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    Foreign Exchange Management Act, 1999

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    Shivangi Chandak
    FEMA replaced FERA as the key legislation governing foreign exchange in India. FERA was passed in 1973 to regulate foreign exchange transactions and securities during a time when India's foreign reserves were low. However, FERA did not align with India's post-liberalization policies. FEMA was introduced in 1999 to relax foreign exchange controls in India and make regulations more suitable to the changing economic environment. FEMA empowers the RBI to regulate foreign exchange and allows the government to pass supporting rules.

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    Foreign Exchange Management Act, 1999

    Uploaded by

    Shivangi Chandak
    17 views9 pages
    FEMA replaced FERA as the key legislation governing foreign exchange in India. FERA was passed in 1973 to regulate foreign exchange transactions and securities during a time when India's foreign reserves were low. However, FERA did not align with India's post-liberalization policies. FEMA was introduced in 1999 to relax foreign exchange controls in India and make regulations more suitable to the changing economic environment. FEMA empowers the RBI to regulate foreign exchange and allows the government to pass supporting rules.

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    FEMA replaced FERA as the key legislation governing foreign exchange in India. FERA was passed in 1973 to regulate foreign exchange transactions and securities during a time when India's foreign reserves were low. However, FERA did not align with India's post-liberalization policies. FEMA was introduced in 1999 to relax foreign exchange controls in India and make regulations more suitable to the changing economic environment. FEMA empowers the RBI to regulate foreign exchange and allows the government to pass supporting rules.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    17 views9 pages

    Foreign Exchange Management Act, 1999

    Uploaded by

    Shivangi Chandak
    FEMA replaced FERA as the key legislation governing foreign exchange in India. FERA was passed in 1973 to regulate foreign exchange transactions and securities during a time when India's foreign reserves were low. However, FERA did not align with India's post-liberalization policies. FEMA was introduced in 1999 to relax foreign exchange controls in India and make regulations more suitable to the changing economic environment. FEMA empowers the RBI to regulate foreign exchange and allows the government to pass supporting rules.

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    FOREIGN EXCHANGE

    MANAGEMENT ACT, 1999


    QUICK FACTS
    • What is FEMA?
    • It is a set of regulations that empowers the
    Reserve Bank of India to pass regulations and
    enables the Government of India to pass rules
    relating to foreign exchange in tune with the
    foreign trade policy of India.

    • Which Act did FEMA replace?


    • FEMA replaced an act called Foreign Exchange
    Regulation Act (FERA).
    CONTD.
    • What is FERA and when was it passed?
    • FERA (Foreign Exchange Regulation Act) legislation
    was passed in 1973. It came into effect on January 1,
    1974. FERA was passed to regulate the financial
    transactions concerning foreign exchange and
    securities. FERA was introduced when the Forex
    reserves of the country were very low.

    • Why was FERA replaced?


    • FERA did not comply with the post-liberalization
    policies of the Government.
    BACKGROUND
    • Foreign Exchange Regulation Act, 1973 (FERA)
    was replaced by the Foreign Management Act,
    1999 (FEMA).
    • FEMA was enacted by Parliament of India and it
    came into force on 1st June, 2000.
    • The reason for the replacement emerged because
    it was not suitable for the prevailing
    environment and was harsh as it contained a
    provision for imprisonment.
    • On the other hand, FEMA was introduced with
    the changes because of the new, liberal and
    changing environment.
    • Also, earlier FERA was passed due to the
    insufficient foreign exchange in the country and
    FEMA was passed with the objective to relax the
    controls on foreign exchange in India.
    • The head office of FEMA is situated in New
    Delhi known as Enforcement Directorate and is
    headed by a Director.
    OBJECTIVES

    • To reinforce and amend the law relating to foreign


    exchange.
    • To simplify and ease the external trade and payments.
    • To promote the systematized development and
    maintenance of a healthy foreign exchange market in
    India.
    • To remove disparity of payments.
    • To control and direct the employment business and
    investment of the non-residents.
    • To utilise the foreign exchange resources effectively for
    the country.
    FEATURES
    • FEMA does not apply to the Indian citizens who resides outside
    India. This criteria is checked by the number of days a person
    stays in India for more than 182 days in the preceding financial
    year.
    • Central Government has the authority given by FEMA to
    impose restrictions on and supervise three things which are-
    payments made to any person outside India or receipts from
    them, forex and foreign security deals.
    • It specified the areas for holding of forex that required specific
    permission of the Reserve Bank of India (RBI) or the
    government.
    • FEMA classified the transaction into a current and capital
    account.
    APPLICABILITY OF FEMA ACT
    FEMA is applicable to:

    • Foreign exchange.
    • Foreign security.
    • Exportation of any commodity and/or service from India to a
    country outside India.
    • Importation of any commodity and/or services from outside India.
    • Securities as defined under Public Debt Act 1994.
    • Purchase, sale and exchange of any kind (i.e. Transfer).
    • Banking, financial and insurance services.
    • Any overseas company owned by an NRI (Non-Resident Indian)
    and the owner is 60% or more.
    • Any citizen of India, residing in the country or outside (NRI).

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