Professional Documents
Culture Documents
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Transactions Regulated by Exchange Control
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Transactions Regulated by Exchange Control
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Foreign Exchange Management Act, 1999
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Foreign Exchange Management Act, 1999 :
Provisions in Section 3
• Prohibits dealings in foreign exchange except through an
authorised person
• No person with permission of RBI can deal in or transfer
any foreign exchange or foreign securities
• Make any payment to or for the credit of any person
resident outside India in any manner
• Receive otherwise through an authorised person, any
payment by order or on behalf of any person resident
outside India in any manner
• Enter into any financial transaction in India for acquisition
or creation or transfer of a right to acquire, any asset outside
India by any person 5
• SECTION 4 - restrains any person resident in India
from acquiring, holding, owning, possessing or
transferring any foreign exchange, foreign security or
any immovable property situated outside India except
as specifically provided in the Act.
• SECTION 5 – current account transactions
Any person may sell or draw foreign exchange to or
from an authorised person if such sale or drawal is a
current account transaction
• SECTION 6 - deals with capital account transactions.
This section allows a person to draw or sell foreign
exchange from or to an authorised person for a capital
account transaction.
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• SECTION 7 - deals with export of goods and
services. Every exporter is required to furnish to
the RBI or any other authority, a declaration etc.
etc. regarding full export value.
• SECTION 8 and 9- casts the responsibility on the
persons resident in India who have any amount of
foreign exchange due or accured in their favour to
get same realised and repatriated to India within
the specific period and the manner specified by
RBI.
• SECTIONS 10 and 12 - deals with duties and
liabilities of the Authorized persons authorised
dealer, money changer, off shore banking unit or
any other person for the time being authorized to
deal in foreign exchange or foreign securities.
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• SECTIONS 13 and 15 - of the Act with
penalties and enforcement of the orders of
Adjudicating Authority
• SECTION 36 to 37 - pertains to the
establishment of Directorate of
Enforcement and the powers to investigate
the violation of any provisions of Act,
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Authorised Dealers in Foreign Exchange
Authorisations in the form of licences to deal in foreign exchange
are granted to banks which are well equipped to undertake foreign
exchange transactions in India.
Authorisations have also been granted to certain financial
institutions to undertake specific types of foreign exchange
transactions incidental to their main business.
Other Institutions
Export-Import Bank of India
Industrial Credit & Investment Corporation of India Ltd.
Industrial Development Bank of India
Industrial Finance Corporation of India
SBI Factors and Commercial Services Pvt. Ltd.
Small Industries Development Bank of India
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Authorised Co-operative/Commercial Banks
Authorisations have also been issued to certain State Co-
operative/Urban Co-operative banks
and Scheduled Commercial banks to open and maintain Ordinary
Non-Resident Rupee Accounts
(NRO Accounts) and Non-Resident (External) Rupee Accounts
(NRE Accounts), on behalf of non-resident individuals of Indian
nationality/origin
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Authorised Money-Changers
In order to provide facilities for encashment of foreign currency to
visitors from abroad, especially foreign tourists, Reserve Bank has
granted licences to certain established firms, hotels and other
organisations permitting them to deal in foreign currency notes,
coins and travellers cheques subject to directions issued to them
from time to time.
These firms and organisations who are generally known as'
authorised money-changers' fall into two categories, viz.
'Full-fledged money-changers'
purchase and sale transactions with the public and
'Restricted money-changers'
purchase foreign currency notes, coins and travellers cheques,
subject to the condition that all such collections are surrendered by
them in turn to an authorised dealer in foreign exchange/full-fledged
money-changer.
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Directorate of Enforcement
• enforcement of the provisions of the Foreign Exchange Management
Act
• prevent leakage of foreign exchange
1) Remittances of Indians abroad otherwise than through normal banking
channels, i.e. through compensatory payments.
2) Acquisition of foreign currency illegally by person in India.
3) Non-repatriation of the proceeds of the exported goods.
4) Unauthorised maintenance of accounts in foreign countries.
5) Under-invoicing of exports and over-invoicing of imports and any
other type of invoice manipulation.
6) Siphoning off of foreign exchange against fictitious and bogus
imports land by.
7) Illegal acquisition of foreign exchange through Hawala.
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Organisation of Exchange Control Department
• Powers conferred upon Reserve Bank by FERA 1973 and Central
Government
• Notifications issued under the Act are exercised by the Exchange
Control Department of Reserve Bank.
• The Department has its Central Office at Mumbai and Offices at
other centres in India
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Methods of Payment
• payment must be received through the
medium of an authorised dealer
• export proceeds - in the form of bank draft,
pay order, banker's cheque, personal
cheque, foreign currency notes, foreign
currency travellers' cheques, etc - handle
documents
• Payment made by Credit card – decleration
for receipt of foreign exchange
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Provisions under Exchange Control Act
• Protection against Transit Risks under f.o.b., c.&f., etc. Contracts
• Bid Bonds and Other Guarantees against Commodity Exports
• Foreign Currency Accounts
Reserve Bank may consider selectively applications from exporters
having good track record for opening foreign currency accounts with
banks abroad for crediting the proceeds of export shipments made
subject to certain terms and conditions
• Counter Trade
• involving adjustment of value of goods imported into India against
value of goods exported from India - through an Escrow Account
opened in India in U.S. dollar will be considered by the Reserve Bank
• Export of goods on lease, hire, etc.
through an authorised dealer, the office of the Reserve Bank
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Provisions under Exchange Control Act
• Participation in Trade Fairs Abroad
render proper account of the expenditure incurred for
the above purpose.
• opening temporary foreign currency account
abroad
the foreign exchange obtained by sale of goods sent
closed immediately after close of exhibition/ trade fair
balances therein is repatriated to India through normal
banking channel
Project Exports and Service Exports
on deferred payment terms
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Export Declaration Forms
The Foreign Exchange Regulation Rules, 1974 prescribe export
declaration forms called Exchange Control Declaration (GR) form,
hereafter referred to as GR form, PP
and VP/COD forms.
(a)Exchange Control Declaration Exports to all countries
(GR)Form made otherwise than by post
(b) PP Form Exports to all countries by parcel
post
(c) VP/COD Form Exports to all countries by parcel
post, under arrangements to realise
proceeds through postal channels
on 'value payable' or 'cash on
delivery' basis.
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Time limit for Realisation of Export
Proceeds
Amount representing the full export value of
goods exported must be realised by an
exporter on the due date for payment or within
six months from the date of shipment,
whichever is earlier.
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Disposal of Copies of Export Declaration Forms
At Port of Shipment
Step 2 Customs certifies the value declared by the exporter on both the
copies of the GR form
Step 3 return the duplicate copy of the form to the exporter and retain the
original for transmission to Reserve Bank
Step 5 After examination of the goods and certifying the quantity passed
for shipment on the duplicate copy, Customs will return it to the exporter
for submission to the authorised dealer for negotiation or collection19 of
export bills.
With the Authorised Bank
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Export Bills Register
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Write off of unrealised Export Bills
(i) In cases where the exporter has not been able to realise the
outstanding export dues despite his best efforts, he may approach the
authorised dealer, who had handled the relevant shipping documents,
with appropriate supporting documentary evidence with a request for
write off of the unrealised portion. Authorised dealers may accede to
such requests (the branch concerned should obtain the approval of its
controlling office) subject to the undernoted conditions:
(a) The relevant amount has remained outstanding for 360 days or more.
(b) The aggregate amount of write off allowed by the authorised dealer
(at all branches put together) during a calendar year should not exceed
10% of the total export proceeds realised by the exporter through the
concerned authorised dealer during the previous calendar year.
(c) The case is not the subject matter of any civil or criminal suit which
is pending.
(d) Satisfactory documentary evidence has been furnished in support of
the exporter having made all efforts to realise the dues but has been
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unsuccessful due to reasons beyond his control.
f) The exporter has not come to the adverse notice of the
Enforcement Directorate or the Central Bureau of Investigation or
such other law enforcement agency.
(g) The exporter has surrendered proportionate export incentives, if
any, availed in respect of the relative shipments.
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