Foreign Exchange Control in India - a Brief Understanding

A Brief Guide to Understanding How the Foreign Exchange Control Works

The Foreign Exchange Control in India is governed by the Foreign Exchange Management Act (FEMA). This guide explains what you need to know before you dip your toes into this sector.

What to Expect From Foreign Exchange Control in India?

In India, the regulations have been liberalised over the last few years. The purpose was to help facilitate the inflow and outflow of funds in the country. Changes are introduced on an ongoing basis from time to time. These changes are in line with the government’s policy on economic liberalisation.

However, there are some specific instances where you need approval from the regulatory authorities. The approval must be obtained prior to any foreign exchange remittances or transactions.

Who Governs the Foreign Exchange?

The Foreign Exchange Control in India is regulated by FEMA and the FEMA Act 1999 while the apex authority is the Reserve Bank of India (RBI). These governing bodies regulate the local laws and any key approvals must be done through them.

FEMA’s regulation covers everywhere in India and applies to certain offices, agencies, and branches outside India too. In this case, the branches and offices are usually run by an Indian resident. FEMA is responsible for overseeing every aspect of the foreign exchange sector. Therefore, FEMA has direct implications on payments and external trade.

If you’re a resident living outside India or a foreigner working in India, FEMA is important legislation. You must be compliant with the regulations outlined for the exchange control if you want to be involved.