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 ”!!!