Foreign exchange transactions in India have become more liberalized with the Foreign Exchange Management Act, 1999 (FEMA) which came into operation as of 1st June 2000. Foreign exchange dealers in India today have been given powers of making all types of remittances in foreign exchange subject to present rules. The previous requirements of seeking Reserve Bank of India permission has been eliminated for most transactions.I remember leaving India in 1970 when I was allowed to purchase only 8 dollars in foreign exchange for my travel abroad. Things have indeed changed today in India as far as foreign currency transactions are concerned.Here are some of the significant provisions from FEMA
APPLICATION FOR REMITTANCES IN FOREIGN CURRENCY
A person, firm or bank may apply to an Authorized Dealer for remittances in any foreign currency to a beneficiary abroad.Application should be made in FORM -A1, if the purpose of remittance is import of goods into India.For any other purpose in Form -A2The Authorized Dealer may sell the foreign Exchange applied for provided the purpose of the request is an approved one.
MODE OF PAYMENT OF RUPEES AGAINST SALE OF FOREIGN EXCHANGE
Transactions amounting to Rupees 20,000 or more should be made by cheque payments. Payment can also be accepted in the form of a Banker's cheque / Pay Order / Demand Draft. Receipt of Payment in cash in case of such sale of foreign Exchange or remittance in foreign Exchange is strictly prohibited.EXCEPTIONS: Indian Currency Notes•If the purpose of sale of foreign exchange is for travel abroad for business etc, cash may be received by Authorized Dealer from Applicant up to Rs. 50,000/- •Where the rupee equivalent for drawing foreign exchange exceeds Rs. 50,000 either for any single installment or for more than one installment for a single journey / visit, it should be paid by the traveler by means of a cross cheque / demand draft/ pay order.
TRAVELERS CHEQUE NEGOTIABLE ONLY IN INDIA
Rupee Travelers cheque cannot be cashed outside India, if they are issued solely for use within India. In such a case they cannot be taken or sent out of India.
RECONVERSION OF INDIAN CURRENCY
Foreign currency may be sold against Indian Rupees held by persons who are not resident of India but are passing through or leaving India after a visit, at the time of their departure from India.Foreign Currency Notes For this purpose, a Bank or encashment certificate issued by an Authorized Dealer, Exchange bureau or Authorized Money changer in form BCI, ECF OR ECR, is required to show that the rupee had been acquired by sale of foreign Exchange to an Authorized Dealer or money changer in India.Such a certificate is valid for such reconversion i.e. a period of three months is not over from the date of sale of the foreign currency by the traveler.
RATES OF EXCHANGE
Authorized dealers and their Exchange bureau may buy from and sell to public foreign currency notes and coins at rates of exchange determined by market conditions. Dealings in foreign currency notes and coins between authorized dealers and between authorized dealers and money changers would also be at rates determined by market conditions.Source: http://www.rbi.org.inSEE NEXT PAGE FOR QUESTIONS & ANSWERS ON FOREIGN EXCHANGE INDIA