Discuss Overall Scheme of Foreign Exchange Management Act, 1999.

Foreign Exchange Management Act, 1999 (FEMA) makes provisions for dealings in foreign exchange. Broadly, all Current Account Transactions are free. However, Central Government can impose reasonable restrictions by issuing rules (Section 3 FEMA). Capital Account Transactions are permitted to the extent specified by RBI by issuing Regulations. (Section 6 of FEMA) FEMA envisages that RBI shall have a controlling role in management of foreign exchange. Since RBI cannot directly handle foreign exchange transactions, it authorizes "Authorised Persons" to deal in foreign exchange. RBI has been empowered to issue directions to such "Authorised Persons" under Section 11. FEMA also makes provisions for enforcement, penalties, adjudication and appeal. The FEMA contains only basic legal framework. The practical aspects are covered in Rules made by Central Government and Regulations made by RBI. FDI Policy announced by Department for Promotion of Industry & Internal Trade, Ministry of Commerce and Industry is directly relevant to understanding the provisions of FEMA. Instructions/Guidelines etc. of Ministry of Finance and Securities and Exchange Board of India (SEBI) become relevant when (ECB) /ADR/GDR and capital market is involved.