Investment law

The Foreign Exchange Management Act (i.e FEMA), is an Act of the Parliament of India with an aim to consolidate and amend the law relating to exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.

This particular Act was passed during winters of 1999, replacing the Foreign Exchange Regulation Act (i.e FERA). It extends to the whole of India, replacing FERA which had become incompatible with the pro-liberalization policies of the Government of India. It enabled a new foreign exchange management regime consistent with the emerging framework of the World Trade Organisation (i.e WTO).

It also paved the way for the introduction of the Prevention of Money Laundering Act, 2002 which came into effect from July 1, 2005.

Unlike other laws where - 'everything is permitted unless specifically prohibited' under FERA (1973), here in FEMA "Everything Is Prohibited Unless Specifically Permitted".

FEMA acts as a regulatory mechanism that enables the Reserve Bank of India (i.e. RBI) to pass regulations and the Central Government to pass rules relating to foreign exchange in tune with the Foreign Trade policy of India.


Hope It Resolves All Your Doubts


Regards
Kevin M. Paul