Q13: The Reserve Bank of India (RBI) issues a Master Direction, requiring Authorized Dealer (AD) banks to obtain specific documentation, for certain outward remittances. What is the legal standing of this direction?

It is merely advisory, and banks can choose to follow it, based on their risk appetite.

It is legally binding on Authorized Dealers, and non-compliance can lead to regulatory action.

It applies only to foreign banks operating in India, not domestic public sector banks.

It is binding, only if the transaction value exceeds ₹1 crore.

✅ Correct Answer: B

Under FEMA, the RBI has the power to issue directions, instructions, and guidelines to Authorized Persons (including AD banks). These directions are mandatory and binding.

Failure to comply with an RBI Master Direction constitutes a contravention of the Act, rendering the bank liable for penal action.

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Bank Promotion Exam Guide

Q13: The Reserve Bank of India (RBI) issues a Master Direction, requiring Authorized Dealer (AD) banks to obtain specific documentation, for certain outward remittances. What is the legal standing of this direction?

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