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CHAPTER 1 – LAW RELATING FOREIGN EXCHANGE MANAGEMENT

REGULATORY FRAMEWORK

Foreign Exchange Management Act, 1999 (FEMA)

The Foreign Exchange Management Act, 1999 enacted to consolidate and amend the law

relating to foreign exchange with the objective of facilitating external trade and payments

and for promoting the orderly development and maintenance of foreign exchange market

in India. In fact, it is the central legislation that deals with inbound investments into

India and outbound investments from India and trade and business between India and the

other countries.

IMPORTANT DEFINITIONS

AUTHORISED PERSON
The term ‘authorised person’ is defined to include an authorised dealer, money changer, offshore
banking unit or any other person for the time being authorised to deal in foreign exchange or
foreign securities.

EXPORT
‘Export’ means
a. the taking out of India to a place outside India any goods
b. provision of services from India to any person outside India.

FOREIGN EXCHANGE
The term ‘foreign exchange’ has been defined to mean foreign currency and includes deposits,
credits, balance payable in foreign currency, drafts, travelers cheques, letters of credit, bills of
exchange expressed or drawn in Indian currency but payable in any foreign currency. Any draft,
travelers cheque, letters of credit or bills of exchange drawn by banks, institutions or persons

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outside India but payable in Indian currency has also been included in the definition of foreign
exchange.

FOREIGN SECURITY
The term ‘foreign security’ has been defined to mean any security, in the form of shares,
stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency
and includes securities expressed in foreign currency but where redemption or any form of
return such as interest or dividend is payable in Indian currency.

PERSON
The definition of the term ‘person’ includes, an individual, a Hindu Undivided Family, a company,
a firm, an association of persons or body of individuals whether incorporated or not; any agency,
office or branch owned or controlled by such persons.

PERSON RESIDENT IN INDIA

The expression ‘person resident in India’ has been defined to mean –
A person residing in India for more than 182 days during the course of the preceding
financial year.

REPATRIATE TO INDIA
‘Repatriate to India’ means bringing into India the realised foreign exchange and
a. the selling of such foreign exchange to an authorised person in India in exchange for rupees,
or
b. the holding of realised amount in an account with an authorised person in India to the extent
notified by the Reserve Bank, and includes use of the realised amount for discharge of a debt
or liability denominated in foreign exchange and the expression “repatriation” shall be construed
accordingly.

SPECIAL DIRECTOR (APPEALS)

‘Special Director (Appeals)’ means an officer appointed under section 17. Section 17 empowers
Central Government which shall, by notification, appoint one or more Special Directors (Appeals)

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to hear appeals against the orders of the Adjudicating Authorities under this section and shall
also specify in the said notification the matter and places in relation to which the Special
Director (Appeals) may exercise jurisdiction.

CURRENT ACCOUNT TRANSACTIONS

The term current account transaction has been defined to mean a transaction other than a
capital account transaction and includes payments due in connection with foreign trade, other
current business, services and short term banking and credit facilities in the ordinary course of
business; payments due as interest on loan and as net income from investments; remittances
for living expenses of parents, spouse and children residing abroad and expenses in connection
with foreign travel, education and medical care of parents, spouse and children.

Current Account Transactions are payment towards-

a. Private visits to any country;
b. Gift or donation;
c. Going abroad for employment;
d. Emigration;
e. Maintenance of close relatives abroad;
f. Travel for business,
g. for meeting expenses for meeting medical expenses,
h. for accompanying as attendant to a patient going abroad for medical treatment,
i. Studies abroad;
j. Any other current account transaction which is not covered under the definition of current
account in FEMA 1999.

PROHIBITION ON DRAWAL OF FOREIGN EXCHANGE FOR CERTAIN TRANSACTIONS

Rule 3 prohibits the drawal of foreign exchange for the purposes of transactions specified in
the Schedule I or a travel to Nepal and/or Bhutan or a transaction with a person resident in
Nepal or Bhutan. Schedule I to the Rules enumerate the situations in which the drawal of
foreign exchange is prohibited. These are as follows:

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Remittance out of lottery winnings.

Remittance of income from racing/riding etc, or any other body

Remittance for purchase of lottery tickets, banned/prescribed magazine, football pools, sweep
stakes, etc.

Payment of commission on exports made towards equity investment in joint venture/wholly

owned subsidiaries abroad of Indian Companies.

Payment of commission on exports under Rupee State Credit Route, except commission upto
10% of invoice value of exports of tea and tobacco.

Payment related to ‘call back service’ of telephone.

Remittance of interest income on funds held in Non-resident Special Rupee Scheme Account.

PRIOR APPROVAL OF GOVERNMENT OF INDIA FOR CERTAIN TRANSACTIONS

Rule 4 requires prior approval of the Government of India for the transactions as specified in
Schedule II. However, this does not apply to the cases where the payment is made out of
funds held in Resident Foreign Currency Account (RFC) of the remitter.

PRIOR APPROVAL OF RESERVE BANK FOR CERTAIN TRANSACTION

Rule 5 of the Foreign Exchange Management (Current Account Transactions) Amendment
Rules, 2015, governs every drawal of foreign exchange for transactions included in Schedule III.

TRANSACTIONS INCLUDED IN SCHEDULE III

1. Facilities for individuals
Individuals can avail of foreign exchange facility for the following purposes within the limit of
USD 2,50,000 only. Any additional remittance in excess thereof requires prior approval of the
Reserve Bank of India.
i. Private visits to any country (except Nepal and Bhutan).
ii. Gift or donation.
iii. Going abroad for employment.
iv. Emigration.

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v. Maintenance of close relatives abroad.

vi. Travel for business,
vii. Expenses in connection with medical treatment abroad.
viii. Studies abroad.
ix. Any other current account transaction.

Furthermore, a person who is resident but not permanently resident in India and
a) is a citizen of a foreign State other than Pakistan; or
b) is a citizen of India, who is on deputation to the office or branch of a foreign company or
subsidiary or joint venture in India of such foreign company, may make remittance up to his
net salary.

Explanation: a person resident in India on account of his employment or deputation of a

specified duration or for a specific job or assignments, the duration of which does not exceed
three years.

2. Facilities for persons other than individual

The following remittances by persons other than individuals require prior approval of the Reserve
Bank of India.
i. Donations exceeding one per cent. of their foreign exchange earnings during the previous three
financial years or USD 5,000,000, whichever is less, for-
a. creation of Chairs in reputed educational institutes;
b. contribution to funds (not being an investment fund) promoted by educational institutes; and
c. contribution to a technical institution or body or association in the field of activity of the
donor Company.
ii. Commission, per transaction, to agents abroad for sale of residential flats or commercial plots
in India exceeding USD 25,000 or five percent of the inward remittance whichever is more.
iii. Remittances exceeding USD 10,000,000 per project for any consultancy services in respect of
infrastructure projects and USD 1,000,000 per project, for other consultancy services procured
from outside India.

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iv. Remittances exceeding five per cent of investment brought into India or USD 100,000 whichever
is higher, by an entity in India by way of reimbursement of pre-incorporation expenses.

LIBERALISED REMITTANCE SCHEME (LRS)

Liberalised Remittance Scheme (LRS) of USD 2, 50,000 for resident individuals. Under the
Liberalised Remittance Scheme, Authorised Dealers may freely allow remittances by resident
individuals up to USD 2, 50,000 per Financial Year (April-March) for any permitted current or
capital account transaction or a combination of both. The Scheme is not available to corporates,
partnership firms, HUF, Trusts, etc.

A. Private visits
For private visits abroad, other than to Nepal and Bhutan, any resident individual can obtain
foreign exchange up to an aggregate amount of USD 2,50,000 from an Authorised Dealer or
FFMC, in any one financial year, irrespective of the number of visits undertaken during the
year.

B. Gift/donation
Any resident individual may remit up-to USD 2,50,000 in one FY as gift to a person residing
outside India or as donation to an organization outside India.

C. Going abroad on employment

A person going abroad for employment can draw foreign exchange up to USD 2,50,000 per FY
from any Authorised Dealer in India.

D. Emigration
A person wanting to emigrate can draw foreign exchange from AD Category I bank and AD
Category II up to the amount prescribed by the country of emigration or USD 250,000.
Remittance of any amount of foreign exchange outside India in excess of this limit may be
allowed only towards meeting incidental expenses in the country of immigration and not for
earning points or credits to become eligible for immigration by way of overseas investments in
government bonds; land; commercial enterprise;

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E. Maintenance of relatives abroad

A resident individual can remit up-to USD 2,50,000 per FY towards maintenance of relative

F. Business trip
For business trips to foreign countries, resident individuals can avail of foreign exchange up to
USD 2,50,000 in a FY irrespective of the number of visits.

G. Medical treatment abroad

Authorised Dealers may release foreign exchange up to an amount of USD 2,50,000 or its
equivalent per FY without insisting on any estimate from a hospital/doctor. For amount
exceeding the above limit, Authorised Dealers may release foreign exchange under general
permission based on the estimate from the doctor in India or hospital/ doctor abroad. A person
who has fallen sick after proceeding abroad may also be released foreign exchange by an
Authorised Dealer for medical treatment outside India.
In addition to the above, an amount up to USD 250,000 per financial year is allowed to a
person for accompanying as attendant to a patient going abroad for medical treatment/check-
up.

H. Facilities available to students for pursuing their studies abroad.

AD Category I banks and AD Category II, may release foreign exchange up to USD 2,50,000 or
its equivalent to resident individuals for studies abroad without insisting on any estimate from
the foreign university. However, AD Category I bank and AD Category II may allow remittances
(without seeking prior approval of the Reserve Bank of India) exceeding USD 2,50,000 based
on the estimate received from the institution abroad. Further, a resident cannot gift to another
resident, in foreign currency, for the credit of the latter’s foreign currency account held abroad
under LRS.

The permissible capital account transactions by an individual under LRS are:

i. opening of foreign currency account abroad with a bank;

ii. acquisition of immovable property abroad, Overseas Direct Investment (ODI) and Overseas
Portfolio Investment (OPI),
iii. extending loans including loans in Indian Rupees to Non-resident Indians (NRIs) who are
relatives.

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CAPITAL ACCOUNT TRANSACTIONS

Capital account transaction’ has been defined to mean any transaction which alters the
assets or liabilities including contingent liabilities, outside India of persons resident in India
or assets or liabilities in India of person resident outside India.

PERMISSIBLE CAPITAL ACCOUNT TRANSACTIONS

Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000

classifies the capital account transactions of a person under the following two heads viz.:-

CLASSES OF CAPITAL ACCOUNT TRANSACTIONS

Classes of capital account transactions

of persons resident in India

Classes of capital account transactions

of persons resident outside India

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CLASSES OF CAPITAL ACCOUNT TRANSACTIONS BY PERSONS RESIDENT IN INDIA

a. Investment by a person resident in India in foreign securities.

b. Foreign currency loans raised in India and abroad by a person resident in India.

c. Transfer of immovable property outside India by a person reident in India

d. Guarntees issued by a person resident in India in favour of a person resident outside India

e. Export,import and holding of currency/currency notes.

f. Loans and overdrafts(borrowings) by a person resident in India from a person resident

outside India

g. Maintenence of foreign currency accounts in India and outside India by a person resident in
India

h. Taking out of insurance policy by a person resident in India from an insurance company
outside India

i. Loans and overdrafts by a person resident in India to a person resident outside India

j. Remittance outside India of capital assets of a person resident in India

k. Undertake derivative contracts

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CLASSES OF CAPITAL ACCOUNT TRANSACTIONS BY PERSONS RESIDENT OUTSIDE INDIA

a. Investment in India by a person resident outside India,

b. Acquisition and transfer of immovable property in India by a person resident outside India

c. Guarantee by a person resident outside India in favour of ,or on behalf of a person resident
outside India.

d. Import and export of currency/currency notes into / from India by a person resident outside
India

e. Foreign currency accounts in India of a person resident outside India.

f. Remittance outside India of capital asset in India of a person resident outside India

g. Undertake derivative contracts.

DUTY OF PERSONS TO REALISE FOREIGN EXCHANGE DUE

A person resident in India to whom any amount of foreign exchange is due or has accrued
shall, take all reasonable steps to realise and repatriate to India such foreign exchange, and
shall in no case do or refrain from doing anything, or take or refrain from taking any
action, which has the effect of securing –
a) that the receipt by him of the whole or part of that foreign exchange is delayed; or
b) that the foreign exchange ceases in whole or in part to be receivable by him.

Manner of Repatriation
On realisation of foreign exchange due, a person shall repatriate the same to India, namely
bring into, or receive in, India and –
a) sell it to an authorised person in India in exchange for rupees; or
b) retain or hold it in account with an authorised dealer in India; or

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c) use it for discharge of a debt or liability denominated in foreign exchange.

PERIOD FOR SURRENDER OF REALISED FOREIGN EXCHANGE

A person not being an individual resident in India shall sell the realised foreign exchange to an
authorised person, within the period specified below: -
i. foreign exchange due or accrued as remuneration for services rendered, whether in or outside
India, or in settlement of any lawful obligation, or an income on assets held outside India, or
as inheritance, settlement or gift, within seven days from the date of its receipt;
ii. in all other cases within a period of ninety days from the date of its receipt.

PERIOD FOR SURRENDER IN CERTAIN CASES

1. Any person not being an individual resident in India who has acquired or purchased foreign
exchange for any purpose mentioned in the declaration made by him to an authorised person
does not use it for such purpose or for any other purpose for which purchase or acquisition of
foreign exchange is permissible under the provisions of the Act or the rules or regulations or
direction or order made thereunder, shall surrender such foreign exchange or the unused portion
thereof to an authorised person within a period of sixty days from the date of its acquisition
or purchase by him.
2. Where the foreign exchange acquired or purchased by any person not being an individual resident
in India from an authorised person is for the purpose of foreign travel, then, the unspent
balance of such foreign exchange shall, be surrendered to an authorised
person-
a) within ninety days from the date of return of the traveller to India, when the unspent foreign
exchange is in the form of currency notes and coins; and
b) within one hundred eighty days from the date of return of the traveller to India, when the
unspent foreign exchange is in the form of traveller’s cheques.

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PERIOD FOR SURRENDER OF RECEIVED/REALISED/UNSPENT/UNUSED FOREIGN EXCHANGE

BY RESIDENT INDIVIDUALS
A person being an individual resident in India shall surrender the received/ realised/ unspent/
unused foreign exchange whether in the form of currency notes, coins and traveller’s cheques,
etc. to an authorised person within a period of 180 days from the date of such receipt/
realisation/ purchase/ acquisition or date of his return to India, as the case may be.

EXEMPTION
The Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign
Exchange) Regulations, 2015 does not apply to foreign exchange in the form of currency of
Nepal or Bhutan.

REMITTANCE OF ASSETS

REMITTANCES BY INDIVIDUALS NOT BEING NRIS/ PIOS

‘Remittance of assets’ means remittance outside India of funds in a deposit with a bank/ firm/
company, provident fund balance or superannuation benefits, sale proceeds of shares, securities,
immovable property or any other asset held in India.
Authorised Dealer (AD) may allow remittance of assets by a foreign national where:
i. the person has retired from employment in India;
ii. the person has inherited from a person referred to in section 6(5) of the Act;
iii. the person is a non-resident widow/widower and has inherited assets from her/his deceased
spouse who was an Indian national resident in India;
The remittance should not exceed USD one million per financial year. This limit, however, will
not cover sale proceeds of assets held on repatriation basis.
iv. the remittance is in respect of balances held in a bank account by a foreign student who has
completed his/ her studies, provided such balance represents proceeds of remittances received
from abroad through normal banking channels or out of stipend/scholarship received from the
Government or any organisation in India.
These facilities are not available for citizens of Nepal or Bhutan or a PIO.

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REMITTANCES BY NRIS/ PIOS

‘Non-Resident Indian’ (NRI) means a person resident outside India who is a citizen of India.
A ‘Person of Indian Origin (PIO)’ is a person resident outside India who is a citizen of any
country other than Bangladesh or Pakistan satisfying the following conditions:
Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955;
or
a) Who belonged to a territory that became part of India after the 15th day of August, 1947; or
b) Who is a child or a grandchild or a great grandchild of a citizen of India
c) Who is a spouse of foreign origin of a citizen of India

ADs may allow NRIs/ PIOs, on submission of documentary evidence, to remit up to USD one
million, per financial year:
a. out of balances in their non-resident (ordinary) (NRO) accounts/ sale proceeds of assets/
assets acquired in India by way of inheritance/ legacy;
b. in respect of assets acquired under a deed of settlement made by either of his/ her parents or
a relative.
In case the remittance is made in more than one instalment, the remittance of all instalments
should be made through the same AD. Where the remittance is to be made from the balances
held in the NRO account, the Authorised Dealer should obtain an undertaking from the account
holder stating that the said remittance is sought to be made out of the remitter’s balances
held in the account arising from his/ her legitimate receivables in India and not by borrowing.

REMITTANCES BY COMPANIES/ ENTITIES

ADs may allow remittances by Indian companies under liquidation on directions issued by a
Court in India/ orders issued by official liquidator in case of voluntary winding up on submission
of:
a. Auditor’s certificate confirming that all liabilities in India have been either fully paid or
adequately provided for.
b. Auditor’s certificate to the effect that the winding up is in accordance with the provisions of
the Companies Act.

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c. In case of winding up otherwise than by a court, an auditor’s certificate to the effect that
there are no legal proceedings pending in any court in India against the applicant or the
company under liquidation.

REMITTANCES/ WINDING UP PROCEEDS OF BRANCH/ OFFICE

ADs may permit remittance of assets on closure or remittance of winding up proceeds of
branch office/ liaison office (other than project office) on submission of the following
documents:
i. A copy of the Reserve Bank’s permission for establishing the branch/ office in India.
ii. Auditor’s certificate:
a. indicating the manner in which the remittable amount has been arrived;
b. confirming that all liabilities in India including arrears of gratuity and other benefits to the
employees etc., of the branch/ office have been either fully met or adequately provided for;
c. confirming that no income accruing from sources outside India (including proceeds of exports)
has remained un-repatriated to India;
d. confirming that the branch/office has complied with all regulatory requirements
iii. a confirmation from the applicant that no legal proceedings are pending in any Court in India
and there is no legal impediment to the remittance; and
iv. a report from the Registrar of Companies regarding compliance with the provisions of the
Companies Act, 2013, in case of winding up of the office in India.

REMITTANCE OF ASSETS REQUIRING RBI APPROVAL

Prior approval of the Reserve Bank is necessary for remittance of assets where:
(a) Remittance is in excess of USD 1,000,000 (US Dollar One million only) per financial year.
(b) Hardship will be caused to a person if remittance from India is not made to such a person.
Remittance of funds from the sale of assets in India held by a person, whether resident in or
outside India, not covered under the directions stipulated above will require approval of the
Reserve Bank.

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POSSESSION AND RETENTION OF FOREIGN CURRENCY OR FOREIGN COINS

Under Regulation 3 the Reserve Bank has specified following limits for possession or retention
of foreign currency or foreign coins, namely:
i. possession without limit of foreign currency and coins by an authorised person within the
scope of his authority;
ii. possession without limit of foreign coins by any person;
iii. retention by a person resident in India of foreign currency notes, bank notes and foreign
currency traveller’s cheques not exceeding US $ 2000 or its equivalent in aggregate.
Regulation 4 deals with possession of foreign exchange by a person resident in India but not
permanently resident therein and provides that a person resident in India but not permanently
resident therein may possess without limit foreign currency in the form of currency notes, bank
notes and traveller’s cheques, if such foreign currency was acquired, held or owned by him
when he was resident outside India and, has been brought into India in accordance with the
law for the time being in force.

ACQUISITION OR TRANSFER OF IMMOVABLE PROPERTY IN INDIA

➢ An NRI or an OCI can acquire by way of purchase any immovable property (other than
agricultural land/ plantation property/ farm house) in India.
➢ An NRI or an OCI can acquire by way of gift any immovable property (other than
agricultural land/ plantation property/ farm house) in India from person resident in India
or from an NRI or an OCI who is a relative.
➢ An NRI or an OCI can acquire any immovable property in India by way of inheritance
from a person resident outside India who had acquired the property in accordance with
the provisions of the foreign exchange law
➢ An NRI or an OCI can acquire any immovable property in India by way of inheritance
from a person resident in India.
➢ An NRI or an OCI may transfer any immovable property in India to a person resident
in India.
➢ An NRI or an OCI may transfer any immovable property (other than agricultural land
or plantation property or farmhouse) to an NRI or an OCI.

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JOINT ACQUISITION BY THE SPOUSE OF AN NRI OR AN OCI

i. A person resident outside India, not being a Non-Resident Indian or an Overseas Citizen of
India, who is a spouse of a Non-Resident Indian or an Overseas Citizen of India may acquire
one immovable property (other than agricultural land/ farm house/ plantation property), jointly
with his/ her NRI/ OCI spouse.
ii. The marriage should have been registered and subsisted for a continuous period of not less
than two years immediately preceding the acquisition of such property.
iii. The non-resident spouse should not otherwise be prohibited from such acquisition.

ACQUISITION BY A LONG-TERM VISA HOLDER

A person being a citizen of Afghanistan, Bangladesh or Pakistan belonging to minority
communities in those countries viz., Hindus, Sikhs, Jains, Buddhists, Parsis and Christians, who
is residing in India and has been granted a Long-Term Visa (LTV) by the Central Government
may purchase only one residential immovable property in India as dwelling unit for self-
occupation and only one immovable property for self-employment.

AUTHORISED PERSON
1. Authorised Person include an authorised dealer, money charger, offshore banking unit or any
other person for the time being authorised to deal in foreign exchange or foreign securities.
2. An Authorised Dealer is any person specifically authorized by the Reserve Bank under Section
10(1) of FEMA, 1999, to deal in foreign exchange or foreign securities.
3. Normally, nationalised banks, leading non nationalized banks and foreign banks are appointed
as authorized persons.
4. Reserve Bank of India has been empowered to revoke the authorisation granted to any person
at any time in the public interest. It may also revoke the authorisation after giving an
opportunity, if the authorised person failed to comply with the conditions subject to which the
authorisation was granted or contravened any of the provisions of the Act, rules, notifications
or directions.

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5. An authorised person, before undertaking any transaction on behalf of any person shall, require
that person to make such declaration and give such information as will reasonably satisfy the
authorised person that the transaction will not involve or is not intended to violate or contravene
any provisions of the Act.
6. Any person, other than an authorised person who has acquired or purchased foreign exchange
for any purpose mentioned in the declaration made by him to the authorised person does not
use it for such purpose, or does not surrender it to authorised person
7. such person shall be deemed to have committed contravention of the provisions of the Act.

POWER OF THE RESERVE BANK TO ISSUE DIRECTIONS TO AUTHORISED PERSON

a. Section 11 of the Act empowers the RBI to issue directions to the authorised person in regard
to making of payment or doing or desist from doing any act relating to foreign exchange or
foreign security.
b. Reserve Bank has also been empowered to issue directions to the authorised persons to furnish
such information in such manner as it deems fit.
c. If any authorised person contravenes any direction given by the RBI or fails to file the return
as directed by RBI, he may be liable to a fine not exceeding Rs. 10,000/- and in the case of
continuing contravention, with an additional penalty which may extend to Rs. 2,000 for every
day during which such contravention continues.

ADJUDICATION AND APPEAL

APPOINTMENT OF ADJUDICATING AUTHORITY

a. Section 16 empowers the Central Government to appoint by notification in the Official Gazette
as many Adjudicating Authorities as it may think fit for holding enquiries;
b. The Adjudicating Authority has been empowered to hold any enquiry on a complaint made in
writing by an officer authorised by a general or special order by the Central Government.
c. The Adjudicating Authority has discretion to demand from the persons against whom a
complaint is made a bond or guarantee for any such amount as he thinks fit, if he is of the
opinion that such persons likely to abscond or evade the payment of penalty, if imposed.

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APPEAL TO SPECIAL DIRECTOR (APPEALS)

a. Section 17 of the Act provides for appointment of one or more Special Directors (Appeals) to
hear appeals against the orders of the Adjudicating Authorities.
b. An appeal to the Special Director (Appeals) may be made against the orders of the Assistant
Director or Deputy Director of enforcement, acting as Adjudicating Authority.
c. The appeal against the order of Adjudicating Authority shall be made in the prescribed form
along with requisite fee, within forty five days from the date of the receipt of the order by
aggrieved person.
d. The Special Director (Appeals) has however, been empowered to entertain appeal after the
expiry of the said period of forty five days.

ESTABLISHMENT OF APPELLATE TRIBUNAL

Section 18 of the Act provides that the Appellate Tribunal constituted under Smugglers and
Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, shall be the Appellate
Tribunal for the purposes of this Act.

APPEAL TO APPELLATE TRIBUNAL

1. The Central Government or any person aggrieved by an order made by an Adjudicating Authority,
or the Special Director (Appeals), may prefer an appeal to the Appellate Tribunal:
2. Provided that any person appealing against the order of the Adjudicating Authority or the
Special Director (Appeals) levying any penalty, shall while filing the appeal, deposit the amount
of such penalty with such authority as may be notified by the Central Government:
3. Provided further that where in any particular case, the Appellate Tribunal is of the opinion that
the deposit of such penalty would cause undue hardship to such person, the Appellate Tribunal
may dispense with such deposit subject to such conditions as it may deem fit to impose so as
to safeguard the realisation of penalty.
4. Every appeal under sub-section (1) shall be filed within a period of forty-five days from
the date on which a copy of the order made by the Adjudicating Authority or the Special
Director (Appeals) is received by the aggrieved person.

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5. Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard,
pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order
appealed against.
6. The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with
by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal
finally within one hundred and eighty days from the date of receipt of the appeal:
7. Provided that where any appeal could not be disposed of within the said period of one hundred
and eighty days, the Appellate Tribunal shall record its reasons in writing for not disposing off
the appeal within the said period.

APPEAL TO HIGH COURT

a. A right to appeal to High Court lies with the appellant who is aggrieved by the decision of
the Tribunal. Such appeal must be filed within 60 days from the date of communication of
the decision or order of the Tribunal.
b. The appeal to the High Court can be made on any question of law arising out of such order.
c. A relaxation for a maximum period of sixty days for making an appeal may be granted by the
High Court, if it is satisfied that the appellant was prevented by sufficient cause from filing
the appeal within the specified period.

DIRECTORATE OF ENFORCEMENT
Section 36 of the Act empowers the Central Government to establish a Directorate of
Enforcement with a Director and other officers or class of Officers, for the purposes of the
enforcement of the Act. The Central Government has also been empowered to authorise
Director, Additional Director, Special Director or Deputy Director to appoint officers of
enforcement below the rank of Assistant Director of Enforcement to exercise the powers and
discharge the duties conferred or imposed on him under the Act.

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CONTRAVENTION AND PENALTIES

a. If any person contravenes any provision of this Act, he shall, upon adjudication, be
liable to a penalty up to thrice the sum involved in such contravention where such amount is
quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such
contravention is a continuing one, further penalty which may extend to five thousand rupees
for every day after the first day during which the contravention continues.
b. (1A) If any person is found to have acquired any foreign exchange, foreign security or immovable
property, situated outside India, he shall be liable to a penalty up to three times the sum
involved in such contravention and confiscation of the value equivalent, situated in India,
punishable with imprisonment for a term which may extend to five years and with fine.

COMPOUNDING OF CONTRAVENTIONS
The provisions of section 15 of Foreign Exchange Management Act, 1999 permit compounding
of contraventions and, as such it empowers the Reserve Bank to compound any contravention
as defined under section 13 of the FEMA, 1999 on an application made by the person committing
such contravention. Willful, malafide and fraudulent transactions are, however, viewed seriously,
which will not be compounded by the Reserve Bank.
Any person who contravenes any provision of the FEMA, 1999 can apply for compounding to
the Reserve Bank.

RESERVE BANK OF INDIA

Section 11 of the Foreign Exchange Management Act empowers the RBI to issue directions to
the authorised person in regard to making of payment or doing or desist from doing any act
relating to foreign exchange or foreign security. The Reserve Bank of India was established on
April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The
Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:
“to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary
stability in India and generally to operate the currency and credit system of the country to its
advantage; to have a modern monetary policy framework to meet the challenge of an
increasingly complex economy, to maintain price stability while keeping in mind the objective
of growth.”

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CENTRAL BOARD OF DIRECTOR

The Reserve Bank’s affairs are governed by a Central Board of Directors. The board is appointed
by the Government of India in keeping with the Reserve Bank of India Act. They are
appointed/nominated for a period of four years. Constitution of Central Board of Directors are
as under:
Official Directors: Full-time: Governor and not more than four Deputy Governors.
Non-Official Directors:
➢ Nominated by Government: ten Directors from various fields and two government
Official
➢ Others: four Directors - one each from four local boards.

ORGANISATION STRUCTURE

CENTRAL BOARD OF DIRECTORS

Governor

Deputy Governor

Executive Directors

Principal Chief General Managers

Chief General Managers

General Managers

Deputy General Managers

Asstt. General Managers

Managers

Asstt. Managers

Support Staff

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MAIN FUNCTIONS RESERVE BANK OF INDIA

The main Functions of Reserve Bank of India are as follows:
Monetary Authority:
➢ Formulates, implements and monitors the monetary policy.
➢ Objective: maintaining price stability while keeping in mind the objective of growth.

Regulator and Supervisor of the Financial System:

➢ Prescribes broad parameters of banking operations within which the country’s banking
and financial system functions.
➢ Objective: maintain public confidence in the system, protect depositors’ interest and
provide cost effective banking services to the public.

Manager of Foreign Exchange:

➢ Manages the Foreign Exchange Management Act, 1999.
➢ Objective: to facilitate external trade and payment and promote orderly development and
maintenance of foreign exchange market in India.

Issuer of Currency:
➢ Issues, exchanges and destroys currency notes as well as puts into circulation coins
minted by Government of India.
➢ Objective: to give the public adequate quantity of supplies of currency notes and coins
and in good quality.

Developmental Role:
➢ Performs a wide range of promotional functions to support national objectives.

Regulator and Supervisor of Payment and Settlement Systems:

➢ Introduces and upgrades safe and efficient modes of payment systems in the country
to meet the requirements of the public at large.
➢ Objective: maintain public confidence in payment and settlement system.

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Related Functions:
➢ Banker to the Government: performs merchant banking function for the central and the
state governments; also acts as their banker.
➢ Banker to banks: maintains banking accounts of all scheduled banks.

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