FEMA : FEMA GYAN AGNIHOTRI Foreign Exchange Management Act , 2000 : 20 September 2010 GYAN AGNIHOTRI 2 Foreign Exchange Management Act , 2000 Foreign Exchange transactions were earlier regulated in India by the Foreign Exchange Regulation Act, 1973.
It was widely described as a draconian and obnoxious law.
After Liberalization in 1973, some amendments to FERA were affected in 1991.
The main objective of FERA was conservation and proper utilization of the foreign exchange resources of the country. Slide 3: 20 September 2010 GYAN AGNIHOTRI 3 FEMA replaced FERA in 1999.
Came into effect from Jan 1, 2000.
It extends to the whole of India and also applies to all branches , offices and agencies outside India , owned or controlled by a person resident in India. Slide 4: 20 September 2010 GYAN AGNIHOTRI 4 Objectives :
Facilitate external trade and payments.
Promote the orderly development and maintenance of Foreign exchange market Slide 5: 20 September 2010 GYAN AGNIHOTRI 5 Dealings in Foreign Exchange :
Section 3 of FEMA imposes restrictions on dealings in foreign exchange and foreign security and payments to and receipts from any person outside India.
Accordingly except as provided in terms of the act, or with the general or special permission of the Reserve Bank , no person shall : Slide 6: 20 September 2010 GYAN AGNIHOTRI 6 deal in any foreign exchange or foreign security with any person other than an authorized person .
Make any payment to or for the credit of any person resident outside India in any manner. Slide 7: 20 September 2010 GYAN AGNIHOTRI 7 Receive otherwise through an authorized person , any payment by order or on behalf of a person resident outside India in any manner.
Enter in to any Financial Transaction in India as a consideration for or in association with acquisition or creation or transfer of a right to acquire , any asset outside India by any person. Slide 8: 20 September 2010 GYAN AGNIHOTRI 8 Holding of Foreign Exchange
Save as otherwise provided in this act , no person resident in India shall acquire , hold , own , possess or transfer any foreign exchange , foreign security or any immediate property situated outside India. Slide 9: 20 September 2010 GYAN AGNIHOTRI 9 Current Account Transactions
FEMA permits dealings in Foreign exchange through authorized persons for current account transactions. However the central govt. can impose reasonable restrictions in public interest. Slide 10: 20 September 2010 GYAN AGNIHOTRI 10 Capital account Transactions
Any person shall sell or draw foreign exchange to or from an authorized person for a capital account Transaction permitted by the RBI in consultation with the central govt. Slide 11: 20 September 2010 GYAN AGNIHOTRI 11 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 or owned by such person when he was resident outside India or inherited from a person who was resident outside India. Slide 12: 20 September 2010 GYAN AGNIHOTRI 12 A person resident outside India may hold , own , transfer or invest in Indian currency, security or any immovable property situated in India if such currency was acquired , held, or owned by such person when he was resident in India or inherited from a person who was resident in India. Slide 13: 20 September 2010 GYAN AGNIHOTRI 13 The RBI is empowered by this act to 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 such activity relating to such branch, office or other place of business. Slide 14: 20 September 2010 GYAN AGNIHOTRI 14 Export of Goods and services
Every exporter of goods shall furnish to RBI or to such other authority a declaration as specified containing true and correct material, particulars , including the amount representing the full export value. Contravention and Penalties : 20 September 2010 GYAN AGNIHOTRI 15 Contravention and Penalties Any kind of contravention under this act is liable to a penalty up to thrice the amount involved where it is quantifiable or up to 2 lakhs where it is not quantifiable.
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. Slide 16: 20 September 2010 GYAN AGNIHOTRI 16 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.
Administration of this act
FEMA provides for the establishment of an Enforcement Directorate for investigating the contraventions under this act. FERA & FEMA A Comparison : 20 September 2010 GYAN AGNIHOTRI 17 FERA & FEMA A Comparison Anything and everything that has to do with foreign exchange was controlled .
Aim of FERA is to prevent misuse of Foreign Trade.
Theme of FERA was “Everything that is specified is under control.
FERA had 81 sections. Only the specified acts related to foreign exchange are regulated .
The aim of FEMA is facilitating Trade.
Theme of FEMA is, “Everything other than what is expressly covered is not controlled.”
FEMA has only 49 sections. Slide 18: 20 September 2010 GYAN AGNIHOTRI 18 Many provisions of FERA like Indians taking up employment abroad, employment of foreign technicians in India etc. have no appearance in FEMA. Changing Dimensions of these laws : 20 September 2010 GYAN AGNIHOTRI 19 Changing Dimensions of these laws With the advent of Liberalization and privatization , all these laws have undergone a tremendous change , which is clearly visible from the amendments that had been made in these laws from time to time. The provisions of MRTP Act, 1969 were amended after 1991 to make it more reform oriented and remove its provisions related to Monopolies restriction . Slide 20: 20 September 2010 GYAN AGNIHOTRI 20 The FERA was totally scrapped and it gave way to FEMA. The Industries Development and regulation act 1951 had also undergone through various amendments to make way for reforms. In short it can be said that all these laws and constitutional provisions which earlier played a regulatory role were transformed to play a facilitator role for Industrial development.