RBI, FDI, Parliament!

DOES AN AMENDMENT TO FEMA REGULATIONS BY RBI NEED PARLIAMENT’S APPROVAL?

In this brief column M R Madhavan of PRS Legislative explains what Parliament has been voting on this week and whether amendments to FEMA regulations by RBI need approval by either or both houses of Parliament.

On what grounds can Parliament insist on debating & voting on a policy determined by the Government, if that policy does not involve a new legislation?

Parliament has the inherent power to oversee the functions of the government. It may move a resolution through a motion or discuss a decision of the government. All motions are voted upon (discussions under Rule 193 of Lok Sabha are not voted upon). The government is expected to follow the directions of Parliament determined through a resolution.

The Government’s decision to permit FDI in multi-brand retail has to be enabled by an RBI notification. This has been done via a circular and amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated May 3, 2000). Do the amendments to the Regulations have to be approved by Parliament ( either or both houses)?

No, the FEMA Act delegates the power to make Regulations to RBI. These Regulations form part of the law as delegated or subordinate legislation. The Act also required the government to place before each House of Parliament all Regulations issued by RBI.  Parliament retains the power to modify or annul the Regulations.  The modification or annulment has to be agreed up by both Houses (by simple majority).

If not, could you explain what the Lok Sabha was voting on (on Wednesday) and the relevance of the Rajya Sabha vote (Friday)?

The sequence is as follows. RBI issued Regulations, which become part of law. Some MPs moved motions to modify the Regulations. The modification would require that both Lok Sabha and Rajya Sabha vote in favour of the modification.  If even one House votes against the modification, the Regulations issued by RBI would continue to be in force. Lok Sabha negatived the motion for modification. Therefore, regardless of which way Rajya Sabha votes, there would be no change in the Regulations issued by RBI.