Foreign Exchange Management Act, 1999
Section 47 FEMA 1999 - Power to Make Regulations
Section 47 of the Foreign Exchange Management Act, 1999 (FEMA) gives the Reserve Bank of India (RBI) statutory power to make regulations by notification for carrying out FEMA and the rules made under it. The section also identifies important subjects on which RBI regulations may be framed.
What does Section 47 of FEMA mean?
Section 47 is the principal regulation-making provision for the RBI under FEMA. A regulation is subordinate legislation made under authority granted by the Act. RBI regulations must operate within FEMA and the rules made under FEMA; they cannot override the parent Act.
The provision should be read with Section 46, which gives the Central Government power to make rules, and Section 48, which requires rules and regulations made under FEMA to be laid before Parliament.
Current text of Section 47 - Power to make regulations
47. (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 involving debt instruments determined under sub-section (7) of section 6, the limits of admissibility of foreign exchange for such transactions, and the prohibition, restriction or regulation of such 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;
(ga) export, import or holding of currency or currency notes;
(h) any other matter which is required to be, or may be, specified.
(3) All regulations made by the Reserve Bank before the date on which the provisions of this section are notified under section 6 and section 47 of this Act on capital account transactions, the regulation making power in respect of which now vests with the Central Government, shall continue to be valid, until amended or rescinded by the Central Government.
Key legal provisions explained
Section 47(1) - General regulation-making power
Subsection (1) authorises the RBI to make regulations by notification to implement FEMA and the rules made under it. This is a general enabling power and forms the statutory basis for numerous FEMA regulations issued by the RBI.
Section 47(2)(a) - Debt instrument capital account transactions
Clause (a) concerns permissible classes of capital account transactions involving debt instruments determined under Section 6(7), the admissible limits of foreign exchange for those transactions, and their prohibition, restriction or regulation under Section 6. Section 6(7) provides for determination of debt instruments by the Central Government in consultation with the RBI.
This wording is important because the statutory framework now distinguishes debt-instrument capital account transactions from capital account transactions that do not involve debt instruments. The latter fall within the Central Government rule-making framework under Section 46 read with Section 6.
Section 47(2)(b) - Export declarations under Section 7
Clause (b) enables regulations concerning the manner and form of declarations required under Section 7(1)(a). Section 7 deals with export of goods and services and the furnishing of prescribed information relating to export value.
Section 47(2)(c) - Repatriation under Section 8
Clause (c) authorises regulations governing the period and manner for repatriation of foreign exchange. Section 8 places an obligation, subject to FEMA, its rules and regulations, on a person resident in India to take reasonable steps to realise and repatriate foreign exchange due or accrued to that person.
Section 47(2)(d) to (g) - Foreign currency, accounts and retention
Clauses (d) to (g) relate to the statutory exceptions contemplated by Section 9. They permit regulations concerning limits for possession of foreign currency or foreign coins, classes of persons and limits for foreign currency accounts, exemptions for specified foreign exchange, and limits for retention of foreign exchange.
Section 47(2)(ga) - Currency and currency notes
Clause (ga) expressly permits regulations dealing with the export, import or holding of currency or currency notes. This clause was inserted as part of the restructuring of the capital account regulatory framework.
Section 47(2)(h) - Matters required to be specified
Clause (h) is a residual enabling provision for any other matter that FEMA requires or permits to be specified through regulations.
Section 47(3) - Continuity of earlier RBI regulations
Subsection (3) is a transitional saving provision. Where regulation-making authority for particular capital account transactions shifted from the RBI to the Central Government, earlier RBI regulations continue to remain valid until the Central Government amends or rescinds them.
Rules and regulations under FEMA: the practical distinction
Section 46 authorises the Central Government to make rules, while Section 47 authorises the RBI to make regulations. Following the statutory changes brought into effect in 2019, the division is particularly significant for capital account transactions: the RBI regulatory power under Section 47(2)(a) is framed around debt instruments, while the Central Government has rule-making authority for the corresponding non-debt capital account framework.
Examples of RBI regulations made under FEMA
Section 47 is used as an enabling provision for RBI regulations across foreign exchange subjects. Examples include regulations concerning debt instruments, overseas investment, deposits, foreign currency accounts, receipt and payment, borrowing and lending, and export-related matters. The applicable regulation and later amendments should always be checked for the particular transaction.