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Foreign Exchange Management Act (FEMA)Presented by MBA-IB (2nd sem) Students :-Vaibhav Kadam 04Mihir Panchal 08Niyaz Khan - 18 Manu Shaji 20Faizan Hamirani - 24Mujtaba Khan 29 Pratik Tantia 31

1FOREIGN EXCHANGE MECHANISMStatutory Basis for Exchange Control

The Foreign Exchange Regulation Act, 1973 (FERA 1973), as amended by the Foreign Exchange Management (Amendment) Act, 1999, forms the statutory basis for Exchange Control in India.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. FEMAconsolidate and amend the law relating to foreign exchange facilitating external trade and payments promoting the orderly development and maintenance of foreign exchange market in India 49 sections in the Act

Important Terms (Sec-2) Authorized Person:Authorized under the Act to deal in foreign exchangeCapital account transaction: Alters the assets or liabilityCurrency:Currency notes, Money order, cheque, drafts etcCurrency Notes:Coin and bank notesCurrency Account Transaction:Transactions other than capital account transactionsIndian Currency:Indian rupees

Export:Goods and services from India to outsideForeign Currency:Other than Indian currencyForeign Exchange:Means foreign currencyForeign Security:Security expressed in foreign currencyImport:Goods and services from outside to IndiaSecurity:Shares, Stock etc as defined in the Public Debt Act of 1994Repatriate to India:Realized foreign exchange to IndiaService:Banking, Financing, insurance etcTransfer:Sale, Purchase, Exchange etcNon-Resident Indian (NRI):Citizen of India residing outsideOverseas Corporate Body (OCB):A company, firm etc.. Owned at least 60% by NRIsPerson of Indian Origin (PIO):Citizen of country other then Bangladesh and Pakistan, ifAny time held Indian passport orEither of his parents or grandparents was citizen of IndiaThe Person is spouse of an Indian citizenTo Whom Act is Applicable ?The FEMA, is applicable-To the whole of India.Any Branch, office and agency, which is situated outside India, but is owned or controlled by a person resident in India.Broadly speaking FEMA, covers, three different types of categories, and deals differently with them. These categories are:PersonPerson Resident In IndiaPerson Resident Outside India

PersonFor the purpose of provisions, a person shall include any of the following:

An individualA Hindu Undivided familyA companyA FirmAn association of persons or a body of individuals, whether incorporated or not,Every artificial judicial person, not falling within any of the preceding sub clauses, and Any agency, office or branch owned or controlled by such person.

Person resident in IndiaA person who has been residing in India for more than 182 days, in the last financial year. This means if a person has to be assessed, as to whether he is person resident in India, for any offence committed in August 2001, then he should be residing in India for more than 182 days during April 2000 to March 2001Any person or body corporate registered or incorporated in India, orAn office, branch or agency in India owned or controlled by a person resident outside India, orAn office, branch or agency outside India owned or controlled by a person resident in India.

Person resident outside IndiaSimply putting it, "a person resident outside India" means "a person who is not resident in India"Provisions in Section 3Prohibits dealings in foreign exchange except through an authorized person Make any payment to or for the credit of any person resident outside India in any manner Receive otherwise through an authorized person, any payment by order or on behalf of any person resident outside India in any manner Enter into any financial transaction in India for acquisition or creation or transfer of a right to acquire, any asset outside India by any personProvisions in Sections SECTION 4 Restrains any person resident in India from acquiring, holding, owning, possessing or transferring any foreign exchange, foreign security or any immovable property situated outside India except as specifically provided in the Act. SECTION 5 deals with current account transactionAny person may sell or draw foreign exchange to or from an authorized person if such sale or drawl is a current account transactionSECTION 6 - deals with capital account transactions. This section allows a person to draw or sell foreign exchange from or to an authorized person for a capital account transaction. Transactions Regulated by Exchange ControlTransactions having international financial implications matters are regulated by Exchange Control:Purchase and sale of and other dealings in foreign exchange and maintenance of balances at foreign centersProcedure for realization of proceeds of exportsPayments to non-residents or to their accounts in IndiaTransfer of securities between residents and non-residents and acquisition and holding of foreign securitiesForeign travel with exchange

Export and import of currency, cheques, drafts, travelers cheques and other financial instruments, securities, etc.Activities in India of branches of foreign firms and companies and foreign nationalsForeign direct investment and portfolio investment in India including investment by non-resident Indian nationals/persons of Indian origin and corporate bodies predominantly owned by such personsAppointment of non-residents and foreign nationals and foreign companies as agents in IndiaSetting up of joint ventures/subsidiaries outside India by Indian companiesAcquisition, holding and disposal of immovable property in India by foreign nationals and foreign companiesAcquisition, holding and disposal of immovable property outside India by Indian nationals resident in India.

Provisions in Sections SECTION 7 - deals with export of goods and services.Every exporter is required to furnish to the RBI or any other authority, a declaration etc. etc. regarding full export value. SECTION 8 and 9- casts the responsibility on the persons resident in India who have any amount of foreign exchange due or accrued in their favor to get same realized and repatriated to India within the specific period and the manner specified by RBI.SECTIONS 10 and 12 - deals with duties and liabilities of the Authorized persons authorized dealer, money changer, off shore banking unit or any other person for the time being authorized to deal in foreign exchange or foreign securities.DUTIES OF AN AUTHORIZED PERSONTo comply with RBI directionsNot to engage in un authorized transactionsEnsure compliance of FEMA provisionsTo produce books, accounts etcPOWERS OF AN AUTHORISED PERSONTo deal in or transfer any foreign exchangeReceive payments by order To open NRO, NRE, FCNR, NRNR, NRSR accountsTo sell or purchase foreign exchange for current account transactionsTo sell or purchase foreign exchange for permissible capital account transactions

Powers of Reserve Bank of IndiaVerifying the correctness of any statements, information or particularObtaining information which such authorized person has failed to furnishSecuring compliance with the provisions of ActProvisions in Sections SECTION 13 Any contravention, under FEMA, may invite following kinds of penalties:If, the amount against which offence is quantities, then penalty will be "THRICE" the sum involved in contravention. Where the amount cannot be quantified the penalty may be imposed up to two lakh rupees. If, the contravention is continuing everyday, then Rs. Five Thousand for every day after the first day during which the contravention continues.Further in addition to the penalty, any currency, security or other money or property involved in the contravention may also be confiscated.

Provisions in Sections SECTION 14 If a person fails to make full payment of the penalty imposed with in a period of 90 days, he shall be liable to civil imprisonment.SECTION 15 Empowers the Directorate of Enforcement and Officers of the Reserve Bank of India as may be authorized by the central Govt. in this behalf to compound the offences.SECTION 16 Empowers the central Govt. to appoint the as many adjudicating authorities as it may think fit for holding enquiries.Provisions in Sections SECTION 17 Empowers the central Govt. to appoint one or more special Directors to hear the appeals against the orders of the Adjudicating Authorities.SECTION 18 Empowers the central Govt. to establish Appellate Tribunal to hear appeals against the orders of Adjudicating Authorities and special Director.SECTION 19 It makes provisions as regards appeals to Appellate Tribunal. Provisions in Sections SECTION 20 Composition of Appellate Tribunal. SECTION 21 Qualifications for appointment of Chairperson member and Special Director.SECTION 22 Term of Office.SECTION 23 Terms and Conditions of service.SECTION 24 Vacancies.Provisions in Sections SECTION 25 Resignation and Removal.SECTION 26 Member to act as Chairperson in certain circumstances.SECTION 27 Staff of Appellate Tribunal and Special Directorate.SECTION 28 Power of Appellate Tribunal and Special Director.SECTION 29 Distribution of business among benches.SECTION 30 Power of Chairperson to Transfer cases.Provisions in Sections SECTION 31 Decision to be by majority.SECTION 32 Right of Appellant to take assistance of legal practitioner or CA and of Govt. to appoint presenting officer.SECTION 33 Members, etc to public servants.SECTION 34 Civil court not to have jurisdiction.SECTION 35 Appeal to High Court.Provisions in Sections SECTION 36 to 38 Directorate of Enforcementenforcement of the provisions of the Foreign Exchange Management Act prevent leakage of foreign exchange Remittances of Indians abroad otherwise than through normal banking channels, i.e. through compensatory payments.Acquisition of foreign currency illegally by person in India.Non-repatriation of the proceeds of the exported goods.Unauthorized maintenance of accounts in foreign countries.Siphoning off of foreign exchange against fictitious and bogus imports land by.Illegal acquisition of foreign exchange through Hawala Indian Computer Hardware IndustryElectronic Corporation India LimitedTo tie up with international companies for local manufacture of computersTo increase the local content to a point of "self sustenance".Tie up between ECIL and IBMImport of computers was carefully regulated, depending on ECILs production capacity, and the entry of the local private sector was controlled.The Implementation of FERA (in 1977) led to exit of IBM from India.Because FERA restricts any foreign company from holding 40% shares but IBM had 70%.THANK YOU !!