When was the 'Foreign Exchange Management Act' came into force?

Question

Question

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UP Police SI (दरोगा) Official PYP (Held On: 20 Nov 2021 Shift 1)

Answer 1

The correct answer is June 2000.

Key Points

The Foreign Exchange Management Act (FEMA) was introduced in India as a replacement for the older Foreign Exchange Regulation Act (FERA).
FEMA officially came into force on June 1, 2000, marking a significant change in India's approach to foreign exchange management.
It was enacted to facilitate external trade, payments, and promote orderly development and maintenance of the foreign exchange market in India.
The Act applies to all branches, offices, and agencies outside India owned or controlled by an Indian resident, as well as Indian citizens residing abroad.
FEMA is administered by the Reserve Bank of India (RBI) and the central government to regulate foreign exchange transactions.

Additional Information

Key Terminology under FEMA:
- Capital Account Transactions: Transactions that alter the assets or liabilities outside India.
- Current Account Transactions: Transactions involving payments for goods, services, and short-term credits.
- Authorized Dealer: Entities authorized by the RBI to deal in foreign exchange.
- Foreign Exchange: All currency transactions involving foreign nations.
Difference between FERA and FEMA:
- FERA was a restrictive law, while FEMA is more liberal and promotes foreign trade.
- FERA's violation was considered a criminal offense, whereas FEMA treats violations as civil offenses.
Objectives of FEMA:
- To facilitate external trade and payments.
- To promote orderly development and maintenance of the foreign exchange market.
- To ensure the conservation and effective utilization of foreign exchange resources.
Penalties under FEMA:
- For violations, FEMA imposes fines up to thrice the sum involved in the contravention.
- In case of non-payment, further penalties may include imprisonment of up to six months.