2. FOREIGN EXCHANGE
• Foreign exchange is a mechanism by which
the currency of one country gets converted
into currency of another country
• The conversion of currencies is done by the
banks who deal in foreign exchange.
• These banks maintain stocks of foreign
currencies in the form of balances with
banks abroad.
3.
4. BACKGROUND
Replaced FERA – Foreign Exchange
Regulation Act 1974
FERA had become incompatible with the
pro-liberalisation policies of the Govt. of
India
This was done in order to relax the controls
on foreign exchange in India, as a result of
economic liberalization.
5. FEMA (1999)
The Foreign Exchange Management Act
(1999) or in short FEMA has been
introduced as a replacement for earlier
Foreign Exchange Regulation Act (FERA).
FEMA came into force on the 1st day of
June, 2000.
6. OBJECTIVE OF THE ACT
• Conservation & proper utilization of
foreign exchange resources of the country.
• Control certain aspects of the conduct of
business outside the country by Indian
companies and in India by foreign
companies
7. FEATURES OF THE ACT
• Non compliance with the regulation is
diluted. Its only of civil & no criminal
consequences.
• Nature of current account & capital account
transactions have been clearly defined.
• All the current account transactions can be
freely carried out.
• Definitions of residents & non residents
taken into account.
8. ADMINISTATIVE SET UP
• U/s 46 the central government has been
authorized to carry out provisions of the
act.
• Section 47 empowers RBI to make rules &
regulations to carry out provisions of the
act.
• Section 41 central government may from
time to time give directions to RBI.
• RBI has the ultimate power &
responsibility.
9. AUTHORISED PERSON
• "Authorized person" means an authorized
dealer, money changer, off-shore banking
unit or any other person for the time being
authorized under sub-section (1) of section
10 to deal in foreign exchange or foreign
securities;
10. 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 the
customers to ensure provisions of the act
are not violated
11. AUTHORISED dealers
• Authorised dealers are banks financial
institutions & other institutions
authorized by RBI.
• Category I A major portion of
transaction in foreign exchange from the
customers dealt by such banks.
• Category II purchase & sell foreign
exchange for private & business visits
abroad undertaken by residents.
12. • Category III They comprise of selected
financial & other institutions.
13. FOREIGN EXCHANGE DEALERS
ASSOCIATION OF INDIA
• FEDAI was established in 1958
• Authorised dealers of category I & II
currently numbering 89 are its members.
• HQ at Mumbai.
• Local offices at BENGALURU, CHENNAI
& NEW DELHI.
• Managed by managing committee at Head
Office.
14. AUTHORISED MONEY CHANGERS
• To provide facilities for encashment of
foreign currency for tourists etc. Certain
established firms, hotels & other
organizations have been permitted to deal in
foreign currency notes, coins & travellers’
cheques subject to directions issued to them
from time to time.
15. • a Full Fledged Money Changer is
authorized by RBI to under take both purchase
of foreign exchange & sale transactions with
the public for private & business visits abroad.
• A restricted money changer is
authorized only to purchase foreign currency
notes, coins & travellers’ cheques subject to
condition are surrendered by him to in turn to
an authorized dealer.
