The Reserve Bank of India (RBI) has extensive powers with respect to authorized persons under FEMA (Foreign Exchange Management Act, 1999), enabling it to regulate, supervise, and enforce compliance in the conduct of foreign exchange transactions.
Authorization & Licensing
RBI is empowered to authorize any person or entity (banks, money changers, financial institutions) to act as an authorized person to deal in foreign exchange and securities.
Authorization is granted through a written license specifying the scope and terms of operations, which the authorized entity must strictly follow.
Issuance of Directions
RBI can issue directions to authorized persons regarding how to conduct foreign exchange transactions, including making payments, transferring securities, and reporting requirements.
Authorized persons must comply with all instructions, circulars, and operational guidelines issued by RBI at all times.
Inspection & Supervision
RBI has the right to inspect the books, accounts, and business conduct of authorized persons at any time to ensure compliance with FEMA and its directions.
RBI officers can require authorized persons to furnish documents and information related to their foreign exchange dealings within a specified timeframe.
Revocation & Disciplinary Action
If an authorized person violates the terms of authorization, fails to comply with RBI directions, or acts against public interest, RBI may revoke their authorization, but only after providing a reasonable opportunity for representation.
RBI can also impose penalties and disciplinary measures for breaches of operational guidelines or FEMA rules.
Regulatory Oversight
RBI continuously monitors foreign exchange transactions to maintain market stability, prevent fraud, and ensure proper documentation and reporting by authorized persons.
It specifies permissible capital and current account transactions and may restrict or liberalize foreign exchange flows as needed.
Summary Table: RBI Powers under FEMA
| Power | Description |
| Authorization | Grant/revoke license to deal in foreign exchange |
| Directions & Guidelines | Issue binding instructions to ensure compliance |
| Inspection | Examine books/records, demand information |
| Disciplinary Actions | Impose penalties, revoke authorization for violations |
| Oversight | Monitor and regulate transactions and activities |
The RBI’s powers ensure that India’s foreign exchange market operates in compliance with national interests and global standards, helping prevent misuse and safeguard economic stability.
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