FOREIGN EXCHANGE MANAGEMENT

ACT (FEMA), 1999

TheYoungIndianEconomists.wordpress.com
HISTORICAL BACKGROUND
The Foreign Exchange Regulation Act (FERA)
of 1973 enacted in 1973
In the backdrop of acute shortage of foreign
exchange in the country
FERA had a controversial 27 year stint during
which many bosses of the Indian corporate
world found themselves at the mercy of the
Enforcement Directorate (E.D).

TheYoungIndianEconomists.wordpress.com
 FOREIGN EXCHANGE
MANAGEMENT ACT
(FEMA),1999
The FEMA (1999) or in short FEMA has been
introduced as a replacement for earlier Foreign
Exchange Regulation Act (FERA)
FEMA came into act on the 1st day of June,2000
49 sections in the Act.

TheYoungIndianEconomists.wordpress.com
 OBJECTIVES
To consolidate & amend the law relating to foreign
exchange.
To facilitating external trade & payments.
To remove imbalance of payment.
To make strong & developed foreign exchange market.
Regulation of employment business & investment of
non-residents.

TheYoungIndianEconomists.wordpress.com
 FEATURES
Activities such as payments made to any person outside
India or receipts from them, along with the deals in
foreign exchange and foreign security is restricted. It is
FEMA that gives the Central Government the power to
impose the restrictions
Restrictions are imposed on residents of India who carry
out transactions in foreign exchange, foreign security or
who own or hold immovable property abroad
Without general or specific permission of the MA
restricts the transactions involving foreign exchange or
foreign security and payments from outside the country
to India the transactions should be made only through
an authorized person.

TheYoungIndianEconomists.wordpress.com
 Deals in foreign exchange under the current account by an
authorized person can be restricted by the Central
Government, based on public interest generally.
Although selling or drawing of foreign exchange is done
through an authorized person, the RBI is empowered by
this Act to subject the capital account transactions to a
number of restrictions.
Residents of India will be permitted to carry out
transactions in foreign exchange, foreign security or to
own or hold immovable property abroad if the currency,
security or property was owned or acquired when he/she
was living outside India, or when it was inherited by
him/her from someone living outside India.
Exporters are needed to furnish their export details to RBI.
To ensure that the transactions are carried out properly,
RBI may ask the exporters to comply to its necessary
requirements.
 NEED FOR THIS
MANAGEMENT
The buying and selling of foreign currency and other debt
instruments by businesses, individuals and governments
happens in the foreign exchange market
Largest and most liquid market in the world as well as in
India
The management of foreign exchange market becomes
necessary in order to mitigate and avoid the risks.
Central banks would work towards an orderly functioning
of the transactions which can also develop their foreign
exchange market.
 TO WHOM IT IS APPLICABLE

FEMA is applicable to all parts of India.

The act is also applicable to all branches, offices &
agencies outside India owned or controlled by a person
who is resident of India.

TheYoungIndianEconomists.wordpress.com
 SWITCH FROM FERA TO FEMA

Liberal Form of FERA.

Extends of whole of India.
It is more human & natural.
Removes restrictions on drawal of foreign exchange.

TheYoungIndianEconomists.wordpress.com
 Fera fema
Objective is to conserve FOREX and Objective is to facilitate external
to prevent its misuse trade and payments and maintenance
of FOREX market in India

Violation of FERA was a criminal Violation of FEMA is a civil offence

offence

Offences under FERA were not Offences under FEMA are

compoundable compoundable

Citizenship was a criteria to Stay of more than 182 days in India is

determine the residential status of a the criteria to decide residential status
person under FERA under FEMA.

TheYoungIndianEconomists.wordpress.com
DIFFRENCES FERA FEMA
Definitions Current A/c not Current a/c, service all
defined defined

2.Provisions Complex 81 Sec Simple 49 Sec

3.Authorised Person Narrow Definition Has been widened to

include banks

4. Compatibility with Not dealt Considers resident in

IT India similar to IT

5. Right of Assistance No help allowed Sec 32 gives right to

help of legal
practitioner

TheYoungIndianEconomists.wordpress.com
SIMILARITIES BETWEEN FERA &
FEMA
The Reserve Bank of India and central
government would continue to be the
regulatory bodies.
Presumption of extra territorial jurisdiction as
envisaged in section (1) of FERA has been
retained.
The Directorate of Enforcement continues to be
the agency for enforcement of the provisions of
the law such as conducting search and seizure.

TheYoungIndianEconomists.wordpress.com
RULES & REGULATIONS UNDER FEMA
Current Account Transactions Rules, 2000
Permissible Capital Account Transactions
Regulations,2000
Transfer or Issue of any Foreign Security regulations,
2004
Foreign currency accounts by a person resident in India
Regulations,2000
Acquisition and transfer of immovable property in India
regulations,2000
Establishment in India of branch or office or other place
of business regulations, 2000
Manner of Receipt and Payment Regulations, 2000

TheYoungIndianEconomists.wordpress.com
RULES & REGULATIONS UNDER FEMA

Export of Goods and Services regulations,

2000
Realization, repatriation and surrender of
Foreign Exchange regulations, 2000
Possession and Retention of Foreign Currency
Regulations, 2000
Foreign Exchange (compounding proceedings)
rules, 2000

TheYoungIndianEconomists.wordpress.com
 PRESENTED BY:
TheYoungIndianEconomists