Context:

Recently, the government has notified amendments to Foreign Exchange Management rules and allowed NRIs 100% foreign direct investment (FDI) in Air India. The new rules is known as Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2020.

About:

• The Foreign Exchange Management Act, 1999 (FEMA) is to consolidate and amend the laws relating to foreign exchange.
• It aims to facilitate external trade and payments and for promoting the orderly development and maintenance of the foreign exchange market in India.

Features of FEMA

• FEMA empowers the Central Government to initiate activities, such as making payments to a person outside the country or receiving money for it. In addition to this, foreign exchange, as well as foreign securities transactions, are also restricted by FEMA. Transactions cannot be made without specific or general consent of FEMA from any foreign country to India which deals with foreign security or foreign exchange as well as payments made by such foreign countries.
• All transactions must be carried out by an individual who has been authorized to do so.
• The Central Government may restrict an authorized individual from carrying out foreign exchange transactions within the current account, based on the general interest of the public.
• Although the withdrawal or sale of foreign currency by an authorized person, FEMA law empowers the Reserve Bank of India to place a number of restrictions on the transactions of the capital account.