Foreign Exchange Management Act [FEMA]

[Neena Ramesh]

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INTRODUCTION
The Foreign Exchange Regulation Act, 1973 was reviewed in 1993 and several amendments were enacted as part of the ongoing process of economic liberalisation relating to foreign investment and foreign trade for closes interaction with the world economy. Significant development have taken place since 1993 such as substantial increase lours foreign exchange reserves , growth in foreign trade, nationalization of tariffs ,current account convertibility, liberalization of Indian investments abroad increase access to external commercial borrowings by Indian corporate and participation of foreign institutional investing in our stock markets. At that stage the central government decided that a further review of the Foreign Exchange Regulation Act would be undertaken in the light of subsequent developments and experiences in relation to foreign trade and investment. Keeping in view the changed environment, the central Government decided to introduce. The Foreign Exchange Management Bill and repeat the Foreign Exchange Regulation Act, 1973. The Foreign Exchange Management Bill was passed by both the House of parliament and received the assent of the parliament on 29 December 1999.
Through this seminar I am going to introduce a detail report about the Foreign Exchange Management Act of 1999.This includes the operations, its objectives, scope, characteristics and various provisions in the Foreign Exchange Management Act. This Foreign Exchange Management Act 1999 was the conservation of Foreign Exchange resources of the country.
Foreign Exchange Management Act [FEMA]
The Foreign Exchange Regulation Act is 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.
The act extends to the whole of India. It shall also apply to all branches, offices and agencies outside India owned or controlled by a person resident in India and also to any contravention there under committed outside India by any person to whom this act applies.
The main objects of the foreign exchange management act are as follows.
To regulate import and export of currency
to Regulate acquisition, holding etc., of immovable property in India by non-residents
To regulate holding o immovable property outside India
To regulate dealings in foreign exchange and securities.
To regulate certain payments
To regulate foreign companies.
To regulate the transactions indirectly officiating foreign exchange.
To regulate employment of foreign nationals
To conserve the foreign exchange resources of the country and to utilise the same in the interest of the economic development of the country
CHARACTERISTICS OF F E M A
Foreign exchange Management act (FEMA) was formulated to repeal foreign exchange regulation act (FERA), 1975 because the conditions had changed a lot major characteristics of FEMA are as follows.
There is a major shift under FEMA. Under FEMA 1973, all transaction in foreign exchange and all transactions with non residents [in foreign currency or in rupees] were absolutely prohibited except where specific relaxations were made. Similarly non residents were also not permitted to have any dealings in India. Under FEMA 1990, how was, the major focus is on transactions dealings foreign exchange and foreign securities. Restrictions over dealings with non residents and by non-residents in India have been, substantially diluted through eliminated.
Major change under FEMA is that only a monetary penalty will be slopped on the convicted and a there is no punishment by way of imprisonment for contraction of any of the provisions. The only circumstance under which imprisonment can be imposed is for non payment of such penalty. Under FERA however of the enforcement directorate had sweeping process to arrest anyone suspected in indulging in foreign exchange violations naturally, individual in are particularly employees of companies would welcome the new provision of FEMA. Foreign Exchange Management Act. Causes under the Exchange Management Act will also have to refer by Reserve Bank of India.
Foreign Exchange Management Act 1998 attempts to simplify the provision of Foreign Exchange Regulation Act 1973.In fact there are several major changes with immediate effect and relevance, particularly those relation to certain substantive matters and contraventions and Punishments.
PROVISION IN FEMA
Provisions in FEMA, 1999 regarding regulation and management of foreign exchange. The provision under the act was us follows:-
Provisions regarding current account transactions[section 5]
Provision regarding dealing in foreign exchange (section 3)
Provision regarding capital account transaction(section 6)
Provision regarding goods and services(section 7)
Provision regarding and repatriation of foreign exchange (section 8)
Provision regarding the exemptions from realization and repatriation in certain cases (section 9)
Provision regarding the exemption from the realisation and repatriation in certain cases.

Provision regarding dealing in foreign exchange.

Without the general or specific permission of the Reserve Bank of India, no person shall:
a) Deal in or transfer any foreign exchange or foreign security to any person not being an authorised person.
b) Make any payment to or for the credit of any person resident outside India in any manner.
c) Receive otherwise through an authorised person, any payment by order or on behalf of any person resident outside India in any manner.
d) Enter into any financial transition in India as consideration for or in association with acquisition or creation or transfer of a right to acquire any asset outside India by any person.
Provision regarding holding of foreign exchange.
No person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.
Provision regarding current account transactions
Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawl is a current account transaction. It also empowers the Central Government to prescribe in public interest and in consultation with the RBI, the restrictions for such transactions as may be considered reasonable.
Provision regarding capital account transactions.
Any person may sell or draw foreign exchange to or from an authorised person for capital account transaction (see 6(1)).The Reserve Bank of India may in consolation with the central Government specify any class or classes of capital account which are permissible; the limit up to which foreign exchange shall be admissible for such transactions (sec 6(2)).The Reserve Bank of India may by regulations, prohibit restrict or regulate the following.
Transfer or issue of any foreign security by a person resident in India.
Transfer or issue of any security by a person resident outside India.
Transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India.
Any borrowing or lending in rupees in whatever from or by whatever name called between a person resident in India and a person resident outside India.
Any borrowings or lending in foreign exchange in whatever form or whatever name called.
Deposits between person resident in India and person resident outside India.
Export, Import or holding of currency notes.
Transfer of immovable properly outside India, other than a lease not exceeding five years by a person resident in India.
Acquisition or transfer of immovable property in India other than a year or not exceeding five years by a person resident outside India.
Giving of a guarantee or security in respect of any debit obligation or other liability increased by a person resident in India and owned to a person resident outside India or by a person resident outside; India (sec 6(3)).
A person resident in India may hold own transfer or invest in foreign currency, foreign security or any immovable property situated outside India, If such currency ,security or property was acquired ,held pr owned by such person when he was resident outside India or inherited from a person who was resident outside India (section6(4)
A person resident outside India may hold, own transfer or invest into any Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned or inherited from a person who was president in India (Sec 6(5))
The Reserve bank of India may by regulation, prohibit, restrict or regulate establishment in India of a branch, office or other place of business by a person resident outside India for carrying on any activity relating to such branch, office or other place of business(Sec 6(6))