What is Foreign Exchange Regulations?

November 20, 2021
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The Foreign Exchange Regulations were enacted in order to control the increased movement of funds into and out of India. The Reserve Bank of India (RBI) regulates foreign exchange regulations in India through the Foreign Exchange Management Act (FEMA). The Foreign Exchange Regulation Act of 1973 (FERA) was repealed in 1999, and the Foreign Exchange Management Act of 1999 took its place (FEMA). FEMA was passed by the Indian Parliament and came into effect on June 1, 2000. FEMA was introduced to fill all the drawbacks and loopholes of FERA. Hence FEMA Act added various significant reforms.

FEMA GUIDELINES

• If the selling or withdrawal is a current account transaction, anyone can sell foreign exchange to any authorised individual or dealer or withdraw foreign exchange from an authorised dealer or person.

• The Reserve Bank of India has the authority under FEMA to impose restrictions on transactions from the capital account, even if they are carried out by an authorised person.

• A former resident of India is allowed to hold shares, securities, and assets that he or she obtained while residing in India. It also allows an NRI to own property that he or she inherits from an Indian resident.

• Under FEMA, every exporter of goods and services should furnish to RBI the full particulars including the export value of goods and services exported, and ensure the realization and repartition of export proceeds within the time and manner as prescribed by RBI.

 

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