Features of Foreign Exchange Management-What are the Features of Foreign Exchange Management-What are Foreign Exchange Management Features

Features of Foreign Exchange Management

It is more specifically a set of rules that lets the Reserve Bank of India and the Government of India make rules about foreign exchange that are in line with India’s plan for international trade. Not until 1973 did the Foreign Exchange Regulation Act (FERA) become a law. At midnight on December 31, 1973, the law goes into effect. FERA’s job is to keep an eye on international financial transactions involving foreign currency and securities. When FERA was passed, the country had a dangerously low amount of foreign currency on hand. Check out these features of foreign exchange management to enhance your knowledge.

In 1999, Congress passed the Foreign Exchange Management Act (FEMA) and put it into place. On December 29, 1999, it became law. In accordance with WTO rules, this new law was passed (WTO). Also made possible was the 2002 Money Laundering Prevention Act, which went into effect on July 1, 2005. Both the preliminary and final IAS exams could use this information.

Features of Foreign Exchange Management

The FEMA law gives the federal government the power to limit some financial transactions, like those with or through foreign people. Without the specific or general approval of FEMA, it is against the law to deal in foreign securities or foreign currencies or to send money to India from a country other than India. Read on to discover everything there is to know about features of foreign exchange management and to become a subject matter expert on it.

Require Forex Permissions

Foreign exchange and foreign security transactions, as well as payments to or receipts from foreign nationals, are strictly forbidden. The law explains in detail the situations in which you need permission from the Reserve Bank of India or the Government of India to buy or hold foreign currency.

This makes it clear how the law works. All transactions involving foreign currency must go through “Authorized Organizations.” These are the only businesses that are legally allowed to deal in foreign currency. Entities with licenses must follow all RBI rules in order to keep their licenses valid.

Capital Account Transactions

Lending and borrowing money, buying and selling stocks and bonds, buying and selling real estate, and other cross-border capital account activities can affect people’s overall financial situation.

Most current account outflows and inflows come from and go to travel, medical bills, remittances, tuition, and other personal expenses paid for in other countries. As long as the bank sets reasonable limits, all of the things you do with your checking account are free.

Civil Offenses that are Criminal

On the other hand, FEMA thinks that these same violations are civil, not criminal. When FEMA is in charge, arresting criminals is the last option. It made it possible to update the FX management system to match the changing rules of the WTO (WTO). It also made it possible to pass the Anti-Money Laundering Act.

Indian Citizens can Use it

The FEMA Act rules apply to anyone in India who fits the definition of “Resident.” FEMA protects the person from liability in foreign exchange transactions, even if the person is not an Indian citizen. But FEMA does not have any power over Indian citizens who live outside of India. For the purposes of this Act, a Resident is anyone who has lived in India for more than 182 days.

People have Full Freedom

As long as he follows the Foreign Exchange Management Act, a person who now lives in India but used to live in another country can own or transfer any foreign property or security that he got while living in that other country, as long as it is located outside of India.

Maintain Separate Forex Transactions

It makes a difference between capital account transactions and current account transactions when it comes to foreign exchange. When it comes to current account transactions, FEMA is in line with convertibility, and its provisions for gradual liberalization of capital account operations are a good thing. The Reserve Bank of India determines the types and limits of capital account transactions (RBI) (RBI).

Frequently Asked Questions

What Makes the Foreign Exchange Market Stand Out?

The way the forex market is set up is fluid and always changing. In these markets, the prices of currencies change every minute and hour. The markets for buying and selling currencies are always open. This allows dealers to conduct business whenever it is convenient for them.

What does the Foreign Exchange Regulation Act Try to Do?

The government made the Act to keep an eye on financial transactions that could affect the exchange rates of currencies and the flow of foreign currency into and out of the country.

What are the Main Parts of the Foreign Exchange Management Act 1999?

Current accounts can make free transactions as long as they follow RBI rules. A separate department is in charge of investigating potential violations of the Foreign Currency Management Act (FEMA).


FEMA is in charge of India’s investments and business projects. The FEMA is responsible for enforcing the RBI’s rules and regulations. The Foreign Exchange Management Act sets the rules for these services so that India’s foreign exchange can move freely. If an Indian citizen or permanent resident has a branch in another country, that branch is subject to FEMA.

One of FEMA’s main jobs is to make international trade and financial transactions easier by keeping currency exchange rules up to date and making them uniform. Its goal is to keep India’s foreign exchange market healthy in a safe way. Check out these features of foreign exchange management to enhance your knowledge. To broaden your perspectives on importance of foreign exchange management subject, read more.