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FOREIGN EXCHANGE MANAGEMENT ACT, 1999 (FEMA) 1. INTRODUCTION The Foreign Exchange Management Act, 1999 is a central legislation in India that regulates foreign exchange transactions, external trade, and payments outside India. This Act replaced the Foreign Exchange Regulation Act, 1973 (FERA). The main purpose of this change was to shift from a strict control-based system to a liberal and facilitative system. Under FEMA, the approach is not to criminalize violations but to regulate and impose civil penalties. The Reserve Bank of India (RBI) and the Central Government play an important role in its implementation. (A) OBJECTIVES, SCOPE AND COMMENCEMENT 1. OBJECTIVES OF FEMA, 1999 The main objectives of FEMA are: (i) To facilitate external trade and payments FEMA aims to make import and export transactions smooth and efficient without unnecessary restrictions. Example: An Indian company importing machinery from Japan can make payment through authorized banking channels und...