FEMA Act Full Form
What is the full form of FEMA?
A law passed by Parliament called the Foreign Exchange Management Act of 1999 (FEMA) into effect. It came into effect on December 29, 1999. This new Act complies with the World Trade Organization's guidelines (WTO). The Prevention of Money Laundering Act, 2002, which went into effect on July 1, 2005, was also made possible by this. Both the Preliminary and Main IAS Exams would focus on this subject.
Pointers on FEMA for UPSC
What is FEMA?
It is a set of regulations that gives the Reserve Bank of India the authority to enact rules and gives the Indian government the ability to do the same, through India's foreign trade policy.
When was FERA passed? What does it mean?
The Foreign Exchange Regulation Act (FERA) was enacted into law in 1973. It started working on January 1st, 1974. To control financial transactions involving securities and foreign exchange, FERA was passed. When the nation's foreign exchange reserves were extremely low, FERA was implemented.
Here is a detailed explanation of the differences between the Foreign Exchange Regulation Act (FERA) and the Foreign Exchange Management Act (FEMA). From the perspective of the Indian Economy Syllabus, this subject is crucial. Unlike FEMA, which is an act to encourage orderly management of foreign exchange in India, FERA was enacted to regulate payments and foreign exchange in India.
The distinctions between FERA and FEMA described here can aid candidates for the UPSC Civil Service Exam in understanding the fundamentals and making accurate comparisons.
Main Features of the Foreign Exchange Management Act, 1999
It grants the Central Government the authority to control the flow of payments to and from a person who is located outside of the nation.
Without FEMA's consent, no financial transaction involving foreign securities or exchange may be made. Every transaction needs to go through "Authorised Persons."
The Government of India may forbid a designated person from engaging in foreign exchange transactions within the current account if it is in the best interests of the general public.
Enables RBI to impose restrictions on capital account transactions, even if they are made through an authorised person.
According to this law, Indian citizens living in India are permitted to engage in foreign exchange and security transactions as well as have the right to hold or own real estate abroad if the asset was purchased or acquired while the Indian citizen was based abroad or if they inherited it from a foreign citizen.
Structure of FEMA.
The Enforcement Directorate, or FEMA's "head office," which is run by the Director, is situated in New Delhi.
There are 5 zonal offices, each led by a Deputy Director, located in Delhi, Mumbai, Kolkata, Chennai, and Jalandhar.
Each of the five zones is further divided into five field units led by chief enforcement officers and seven sub-zonal offices run by assistant directors.
Candidates preparing for the UPSC 2022 exams from the standpoint of the main examination will find the aforementioned information useful.
Structure of FEMA
CATEGORY | CATEGORY I | CATEGORY II | CATEGORY III | FULL FLEDGED MONEY CHANGERS |
ENTITIES | 1.Commercial Banks 2.State Co-operative Banks 3.Urban Co-operative Banks | 1. Upgraded FFMC 2.Regional Rural Banks (RRB’s), others 3.Co-operative Banks | Pick financial institutions and other entities | 1.Department of Post 2.Other FFMC 3.Urban Co-operative Banks |
ACTIVITIES PERMITTED | All current and capital account transactions must follow RBI guidelines. | All FFMC-approved activities as well as specific transactions involving current accounts that are not trade-related. | Foreign exchange, transactions related. | Purchasing and selling foreign currency for both personal and professional trips abroad. |
Frequently Asked Questions (FAQs)
Foreign Exchange Management Act, or FEMA, is an official Act that amends and codifies laws governing foreign exchange in India. In order to replace the Foreign Exchange Regulation Act (FERA) of 1973, FEMA was passed by the Indian Parliament during the winter session of 1999. In order to oversee foreign trade and exchange transactions, the RBI proposed FEMA in 1999. On June 1st, 2000, the Foreign Exchange Management Act became law.
FEMA's primary goal was to aid in the facilitation of Indian payments and trade abroad. Additionally, it was intended to support the orderly growth and upkeep of India's foreign exchange market. It outlines the processes, dealings, and formalities for all currency exchanges in India.
FEMA is applicable to all of India as well as to organisations and offices abroad (which are owned or managed by an Indian Citizen). The Enforcement Directorate is the name of FEMA's headquarters, which is located in New Delhi.
When a violation is quantifiable, the adjudicator—an officer with the ED—can impose a fine that is three times the amount of the violation. The fine is set at Rs 2 lakh if the violation is not quantifiable. A further fine of Rs 5,000 per day of violation may be imposed in cases where the violation is ongoing.
FEMA gives the federal government the authority to impose limitations on actions like sending money to someone who resides abroad or receiving funds from them. In addition, FEMA has restrictions on foreign exchange and security transactions.
An act known as FERA was published to control payments and foreign exchange in India.
FEMA is a law that was implemented to support the country's forex market being managed in an orderly manner as well as to aid in international trade and payments.