What is FEMA?

FEMA stands for Foreign Exchange Management act.

Key PointsForeign Exchange Management act:

• FEMA- ​Foreign Exchange Management Act
• In India, all transactions that included foreign exchange were regulated by Foreign Exchange Regulations Act (FERA),1973.
• But as the liberalization approached in India, FERA was replaced by a new Act called the Foreign Exchange Management Act (FEMA),1999. This Act applies to all agencies outside India, owned or controlled by a person resident in India.
• The objectives of FEMA are:
  • To facilitate external trade and payments; and
  • To promote the orderly development and maintenance of the foreign exchange market.
• An only authorized person is permitted to deal in foreign exchange or foreign security as per FEMA.
• An authorized person, under this Act, means authorized dealer, money changer, off-shore banking unit, or any other person for the time being authorized by Reserve Bank.
• Foreign exchange transactions are put into two categories as per FEMA - capital account and current account.