Sections 11 and 12 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Once the Reserve Bank has authorised a person under section 10, sections 11 and 12 give it the tools to keep that person in line. Section 11 allows directions about payments and acts relating to foreign exchange, a power to call for information, and a money penalty for non-compliance. Section 12 allows inspection of the authorised person's business and imposes a duty on the person, and on its directors, partners and officers, to produce books and information.
The Reserve Bank may direct authorised persons to make a payment or to do, or desist from doing, an act relating to foreign exchange or foreign security (section 11(1)), and may direct them to furnish information (section 11(2)). For breach of a direction or failure to file a return, it may, after reasonable opportunity of being heard, impose a penalty up to ten thousand rupees and, for a continuing contravention, an additional penalty up to two thousand rupees for every day (section 11(3)). Section 12 lets it inspect the business of an authorised person through a specially authorised officer.
About this article
This article is based on the consolidated text of the Act consulted (amendments shown up to Act 50 of 2019). Later amendments should be checked. Sections 11 and 12 carry no amending footnote in the copy consulted. The amounts in section 11(3) are given as printed. For banks and other entities handling foreign exchange, our FEMA advisory team can help prepare for directions, returns and inspections.
Section 11: directions, information and penalty
Sub-section (1): directions
The Reserve Bank may, "for the purpose of securing compliance with the provisions of this Act and of any rules, regulations, notifications or directions made thereunder", give to the authorised persons "any direction in regard to making of payment or the doing or desist from doing any act relating to foreign exchange or foreign security".
Points to note:
- The purpose is compliance, with the Act and with instruments made under it.
- The persons directed are authorised persons, as defined in section 2(c) and created under section 10 (see our article on section 10).
- The subject matter is wide: payments, and doing or not doing any act relating to foreign exchange or foreign security.
- The power is the Reserve Bank's own. It does not need a rule under section 46 or a regulation under section 47, which is why this article names no direction. Section 10(4) already requires an authorised person to comply with general or special directions or orders.
Sub-section (2): directions to furnish information
The Reserve Bank may, "for the purpose of ensuring the compliance with the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, direct any authorised person to furnish such information, in such manner, as it deems fit." The content and manner are left to the Reserve Bank. The Act prints no form and no timeline.
Sub-section (3): penalty
Where an authorised person "contravenes any direction given by the Reserve Bank under this Act or fails to file any return as directed by the Reserve Bank", the Reserve Bank may, "after giving reasonable opportunity of being heard", impose a penalty which may extend to ten thousand rupees and, in the case of a continuing contravention, an additional penalty which may extend to two thousand rupees for every day during which the contravention continues.
| Element | What the Act says |
|---|---|
| Trigger 1 | Contravening any direction given by the Reserve Bank under the Act |
| Trigger 2 | Failing to file any return as directed by the Reserve Bank |
| Procedure | After giving reasonable opportunity of being heard |
| Basic penalty | Which may extend to ten thousand rupees |
| Continuing contravention | Additional penalty which may extend to two thousand rupees for every day during which it continues |
| Who imposes | The Reserve Bank |
Three observations.
- It is a ceiling. "May extend to" sets a maximum, so the amount is a matter for the Reserve Bank within it.
- The hearing comes before the penalty. The Reserve Bank must give a reasonable opportunity of being heard first.
- The daily amount is additional. It applies for every day during which the contravention continues, on top of the basic penalty.
This penalty is separate from section 13, which provides a penalty "upon adjudication" for contravention of the Act, rules, regulations, notifications, directions or orders and for contravention of any condition subject to which an authorisation is issued. See our guide on contravention and penalties under section 13; this article does not restate section 13.
Example. The Reserve Bank directs an authorised dealer to file a return in a particular manner. The dealer does not file it. After giving the dealer a reasonable opportunity of being heard, the Reserve Bank may impose a penalty up to ten thousand rupees and, if the failure continues, an additional penalty up to two thousand rupees for each day it continues. The direction itself, the manner of filing and the due date are for the Reserve Bank to give, not the Act.
Section 12: inspection
Sub-section (1): the power to inspect
The Reserve Bank may, "at any time", cause an inspection to be made, by any officer of the Reserve Bank "specially authorised in writing by the Reserve Bank in this behalf", of the business of any authorised person as may appear to it to be necessary or expedient for the purpose of:
- (a) verifying the correctness of any statement, information or particulars furnished to the Reserve Bank;
- (b) obtaining any information or particulars which the authorised person has failed to furnish on being called upon to do so; or
- (c) securing compliance with the provisions of the Act or of any rules, regulations, directions or orders made under it.
Note the three safeguards in the wording: the officer must be an officer of the Reserve Bank, specially authorised in writing, and the inspection must appear to the Reserve Bank to be necessary or expedient for one of the three listed purposes.
Sub-section (2): the duty to produce
It is the duty of every authorised person, "and where such person is a company or a firm, every director, partner or other officer of such company or firm", to produce to any officer making an inspection:
- such books, accounts and other documents in his custody or power; and
- any statement or information relating to the affairs of the person, company or firm as the officer may require,
within such time and in such manner as the officer may direct.
The duty is therefore personal to individuals at the top of the entity, as well as to the entity. The Act leaves the time and manner to the inspecting officer. It does not describe the consequences of a failure to produce documents; section 13 deals with contravention of the Act generally.
How sections 10, 11 and 12 fit
| Section | Role |
|---|---|
| 10 | Creates the authorised person, sets conditions, allows revocation, requires declarations from customers |
| 11 | Lets the Reserve Bank direct, demand information and penalise non-compliance |
| 12 | Lets the Reserve Bank inspect and requires production of books and information |
Sections 10 to 12 form Chapter III of the Act. The practical side of how banks and money changers deal with these powers is in our guide on authorised persons and AD banks.
What the Act does not say
- It does not list the directions the Reserve Bank has given.
- It does not give a form or due date for any return.
- It does not say how often inspections take place.
- It does not state what happens to a director who does not produce documents beyond the general provisions.
Need help with directions, returns or an inspection?
If you handle foreign exchange as an authorised person or on behalf of one, directions and returns are part of your routine, and a missed return can lead to a penalty under section 11(3). Our FEMA advisory team can help you set up a compliance calendar from the directions currently in force and prepare your records for inspection.
Key takeaways
- The Reserve Bank may direct authorised persons about payments and acts relating to foreign exchange or foreign security (section 11(1)) and may direct them to furnish information (section 11(2)).
- Breach of a direction or failure to file a return directed by the Reserve Bank can lead to a penalty up to ten thousand rupees and an additional penalty up to two thousand rupees for each day of continuing contravention, after a reasonable opportunity of being heard (section 11(3)).
- The Reserve Bank may inspect the business of an authorised person through a specially authorised officer (section 12(1)).
- Authorised persons, and the directors, partners and officers of a company or firm, must produce books, accounts, documents and information (section 12(2)).
- The Act prints no direction, form or timeline; those come from the Reserve Bank.
Read next
- Section 10: authorised person, authorisation, revocation and duties
- Section 13(1A) to (1D): penalty, confiscation and prosecution for assets held outside India
- Authorized Persons Under FEMA: AD Banks
- Money Changers and Authorized Dealers: Categories
Disclaimer: Based on a consolidated text of the Foreign Exchange Management Act, 1999 showing amendments up to Act 50 of 2019, as consulted on 2 October 2026. Limits, forms, timelines and procedures are set by rules, regulations and Reserve Bank directions made under the Act; they change from time to time and are not covered here. Later amendments should be checked. This article is general information, not legal advice; check the official text before acting.