Under section 2(n) of FEMA, 'foreign exchange' includes:

Correct answer: A) Drafts, travellers' cheques, letters of credit or bills of exchange expressed or drawn in Indian currency but payable in any foreign currency

Explanation

Section 2(n) defines foreign exchange as foreign currency, including deposits, credits and balances payable in foreign currency. It also covers drafts, travellers' cheques, letters of credit or bills of exchange expressed or drawn in Indian currency but payable in foreign currency, and similar instruments drawn by banks outside India payable in Indian currency. Special bank notes are expressly excluded from 'Indian currency' by section 2(q). Gold is not foreign exchange.