1. Presented By-
Smita Satapathy
Roll No- 020
LLM

2. The Foreign Exchange Management Act
(1999) or in short FEMA has been introduced
as a replacement for earlier Foreign
Exchange Regulation Act (FERA). FEMA
became an act on the 1st day of June, 2000.
• FEMA was introduced because the FERA didn‟t fit in
with post-liberalization policies.
The main objective behind the Foreign
Exchange Management Act (1999) is to
consolidate and amend the law relating to
foreign exchange with the objective of
facilitating external trade and payments

3. RBI (Reserve Bank of India) acts as the banker,
agent and advisor to the Government of India.
It accepts payments for the account of the
union and state governments and also makes
payments on behalf of the Government.
According to International Monetary Fund,
FDI i.e. Foreign Direct Investment is defined
as “investment that is made to acquire a
lasting interest in an enterprise operating in
an economy other than that of the investor.

4. When the Indian economy is more liberalised; the financial
markets are deepened and well connected globally and RBI has
some comfortable reserves so that it can take effective market
steps.
The financial sector in India has remained dominated by the
banking sector through which the changes in foreign exchange
primarily operate.

5. Forex reserves continue to be an important tool for
commercial risk management and are essential for
the healthy development of the Indian financial
markets.
The RBI, corporations, and banks must continue to
work together to address systemic weaknesses,
remove ambiguities, and standardize laws and
market practices regarding such instruments to
prevent future litigation.

6. • In RBI Act,the preamble reads as „to use the currency
system to the country‟s advantage and with a view to
securing monetary stability‟.
• The Reserve Bank has to ensure that the normal short-term
fluctuations in trade do not affect the exchange rate and
this secures by the centralization of the entire foreign
exchange reserves of the country.
• In order to maintain stability in exchange rates, the Reserve
Bank enter into foreign exchange transactions. It also
administers foreign currency for the Central Govt. & State
Govt.

7. RBI is the
Manager of
Foreign
Exchange,
because it
manages
the Foreign
Exchange
Managemen
t Act, 1999.
There is a
separate
department
in RBI known
as “Exchange
control
currencies”
and it tries
to maintain
balance
between the
demand and
supply of
foreign
exchange.
So, The RBI
acts as the
custodian of
foreign
exchange
reserves, the
banks
administer the
control
through the
authorised
foreign
exchange
dealers.

8. The investment is said to be direct because the foreign
investor would seek to manage, control or substantially
influenced.
The FDI Framework in India stands on a three
legged tripod consisting of three Regulations ~
the Foreign
Exchange
Management
Act, 1999 along
with its
Regulations
the
Consolidated
FDI Policy
the Circulars to
Authorised
Person issued
from time to
time by the
Reserve Bank of
India.

9. • Three Agencies/Ministries/Regulators which are involved in the FDI
Regime –
• the Reserve Bank of India (RBI),
• the Department of Industrial Policy and Promotion (DIPP),
• Ministry of Commerce & Industry and the Foreign Investment
Promotion Board (FIPB), Ministry of Finance.
• FDI in India is regulated by RBI. All foreign inflows and outflows are
governed and regulated by the RBI. FDI governed by the provisions of
the Foreign Exchange Management Act (FEMA), 1999.
• FEMA Regulations which prescribe amongst other things the mode of
investments i.e. issue or acquisition of shares / convertible debentures
and preference shares, manner of receipt of funds, pricing guidelines
and reporting of the investments to the Reserve Bank.

10. Retailing could be understood in terms of business
activities, which involve the sale of goods and services
to consumer for personal or non-business use.
• Indian retail Sector can be divide into two categories-
• organized and
• unorganized.
The organized sector refers to business employing more than ten
persons, which includes retail chains like Big Bazar and reliance.
This sector is only 2% of the total retail sector and employs just 5
lakh persons.
• But the rest 98% is in the hand of unorganized sector. They are in
the traditional form; low cost building, kirana shops, roadside
vendors, paan-beedi shops etc. Over 4 crore people are engaged
in this sector.

11.  The government and the RBI need to evolve suitable
policies to enable the retailers in the unorganized
sector to expand and improve their efficiencies.
 FDI plays an extra ordinary and growing role in global
business. It can provide a firm with new markets and
marketing channels, cheaper production facilities,
access to new technology, products, skills and
financing.
 If there is a conflict between the FDI Policy and the
FEMA Regulations, then the FEMA and the Regulations
issued there under will be more superior to the FDI
Policy because the FDI Policy itself provides that in
the case of any conflict with the FEMA Regulations,
the FEMA Notifications would prevail.

12.  RBI act like a custodian to Foreign Exchange
management in India. The promotion of FDI forms an
integral part in the Indian Economic Policy. It increases
economic growth by inculcating capital, technology
and modern management practices. Retailing in India
is slightly different than in developed markets.
 My two suggestions-
1- In India, the unorganized retail sector should be more
and more widened and RBI along with FEMA and FDI
policy should take steps to improve this sector and
2- Offences in FEMA should be made criminal in nature.