An Introduction To The Reserve Bank Of India Foreign Exchange Department
Reserve Bank of India is the central bank of the Republic of India. In its role as the supreme monetary authority of the country, the Reserve Bank regulates all aspects of the flow of currency in India. Reserve Bank Of India Foreign Exchange Department is its department which is involved in handling of the affairs related to foreign exchange in India. Over all the role of Reserve Bank of India is somewhat the like that of 'The Fed' of United States.
The Foreign Exchange Department of the bank became a powerful entity in 2000, when the Foreign Exchange Management Act came in force. Earlier the main objective of the department was to conserve the foreign exchange reserves of India. Post 2000, the department took a more liberal outlook.
Its new role is to facilitate and promote external trade as well as payments. It is also in charge of the measures to develop a foreign exchange market in India.
The department witnessed phenomenal changes in the way it administers control over the foreign exchange after the introduction of the new law. There are new regulations to govern the transactions of different natures. The new regulations are designed to be more transparent. The entire concept of case by case approval has been eliminated for good.
Today the Foreign Exchange Department allows all the transactions except those which are explicitly prohibited. The contraband transactions include the eight transactions which the Government of India does not allow, eleven transactions which can not be conducted without the obtaining permission from the government, sixteen types of transactions where the government has set some limits and in order to bypass these limits, the departmental permission has to be obtained. This Department is entrusted with the duty to release the export proceeds in a timely manner. It is also duty bound to review the rules governing the way forex is handled and traded in India. This is done on a continuous basis and as per the recommendations put forward by exporters and other organizations involved in foreign exchange related trade. Similarly the Foreign Exchange Department is also required to collect data from foreign exchange dealers on a daily basis. This data shall be used to help in management of exchange rates. The rates may be revised every fortnight. It shall also be used to provide a quick overview of the country's balance of payments every month. Similarly the data shall be utilized for a quarterly analysis of the balance of payments. The Reserve Bank Of India Foreign Exchange Department is also entrusted with the duty of revision of related laws and procedures for the convenience of Non Resident Indians. This is also to be done on a regular basis.
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