SHIA P.G.

COLLEGE
M.COM- II SEM. PRESENTATION ON Foreign Exchange Regulation Act & Foreign Exchange Management Act
An Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.

Submitted bySUBMITTED TOGROUPSTUTI Maam

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FOREIGN EXCHANGE MANAGEMENT ACT

(FEMA)
EVOLUTION OF FOREIGN EXCHANGE MANAGEMENT ACT (FEMA)- To know about the evolution of Foreign Exchange Management Act, first we have to understand the Foreign Exchange Regulation Act (FERA). FOREIGN EXCHANGE REGULATION ACT (FERA) The Foreign Exchange Regulation Act was passed by the Indian Parliament in 1973 by the government of Indira Gandhi and came into force with effect from January1, 1974. It consisted of 81 sections. FERA imposed stringent regulations on certain kinds of payments, dealing in foreign exchange & securities and the transactions which had an indirect impact on the foreign exchange and export of currency. FERA was repealed in 1993 by the government of Mr. Atal Bihari Vajpayee and was replaced by the Foreign Exchange Management Act on June1, 2000. FEMA is a modified form of FERA, in which all the limitations of FERA were overcome and a liberalized act was made. FOREIGN EXCHANGE MANAGEMENT ACT

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Introduction of FEMA- On Dec.29, 1999 the Indian
government amended Foreign Exchange Management Act (FEMA).On June 1, 2000 FEMA came into force consisting of 49 sections, replacing the Foreign Exchange Regulation Act (FERA).

Abstract- The government of India has formulated the FEMA

which relates to the foreign direct investment (FDI) in the country. FEMA has helped the country by encouraging external payments and trade. This act is liberalized and made simple in comparison of FERA act.

Objectives of FEMAi) To consolidate and amend the law relating to foreign exchange. ii) Facilitating external trade and payments. iii) To encourage the foreign exchange. iv) Promotion and maintenance of exchange market in India. v) Control over the foreign exchange.

Scope of FEMA- This act extends to the whole of India

and also applies to all the branches, offices and agencies outside India but owned or controlled by a person resident in India. MAIN PROVISIONS & FEATURES OF FEMA

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Provisions regarding Foreign Exchange management Act are given below:

i) Dealing in foreign exchange Sec. 3 of FEMA imposes

restrictions on dealing in foreign exchange except as provided in its act or with the permission of RBI. No person will deal in foreign exchange with any person other than authorized person .Authorized person means a Person licensed by RBI.

ii) Holding of foreign exchange As per Sec.4, no person

shall hold and transfer any foreign security or immovable property situated outside of India without permission of RBI.

iii) Current account transactions As per sec.5, current

account transactions are allowed through an authorized person.

iv) Capital account transactions- As per sec.6 capital

account transactions are allowed but in certain cases, RBI, after consultation, can fix the limit of transactions.

v) Export of goods or services- As per sec.7 of FEMA,

every exporter shall file a declaration with RBI or with any other specified authority regarding full export value of goods and services. He will also provide all information as may be required by RBI.

vi) Realisation and repatriation of foreign exchange- As

per sec.8, if any foreign exchange is due to any person resident in INDIA , such a person shall take all reasonable steps to realize and repatriate foreign exchange to India in the manner specified by RBI.

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vii) Authorized person- As per sec.10 Reserve Bank of India
can authorize any person to deal in foreign exchange or in foreign security as an authorised dealer or authorized money changer. As per Sec. 11, RBI can revoke license of the authorised dealer. As per sec.12, RBI can inspect the working of an authorised person, can verify the correctness of transaction and can demand any information.

viii) Penalties As per sec.13, if any person breaks any

provision of this act such a person shall be liable for penalty. This penalty can be up to three times of the actual amount. Further penalty may extend up to five thousand rupees for every day after the first day. In FERA there was provision for imprisonment and no limit on fine. In FEMA a person will be liable to civil imprisonment only if he does not pay the fine within 90 days from the date of notice

ix) Appointment of Adjusticating authority Central

government may appoint adjusticating authority for the holding of any contraventions of this act. Adjusticating authority is given the power of civil court and it will dispose all complaints within one year from the date of complaint.

X) Appeal to special directors- Central government

shall appoint special directors to hear appeals against the order of Adjusticating authority. Such appeals can be filed within 45 days from the date of order of adujusticating authority.

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xi) Power to make rules- sec.46 of the act authorizes
central government to make rules to carry out the provisions of this act.

DIFFERENCE BETWEEN FERA AND FEMA

1)

FERA was an old amendment which was passed in 1973 and came into effect on January 1, 1974 whereas FEMA is a new amendment which was passed in the year 1999 and came into effect on June 1,2000. FERA was a long enactment with 81 sections whereas FEMA is a small enactment with 49 sections. FERA was very strict in nature whereas FEMA is liberal and simple in nature. Approach of FERA towards foreign exchange transaction was very conservative and restrictive whereas approach of FEMA towards foreign exchange transaction is very positive and welcoming. Penalty provisions in FERA were very strict whereas FEMA provides only monetary penalty for violating its provisions. The scope of FERA was very wide. It deals with all the transactions related to foreign exchange whereas the scope of FEMA is narrow. It deals with specified transactions related to foreign exchange.

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