Module: | MODULE A: INTERNATIONAL BANKING
Q189: Consider the following statements regarding the realization and repatriation of foreign exchange under Section 8 of the Act:
1. Persons resident in India must take all reasonable steps to realize and repatriate to India any foreign exchange that is due or has accrued to them.
2. The Reserve Bank of India holds the power to grant exemptions from this mandatory realization requirement under specific circumstances.
3. Foreign exchange acquired by an Indian resident by way of a legitimate gift from a non-resident relative is permanently exempt from all realization and repatriation requirements.
Which of the statements given above is or are INCORRECT?
2. The Reserve Bank of India holds the power to grant exemptions from this mandatory realization requirement under specific circumstances.
3. Foreign exchange acquired by an Indian resident by way of a legitimate gift from a non-resident relative is permanently exempt from all realization and repatriation requirements.
Which of the statements given above is or are INCORRECT?
✅ Correct Answer: C
🎯 Quick Answer:
Option C is correct because only statement 3 is incorrect.Structural Breakdown: Section 8 creates a statutory duty for residents to bring their overseas earnings home.
The central bank dictates the time limits for this process but can also grant specific exemptions, making statements 1 and 2 correct.
Statement 3 is incorrect; there is no permanent blanket exemption for gifts.
Any foreign exchange acquired, even as a gift, must generally be repatriated and surrendered to an Authorized Person within a stipulated time frame, such as 180 days, unless permitted to be held in a specific foreign currency account.
Historical Context: The mandate to repatriate earnings is a cornerstone of India's foreign exchange policy, designed to continually build the nation's sovereign currency reserves and prevent capital flight through indefinitely parked offshore funds.
Causal Reasoning: The causal logic for mandating repatriation is liquidity.
If exporters or individuals were allowed to hold their earnings abroad indefinitely, the domestic banking system would face a severe shortage of foreign currency, leading to a massive depreciation of the Indian Rupee.