Regulative Policy_fema.pptx

IDENTIFY ONE REGULATIVE POLICY IN INDIA AND DISCUSS ABOUT THE CONCEPT AND IMPLICATIONS, OUTPUT AND OUTCOME OF THE POLICY

Introduction : Why Regulative Policy? •India being a democratic country, the main objective of govt. is to reduce the concentration of the wealth in the few hands. •So to prevent these things Govt. has enacted special legislation within which a business should operate. • It is essential for the business houses to understand the legal environment & work accordingly. •Govt. makes law for the smooth functioning of the business & to safeguard the interest of consumers, workers. •These legislation effect the business form starting to the winding up of business .

Some important enactment to regulate the industry in India are: 1) 2) 3) 4) 5) 6) 7)

The industrial development & Regulation Act, 1952. The companies Act, 1956. The Indian Patent Act, 1970. MRTP Act, 1969. The Foreign Exchange Regulation Act, 1973. The Consumer Protection act, 1986. The Security & Exchange Board Of India (SEBI), 1992.

WHAT IS FOREIGN EXCHANGE?? •Foreign

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exchange includes the transfer of credits to settle debts or accounts between residents of the home country and those of the foreign country •These include Instruments, such as paper currency, notes, checks, foreign bills. These also include gold and IMF (international monetary fund) reserves. •This foreign currency deposits and bonds held by central bank and monetary authorities.

FOREIGN EXCHANGE REGULATION ACT, 1973 •The

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Foreign Exchange Regulation Act was enacted in 1973 and it came into force on January 1, 1974. •The FERA had emerged as an important piece of legislation to exercise strict control over the working of multinational companies, foreign collaborations, joint venture arrangements, technology etc. • Several amendments had been done in FERA and finally it became popular only after the amendment 1973.

OBJECTIVES To

OF

FERA

conservate foreign exchange resources. To regulate dealings in foreign exchange and securities. To regulate foreign investment. To regulate the appointment of foreign nationals. 6

FOREIGN EXCHANGE MANAGEMENT ACT, 1999 The FERA was formed to serve the needs of a closed economy having very limited and selective interaction with other countries of the world.  After the liberalisation and globalisation of Indian Economy, the FERA was not fulfilling the needs of the newly emerged economic environment both within the country as well as at the international level.  Consequently, the government of India decided to abolish the existing FERA provisions with a new legislation known as the Foreign Exchange Management Act. 

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FEMA bill was introduced in august 1998 & adopted in 1999. it is applicable to whole of India. The Foreign Exchange Management Act (FEMA) is a 1999 Indian Law to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India"

Main objectives 1) To amend the restrictive law relating to foreign exchange 2) To manage current account & capital account transaction 3) To facilitate external trade by Indian 4) To ensure free flow of capital 5) To develop & expand foreign exchange market in India 6) To redress dispute related to foreign exchange transaction 7) To provide suitable economic environment for globalization

MAIN FEATURES 

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Activities such as payments made to any person outside India or receipts from them, along with the deals in foreign exchange and foreign security is restricted. It is FEMA that gives the central government the power to impose the restrictions. - Restrictions are imposed on people living in India who carry out transactions in foreign exchange, foreign security or who own or hold immovable property abroad. - Without general or specific permission of the MA restricts the transactions involving foreign exchange or foreign security and payments from outside the country to India – the transactions should be made only through an authorised person. - Deals in foreign exchange under the current account by an authorised person can be restricted by the Central Government, based on public interest. - Although selling or drawing of foreign exchange is done through an authorised person, the RBI is empowered by this Act to subject the capital account transactions to a number of restrictions. - Exporters are needed to furnish their export details to RBI. To ensure that the transactions are carried out properly, RBI may ask the exporters to comply to its necessary requirements.

Main provision of FEMA

Definition of Resident - Section 2(5) Residing in India for more than 182 days, Any person or body corporate registered in India, Any office in India owned by a person who is residing outside India, An office outside India owned by a person who is residing in India.

1)

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Provision relating to export of goods & services Section7(1) of the act says every exporter of the good has to : Furnish with RBI or with any other authority for the purpose, a declaration has to be given describing the full value of the goods to be exported. Furnish other information to the RBI which may be required for the purpose for ensuring the realization of export

4) Provision relating to current & capital account transactions : section 5 of the act says that person can sell or draw foreign exchange only through authorized person from the current account.

a) b) a) b)

Section 6 (1) of the act says that person can sell or draw foreign exchange only through authorized person from the capital account transaction where govt. may specify : Any class of the account transaction which is permitted The limit upto which the foreign exchange be admissible Section 6(3) of the act provide that RBI can impose strict regulations or prohibit any of the following transactions : Transfer or issue of foreign security by Indian resident Transfer or issue of foreign security by person resident outside India

c) Any borrowing or lending of foreign exchange d) Any borrowing or lending in Indian currency between Indian & foreigner e) Any export, import or holding of currency 5)

Repatriation person -"repatriate to India" means bringing into India the realized foreign exchange and –

(i) the selling of such foreign exchange to an authorized person in India in exchange for rupees, or (ii) the holding of realized amount in an account with an authorized person in India to the extent notified by the Reserve Bank, and includes use of the realized amount for discharge of a debt or liability denominated in foreign exchange;

6) Authorized person – Section 10-RBI is empowered to appoint any person in writing as authorized person to deal in foreign exchange, foreign securities, money changer. Also it is empowered to give directions to its authorized persons regarding the mode of performing his duties and inspect the business of the authorized person as well.

Provision regarding Contravention & penalties – Section 13 & Section 14Any person who contravene any of the provisions of the act shall be liable to pay penality up to thrice the sum involved in such contravention. If it is quantifiable, and up to Rs 2 lakh if the sum is not quantifiable.

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Provision relating to adjudication & appeals – Section 16

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Appeal to special director – Section 17

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Appeal to appellate tribunal – Section 18

Appeal to high court -Centre Government is empowered to appoint authorities for conducting enquiries under the act to impose penalties and prosecution. The authorities will give reasonable opportunity to the accused person of being heard before imposing any penalty and prosecution under the act.

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Directorate of enforcement – Section 6(A)

FERA

FEMA

1. It consists of 81 sections and was more complex 2. Terms like capital and current account transactions were not defined 3. Definition of Authorized Person was a narrow one 4. There was a big difference in the definition of “Resident”, under FERA, and Income Tax Act 5. Any offence under FERA was a criminal offence, punishable with a imprisonment 6. Aim of FERA is to prevent misuse of Foreign Trade. 7. It did not contain any provision on the right of accused person to take legal assistance

1. It consists of 49 sections and is simple than FERA 2. Terms like capital and current account transactions have been defined 3. Definition of Authorized Person has been widened to include banks, money changes etc. 4. The provisions of FEMA, are in consistent with Income Tax Act 5. Any offence under FEMA is a civil offence and punishable with some amount of money 6. The aim of FEMA is facilitating Trade. 7. It recognizes the right of accused person to take legal assistance

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