Foreign Exchange Management - an overview of Current account Transactions. Santha Paul Asst. General Manager Reserve Bank Of India, Chennai. What is new in FEMA regime ? . Preamble itself is changed All current account transactions are free
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Asst. General Manager
Reserve Bank Of India, Chennai
Preamble itself is changed
All current account transactions are free
Capital account transactions are deregulated
Definition of NRI changed from purpose to residence
From Criminal law to Civil Law
Less punishment – No Imprisonment
Compounding powers to RBI
Less stringent & more business friendly
1991-Downward correction of exchange rate ( Devaluation)
1992- LERMS (Liberalised Exchange Rate Management System)
1993- Modified LERMS
1994 – Current Account Convertibility - declared
1997 – Capital Account Convertibility – debate started
2000 – FEMA 1999 replaced FERA 1973 w.e.f.1.6.2000 IMF loans repaid
2003 - Money Laundering Act, 1999 passed
- IMF designates India as Creditor under its Financial Transaction Plan (FTP)
2004 – Reserves exceed external debt
2006 – Capital Account Convertibility– further steps
Regulator: Reserve Bank of India
Regulation: Foreign Exchange Management Act, 1999
Tier - II
Authorised Dealers, Money changers
Buyers and sellers: exporters, importers, individuals,
Corporates, FIIs, Non-Residents, NRIs etc.
Ministry of Finance
Ministry of Commerce , DGFT
Directorate of Enforcement
Export Promotion Councils – FIEO
Export Inspection Units
RI & NRI
Current account transaction – All transactions undertaken by a resident that do not alter his assets or liabilities outside India are current account transactions.
affects cash position of an entity – Trade-related remittances & miscellaneous remittances fully convertible - fully delegated to ADs
Capital account transaction – affects asset & liability position of an entity - borrowing, lending & investment – FDI , FII, ECBs , NRI deposits , Overseas Investments – expanding convertibility
In terms of the Rules -Foreign Exchange Management (Current Account Transactions) Rules, 2000 (Annex I)- drawal of exchange for certain categories of transactions as listed in
Schedule I - expressly prohibited
Schedule II - permitted by the ADs if approval from the Ministry/Dept of GoI is secured
Schedule III- prior approval of the RBI required for remittance exceeding limits.
Cultural tours , Advertisement in foreign print media , Freight of vessel charted by a PSU , Payment for import by a Govt, dept. or PSU on c.i.f. basis, Multi modal transport operators making remittance to their agents abroad , hiring of transponders by TV channels , ISPs , Remittances under technical collaboration agreements etc.
Facility extended to all resident individuals
freely remit upto USD 200,000 per financial year for any permissible current or capital account transaction or a combination of both.
Not available for purposes specifically prohibited (Sch I) or GOI (Sch II) of FEMA(Current Account Transactions) Rules, 2000.
free to acquire and hold immovable property, shares or any other asset outside India without prior approval of RBIusing the scheme.
Free to open, hold and maintain foreign currency accounts with a bank outside India for remittances under the scheme without the prior approval of RBI.
Remittance cannot be made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan.
Not available for making remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as ‘non-co-operative Countries or Territories, from time to time (website site www.fatf-gafi.org).
No release of foreign exchange for any kind of travel to Nepal and Bhutan or for any transaction with persons resident in Nepal and Bhutan.
Travellers allowed to purchase/carry foreign currency notes/coins only up to USD 2000.
Balance amount in the form of traveller’scheque or banker’s draft.
The foreign exchange acquired has to be used within 180 days of purchase.
If not possible, to be surrendered to an AD within 180 days.
Can retain upto USD 2000 in currency notes/travellers cheque.
Foreign Exchange purchased for a specific purpose is not utilized for that purpose, it could be utilized for any other eligible purpose permitted under the relevant regulation.
PERSON OF INDIAN ORIGIN(PIO)
Non-Resident Indian (NRI):
is a person resident outside India who is a citizen of India or is a person of Indian origin .
(defined in Regulation 2 of FEMA Notification No.5 dated May 3, 2000)
Person of Indian Origin (PIO) :
(defined in Regulation 2 of FEMA)
is a citizen of any country other than Bangladesh or Pakistan, if
(a) he at any time held Indian passport; or
(b) he or either of his parents or any of his grand-parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 or
(c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b) above.
Master Circular No.4 on Remittance Facilities for Non-Resident Indians / Persons of Indian Origin / Foreign Nationals dated July 01, 2009
Notification FEMA 13/2000-RB dated 03/05/2000
Notification FEMA 21/2000-RB dated 03/05/2000
type: Savings, Current & Recurring, Fixed deposits
Type: Only Term Deposit
a few are as under;
A few such cases are as under;
ADs can allow reduction in value subject to the following conditions:
b. It does not relate to export of commodities subject to floor price stipulations
c. The exporter is not on the exporters’ caution list of Reserve Bank, and