Foreign Currency In India
India has been a closed economy until the early 1990s. Possession and trade of foreign currency in India was tightly regulated because of the clutches of Foreign Exchange Regulation Act. In 1999, the Parliament of India repealed this draconian law and replaced it with the more humane Foreign Exchange Management Act. Today foreign exchange trade has potential to become on the the most popular ways to invest money.
Any handling of foreign exchange in India is to be done as per the regulations mentioned in the sections of Foreign Exchange Management Act. Non compliance with the sections of this Act are considered a civil wrong in India. Similarly the Reserve Bank of India is the main regulatory authority of trade in foreign exchange in India. The bank regularly issues guidelines in this regard. This new regulatory system is in compliance with the structure required by WTO.
Today the permission of Reserve Bank of India is required if any person wants to be involved in any transaction of foreign exchange or foreign security with a person who is not considered to be authorized to do so or in case if any Indian wants to pay money towards credit of any person who is not residing in India or in case a person wants to receive any payment from an unauthorized person, provided that the payer is not residing in India. Some other restrictions are also prescribed.
The Reserve Bank of India is authorized to specify the classes which define the permissible transactions from a capital account. The Reserve Bank is also authorized to define the limitations on foreign exchange that can be mobilized in these transactions. The bank is required to define these limits in consultation with the Central Government of India. Similarly it is possible for the people who are traveling back to home in India after a foreign tour, to have currency as much as 2000 USD in their possession. This may be in the form of currency notes and travelers checks. If you are in possession of more foreign currency, you have to deposit it in a special account called the Â"Resident Foreign Currency (Domestic) AccountÂ". Apart from this there are other accounts defined for keeping foreign currency in India. The main account for the people who earn foreign currency is the Â"Exchange Earner's Foreign Currency AccountÂ". The person who holds this account account can put all of his earnings in foreign exchange in this account. The account is to be maintained as per the guidelines set forward by the Reserve Bank of India. Foreign currency in India is still regulated very tightly but the government is taking more and more steps to loosen its control and let the currency flow with the market.
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