FEMA-Foreign Exchange Management Act

1. 1. Presented By: S.Vignesh First Year MBANational Institute Of Technology Karnataka

Surathkal
2. 2. The Foreign Exchange Regulation Act, 1973 (FERA 1973), as amended by the Foreign
Exchange Management (Amendment) Act, 1999, forms the statutory basis for Exchange
Control in India. Statutory Basis for Exchange Control
3. 3. 49 sections in the Act promoting the orderly development and maintenance of foreign
exchange market in India facilitating external trade and payments consolidate and
amend the law relating to foreign exchange FEMA The Foreign Exchange Management
Act (1999) or in short FEMA has been introduced as a replacement for earlier Foreign
Exchange Regulation Act (FERA). FEMA came into force on the 1st day of June, 2000.
4. 4. Indian rupees Indian Currency: Transactions other than capital account transactions
Currency Account Transaction: Coin and bank notes Currency Notes: Currency notes,
Money order, cheque, drafts etc Currency: Alters the assets or liability Capital
account transaction: Authorized under the Act to deal in foreign exchange Authorized
Person:
5. 5. Shares, Stock etc as defined in the Public Debt Act of 1994 Security: Goods and
services from outside to India Import: Security expressed in foreign currency Foreign
Security: Means foreign currency Foreign Exchange: Other than Indian currency
Foreign Currency: Goods and services from India to outside Export:
6. 6. The Person is spouse of an Indian citizen Either of his parents or grandparents was
citizen of India Any time held Indian passport or Citizen of country other then
Bangladesh and Pakistan, if Person of Indian Origin (PIO): A company, firm etc.. Owned
at least 60% by NRIs Overseas Corporate Body (OCB): Citizen of India residing outside
Non-Resident Indian (NRI): Sale, Purchase, Exchange etc Transfer: Banking,
Financing, insurance etc Service: Realized foreign exchange to India Repatriate to
India:
7. 7. 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 Any Branch, office and agency, which is situated outside India, but is owned
or controlled by a person resident in India. To the whole of India. The FEMA, is
applicable-
8. 8. For the purpose of provisions, a person shall include any of the following: 1. An individual
2. A Hindu Undivided family 3. A company 4. A Firm 5. An association of persons or a body
of individuals, whether incorporated or not, 6. Every artificial judicial person, not falling within
any of the preceding sub clauses, and 7. Any agency, office or branch owned or controlled by
such person.
9. 9. 1. A person who has been residing in India for more than 182 days, in the last financial
year. This means if a person has to be assessed, as to whether he is person resident in
India, for any offence committed in August 2001, then he should be residing in India for more

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than 182 days during April 2000 to March 20012. Any person or body corporate registered or
incorporated in India, or3. An office, branch or agency in India owned or controlled by a
person resident outside India, or4. An office, branch or agency outside India owned or
controlled by a person resident in India.
10. Simply putting it, "a person resident outside India" means "a person who is not resident
in India"
11. Enter into any financial transaction in India for acquisition or creation or transfer of a right
to acquire, any asset outside India by any personReceive otherwise through an authorized
person, any payment by order or on behalf of any person resident outside India in any
mannerMake any payment to or for the credit of any person resident outside India in any
mannerProhibits dealings in foreign exchange except through an authorized person
12. This section allows a person to draw or sell foreign exchange from or to an authorized
person for a capital account transaction. SECTION 6 - deals with capital account
transactions. Any person may sell or draw foreign exchange to or from an authorized
person if such sale or drawl is a current account transaction SECTION 5 deals with
current account transaction Restrains any person resident in India from acquiring, holding,
owning, possessing or transferring any foreign exchange, foreign security or any immovable
property situated outside India except as specifically provided in the Act. SECTION 4
13. Transactions having international financial implications matters are regulated by
Exchange Control: a) Purchase and sale of and other dealings in foreign exchange and
maintenance of balances at foreign centers b) Procedure for realization of proceeds of
exports c) Payments to non-residents or to their accounts in India d) Transfer of securities
between residents and non- residents and acquisition and holding of foreign securities e)
Foreign travel with exchange
14. f) Export and import of currency, cheques, drafts, travelers cheques and other financial
instruments, securities, etc.g) Activities in India of branches of foreign firms and companies
and foreign nationalsh) Foreign direct investment and portfolio investment in India including
investment by non-resident Indian nationals/persons of Indian origin and corporate bodies
predominantly owned by such personsi) Appointment of non-residents and foreign nationals
and foreign companies as agents in Indiaj) Setting up of joint ventures/subsidiaries outside
India by Indian companiesk) Acquisition, holding and disposal of immovable property in India
by foreign nationals and foreign companiesl) Acquisition, holding and disposal of immovable
property outside India by Indian nationals resident in India.
15. deals with duties and liabilities of the Authorized persons authorized dealer, money
changer, off shore banking unit or any other person for the time being authorized to deal in
foreign exchange or foreign securities. SECTIONS 10 and 12 - casts the responsibility on
the persons resident in India who have any amount of foreign exchange due or accrued in
their favor to get same realized and repatriated to India within the specific period and the
manner specified by RBI. SECTION 8 and 9- Every exporter is required to furnish to the
RBI or any other authority, a declaration etc. etc. regarding full export value. SECTION 7 deals with export of goods and services.

16. 16. To produce books, accounts etc Ensure compliance of FEMA provisions Not to
engage in un authorized transactions To comply with RBI directions
17. 17. To sell or purchase foreign exchange for permissible capital account transactions To
sell or purchase foreign exchange for current account transactions To open NRO, NRE,
FCNR, NRNR, NRSR accounts Receive payments by order To deal in or transfer any
foreign exchange
18. 18. Securing compliance with the provisions of Act Obtaining information which such
authorized person has failed to furnish Verifying the correctness of any statements,
information or particular
19. 19. Further in addition to the penalty, any currency, security or other money or property
involved in the contravention may also be confiscated. If, the contravention is continuing
everyday, then Rs. Five Thousand for every day after the first day during which the
contravention continues. Where the amount cannot be quantified the penalty may be
imposed up to two lakh rupees. If, the amount against which offence is quantities, then
penalty will be "THRICE" the sum involved in contravention. Any contravention, under
FEMA, may invite following kinds of penalties: SECTION 13
20. 20. Empowers the central Govt. to appoint the as many adjudicating authorities as it may
think fit for holding enquiries. SECTION 16 Empowers the Directorate of Enforcement
and Officers of the Reserve Bank of India as may be authorized by the central Govt. in this
behalf to compound the offences. SECTION 15 If a person fails to make full payment of
the penalty imposed with in a period of 90 days, he shall be liable to civil imprisonment.
SECTION 14
21. 21. It makes provisions as regards appeals to Appellate Tribunal. SECTION 19
Empowers the central Govt. to establish Appellate Tribunal to hear appeals against the
orders of Adjudicating Authorities and special Director. SECTION 18 Empowers the
central Govt. to appoint one or more special Directors to hear the appeals against the orders
of the Adjudicating Authorities. SECTION 17
22. 22. Vacancies. SECTION 24 Terms and Conditions of service. SECTION 23
Term of Office. SECTION 22 Qualifications for appointment of Chairperson member
and Special Director. SECTION 21 Composition of Appellate Tribunal. SECTION 20

23. 23. Power of Chairperson to Transfer cases. SECTION 30 Distribution of business

among benches. SECTION 29 Power of Appellate Tribunal and Special Director.
SECTION 28 Staff of Appellate Tribunal and Special Directorate. SECTION 27
Member to act as Chairperson in certain circumstances. SECTION 26 Resignation and
Removal. SECTION 25
24. 24. Appeal to High Court. SECTION 35 Civil court not to have jurisdiction. SECTION
34 Members, etc to public servants. SECTION 33 Right of Appellant to take
assistance of legal practitioner or CA and of Govt. to appoint presenting officer. SECTION
32 Decision to be by majority. SECTION 31
25. 25. Illegal acquisition of foreign exchange through Hawala Siphoning off of foreign
exchange against fictitious and bogus imports land by. Unauthorized maintenance of

accounts in foreign countries. Non-repatriation of the proceeds of the exported goods.

Acquisition of foreign currency illegally by person in India. Remittances of Indians abroad
otherwise than through normal banking channels, i.e. through compensatory payments.
prevent leakage of foreign exchange enforcement of the provisions of the Foreign
Exchange Management Act SECTION 36 to 38 Directorate of Enforcement
26. 26. Because FERA restricts any foreign company from holding 40% shares but IBM had
70%. The Implementation of FERA (in 1977) led to exit of IBM from India. Import of
computers was carefully regulated, depending on ECILs production capacity, and the entry of
the local private sector was controlled. Tie up between ECIL and IBM To increase the
local content to a point of "self sustenance". To tie up with international companies for local
manufacture of computers Electronic Corporation India Limited