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Foreign Exchange Management Act 1999.
Presented By:-
Hemangi Patil
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Introduction
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.
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Structure:
FEMA is administered by means of Notifications/ Circulars/ Clarifications/ Rules issued by RBI/
Government.
Section 2 Definitions
Provisions relating to
Section 2(c) & 10 - 12
Authorised Persons
Section 39 - 49 Miscellaneous
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Objectives:
objectives
Facilitating promoting
Ordinary development
Orderly maintenance
Externa l trade
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Extent & Application of FEMA (Section 1)
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Important Definations
Foreign exchange (“Forex”) – Sec 2(n) means
◦ Foreign currency
◦ Credit card
◦ Deposits, credits and balances in foreign currency
◦ Drafts, traveler's cheques, LOC, BOE expressed/ drawn in Indian
currency but payable in foreign currency
◦ Drafts, traveler’s cheques, LOC, BOE drawn by non-resident but
payable in Indian currency
Person – Sec 2(u) includes
◦ Individual, HUF, Firm, Company, AOP/ BOI, Artificial juridical person
◦ The term includes any agency, office or branch owned/ controlled by
such person
Person resident outside India (“PROI”) – Sec 2(w)
◦ Any person other than a person resident in India
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Person resident in India (“PRII”) – Sec 2(v)Individual who stays in India for more
than 182 days during the previous financial year:
Comes to
India or stays a) Employment in India
in India b) Carrying on business/ vocation in India PRII
for c) Other purpose for an uncertain period
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Firm/ body corporate/ AOP/ BOI
◦ Registered or incorporated in India – PRII
◦ Registered or incorporated outside India – PROI
Agency/ office/ branch
◦ In India – PRII
◦ Outside India
Owned/ controlled by resident in India – PRII
Owned/ controlled by resident outside India – PROI
Currency – Sec 2(h) includes
◦ Currency notes, money order, cheques, DD, instruments, traveler's cheques, letter of
credit, credit cards, BOE, promissory notes
◦ The term includes debit cards and ATM cards
Authorised Person – Sec 2(c)
◦ Means an AD, money changer, offshore banking unit or any other person authorized
under Sec 10(1) to deal in forex or foreign securities
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Repatriate to India – Sec 2(y)
◦ Means bringing into India the realised foreign exchange and
The selling of such foreign exchange to an authorized person in India
in exchange for rupees
The holding of realised amount in an account with an authorized
person in India to the extent notified by the Reserve Bank
◦ Includes use of the realised amount for discharge of a debt or liability
denominated in foreign exchange
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Provisions:
The main provision of the Act are as follows:
Section 3: Dealing in Foreign Exchange
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Regulation & Management:
The Reserve Bank can, by regulations, prohibit, restrict
or regulate the following :-
Transfer or issue of any foreign security by a person resident in India;
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Regulation & Management:
deposits between persons resident in India and persons resident outside
India;
export, import or holding of currency or currency notes;
liability incurred
(i) by a person resident in India and owed to a person resident outside India
or
(ii) by a person resident outside India.
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Conversion from FERA TO FEMA
The Foreign Exchange Regulation Act of 1973 (FERA) in India was
repealed on 1 June, 2000. It was replaced by the Foreign Exchange
Management Act (FEMA), which was passed in the winter session of
Parliament in 1999. Enacted in 1973, in the backdrop of acute shortage of
Foreign Exchange in the country.
FEMA, which has replaced FERA, had become the need of the hour since
FERA had become incompatible with the pro-liberalisation policies of the
Government of India. FEMA has brought a new management regime of
Foreign Exchange consistent with the emerging frame work of the World
Trade .
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