Foreign Exchange

Management

Rajat Dixit
 ForEx
● Foreign Exchange (forex or FX) is a global market for exchanging national currencies
with one another.
● Foreign exchange trading utilizes currency pairs, priced in terms of one versus other.
● Forwards and futures are another way to participate in the forex market.

Working of ForEx Market

Size of ForEx Market Spot Market

Forward
Trading in ForEx Market
Future
 Why to Regulate/ Manage ForEx

Hawala Transactions Round Tripping

Hawala Scandals Money Laundering

Government Revenue
Foreign Exchange Regulation in India

- Promote Foreign Reserves

FERA, 1947 - Conservative Approach
- Control ForEx Transaction
- Criminal Offence
- No Compounding Allowed
FERA, 1974
- Directorate of Enforcement
Foreign Exchange Management in India

FEMA, 1999 - Promote orderly development and

maintenance of ForEx Market
- Liberal Approach
- Management of ForEx Transaction
- Civil Offence
- Compounding Allowed
RBI FIPB

ED
 Foreign Exchange Management Act
Structure of ForEx Management Objective of ForEx Management

● Supreme Legislation
○ FEMA, 1999 (49 Sections- 7 Chapter)
● Delegated Legislation Facilitating Promoting
○ 5 Rules by Ministry (S. 46)
● Subordinate Legislation
- External Payment - Orderly Development
○ 23 Regulation by RBI (S. 47) - External Trade - Orderly Maintenance
● Circulars and Notification of RBI
Of Foreign Exchange Market
○ Master Circular in India
○ Common Circular
● FDI
● DIPP now DPIIT
● ED