With the introduction of the Foreign Exchange Management Act 1999, (FEMA) with effect from June 1, 2000, the objective of the Exchange Control Department has shifted from conservation of foreign exchange to "facilitating external trade and payment and promoting the orderly development and maintenance of foreign exchange market in India".
The new Act has brought about structural changes in the exchange control administration. Regulations have been framed for dealing with various types of transactions. These regulations are transparent and have eliminated case-by-case approvals.
All current account transactions are free from restrictions except
8 transactions prohibited by the Government of India.
11 transactions which require prior permission of the Government of India and
16 transactions on which indicative limits are fixed by the Government and release of foreign exchange beyond those limits requires permission from the Reserve Bank. All Regional Offices of the Department have in turn been authorised to release exchange for such transactions.
For capital account transactions, the Reserve Bank regulations provide for general permissions/automatic routes for investments in India by non-residents, investments overseas by residents and borrowings abroad, etc.
The Department ensures timely realisation of export proceeds and reviews, on a continuous basis, the existing rules in the light of suggestions received from various trade bodies and exporters' fora.
The Department collects data relating to forex transactions from authorised dealers on a daily basis for exchange rate management and on a fortnightly basis for monthly quick estimates of balance of payments and quarterly balance of payments compilation.
The Department lays down policy guidelines for risk management relating to forex transactions in banks.
The Department is also entrusted with the responsibility of licensing banks/money changers to deal in foreign exchange and inspecting them.
There is a "Standing Consultative Committee on Exchange Control" consisting of representatives from various trade bodies and authorised dealers which meets twice a year and makes recommendations for policy formulation.
With a view of further improving facilities available to NRIs and removing irritants, the Department is also engaged, on an ongoing basis, in reviewing and simplifying the procedures and rules.
