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Foreign Exchange

Management Act, 1999


FEMA, 1999

 Came into effect from 1st June 2000


 Objective
 Facilitating external trade and payments
 Promoting orderly development and maintenance
of foreign exchange market in India
 Application of the Act
 Whole of India
 Branches and offices owned or controlled by a
person resident of India
Definitions
 Authorized Person
 Authorized dealer
 Money changer, Offshore banking Unit
 Any other person authorized to deal in foreign
exchange and foreign securities
 Capital Account Transaction : A transaction
which alters assets or liabilities
 Currency : Currency notes, Postal notes,
Postal orders, Money orders, Cheques,
Traveler's Cheques, Letter of Credit, Bill of
Exchange, Promissory notes, Credit Cards
Definitions
 Current Account Transaction
 Payments due in connection with foreign trade
 Short term banking & Credit facilities
 Interest on Loans
 Remittances for living expenses of parents,
spouse, children residing abroad
 Expenses like foreign travel, education & medical
care
 Export : Taking any goods out of India to a
place outside India; any provision of services
to any person outside India
Definitions
 Foreign Exchange :
 Deposits, credits & balances payable in foreign currency
 Drafts, traveler’s cheques, letters of credit drawn in India
(foreign) payable in foreign (India)
 Foreign Security :
 Shares, stocks, bonds, debentures expressed in foreign
currency
 Cos. Maintain 2 share registers (one in India & other
outside [foreign security])
 Person : an Individual, HUF, Company, Firm,
Association of persons, Office owned or controlled
by such person, etc.
Definitions
 Person Resident in India
 Person residing for more than 182 days in preceding
financial year
 Person or body corporate registered or incorporated in
India
 Office, branch or agency in India controlled by a non-
resident
 Office, branch or agency outside India controlled by a
resident
 Repatriate to India : bringing into India realized
foreign exchange and selling to an authorized
person in exchange of rupees or holding it in an
account with authorized person (extent notified by
RBI)
Definition

 Transfer : Sale, purchase, exchange,


mortgage, pledge, gift, loan or any other form
of transfer of right, title, possession or lien
Regulation & Management of Foreign
Exchange
 Dealings in foreign exchange (Sec 3)
 Deal or transfer any foreign exchange only to an
authorized person
 Current Account Transactions
 May sell or draw foreign exchange to or from an
authorized person
 Capital Account Transactions
 Through an authorized person
 RBI specifies limits for such transactions
 RBI has right to prohibit, regulate or restrict
transactions
Regulation & Management of Foreign
Exchange
 Holding
 By a Resident : may hold, own, transfer or invest
in foreign currency or security or any immovable
property if acquired, held or owned when he was
outside or inherited from a non-resident
 By a Non-Resident : may hold, own, transfer or
invest in Indian currency or security or any
immovable property if acquired, held or owned
when he was resident in India or inherited from a
resident
Regulation & Management of Foreign
Exchange
 Export of Goods and Services
 Furnish Declaration (Goods)
 True and correct material particulars to RBI or such
other authority
 Amount representing full export value (if it is not known
then expectation on sale in market outside India)
 Full Export Value
 Whole of price agreed between parties
 Exporter of services to furnish declaration to
Reserve Bank or such other authority
Regulation & Management of Foreign
Exchange
 Realization and Repatriation of foreign
exchange
 Any amount is due or has accrued that person
shall take all reasonable steps to realize or
repatriate to India
 Period and Manner is specified by RBI
Authorized Person
 Granting of authorization on application
 Authorization is given in writing
 Subject to conditions
 Revocation
 May be done by RBI
 Reason : Public Interest or Failure to comply with
conditions
 Declaration
 By the person making transaction to check if any condition
is contravened if so Authorized person refuse in writing or
report it to RBI
 To see if that person uses money for other purpose than
given in declaration, then it is contravention
RBI Powers

 To Issue Directions
 To Authorized person (for transactions)
 To Authorized person (on furnishing information)
 Inspect Authorized Person
 Verify correctness, obtain information, secure
compliance with provisions of Act
 Production of Books, Accounts and Documents
 Confiscation
RBI Powers

 Penalty
 If amount is quantifiable maximum limit is thrice
that sum; If not limit is Rs. 2,00,000.
 If contravention continues each day Rs. 5000
 Civil Imprisonment
 If full payment of penalty not made within 90 days
 If amount more than 1 crore => max. 3 years; less
than 1 crore => max. 6 months
RBI Powers

 Procedure
 Notice upon defaulter
 Opportunity for showing cause
 Warrant for Arrest
 Order on conclusion of inquiry
 Release of defaulter
 Execution of detention order
Adjudication & Appeal
 Adjudicating Authority
 Central Govt. may appoint by order published in
Official Gazette
 Complaint in writing by an officer authorized by
Central Govt.
 Appeal to Special Director (Appeals)
 Appointment made by Central Govt.
 Appeal within 45 days of order
 Opportunity to be heard is given
 Copies of order sent to parties & concerned
Adjudicating Authority
Adjudication & Appeal

 Appellate Tribunal
 Appeals against Adjudicating Authorities &
Special Director (Appeals)
 Deposit amount of penalty and then appeal
 Appeal to be filed within 45 days
 Within 180 days dispose appeal
 Appeal to High Court
Officers of Enforcement

 Appointed by Central Government


 Power of search and seizure