FAQs on FEMA

FEMA (Foreign Exchange Management Act) is a law in India that regulates and governs all the transactions related to foreign exchange. It was enacted in 1999 and replaced the earlier law FERA (Foreign Exchange Regulation Act).

 Foreign Exchange Management Act is the full name of the organization.

FERA (Foreign Exchange Regulation Act) was a law enacted in India in 1973 that regulated and controlled all the transactions related to foreign exchange. This act was replaced by FEMA in 1999.

FERA (Foreign Exchange Regulation Act) was a stricter law that aimed to control and regulate foreign exchange transactions in India. On the other hand, FEMA (Foreign Exchange Management Act) is a more liberal law that aims to regulate foreign exchange transactions but with more relaxed rules and regulations.

The Reserve Bank of India (RBI) is the central authority that governs the foreign exchange market in India.

The main objectives of FEMA are:

  • To promote the orderly development and maintenance of the foreign exchange market in India
  • To facilitate external trade and payment
  • To promote the orderly development and maintenance of the foreign exchange market in India
  • To prevent foreign exchange from being used for prohibited activities
  • To promote the efficient utilization of foreign exchange resources.

The features of FEMA 1999 are:

  • FEMA replaces FERA and provides a more liberalized framework for foreign exchange transactions in India
  • It allows for ease of doing business by making the regulations less stringent
  • It promotes cross-border trade and investment
  • It provides for penal provisions for contraventions of the act
  • It provides for a streamlined process of dispute resolution through an appellate mechanism.

The importance of FEMA can be summarized as follows:

  • It provides a more liberalized framework for foreign exchange transactions in India
  • It promotes cross-border trade and investment
  • It helps in maintaining order and stability in the foreign exchange market
  • It helps in preventing foreign exchange from being used for prohibited activities
  • It promotes efficient utilization of foreign exchange resources.