UGC NET Foreign Exchange Management Act (FEMA) FEMA is a set of regulations that empowers the Reserve Bank of India to pass regulations and enables the Government of India to pass rules relating to foreign exchange in tune with the foreign trade policy of India. The Foreign Exchange Management Act, 1999 (FEMA) is an Act […]
Objective of FEMA
- Facilitate external trade and payments.
- Promote orderly development and maintenance of foreign exchange market in India.
- Consolidate and amend the laws relating to foreign exchange.
? Key Features of FEMA
- Applies to the whole of India and also to all branches, offices, and agencies outside India owned or controlled by Indian residents.
- Deals primarily with current account and capital account transactions.
- Liberalized approach in contrast to FERA’s restrictive nature.
- FEMA is a civil law; violations are treated as civil offenses, not criminal.
- Administered by the Reserve Bank of India (RBI) and the Central Government.
⚖️ Important Definitions
- Capital Account Transaction: Alters assets or liabilities, including contingent liabilities, outside India of persons resident in India or inside India of persons resident outside India.
- Current Account Transaction: Transactions other than capital account, such as payments related to foreign trade, services, interest, etc.
- Authorized Person: Entities authorized by the RBI to deal in foreign exchange (banks, money changers, etc.).
- Person Resident in India: A person residing in India for more than 182 days during the preceding financial year.
? Main Provisions of FEMA
- Section 3: Restriction on dealing in foreign exchange.
- Section 4: Restriction on holding foreign exchange.
- Section 5: Deals with current account transactions.
- Section 6: Regulation of capital account transactions.
- Section 7: Export of goods and services.
- Section 10: Powers of authorized persons.
- Section 13: Penalties for contraventions.