FOREIGN EXCHANGEMANAGEMENT ACT 1999BY:SAHANA HIREMATHM.COM II SEM
FOREIGN EXCHANGE• Foreign exchange is a mechanism by whichthe currency of one country gets convertedinto currency of another country• The conversion of currencies is done by thebanks who deal in foreign exchange.• These banks maintain stocks of foreigncurrencies in the form of balances withbanks abroad.
BACKGROUNDReplaced FERA – Foreign ExchangeRegulation Act 1974FERA had become incompatible with thepro-liberalisation policies of the Govt. ofIndiaThis was done in order to relax the controlson foreign exchange in India, as a result ofeconomic liberalization.
FEMA (1999) The Foreign Exchange Management Act(1999) or in short FEMA has beenintroduced as a replacement for earlierForeign Exchange Regulation Act (FERA).FEMA came into force on the 1st day ofJune, 2000.
OBJECTIVE OF THE ACT• Conservation & proper utilization offoreign exchange resources of the country.• Control certain aspects of the conduct ofbusiness outside the country by Indiancompanies and in India by foreigncompanies
FEATURES OF THE ACT• Non compliance with the regulation isdiluted. Its only of civil & no criminalconsequences.• Nature of current account & capital accounttransactions have been clearly defined.• All the current account transactions can befreely carried out.• Definitions of residents & non residentstaken into account.
ADMINISTATIVE SET UP• U/s 46 the central government has beenauthorized to carry out provisions of theact.• Section 47 empowers RBI to make rules ®ulations to carry out provisions of theact.• Section 41 central government may fromtime to time give directions to RBI.• RBI has the ultimate power &responsibility.
AUTHORISED PERSON• "Authorized person" means an authorizeddealer, money changer, off-shore bankingunit or any other person for the time beingauthorized under sub-section (1) of section10 to deal in foreign exchange or foreignsecurities;
duties OF AN AUTHORISED PERSON• To comply with RBI directions• Not to engage in un authorized transactions• Ensure compliance of FEMA provisions• To produce books, accounts etc…• Has to obtain declaration from thecustomers to ensure provisions of the actare not violated
AUTHORISED dealers• Authorised dealers are banks financialinstitutions & other institutionsauthorized by RBI.• Category I A major portion oftransaction in foreign exchange from thecustomers dealt by such banks.• Category II purchase & sell foreignexchange for private & business visitsabroad undertaken by residents.
• Category III They comprise of selectedfinancial & other institutions.
FOREIGN EXCHANGE DEALERSASSOCIATION OF INDIA• FEDAI was established in 1958• Authorised dealers of category I & IIcurrently numbering 89 are its members.• HQ at Mumbai.• Local offices at BENGALURU, CHENNAI& NEW DELHI.• Managed by managing committee at HeadOffice.
AUTHORISED MONEY CHANGERS• To provide facilities for encashment offoreign currency for tourists etc. Certainestablished firms, hotels & otherorganizations have been permitted to deal inforeign currency notes, coins & travellers’cheques subject to directions issued to themfrom time to time.
• a Full Fledged Money Changer isauthorized by RBI to under take both purchaseof foreign exchange & sale transactions withthe public for private & business visits abroad.• A restricted money changer isauthorized only to purchase foreign currencynotes, coins & travellers’ cheques subject tocondition are surrendered by him to in turn toan authorized dealer.