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. Hence the tenor and tone of the Act was very drastic. It required imprisonment even for minor offences. FEMA is a regulatory mechanism that enables foreign exchange market mechanism pdf Reserve Bank of India to pass regulations and the Central Government to pass rules relating to foreign exchange in tune with the Foreign Trade policy of India.
FERA, in place since 1974, did not succeed in restricting activities such as the expansion of Multinational Corporations. The concessions made to FERA in 1991-1993 showed that FERA was on the verge of becoming redundant. After the amendment of FERA in 1993, it was decided that the act would become the FEMA. This was done in order to relax the controls on foreign exchange in India, as a result of. The switch to FEMA shows the change on the part of the government in terms of for the capital. The buying and selling of foreign currency and other debt instruments by businesses, individuals and governments happens in the foreign exchange market.
Apart from being very competitive, this market is also the largest and most liquid market in the world as well as in India. It constantly undergoes changes and innovations, which can either be beneficial to a country or expose them to greater risks. The management of foreign exchange market becomes necessary in order to mitigate and avoid the risks. Central banks would work towards an orderly functioning of the transactions which can also develop their foreign exchange market. Foreign Exchange Market Whether under FERA or FEMA’s control, the need for the management of foreign exchange is important. It is necessary to keep adequate amount of foreign exchange from Import Substitution to Export Promotion. Activities such as payments made to any person outside India or receipts from them, along with the deals in foreign exchange and foreign security is restricted.
It is FEMA that gives the central government the power to impose the restrictions. Deals in foreign exchange under the current account by an authorised person can be restricted by the Central Government, based on public interest generally. Although selling or drawing of foreign exchange is done through an authorized person, the RBI is empowered by this Act to subject the capital account transactions to a number of restrictions. FCRA, 2010 has been enacted by the Parliament to consolidate the law to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to national interest and for matters connected therewith or incidental thereto.
India, of such article, on the date of such gift is not more than such sum as may be specified from time to time by the Central Government by rules made by it in this behalf. This sum has been specified as Rs. Section 2 of the Foreign Exchange Management Act, 1999. A donation, delivery or transfer or any article, currency or foreign security referred to in this clause by any person who has received it form any foreign source, either directly or through one or more persons, shall also be deemed to be foreign contribution with the meaning of this clause. Section 17 or any other income derived from the foreign contribution or interest thereon shall also be deemed to be foreign contribution within the meaning of this clause.
India or outside India or any contribution received from an agent or a foreign source towards such fee or cost shall be excluded from the definition of foreign contribution within the meaning of this clause. Dept of Revenue, Govt of India. This page was last edited on 5 December 2017, at 11:53. This market determines the foreign exchange rate. It includes all aspects of buying, selling and exchanging currencies at current or determined prices. Since currencies are always traded in pairs, the foreign exchange market does not set a currency’s absolute value but rather determines its relative value by setting the market price of one currency if paid for with another. Ex: 1 USD is worth X CAD, or CHF, or JPY, etc.