IGNOU : M.COM : IBO 4 : UNIT 7 : Q - 2. Explain various provisions related to regulation and management of foreign exchange.

 

Ans.  REGULATION AND MANAGEMENT OF FOREIGN EXCHANGE

You have learnt the objectives of exchange control and an overview of FEMA, 1999. The second chapter of FEMA Act, 1999 is very important for exporters and importers. It deals with various provisions related to regulation and management of foreign exchange. Let us learn them in detail,

1. Dealing in foreign exchange, etc. : Save as otherwise provided in this Act, rules or regulations made there under, or with the general or special permission of the Reserve Bank, no person shall:

(a) deal in or transfer any foreign exchange or foreign security to any person not being an authorized person;

(b) make any payment to or for the credit of any person resident outside India in any manner;

(c) receive otherwise through an authorized person, any payment by order or on behalf of any person resident outside India ill any manner;

(d) enter into any financial transaction in India as consideration for or in 'association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person.

2. Holding of foreign exchange, etc. : Save as otherwise provided in this Act, no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.

3. Current account transactions : Any person may sell or draw foreign exchange to or from an authorized person if such sale or draw is a current account transaction; provided that the Central Government may, in public interest and in consultation with , the Reserve Bank, impose such reasonable restrictions for current account transactions as may be prescribed.

4. Capital account transactions : The provisions for capital account transactions include:

i) subject to the provisions of sub- section, any person may sell or draw foreign exchange to or from an authorized person for a capital account transaction.

ii) The Reserve Bank may, in consultation with the Central Government, specify-

(a) any class or classes of capital account transactions which are permissible

(b) the limit up to which foreign exchange shall be admissible for such transactions: provided that the Reserve Bank shall not impose any restriction on the draw of foreign exchange for payments due on account of amortization of loans or for depreciation on direct investments in the ordinary course of business.

iii) Without prejudice to the generality of the provisions of sub- section, the Reserve Bank may, by regulations, prohibit, restrict or regulate the following:

(a) transfer or issue of any foreign security by a person resident in India;

(b) transfer or issue of any security by a person resident outside India;

(c) transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India;

(d) any borrowing or lending in foreign exchange in whatever form or by whatever name called;

(e) any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India;

(f) deposits between persons resident in India and persons resident outside India;

(g) export, import or holding of currency or currency notes;

(h) transfer of immovable property outside India, other than a lease not exceeding five years, by a person resident in India;

(i) acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a person resident outside India;

(j) giving of a guarantee or surety in respect of any debt, obligation or other liability incurred by a person resident in India and owed to a person resident outside India or by a person resident outside India.