Foreign Exchange Regulation

An Act to consolidate and amend the law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency, for the conservation of the foreign exchange resources of the country and the proper utilization thereof in the interests of the economic development of the country.

BE it enacted by Parliament in the Twenty-fourth Year of the Republic of India as follows:-

• Short title, extent, application and commencement
• This Act may be called the Foreign Exchange Regulation Act, 1973.
• It extends to the whole of India.
• It applies also to all citizens of India outside India and to branches and agencies outside India of companies or bodies corporate, registered or incorporated in India.
• It shall come into force on such date as the Central Government may, by notification in the
• Official Gazette, appoint in this behalf:
• Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

Definitions

In this Act, unless the context otherwise requires, –

• Appellate Board” means the Foreign Exchange Regulation Appellate Board constituted by the Central Government under sub-section(1)of section 52;
• authorized dealer” means a person for the time being authorized under section 6 to deal in foreign exchange;
• bearer certificate” means a certificate of title to securities by the delivery of which (with or without endorsement) the title to the securities is transferable;
• certificate of title to a security” means any document used in the ordinary course of business as proof of the possession or control of the security, or authorizing or purporting to authorize, either by an endorsement or by delivery, the possessor of the document to transfer or receive the security thereby represented;
• coupon” means a coupon representing dividends or interest on a security; The provisions of F.E.R. (Amendment) Act, 1993 (hereafter referred to as Act 29 of 1993) came into force on the 8th day of January 1993.
• currency” includes all coins, currency notes, banks notes, postal notes, postal orders, money orders, Cheques, drafts, traveler’s Cheques, letters of credit, bills of exchange and promissory notes;
• foreign currency” means any currency other than Indian currency;
• foreign exchange” means foreign currency and includes –
• all deposits, credits and balances payable in any foreign currency, and any drafts, traveler’s Cheques, letters of credit and bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency;
• any instrument payable, at the option of the drawee or holder thereof or any other party thereto, either in Indian currency or in foreign currency or partly in one and partly in the other;
• foreign security” means any security created or issued elsewhere than in India, and any security the principal of or interest on which is payable in any foreign currency or elsewhere than in India;
• Indian currency” means currency which is expressed or drawn in Indian rupees but does not include special bank notes and special one-rupee notes issued under section 28A of the Reserve Bank of India Act, 1934;
• Indian custom waters” means the waters extending into the sea to a distance of twelve nautical miles measured from the appropriate base line on the coast of India and includes any bay, gulf, harbor, creek or tidal river;
• money-changer” means a person for the time being authorized under section 7 to deal in foreign currency;
• overseas market”, in relation to any goods, means the market in the country outside India and in which such goods are intended to be sold;
• owner”, in relation to any security, includes any person who has power to sell or transfer the security, or who has the custody thereof or who receives, whether on his own behalf or on behalf of any other person, dividends or interest thereon, and who has any interest therein, and in a case where any security is held on any trust or dividends or interest thereon are paid into a trust fund, also includes any trustee or any person entitled to enforce the performance of the trust or to revoke or vary, with or without the consent of any other person, the trust or any terms thereof, or to control the investment of the trust moneys;
• person resident in India” means –
• a citizen of India, who has, at any time after the 25th day of March, 1947, been staying in India but does not include a citizen of India who has gone out of, or stays outside, India, in either case—
• for or on taking up employment outside India, or
• for carrying on outside India a business or vocation outside India, or
• for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
• a citizen of India, who having ceased by virtue of paragraph (a) or paragraph (b) or paragraph (c) of sub-clause (I) to be resident in India, returns to, or stays in, India, in either case –
• for or on taking up employment in India, or
• for carrying on in India a business or vocation in India, or
• for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
• a person, not being a citizen of India, who has come to, or stays in, India, in either case –
• for or on taking up employment in India, or
• for carrying on in India a business or vocation in India, or
• for staying with his or her spouse, such spouse being a person resident in India, or
• for any other purposes, in such circumstances as would indicate his intention to stay in India for an uncertain period;
• a citizen of India, who, not having stayed in India at any time after the 25th day of March,

1947, comes to India for any of the purposes referred to in paragraphs (a), (b) and (c) of sub- clause (iii) or for the purpose and in the circumstances referred to in paragraph (d) of that sub-clause or having come to India stays in India for any such purpose and in such circumstances.

• Explanation – A person, who has, by reason only of paragraph (a) or paragraph (b) or paragraph (d) of sub-clause (iii) been resident in India, shall, during any period in which he is outside India, be deemed to be not resident in India;
• Person resident outside India” means a person who is not resident in India;
• Precious stone” includes pearl and semi-precious stone and such other stone or gem as the Central Government may for the purposes of this Act, notify in this behalf in the Official Gazette;
• “Prescribed” means prescribed by rules made under this Act;
• Reserve Bank” means the Reserve Bank of India;
• security” means shares, stocks, bonds, debentures, debenture stock, Government securities as defined in the Public Debt Act, 1944, savings certificates to which the Government Savings Certificates Act, 1959 applies, deposit receipts in respect of deposits of securities, and units or sub-units of unit trusts and includes certificates of title to securities, but does not include bills of exchange or promissory notes other than Government promissory notes;
• Transfer”, in relation to any security, includes transfer by way of loan or security. Classes of officers of Enforcement

There shall be the following classes of officers of Enforcement, namely:-

• Directors of Enforcement;
• Additional Directors of Enforcement;
• Deputy Directors of Enforcement;
• Assistant Directors of Enforcement; and
• Such other class of officers of Enforcement as may be appointed for the purposes of this Act.
• Appointment and powers of officers of Enforcement

The Central Government may appoint such persons as it thinks fit to be officers of Enforcement.

Without prejudice to the provisions of sub-section (1), the Central Government may authorize a Director of Enforcement or an Additional Director of Enforcement or a Deputy Director of Enforcement or an Assistant Director of Enforcement to appoint officers of Enforcement below the rank of an Assistant Director of Enforcement. Subject to such conditions and limitations as the Central Government may impose, an officer of Enforcement may exercise the powers and discharge the duties conferred or imposed on him under this Act.

Entrustment of functions of Director

The Central Government may, by order and subject to such conditions and limitations as it thinks fit to impose, authorize any officer of customs or any Central Excise Officer or any police officer or any other officer of the Central Government or a State Government to exercise such of the powers and discharge such of the duties of the Director of Enforcement or any other officer of Enforcement under this Act as may be specified in the order.

Authorized dealers in foreign exchange

• The Reserve Bank may, on an application made to it in this behalf, authorize any person to deal in foreign exchange.
• An authorization under this section shall be in writing and –
• May authorize transactions of all descriptions in foreign currencies or may be restricted to authorizing dealings in specified foreign currencies only;
• May authorize dealings in all foreign currencies or may be restricted to authorizing specified transactions only;
• May be granted to be effective for a specified period, or within specified amounts;
• May be granted subject to such conditions as may be specified therein.

Any authorization granted under sub-section (1) may be revoked by the Reserve Bank at any time if the Reserve Bank is satisfied that, –

It is in the public interest to do so; or

The authorized dealer has not complied with the conditions subject to which the authorization was granted or has contravened any of the provisions of this Act or of any rule, notification, direction or order made there under:

Provided that no such authorization shall be revoked on the ground specified in clause (ii) unless the authorized dealer has been given a reasonable opportunity for making a representation in the matter.

Any authorized dealer shall, in all his dealings in foreign exchange and in the exercise and discharge of the powers and of the functions delegated to him under section 74, comply with such general or special directions or instructions as the Reserve Bank may, from time to time, think fit to give, and, except with the previous permission of the Reserve Bank, an authorized dealer shall not engage in any transaction involving any foreign exchange which is not in conformity with the terms of his authorization under this section.

An authorized dealer shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declarations and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of, any contravention or evasion of the provisions of this Act or of any rule, notification, direction or order made there under, and where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorized dealer shall refuse to undertake the transaction and shall, if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to the Reserve Bank.

Money-changers

The Reserve Bank may, on an application made to it in this behalf, authorize any person to deal in foreign currency.

An authorization under this section shall be in writing and –

• May authorize dealings in all foreign currencies or may be restricted to authorizing dealings in specified foreign currencies only;
• may authorize transactions of all descriptions in foreign currencies or may be restricted to authorizing specified transactions only;
• May be granted with respect to a particular place where alone the money changer shall carry on his business;
• May be granted to be effective for a specified period, or within specified amounts;
• May be granted subject to such conditions as may be specified therein.

Any authorization granted under sub-section (1) may be revoked by the Reserve Bank at any time if the Reserve Bank is satisfied that – it is in the public interest to do so; or the money-changer has not complied with the conditions subject to which the authorization was granted or has contravened any of the provisions of this Act or of any rule, notification, direction or order made there under:

Provided that no such authorization shall be revoked on the ground specified in clause (ii) unless the money-changer has been given a reasonable opportunity for making a representation in the matter.

The provisions of sub-sections (4) and (5) of section 6 shall, in so far as they are applicable, apply in relation to a money-changer as they apply in relation to an authorized dealer.

Explanation – In this section, “foreign currency” means foreign currency in the form of notes, coins or traveler’s Cheques and “dealing” means purchasing foreign currency in the form of notes, coins or traveler’s Cheques or selling foreign currency in the form of notes or coins.

• Restrictions on dealing in foreign exchange
• Except with the previous general or special permission of the Reserve Bank, no person other than an authorized dealer shall in India, and no person resident in India other than an authorized dealer shall outside India, purchase or otherwise acquire or borrow from, or sell, or otherwise transfer or lend to or exchange with, any person not being an authorized dealer, any foreign exchange:
• Provided that nothing in this sub-section shall apply to any purchase or sale of foreign currency effected in India between any person and a money-changer.

Explanation – For the purposes of this sub-section, a person, who deposits foreign exchange with another person or opens an account in foreign exchange with another person, shall be deemed to lend foreign exchange to such other person.

Except with the previous general or special permission of the Reserve Bank, no person, whether an authorized dealer or a money-changer or otherwise, shall enter into any transaction which provides for the conversion of Indian currency into foreign currency or foreign currency into Indian currency at rates of exchange other than the rates for the time being authorized by the Reserve Bank.

Where any foreign exchange is acquired by any person, other than an authorized dealer or a money- changer, for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or the conditions cannot be complied with, the said person shall, within a period of thirty days from the date on which he comes to know that such foreign exchange cannot be so used or the conditions cannot be complied with, sell the foreign exchange to an authorized dealer or to a money-changer.

For the avoidance of doubt, it is hereby declared that where a person acquires foreign exchange for sending or bringing into India any goods but sends or brings no such goods or does not send or bring goods of a value representing the foreign exchange acquired, within a reasonable time or sends or brings any goods of a kind, quality or quantity different from that specified by him at the time of acquisition of the foreign exchange, such person shall, unless the contrary is proved, be presumed not to have been able to use the foreign exchange for the purpose for which he acquired it or, as the case may be, to have used the foreign exchange so acquired otherwise than for the purposes for which it was acquired.

Nothing in this section shall be deemed to prevent a person from buying from any post office, in accordance with any law or rules made there under for the time being in force, any foreign exchange in the form of postal orders or money orders.

Restrictions on payments

Save as may be provided in and in accordance with any general or special exemption from the provisions of this sub-section which may be granted conditionally or unconditionally \by the Reserve Bank, no person in, or resident in, India shall –

Make any payment to or for the credit of any person resident outside India;

Receive, otherwise than through an authorized dealer, any payment by order or on behalf of any person resident outside in India.

Explanation – For the purposes of this clause, where any person in, or resident in, India receives any payment by order or on behalf of any person resident outside India through any other person (including an authorized dealer) without a corresponding inward remittance from any place outside India, then, such person shall be deemed to have received such payment otherwise than through an authorized dealer;

Draw, issue or negotiate any bill of exchange or promissory note or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person resident outside India;

Make any payment to, or for the credit of, any person by order or on behalf of any person resident outside India;

Place any sum to the credit of any person resident outside India;

Make any payment to, or for the credit of, any person or receive any payment for, or by order or on behalf of, any person as consideration for or in association with –

The receipt by any person of a payment or the acquisition by any person of property outside India,

The creation or transfer in favour of any person of a right (whether actual or contingent) to receive payment or acquire property outside India;

Draw, issue or negotiate any bill of exchange or promissory note, transfer any security or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person as consideration for or in association with any matter referred to in clause (f).

Where a person has failed to comply with the requirements of sub-section (1) in relation to any foreign exchange or payment in rupees, the Reserve Bank may give to him such directions as appear to be expedient for the purposes of securing the receipt of the foreign exchange or payment, as the case may be.

Payment for exported goods

The Central Government may, by notification in the Official Gazette, prohibit the taking or sending out by land, sea or air (hereafter in this section referred to as export) of all goods or of any goods or class of goods specified in the notification from India directly or indirectly to any place so specified unless the exporter furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed or so specified and true in all material particulars which, among others, shall include the amount representing –

The full export value of the goods; or if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the overseas market, and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time of export or not) has been, or will within the prescribed period be, paid in the prescribed manner.

If the Central Government is of opinion that it is necessary or expedient in the public interest so to do, it may, by notification in the Official Gazette, specify any goods, from among those goods to which a notification under clause (a) applies, and direct that in respect of the goods so specified, where an exporter makes a declaration under sub-clause (ii) of clause (a) of the value which he, having regard to the prevailing market conditions expects to receive on the sale of such goods in the overseas market, he shall not, except with the permission of the Reserve Bank on an application made to the Reserve Bank by the exporter in this behalf, authorize or permit or allow or in any manner be a party to, the sale of such goods for a value less than that declared:

Provided that no permission shall be refused by the Reserve Bank under this clause unless the exporter has been given a reasonable opportunity for making a representation in the matter:

Provided further that where the exporter makes an application to the Reserve Bank for permission under this clause and the Reserve Bank does not, within a period of twenty days from the date of receipt of the application, communicate to the exporter that permission applied for has been refused, it shall be presumed that Reserve Bank has granted such permission.

Explanation – In computing the period of twenty days for the purposes of the second proviso, the period, if any, taken by the Reserve Bank for giving an opportunity to the exporter for making a representation under the first proviso shall be excluded.

Where any export of goods, to which a notification under clause (a) of sub-section (1) applies, has

been made, no person shall, except with the permission of the Reserve Bank, do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing –

In a case falling under sub-clause (i) or sub-clause (ii) of clause (a) of sub-section (1), –

That payment for the goods – Is made otherwise than in the prescribed manner or

Is delayed beyond the period prescribed under clause (a) of sub-section (1), or that the proceeds of sale of the goods exported do not represent the full export value of the goods subject to such deductions, if any, as may be allowed by the Reserve Bank; and in a case falling under sub-clause (ii) of clause (a) of sub-section (1), also that the sale of the goods is delayed to an extent which is unreasonable having regard to the ordinary course of trade:

Provided that no proceedings in respect of any contravention of the provisions of this sub- section shall be instituted unless the prescribed period has expired and payment for the goods representing the full export value has not been made in the prescribed manner within the prescribed period.

Where in relation to any goods to which a notification under clause (a) of sub-section (1) applies the prescribed period has expired and payment therefore has not been made as aforesaid, it shall be presumed, unless the contrary is proved by the person who has sold or is entitled to sell the goods or to procure the sale thereof, that such person has not taken all reasonable steps to receive or recover the payment for the goods as aforesaid and he shall accordingly be presumed to have contravened the provisions of sub-section (2).

Where in relation to any goods to which a notification under clause (a) of sub-section (1) applies the prescribed period has expired and payment therefore has not been made as aforesaid, the Reserve Bank may give to any person who has sold the goods or who is entitled to sell the goods or procure the sale thereof, such directions as appear to it to be expedient for the purpose of securing – if the goods have been sold, the payment therefore, or if the goods have not been sold, either the sale of the goods and payment therefore as aforesaid, or the re-import of the goods into India as the circumstances permit, within such period as the Reserve Bank may specify in this behalf and without prejudice to the generality of the foregoing provision, may direct that the goods, the right to receive the payment therefore or any other right to enforce such payment shall be transferred or assigned to the Central Government or to a person specified in the directions.

Where any goods or a right to receive payment or any other right to enforce such payment, are or is transferred or assigned in accordance with sub-section (4), the Central Government shall pay to the person transferring or assigning the same, the amount recovered by or on behalf of the Central Government in respect of the goods, after deducting all costs, charges and expenses incurred by the Central Government in selling the goods or in recovering or realizing the amount in respect of such goods.

Without prejudice to the provisions of sub-section(1), where the value of the goods specified in the declaration furnished under that sub-section is less than the amount which in the opinion of the Reserve Bank, in a case falling under sub-clause (i) of clause (a) of that sub-section, represents the full export value of those goods, or in a case falling under sub-clause (ii) of that clause, the value which the exporter can, having regard to the prevailing market conditions, expect to receive on the sale of the goods in the overseas market, the Reserve Bank may issue an order requiring the person holding the shipping documents to retain possession thereof until such time as the exporter of the goods has made arrangements for the Reserve Bank or a person authorized by the Reserve Bank to receive on behalf of the exporter payment in the prescribed manner of an amount which in the opinion of the Reserve Bank represents the full export value of such goods or the value which the exporter, having regard to the prevailing market conditions, can be expected to receive on the sale of the goods in the overseas market.

For the purpose of ensuring compliance with provisions of this section and any order or direction made there under, the Reserve Bank or the prescribed authority referred to in sub-section (1) may require any person making any export of goods to which a notification under clause (a) of that sub-section applies to exhibit contracts with his foreign buyer or other evidence to show that the full export value of the goods, or, as the case may be, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the overseas market, has been, or will within the prescribed period be, paid in the prescribed manner.

Without prejudice to the provisions of sub-section (1), where the Reserve Bank has permitted any authorized dealer to accept for negotiation or collection of shipping documents covering exports from his constituent [not being a person who has signed the declaration in terms of sub-section (1)], such authorized dealer shall, before accepting such documents for negotiation or collection, require the constituent concerned also to sign such declaration and thereupon such constituent shall be bound to comply with such requisition and the original declarant and such constituent signing the declaration shall each be considered to be the exporter for the purposes of this section, and shall be governed by the provisions thereof accordingly.

Without prejudice to the provisions of sub-section (1), in relation to export of goods to which a notification under clause (a) of that sub-section applies, the Reserve Bank may, for the purpose of ensuring that the full export value of the goods or, as the case may be, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the overseas market, is received in proper time or without delay, by general or special order, direct from time to time, that in respect of export of goods to any destination or any class of export transactions or any class of goods or class of exporters, the exporter shall, prior to the export of the goods, comply with any or all of the following conditions as may be specified in the order, namely:- that any contract or other arrangement for the sale of the goods shall be registered in such manner and with such authority or organisation as may be specified in the order;

That the payment for the goods is covered by an irrevocable letter of credit or by such other arrangement or document as may be specified in the order;

That a copy of the declaration to be furnished to the prescribed authority under sub-section(1) shall be submitted to such authority or organisation as may be specified in the order for certifying that the value of the goods specified in such declaration represents the proper value thereof;

That any declaration to be furnished to the prescribed authority under sub-section (1) shall be submitted to the Reserve Bank for its prior approval, which may, having regard to the circumstances, be given or withheld or may be given subject to such conditions as the Reserve Bank may deem fit to impose:

Provided that no approval shall be withheld by the Reserve Bank under this clause unless the exporter has been given a reasonable opportunity for making a representation in the matter.

Where the Central Government is of opinion that, in respect of any goods or class of goods or class of exporters, or in respect of export to any destination, the practice of exporting goods in accordance with any term to the effect that the goods will be sold on account of the exporter and the account of such sales rendered to the exporter has resulted or is likely to result in the full export value of the goods not being brought into India in the prescribed manner or within the prescribed period, it may, by general or special order, prohibit the export, in accordance with such term, of such goods or class of goods or by such exporters or to such destination.

Payment for lease, hire or other arrangement

No person shall, except with the general or special permission of the Reserve Bank, take or send out by land, sea or air any goods from India to any place on lease or hire or under any arrangement other than sale or disposal in any other manner of such goods.

 Regulation of export and transfer of securities

Notwithstanding anything contained in section 81 of the Companies Act, 1956, no person shall, except with the general or special permission of the Reserve Bank, —

Take or send any security to any place outside India;

Transfer any security, or create or transfer any interest in a security, to or in favour of a person resident outside India;

Issue, whether in India or elsewhere, any security which is registered or to be registered in India, to a person resident outside India; Acquire, hold or dispose of any foreign security.

Where the holder of a security is a nominee, neither he nor any person through whose agency the

exercise of all or any of the holder’s rights in respect of the security is controlled shall, except with the general or special permission of the Reserve Bank, do any act, whereby he recognizes or gives effect to the substitution of another person as the person from whom he directly receives instructions, unless both the person previously instructing and the person substituted for that person were, immediately before the substitution, resident in India.

The Reserve Bank may, for the purpose of securing that the provisions of this section are not evaded, require that the person transferring any security and the person to whom such security is transferred shall subscribe to a declaration that the transferee is not resident outside India.

Notwithstanding anything contained in any other law, no person shall, except with the permission of the Reserve Bank, – enter any transfer of securities in any register or book in which securities are registered or inscribed if he has any ground for suspecting that the transfer involves any contravention of the provisions of this section, or enter in any such register or book, in respect of any security whether in connection with the issue or transfer of the security or otherwise, an address outside India except by way of substitution for any such address in the same country or for the purpose of any transaction for which permission has been granted under this section with knowledge that it involves entry of the said address.

Notwithstanding anything contained in any other law, no transfer of any share, bond or debenture of a company registered in India made by a person resident outside India or by a national of a foreign State to another person resident in India shall be valid unless such transfer is confirmed by the Reserve Bank on an application made to it in this behalf by the transferor or the transferee.

If the Reserve Bank is of opinion that it is necessary or expedient in the public interest so to do, it may, by general or special permission exempt any transfer referred to in sub-section (5) or any class of such transfers from the operation of the provisions of that sub-section, subject to such conditions, if any, as may be specified in such permission.

For the purposes of this section –

“holder”, in relation to a bearer security, means the person having physical custody of the security; provided that, where a bearer security is deposited with any person in a locked or sealed receptacle from which the person with whom it is deposited is not entitled to remove it without the authority of some other person, that other person shall be deemed to be the holder of the security;

“nominee” means a holder of any security (including a bearer security) or any coupon representing

dividends or interest who, as respects the exercise of any rights in respect of the security or coupon, is not entitled to exercise those rights except in accordance with the instructions given by some other person, and a person holding a security or coupon as a nominee shall be deemed to act as nominee for the person who is entitled to give instructions either directly or through the agency of one or more persons, as to the exercise by the holder of the security or coupon of any rights in respect thereof and is not, in so doing, himself under a duty to comply with instructions given by some other person.

Restrictions on issue of bearer securities

Except with the general or special permission of the Reserve Bank, no person shall, in India, and no person resident in India shall, outside India, create or issue any bearer certificate or coupon or so alter any document that it becomes a bearer certificate or coupon.

 Restriction on settlement etc.

No person resident in India shall, except with the general or special permission of the Reserve Bank, settle, or make a gift of, any property so that a person who at the time of the settlement or the making of the gift is resident outside India, elsewhere than in the territories notified in this behalf by the Reserve Bank, will have an interest in the property, or exercise any power for payment in favor of a person who at the time of the exercise of the power is resident outside India elsewhere than in such notified territories:

Provided that any settlement or gift made or any power exercised as aforesaid without the permission of the Reserve Bank shall not be invalid merely on the ground that such permission has not been obtained.