UPSC Prelims Practice Questions — RBI releases draft directions on foreign exchange dealings

Q1. The draft Directions on Foreign Exchange Dealings of Authorised Persons, released in February 2026 for public consultation, were issued by which one of the following authorities?

  • A. Securities and Exchange Board of India
  • B. Reserve Bank of India
  • C. Department of Economic Affairs, Ministry of Finance
  • D. International Financial Services Centres Authority

Q2. Among the following categories of Authorised Persons under FEMA, 1999, which one has the widest operational scope, being permitted to undertake all current and capital account transactions permissible under the Act?

  • A. Authorised Dealer Category-I
  • B. Authorised Dealer Category-II
  • C. Authorised Dealer Category-III
  • D. Full Fledged Money Changer

Q3. In the context of RBI's directions governing Authorised Dealers in foreign exchange, the term 'Net Open Position (NOP)' is best described as:

  • A. The cumulative remittances permitted to a resident individual in a financial year under the Liberalised Remittance Scheme
  • B. The unhedged portion of External Commercial Borrowings raised by Indian corporates in a calendar year
  • C. The Authorised Dealer's residual foreign currency exposure arrived at after offsetting its long and short foreign-exchange positions
  • D. The difference between India's gross foreign exchange reserves and short-term external debt at the end of a fiscal year

Q4. With reference to the regulatory regime governing Authorised Persons under the Foreign Exchange Management Act, 1999, consider the following statements: 1. Authorised Persons are licensed by the Reserve Bank of India under Section 10 of FEMA, 1999. 2. An Authorised Dealer Category-I entity may undertake both current and capital account transactions permissible under the Act. 3. Full Fledged Money Changers are permitted to undertake capital account transactions on behalf of resident clients. 4. The Reserve Bank of India is empowered to issue Directions to Authorised Persons under Section 11 of FEMA, 1999. Which of the statements given above are correct?

  1. Authorised Persons are licensed by the Reserve Bank of India under Section 10 of FEMA, 1999.
  2. An Authorised Dealer Category-I entity may undertake both current and capital account transactions permissible under the Act.
  3. Full Fledged Money Changers are permitted to undertake capital account transactions on behalf of resident clients.
  4. The Reserve Bank of India is empowered to issue Directions to Authorised Persons under Section 11 of FEMA, 1999.
  • A. 1 and 3 only
  • B. 2 and 4 only
  • C. 1, 2 and 4 only
  • D. 1, 2, 3 and 4