Fema

INTRODUCTION
 Foreign Exchange transaction were regulated by Foreign exchange

regulation act (FERA), 1973
 Following the liberalization ushered in 1991 some amendments
were made to FERA in 1993 there was a lot demand to bring
certain major changes in FERA in the light of economic changes
took place.
 Consequently, a new act was formed to replace FERA ,known as
Foreign exchange management act(FEMA),1999
FOREIGN EXCHANGE MANAGEMENT ACT,1999

 The Foreign Exchange Management Act(1999) ar in short FEMA
has been introduced as a replacement for earlier Foreign Exchange
Management Act(FERA).
 FEMA came into act on the 1st day of june,2000. FEMA was
introduced because the FERA didn’t fit in with post liberalisation
policy.
 An Act to consolidate and amend the law relating to foreign
exchange with the objective of facilitating extarnal trade and
payment.
Objective of the Act:

 The main objective of FEMA is to utilize foreign exchange
resources of the country effectively.
 It is facilitates external trade,payment,orderly development and
maintenance of foreign exchange in India.
 It is also applicable to all part of India and all branches,offices
and agencies outside India owned ar controlled by a person
who is a resident of India.
 It’s head office is known as Enforcement Directorate is situated
in New Delhi and headed by a Director..
 It is very important to an foreign trade and to maintain a good
relation with the other countries.
FEATURES
 Activities such as payment made to any person outside India ar
receipts from them,along with the deals in foreign exchange and
foreign security is restricted.It is FEMA that gives the Central
Government the power to impose the restrictions.
 Restrictions are imposed on residents of India who carry out
transactions in foreign exchange,foreign security or who own or
hold immovable property aboard.
 Without general or specific permission of the MA restricts the
transactions involving foreign exchange or foreign security and
payment from outside the country to Indiathe transaction should
be made only through an authorized person.
 Deal in foreign exchange under the current account by an
authorized person can be restricted by the Central
Government,based on public interest generally.
 Although selling or drawing of foreign exchange is done through
an authorized person,the RBI is empowered by this Act to
subject the capital account transaction to a number of restrictions.
 Residents India will be permitted to carry out transactions in
foreign exchange,foreign security or to own or hold immovable
property aboard if the currency,security or property was owned or
acquired when he/she was living outside India,or when it was
inherited by him/her from someone living outside India.
Need for this management:

 The buying and selling of foreign currency and other debt
instrument by business,individuals and government happens in the
foreign exchange market.
 Largest and most liquid market in the world as well as in India.
 The management of foreign exchange market becomes necessary
in order to mitigate and the avoid the risks
 Central banks would work towards and orderly functioning of the
transaction which can also develop their foreign exchange market
Applicability of FEMA Act:
FEMA (Foreign Exchange Management Act) is applicable to the
whole of India and equally applicable to the agencies and offices located
outside India (which are owned or managed by an Indian Citizen).
FEMA is applicable to :- Broadly speaking FEMA, Covers Three
different types of categories and deals differently with them.These
categories are
A.Person
B.Person Resident In India
C.Person Resident Outside India
Difference between FERA and FEMA
1.FERA was compiled with 81 different and complex provisions,
however, FEMA has only 48 simple sections.
2. The current account was not defined in FERA but was
introduced in FEMA.
3. FEMA has a broader definition of “Authorized Person” and has
also included banks in it.
4. Compatibility with IT was not handled by FERA at all.
However, FEMA provides on IT.
5. Under FERA, his violation was a criminal offense that was
changed to a civil offense at FEMA.
6. According to FERA, the appeal used to be sent to the Supreme
Court. However, FEMA had aSpecial Director (Appeals) and a Special
Court.
Provision of FEMA
The major provisions of FEMA, 1999 relate to following matters :
 Dealing in foreign exchange, etc.

 Holding of foreign exchange, etc.
 Current account transactions
 Capital account transactions
 Export of goods and services
 Realization and repatriation of foreign exchange
 Power of RBI to inspect authorized person Contravention and
penalties
 Adjudication and appeal
 Directorate of enforcement
 Miscellaneous provisions
 Exemption from realization and repatriation in certain cases.
 Provisions relating to authorised persons. i.e. authorised by RBI to
deal with foreign exchange or in foreign securities
Conclusion
 At the time of legislation of the law, India had shortage of foreign
exchange (forex). The government then tried to restrict the
exchanges, or dealings of India with foreign countries. But the
rules and regulations had great impact on the import and export of
currency.
There were several issues with this act those are:-
 Law violators were treated as criminal offenders.
 Wide power in the hand of Enforcement Directorate to arrest any
person and seize any document (Corporate world found themselves
at the mercy of E.D)
 Control everything that was specified related to foreign exchange
and aimed for minimizing dealings in forex and foreign securities,
etc.
 With liberalization there has been a move to remove the measures
of FERA and replace it with a set of foreign exchange management
regulations. A draft for the Foreign Exchange Management Bill
(FEMA) was prepared by the Government of India to replace
FERA keeping in view of the Indian economy. However until
FEMA is enacted the provisions of FERA was applied. These are
important basic information about Foreign Exchange Regulation
Act (FERA).

Fema

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Fema

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INTRODUCTION

 Foreign Exchange transaction were regulated by Foreign exchange

FOREIGN EXCHANGE MANAGEMENT ACT,1999

Objective of the Act:

Need for this management:

 Dealing in foreign exchange, etc.

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