Foreign Exchange Department With the introduction of the Foreign Exchange Management Act 1999, (FEMA) with effect

from June 1, 2000, the objective of the Foreign Exchange Department has shifted from conservation of foreign exchange to "facilitating external trade and payment and promoting the orderly development and maintenance of foreign exchange market in India".
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The new Act has brought about structural changes in the exchange control administration. Regulations have been framed for dealing with various types of transactions. These regulations are transparent and have eliminated case-by-case approvals. All current account transactions are free from restrictions except o 8 transactions prohibited by the Government of India. o 11 transactions which require prior permission of the Government of India and o 16 transactions on which indicative limits are fixed by the Government and release of foreign exchange beyond those limits requires permission from the Reserve Bank. All Regional Offices of the Department have in turn been authorised to release exchange for such transactions. For capital account transactions, the Reserve Bank regulations provide for general permissions/automatic routes for investments in India by non-residents, investments overseas by residents and borrowings abroad, etc. The Department ensures timely realisation of export proceeds and reviews, on a continuous basis, the existing rules in the light of suggestions received from various trade bodies and exporters' fora. The Department collects data relating to forex transactions from authorised dealers on a daily basis for exchange rate management and on a fortnightly basis for monthly quick estimates of balance of payments and quarterly balance of payments compilation. The Department lays down policy guidelines for risk management relating to forex transactions in banks. The Department is also entrusted with the responsibility of licensing banks/money changers to deal in foreign exchange and inspecting them. There is a "Standing Consultative Committee on Exchange Control" consisting of representatives from various trade bodies and authorised dealers which meets twice a year and makes recommendations for policy formulation. With a view of further improving facilities available to NRIs and removing irritants, the Department is also engaged, on an ongoing basis, in reviewing and simplifying the procedures and rules.

Manager of Foreign Exchange

With the transition to a market-based system for determining the external value of the Indian rupee, the foreign exchange market in India gained

importance in the early reform period. In recent years, with increasing integration of the Indian economy with the global economy arising from greater trade and capital flows, the foreign exchange market has evolved as a key segment of the Indian financial market.
Our Approach The Reserve Bank plays a key role in the regulation and development of the foreign exchange market and assumes three broad roles relating to foreign exchange: Regulating transactions related to the external sector and facilitating the development of the foreign exchange market Ensuring smooth conduct and orderly conditions in the domestic foreign exchange market Managing the foreign currency assets and gold reserves of the country

Our Tools The Reserve Bank is responsible for administration of the Foreign Exchange Management Act,1999 and regulates the market by issuing licences to banks and other select institutions to act as Authorised Dealers in foreign exchange. The Foreign Exchange Department (FED) is responsible for the regulation and development of the market. On a given day, the foreign exchange rate reflects the demand for and supply of foreign exchange arising from trade and capital transactions. The RBIs Financial Markets Department (FMD) participates in the foreign exchange market by undertaking sales / purchases of foreign currency to ease volatility in periods of excess demand for/supply of foreign currency. The Department of External Investments and Operations (DEIO) invests the countrys foreign exchange reserves built up by purchase of foreign currency from the market. In investing its foreign assets, the Reserve Bank is guided by three principles: safety, liquidity and return. Looking Ahead The challenge now is to liberalise and develop the foreign exchange market, with an eye toward ushering in greater market efficiency while ensuring financial stability in an increasingly global financial market environment. With current account convertibility achieved in 1994, the key focus is now on capital account management.
The Department of External Investments & Operations manages a multi-currency multi-instrument portfolio of foreign currency assets. A well-equipped dealing room executes transactions.

In investing its foreign assets, the Reserve Bank

is guided by three principles: safety, liquidity and return.