign currency?

AD banks can issue SBLC on behalf of their customers for availing short term trade credit
from overseas lenders in foreign currency subject to such SBLCs complying with the
provisions contained in Department of Banking Regulation Master Circular No. DBR. No. Dir.
BC.11/13.03.00/2015-16 dated July 1, 2015 on “Guarantees and Co-acceptances”, as amended
from time to time.

45. As per the new guidelines AD banks are required to report permissions
granted for settlement of delayed import dues as per the applicable procedure.
AD banks are also required to report permissions granted for settlement of
delayed import dues by Regional offices of Reserve Bank on a similar basis. Is
the mandated reporting only for approvals accorded for extensions up to one
year/three years for non-capital/capital goods respectively?

AD banks are required to report all permissions granted by the AD banks/Regional offices of
Reserve Bank for settlement of delayed import dues irrespective of the tenures of extension
sought.