FOREIGN EXCHANGE

MANAGEMENT ACT, 1999

FEMA Prof. Parul Gupta 1

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

FEMA Prof. Parul Gupta 2

• 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

FEMA Prof. Parul Gupta 3

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

(b) Payment to or for the credit of any person resident outside

India in any manner

© 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
FEMA Prof. Parul Gupta 5
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
© Transfer or issue of any security or foreign security by any
branch, office or agency in India of a person resident
outside India
(d) Any borrowing or lending in foreign exchange in whatever
form or by whatever name called

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(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
(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 India
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 Export of goods and services
Every exporter of goods shall famish 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

(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

Contravention and penal ties:-

• 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

- 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

FEMA Prof. Parul Gupta 10

 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

1. FEMA is a much smaller enactment only 49

sections against 81 sections of FERA

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 QUESTIONS

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