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Presented By:

S.Vignesh

First Year MBA

National Institute Of Technology

Karnataka

Surathkal

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Statutory Basis for Exchange Control

The Foreign Exchange Regulation Act, 1973(FERA 1973), as amended by the ForeignExchange Management (Amendment) Act,1999, forms the statutory basis for ExchangeControl in India.

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The Foreign Exchange Management Act (1999) orin short FEMA has been introduced as areplacement for earlier Foreign ExchangeRegulation Act (FERA). FEMA came into force on

the 1st day of June, 2000. FEMA consolidate 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

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Authorized Person:

Authorized under the Act to deal in foreign exchange Capital account transaction: Alters the assets or liability

Currency: Currency notes, Money order, cheque, drafts etc

Currency Notes: Coin and bank notes

Currency Account Transaction: Transactions other than capital account transactions

Indian Currency: Indian rupees

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Export: Goods and services from India to outside

Foreign Currency: Other than Indian currency

Foreign Exchange: Means foreign currency

Foreign Security: Security expressed in foreign currency

Import: Goods and services from outside to India

Security: Shares, Stock etc as defined in the Public Debt Act of

1994

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Repatriate to India: Realized foreign exchange to India

Service: Banking, Financing, insurance etc Transfer: Sale, Purchase, Exchange etc

Non-Resident Indian (NRI): Citizen of India residing outsideOverseas Corporate Body (OCB): A company, firm etc.. Owned at least 60% by NRIs

Person of Indian Origin (PIO): Citizen of country other then Bangladesh and Pakistan, if Any time held Indian passport or Either of his parents or grandparents was citizen of India The Person is spouse of an Indian citizen

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The FEMA, is applicable- To the whole of India.

Any Branch, office and agency, which is situated outsideIndia, but is owned or controlled by a person resident in

India. Broadly speaking FEMA, covers, three different

types of categories, and deals differently withthem. These categories are:

a) Personb) Person Resident In India

c) Person Resident Outside India

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For the purpose of provisions, a person shallinclude any of the following:

1. An individual

2. A Hindu Undivided family3. A company4. A Firm5. An association of persons or a body of individuals,

whether incorporated or not,6. Every artificial judicial person, not falling within any of

the preceding sub clauses, and7. Any agency, office or branch owned or controlled by

such person.

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1. A person who has been residing in India for more than182 days, in the last financial year. This means if aperson has to be assessed, as to whether he is personresident in India, for any offence committed in August2001, then he should be residing in India for more than

182 days during April 2000 to March 20012. Any person or body corporate registered or

incorporated in India, or

3. An office, branch or agency in India owned or

controlled by a person resident outside India, or4. An office, branch or agency outside India owned or

controlled by a person resident in India.

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Simply putting it, "a person resident outside India"

means "a person who is not resident in India"

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Prohibits dealings in foreign exchange exceptthrough an authorized person

Make any payment to or for the credit of anyperson resident outside India in any manner

Receive otherwise through an authorized person,any payment by order or on behalf of any personresident outside India in any manner

Enter into any financial transaction in India foracquisition or creation or transfer of a right toacquire, any asset outside India by any person

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SECTION 4 Restrains any person resident in India from acquiring,

holding, owning, possessing or transferring any foreignexchange, foreign security or any immovable propertysituated outside India except as specifically provided in the

Act. SECTION 5 deals with current account transaction Any person may sell or draw foreign exchange to or from an

authorized person if such sale or drawl is a current accounttransaction

SECTION 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 accounttransaction.

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Transactions having international financialimplications matters are regulated by ExchangeControl:a) Purchase and sale of and other dealings in foreign

exchange and maintenance of balances at foreign centers

b) Procedure for realization of proceeds of exports

c) Payments to non-residents or to their accounts in India

d) Transfer of securities between residents and non-residents and acquisition and holding of foreignsecurities

e) Foreign travel with exchange

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f) Export and import of currency, cheques, drafts, travelerscheques and other financial instruments, securities, etc.

g) Activities in India of branches of foreign firms and

companies and foreign nationalsh) Foreign direct investment and portfolio investment in

India including investment by non-resident Indiannationals/persons of Indian origin and corporate bodies

predominantly owned by such personsi) Appointment of non-residents and foreign nationals and

foreign companies as agents in India

j) Setting up of joint ventures/subsidiaries outside India by

Indian companiesk) Acquisition, holding and disposal of immovable property

in India by foreign nationals and foreign companies

l) Acquisition, holding and disposal of immovable propertyoutside India by Indian nationals resident in India.

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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 fullexport value.

SECTION 8 and 9- casts the responsibility on the persons resident in India

who have any amount of foreign exchange due or accruedin their favor to get same realized and repatriated to India

within the specific period and the manner specified byRBI.

SECTIONS 10 and 12 - deals with duties and liabilities of the Authorized persons

authorized dealer, money changer, off shore banking unitor any other person for the time being authorized to dealin foreign exchange or foreign securities.

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To comply with RBI directions

Not to engage in un authorized transactions

Ensure compliance of FEMA provisions

To produce books, accounts etc

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To deal in or transfer any foreign exchange

Receive payments by order

To open NRO, NRE, FCNR, NRNR, NRSR accounts

To sell or purchase foreign exchange for current

account transactions

To sell or purchase foreign exchange for permissible

capital account transactions

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Verifying the correctness of any statements,

information or particular

Obtaining information which such authorized

person has failed to furnish

Securing compliance with the provisions of Act

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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 inthe contravention may also be confiscated.

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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 tocivil imprisonment.

SECTION 15

Empowers the Directorate of Enforcement and Officersof the Reserve Bank of India as may be authorized bythe central Govt. in this behalf to compound theoffences.

SECTION 16 Empowers the central Govt. to appoint the as many

adjudicating authorities as it may think fit for holdingenquiries.

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SECTION 17 Empowers the central Govt. to appoint one or more

special Directors to hear the appeals against the ordersof the Adjudicating Authorities.

SECTION 18 Empowers the central Govt. to establish Appellate

Tribunal to hear appeals against the orders ofAdjudicating Authorities and special Director.

SECTION 19 It makes provisions as regards appeals to Appellate

Tribunal.

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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.

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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.

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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.

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SECTION 36 to 38 Directorate of Enforcement

enforcement of the provisions of the Foreign ExchangeManagement Act prevent leakage of foreign exchange Remittances of Indians abroad otherwise than through

normal banking channels, i.e. through compensatorypayments.

Acquisition of foreign currency illegally by person inIndia.

Non-repatriation of the proceeds of the exportedgoods.

Unauthorized maintenance of accounts in foreigncountries.

Siphoning off of foreign exchange against fictitious andbogus imports land by.

Illegal acquisition of foreign exchange through Hawala

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Electronic Corporation India Limited To tie up with international companies for local

manufacture of computers To increase the local content to a point of "self

sustenance". Tie up between ECIL and IBM Import of computers was carefully regulated, depending

on ECILs production capacity, and the entry of the localprivate sector was controlled.

The Implementation of FERA (in 1977) led to exitof IBM from India. Because FERA restricts any foreign company from

holding 40% shares but IBM had 70%.

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THANK U!!!!!!!!!!!!!!!!!