FOREIGN

EXCHANGE
MANAGEMENT ACT,
1999

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Objectives
To facilitate external trade and
payments
To
promote
the
orderly
development and maintenance
of foreign exchange market

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Introduction: Foreign exchange transactions 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

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Section 3 of FEMA

It talks about dealings in foreign exchange

and foreign securities and payments to and
receipts from any person outside India.
The general or special permission of the
Reserve Bank of India is required in the
following matters: A.) Dealing in any foreign exchange or
foreign security with any person other
than the authorized person

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B.) Payment to or for the credit of any
person resident outside India in any manner
C.) Receiving of any payment by order or on
behalf of any person resident outside India
in any manner otherwise through an
authorized person
D.) Enter in to any financial transaction in
India as a consideration for or in.
association with requisition or creation or
transfer of a right to acquire any asset
outside India by any person

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Holding of Foreign Exchange: No person resident in India shall acquire, hold,
own,
possess
or
transfer
any
foreign
exchange/foreign security or any immovable
property situated outside India
Current account Transactions: Act permits dealing in foreign exchange through
authorized
persons
for
current
account
transactions
Central Government can impose reasonable
restrictions in public interest with this regard

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Capital Account Transactions: Any person may sell or draw foreign exchange to or from
an authorized person for a capital account transaction
permitted by RBI in consultation with central Government
RBI prohibits, restricts or regulate the following:(a) Transfer or issue of any foreign security by a person
resident in India
(b) Transfer or issue of any foreign security by a person
resident outside India
(c) Transfer or issue of any security or foreign security by
any branch, office or agency in India of a person resident
outside India

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(d) Any borrowing or lending in foreign exchange in
whatever form or by whatever name called
(e) Any borrowing or lending in rupees in whatever
form or whatever name called between a person
resident in India and a person resident outside
India;
(f) Deposits between persons resident in India and a
person resident outside India
(g) Export, Import or holding of currency or currency
notes
(h) Transfer of immovable property outside India
other than a lease not exceeding five years by a
person resident outside India

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(i) Acquisition or transfer of immovable
property in India other than a lease
not exceeding five years by a person
resident outside India
(j) Giving of guarantee or surety in
respect of any debt obligation or the
liability
1.) By a person resident in India and
owed to a person resident outside
India
or
2.) By a person resident outside

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Export of goods and services

Every exporter of goods shall furnish to the

RBI or to such other authority the
following:(a)A declaration specified
1.) True and correct material particulars
2.) Amount representing the value of full export of
goods
3.) The time of the export
4.) The value which exporter having regard to the
prevailing market conditions expects to receive
on the sale of the goods in a market outside India

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(b) Other information
That may be required by RBI for the
purpose of ensuring the realization of
the export proceeds by such
exporter
Every exporter of the services shall
furnish to the RBI or to such other
authorities a declaration as specified,
containing the true and correct
material particulars in relation to the
payment for such services

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Realization and Repatriation of
foreign exchange: Any person in this concern shall have
to follow the reasonable steps to
realize and repatriate it to India with
or with in the time in the manner
prescribed by the act

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Contravention and penalties: For any kind of contravention under
this act defaulter is liable to pay up
to thrice the amount involved where
it is quantifiable Up to Rs. 2 lakhs
Where not quantifiable
If such contravention is continued
further penalty which may extend to
Rs. 5,000 for every day after the first
day

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Administration of the Act
The rules regulations and norms pertaining to
many sections are laid down by RBI in
consultation with central Government.
The Act requires central Government to
appoint,
Adjudicating Authorities for holding enquires
related to the contravention of the Act
one or more Special Directors (appeals) to
hear appeals against the order of the
Adjudicating authorities

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Central Government shall have
to establish:1.) An Appellate Tribunal for foreign
Exchange to hear appeals against
the order of the Adjudicating
Authorities and the Special Directors
2. )A Director of Enforcement with a
Director and such officers or class of
officers as it thinks fit for taking up
for investigation the contravention
under this Act

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FERA V/s FEMA:1.) In FEMA only the specified acts related to
foreign exchange are regulated while in
FERA anything and everything that has to
do with foreign exchange was controlled
2.)The objective of FEMA is to facilitate trade
while that of FERA is to prevent misuse
3.) FEMA is a much smaller enactment only
49 sections against 81 sections of FERA