FOREIGN EXCHANGE MANAGEMENT ACT 1999

BY:SAHANA HIREMATH M.COM II SEM

FOREIGN EXCHANGE

• Foreign exchange is a mechanism by which the currency of one country gets converted into currency of another country

• The conversion of currencies is done by the banks who deal in foreign exchange.

• These banks maintain stocks of foreign currencies in the form of balances with banks abroad.

BACKGROUNDReplaced FERA – Foreign Exchange

Regulation Act 1974FERA had become incompatible with the

pro-liberalisation policies of the Govt. of India

This was done in order to relax the controls on foreign exchange in India, as a result of economic liberalization.

FEMA (1999)

The Foreign Exchange Management Act (1999) or in short FEMA has been introduced as a replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA came into force on the 1st day of June, 2000.

OBJECTIVE OF THE ACT• Conservation & proper utilization of

foreign exchange resources of the country.• Control certain aspects of the conduct of

business outside the country by Indian companies and in India by foreign companies

FEATURES OF THE ACT

• Non compliance with the regulation is diluted. Its only of civil & no criminal consequences.

• Nature of current account & capital account transactions have been clearly defined.

• All the current account transactions can be freely carried out.

• Definitions of residents & non residents taken into account.

ADMINISTATIVE SET UP • U/s 46 the central government has been

authorized to carry out provisions of the act.

• Section 47 empowers RBI to make rules & regulations to carry out provisions of the act.

• Section 41 central government may from time to time give directions to RBI.

• RBI has the ultimate power & responsibility.

AUTHORISED PERSON

• "Authorized person" means an authorized dealer, money changer, off-shore banking unit or any other person for the time being authorized under sub-section (1) of section 10 to deal in foreign exchange or foreign securities;

duties OF AN AUTHORISED PERSON

• To comply with RBI directions• Not to engage in un authorized transactions• Ensure compliance of FEMA provisions• To produce books, accounts etc…• Has to obtain declaration from the

customers to ensure provisions of the act are not violated

AUTHORISED dealers

• Authorised dealers are banks financial institutions & other institutions authorized by RBI.

• Category I A major portion of transaction in foreign exchange from the customers dealt by such banks.

• Category II purchase & sell foreign exchange for private & business visits abroad undertaken by residents.

• Category III They comprise of selected financial & other institutions.

FOREIGN EXCHANGE DEALERS ASSOCIATION OF INDIA

• FEDAI was established in 1958• Authorised dealers of category I & II

currently numbering 89 are its members.• HQ at Mumbai.• Local offices at BENGALURU, CHENNAI

& NEW DELHI.• Managed by managing committee at Head

Office.

AUTHORISED MONEY CHANGERS

• To provide facilities for encashment of foreign currency for tourists etc. Certain established firms, hotels & other organizations have been permitted to deal in foreign currency notes, coins & travellers’ cheques subject to directions issued to them from time to time.

• a Full Fledged Money Changer is authorized by RBI to under take both purchase of foreign exchange & sale transactions with the public for private & business visits abroad.

• A restricted money changer is authorized only to purchase foreign currency notes, coins & travellers’ cheques subject to condition are surrendered by him to in turn to an authorized dealer.

THANK U