Which one of the following transactions can be carried on without any restriction or regulation of the RBI under the FEMA?
Drawal of foreign exchange for payments due on account of amortization of loans or for depreciation of direct investment.
Concept: FEMA divides foreign-exchange dealings into capital account transactions, which change assets or liabilities abroad and may be regulated by the RBI, and current account transactions, which relate to ordinary trade and payments and are generally free.
Drawal of foreign exchange to meet payments due for amortization of loans or for depreciation of direct investment is treated as a current account transaction, so it may be carried on freely without RBI restriction (subject only to any specified limits). For example, remitting a scheduled loan-repayment instalment abroad is a routine current-account payment, not a fresh cross-border investment.
Option check: Transfer or issue of a foreign security by a resident (option 1) and transfer or issue of a security by a non-resident (option 2) are capital account transactions the RBI regulates; the export, import or holding of currency notes (option 4) is specifically restricted. Only the current-account drawal in option 3 is free.
Hence the transaction that can be carried on without RBI restriction is the drawal of foreign exchange for amortization of loans or depreciation of direct investment.
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