foreign exchange Means foreign currency and includes,- Deposits, credits and balances payable in any foreign currency, Drafts, travellers cheques, letters of credit or bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency, Drafts, travellers cheques, letters of credit or bills of exchange drawn by banks, institutions or persons outside India, but payable in Indian currency Foreign security Means any security, in the form of shares, stocks,bondsand debentures.
Balance Of Payment Balance of Payment refers to the yearly financial statement of a country for the transactions in the external sector with the rest of the world. (BOP)accounts are an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers.
Definitions: Capital account Transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India Or assets or liabilities in India of persons resident outside India, Includes transactions referred to in subsection (3) of section 6
Capital account The Capital account is an accounting measure to the total domestic currency value of financial transaction between domestic residents and the rest of the world over a period of time. Capital account can be divided into three account: Direct Investment Portfolio Investment Other capital Flows
Currency convertibility It means freedom for withdrawal of foreign exchange from authorised dealer for payment abroad. Full account convertibility refers to the permission to withdraw foreign exchange without ceiling for transaction, listed under the current account of the BOP. India has adopted partial capital account convertibility and liberal current account convertibility. RBI has fixed ceiling on withdrawl of foreign exchange for for transactions, under the capital account
Person resident in India WHO IS INDIAN RESIDENT: A person residing in India for more than 182 days Stays in India:-
Business or vocation India
Stay in India for an uncertain period
Gone out of India:-
To qualify as the resident the person concerned will have to fulfill foll. conditions
Duration of stay
Purpose of stay
FERA:the main objectives of FERA-> To prevent the outflow of Indian currency To regulate dealings in foreign exchange and securities To regulate the transaction indirectly affecting foreign exchange To regulate import and export of currency and bullion To regulate employment of foreign nationals To regulate foreign companies To regulate acquisition, holding etc of immovable property in India by non-residents
FEMA:the main objectives of FEMA-> To regulate dealings in foreign exchange and securities To regulate the transaction indirectly affecting foreign exchange To regulate import and export of currency and bullion To regulate employment of foreign nationals To regulate foreign companies To regulate acquisition, holding etc..of immovable property in India by non-residents
FERA FEMA :- Difference…
FERA FEMA :- Difference…
MAIN DIFFERENCE “FERA:- EVERYTHING WHICH WAS NOT PERMITTED WAS PROHIBITED… FEMA:- EVERYTHING WHICH WAS NOT PROHOBITED WAS PERMITTED…”
FERA to fema… (FERA) reborn in a liberal way to (FEMA) Draft of Foreign Exchange Management Act (FEMA). Relaxes to a degree the restrictions FERA was the product of a time when oil crisis, among other things, had depleted India’s foreign currency reserves. Absurd attempt to conserve foreign exchange.
FERA to fema… No national business transactions Effectively discouraged productive investment. Challenges of a globalisingworld. Penal offences relate essentially to money laundering activities Cover cases already under investigation.
FERA to fema… Unlikely to receive more than half a cheer from Industry Countries, placed in situation similar to India’s in the matter of foreign exchange problems Indian enterprise is to mark its presence globally Cases ought to be considered in the light of the new objectives
Recent Changes fema Overseas Investment External commercial Borrowing( ECB) Liberalized Remittance of US $ 25000 per annum by Resident Indians. Foreign Investment liberalized. Student studying abroad are treated as NRI’s The system of self write-off and self extension of due date for export realisation for exporter was introduced
Adjudiaction and Appeal Adjudicating authority Special Dir. Appeals Appelate Tribunal High Court
"authorised person” Means an -
off-shore banking unit or
any other person for the time being authorisedto deal in foreign exchange or foreign securities
"authorised person” Application to be made to RBI Authorisation will be in writing may be revoked by RBI: in public interest ,failed to foll. Instructions Before transacting require the person to make declaration ,incase of doubt report the matter to the Reserve Bank. RBI can inspect AP record, Accounts documents
Regulation and Management of Foreign Exchange
Dealing in foreign exchange, etc
Holding of foreign exchange, etc.
Current account transactions
Capital account transactions
Export of goods and services
Realisationand repatriation of foreign exchange
Exemption from realisation and repatriation in certain cases
The rupee has not been too volatile over the years.
But that does’t mean it has’t depreciated to the dollar. It has fallen from Rs 4.76 in 1950-51to Rs 47.84 on December 7,2001-a plunge in excess of 1000%. Now, see this in the light of the fact that the past 50 years have seen a mere two ‘devaluation’ (in June 1966 and July 1991) and
The Rupee Progress It is evident that the rupee has continually adjust its value. In 1991, the RBI partially freed the rupee through the liberalised Exchange Rate Mechanism (LERM) in 1991. Subsequently in 1993, the central bank scrapped LERMs and made the rupee ‘free’ on the trade account. And in 1993, the RBI made the rupee fully convertible on the current account to boost foreign capital inflows.