exchange controls in india
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Exchange Controls in IndiaExchange Controls in IndiaExchange controls include set of rules and regulationsExchange controls include set of rules and regulations
aimed at conserving foreign exchange resources of aaimed at conserving foreign exchange resources of acountry by regulating inflows and outflows, receipts andcountry by regulating inflows and outflows, receipts andpayments by regulating and rationing demand andpayments by regulating and rationing demand andutilisation of foreign exchange by residents of theutilisation of foreign exchange by residents of thecountry.country.
Exchange control supplements the efforts to maintainingExchange control supplements the efforts to maintainingexternal value of Rupeeexternal value of Rupee supplemental to Monetarysupplemental to Monetarypolicy and Fiscal policypolicy and Fiscal policy
OBJECTIVES :OBJECTIVES :--
Conservation of forex resourcesConservation of forex resources
Appropriate Allocation of limited forex resourcesAppropriate Allocation of limited forex resources
Regulating inflow outflowRegulating inflow outflow Forex ReservesForex Reserves
Regulating Foreign Investments in IndiaRegulating Foreign Investments in India
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Exchange Controls in IndiaExchange Controls in India
Introduced under D.I.R.Introduced under D.I.R. Sept. 1939 instance ofSept. 1939 instance ofBritish Govt. as a temporary measureBritish Govt. as a temporary measureExtended from time to time up to 1944Extended from time to time up to 1944
FERA, 1947FERA, 1947
Several Amendment to it in tune with PlannedSeveral Amendment to it in tune with Plannedeconomic development programmeeconomic development programme
FERA, 1973FERA, 1973 very stiff, draconian lawvery stiff, draconian law
B/P problems of IndiaB/P problems of India Oil shocksOil shocks -- DecliningDeclining
ReservesReserves IMF pressure on IndiaIMF pressure on India Asian CurrencyAsian CurrencyCrisisCrisis Chinese economic growthChinese economic growth Declining foreignDeclining foreigninvestment in India Reinvestment in India Re--look on FERAlook on FERA
Liberalisation of 1991Liberalisation of 1991--9292
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FEMA, 1999FEMA, 1999 New Act not to regulate but toNew Act not to regulate but to
manage foreign exchange resourcesmanage foreign exchange resourcesEffective from June 1, 2000Effective from June 1, 2000
3 Agencies3 Agencies GOI, RBI & ED.GOI, RBI & ED.
7 Chapters, 49 sections7 Chapters, 49 sections Notifications issued by GOINotifications issued by GOI
Notifications issued by RBINotifications issued by RBI
Authorised Dealers, Authorised MoneyAuthorised Dealers, Authorised MoneyChangersChangers Full Fledged MC; Restricted MCFull Fledged MC; Restricted MC
Transactions with Nepal and Bhutan in Rs.Transactions with Nepal and Bhutan in Rs.
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Exchange controlsExchange controls Methods of paymentsMethods of payments
Nepal and BhutanNepal and Bhutan
ACU countriesACU countries 7 countries7 countries20 permitted currencies20 permitted currencies
METHOD of SettlememtMETHOD of Settlememt-- all countries otherall countries other
than ACU countries, Nepal and Bhutanthan ACU countries, Nepal and Bhutan1.1. In Rs. by Dr. to an A/C of a bank situated inIn Rs. by Dr. to an A/C of a bank situated in
any country other than ACU member countryany country other than ACU member country
2.2. In any of the permitted 20 currenciesIn any of the permitted 20 currencies
Settlement through NOstro / Vostro A/Cs.Settlement through NOstro / Vostro A/Cs.
3. ACU3. ACU In AMU upto 1995, in ACU $ A/C ofIn AMU upto 1995, in ACU $ A/C ofmember country bankmember country bank
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Exchange ControlsExchange Controls -- OperationalOperationalDealing/trading in forexDealing/trading in forex not permitted other than bynot permitted other than by
ADS / AMCsADS / AMCsReceipt and payment in forexReceipt and payment in forex only through and ADonly through and ADor MCor MC
Import og forex into IndiaImport og forex into India No limitNo limit -- CurrencyCurrency
declaration form for Notes exceeding 5000 TC 10000declaration form for Notes exceeding 5000 TC 10000Retention / Surrender of forexRetention / Surrender of forex 7 days grace period7 days grace period
Travel allowance retain 60 days (forex for nonTravel allowance retain 60 days (forex for non travel,travel,
90 fays travel forex in notes, 180 days travel in TC)90 fays travel forex in notes, 180 days travel in TC)Retention up to $ 2000/Retention up to $ 2000/--
Export / Import of Rs. in personExport / Import of Rs. in person Rs. 5000/Rs. 5000/-- Nil asNil asconsignment / postal channelconsignment / postal channel
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Exchange ControlsExchange Controls -- 66Opening of Bank Accounts by Non Residents:Opening of Bank Accounts by Non Residents:
Non Resident Rs. Account by NRIs, FNIO, OCBsNon Resident Rs. Account by NRIs, FNIO, OCBsNon Resident Vostro A/C by foreign banksNon Resident Vostro A/C by foreign banks
NonNon--Resident (External) Rs. A/CResident (External) Rs. A/C
FCNRFCNR B A/CB A/CForex Accounts by residents :Forex Accounts by residents : --
RFC A/CRFC A/C Returning NRIsReturning NRIs
RFC (Domestic) A/CRFC (Domestic) A/C professionalsprofessionals
Exchange Earners Forex A/CExchange Earners Forex A/C 19941994-- exporters 50%exporters 50% --100%100% -- 4 currencies4 currencies
Diamond Dollar A/CDiamond Dollar A/C Diamond traders/exportersDiamond traders/exporters
Shipping / Airlines Forex A/CShipping / Airlines Forex A/C NR companyNR company
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Exchange ControlsExchange Controls --
Exchange controls over ExportsExchange controls over Exports ::--
All exports subject to declaration on EX FormAll exports subject to declaration on EX Form
GR Form :GR Form :-- DuplicateDuplicate
PP Form:PP Form:-- DuplicateDuplicate
SDF Form :SDF Form :-- Duplicate (Statutory declaration FormDuplicate (Statutory declaration Form substitute of GR Form )substitute of GR Form )
SOFTEX Form :SOFTEX Form :-- TriplicateTriplicate
Exempted Exports ;Exempted Exports ;--
Gift Exports up to Rs.500,000/Gift Exports up to Rs.500,000/--, Bona fide trade, Bona fide tradesamples & publicity material, others up to $25,000/samples & publicity material, others up to $25,000/--
Realisation within 6 monthsRealisation within 6 months
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Exchange ControlsExchange Controls -- ImportsImportsImports control and PaymentsImports control and Payments
Import Controls by Director General for Foreign TradeImport Controls by Director General for Foreign TradeForeign Trade (Development and Regulation) Act,Foreign Trade (Development and Regulation) Act,19921992 EXIM PolicyEXIM Policy
Customs Act, 1962Customs Act, 1962
Free importsFree imports Negative ListNegative ListLicence for negative listLicence for negative list
Two copies of Import LicenceTwo copies of Import Licence Customs Copy andCustoms Copy andExchange Control copyExchange Control copy
Evidence for ImportsEvidence for Imports Exchange control copy of BillExchange control copy of Billof Entryof Entry -- Payments within 6 monthsPayments within 6 months
Normal interest up to 3 yrs. delayed paymentsNormal interest up to 3 yrs. delayed payments
Advance paymentsAdvance payments
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Exchange ControlsExchange Controls Fogn. CapitalFogn. CapitalFDIFDI
Prior to July 1991Prior to July 1991 allowed only as FDI and asallowed only as FDI and ascollaborator investor not as financial investorcollaborator investor not as financial investor
Approval by FIPB, SIA, GOI then by RBIApproval by FIPB, SIA, GOI then by RBI generallygenerallyup to 40% of Issued capitalup to 40% of Issued capital
New liberalised Industrial policy on July 24, 1991New liberalised Industrial policy on July 24, 1991 Automatic approval route of RBI up to 51% in theAutomatic approval route of RBI up to 51% in thelisted (Annexure III list)listed (Annexure III list)
List expanded from time to timeList expanded from time to time
Limit enhanced from time to timeLimit enhanced from time to time up to 74% inup to 74% incertain industriescertain industries
Liberalisation of March 2000, up to 100% foreignLiberalisation of March 2000, up to 100% foreignequityequity
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Exchange ControlsExchange Controls Fgn. CapitalFgn. CapitalPortfolio InvestmentsPortfolio Investments
Policy for FIIs portfolio investmentPolicy for FIIs portfolio investment Sept. 1992Sept. 1992
Pension Funds, Mutual Funds, Asset ManagementPension Funds, Mutual Funds, Asset Managementcompanies, Investment Trusts, Nominee companies,companies, Investment Trusts, Nominee companies,
Corporate Institutional portfolio ManagersCorporate Institutional portfolio Managers investment in primary and secondary marketsinvestment in primary and secondary marketssecuritiessecurities
Registration with SEBIRegistration with SEBI Blanket permission from RBIBlanket permission from RBI
FC A/C with designated bankFC A/C with designated bank
Special NR Rupee A/CSpecial NR Rupee A/C
Single/Group invest. 10% overall ceiling of 24% ofSingle/Group invest. 10% overall ceiling of 24% of
issued and paid capital of any one companyissued and paid capital of any one company
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Exchange ControlsExchange Controls -- NRI Invest.NRI Invest.
NonNon--Resident Indian nationals, NonResident Indian nationals, Non-- ResidentsResidentsforeigners of Indian origin, OCBsforeigners of Indian origin, OCBs
NonNon--Resident nonResident non--repatriation schemerepatriation scheme 100% in100% inshares and convertible debentures, debt securitiesshares and convertible debentures, debt securitiesunits etc. Proprietary concern, partnership (not OCGs)units etc. Proprietary concern, partnership (not OCGs)
Portfolio Investment schemePortfolio Investment scheme 10% and 24% limits10% and 24% limits Over and above investments by FIISOver and above investments by FIIS