Features of the Act:

    Chapter I deals with Short title, extent, application and commencement and definitions of various words.


    Application of the Law: 

    FEMA – the Foreign Exchange Management Act, 1999 is applicable to all parts of India.

    The act is also applicable to all branches, offices and agencies outside India owned or controlled by a person who is a resident of India and also to any contravention there-under committed outside India by any person to whom this Act applies.


    We shall study about this article further, in detail, in our next post.


    Keep reading!!

  • FDI


    Why FDI is sought?

    • Domestic capital is inadequate for purpose of economic growth;
    • Foreign capital is usually essential, during the period when the capital market is in the process of development;
    • Foreign capital generally brings it with other scarce productive factors like technical know-how, business expertise and knowledge.


    We shall study about this article further, in detail, in our next post.

    Keep reading!!

  • fdi

    Foreign direct investment (FDI)

    FDI is a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country.

    In India, under the FDI Scheme, investments can be made in shares, mandatorily & fully convertible debentures and mandatorily & fully convertible preference shares of an Indian company by non-residents through two routes:

    • Automatic Route: Under the Automatic Route, the foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for such investment.
    • Government Route: Under the Government Route, the foreign investor or the Indian company should obtain prior approval of the Government of India – (FIPB), (DEA), (MOF) or (DIPP), as the case may be.

    Did you know that – “Payments against import of capital goods into India, can also be converted into FDI”!!!

  • fema


    In the light of economic reforms and the liberalised scenario, Foreign Exchange Regulation Act (FERA) was replaced by a new Act called the Foreign Exchange Management Act (FEMA), 1999. The Act applies to all branches, offices and agencies outside India, owned or controlled by a person resident in India.


    FEMA emerged as an investor friendly legislation which is purely a civil legislation in the sense that its violation implies only payment of monetary penalties and fines. However, under it, a person will be liable to civil imprisonment only if he does not pay the prescribed fine within 90 days from the date of notice.

    Broadly, the objectives of FEMA are: (i) To facilitate external trade and payments; and (ii) To promote the orderly development and maintenance of foreign exchange market. The Act has assigned an important role to the Reserve Bank of India (RBI) in the administration of FEMA. The rules, regulations and norms pertaining to several sections of the Act are laid down by the Reserve Bank of India, in consultation with the Central Government.

    Did you know that – “Every year on the 1st of July, RBI publishes Master Circulars, which are a one-point reference of instructions on various subjects, all having a sunset clause of 1 year. These Master Circulars incorporate various aspects of FEMA and they are hosted on www.rbi.org.in ”!!!

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