INTRODUCTION
A statute enacted by the Government of India, the Foreign Exchange Management Act, encourages foreign exchange payments and trades across borders. The Foreign Exchange Management Act was introduced in 1999 (“FEMA”) as a replacement for the Foreign Exchange Regulation Act (“FERA”). FERA was enacted by the Indian Parliament in 1973 and became effective on January 1, 1974.
Currency imports and exports were subject to strict controls by FERA. Under FERA, nothing is permitted unless it is specifically permitted, unlike other laws that allow everything unless it is specifically prohibited. For these reasons, the Act’s tone and tenor were very harsh.
Violations of even the most trivial nature were punishable with imprisonment. The act presumptively presumed a person guilty even if he proved his innocence, unlike other laws that presume a person innocent unless proven guilty. Because of this, one should be very careful when dealing in foreign exchange and ensure compliance with all legal requirements.
Government officials realized eventually that FERA rules hindered economic growth. To replace FERA, the Government of India prepared the Foreign Exchange Management Bill (FEMA) keeping in mind the spirit of liberalization of the Indian economy. Finally, FERA was repealed by FEMA in 1999.
As part of the FEMA act, several economic reforms (major reforms) were introduced to close all the loopholes and drawbacks associated with FERA (Foreign Exchange Regulation Act). The FEMA was created to de-regulate and liberalize the Indian economy.
FEMA was instituted primarily to facilitate transactions regarding external trade and payments. Further, it was also formed to maintain and facilitate the development of the Indian forex market.
All foreign exchange transactions in India are governed by FEMA. Capital Account Transactions and Current Account Transactions are considered different types of foreign exchange transactions. A balance of payment is a record of whether goods, services, or assets have been traded between citizens of different countries. A capital account and a current account are the two main categories.
In this article, Team YLCC brings you the Top 50 Interview Questions on the Foreign Exchange Management Act, 1999. Read on!
TOP 50 INTERVIEW QUESTIONS
The job description posted by the employer should serve as a guide during your preparations. It will list the qualifications, qualities, and background that the employer seeks in its ideal candidate. Your abilities will be more readily apparent to the employer if you align yourself with these details. During the interview, the employer might ask questions about this topic, depending on the job description.
The following are some important sets of questions one should be aware of:
1. What is FERA and when was this act passed?
2. Why was FERA replaced by FEMA? Was there any major reason?
3. What were the important changes that were bought to FEMA after FERA got repealed?
4. What are the main features of FEMA?
5. List out the Authorised Persons under FEMA by their categories.
6. A brief overview of the structure of FEMA.
7. What are the penalties for violation of the provisions of FEMA?
8. Was FERA better than FEMA? What is your opinion on this?
9. What do you mean by ‘foreign exchange’ as defined under the Act?
10. What is the full form of Forex?
11. What is FEDAI?
12. What does ‘forward margin’ means?
13. What do the terms ‘Loro account’, ‘Nostro Account’, and ‘Vostro Account’ mean?
14. Where does the largest foreign exchange market in the world lie?
15. Why does the foreign exchange market is considered 24 hours?
16. Who are the major players in the foreign exchange market?
17. What is the full form of PCR?
18. In which country first PCR was established?
19. Which account is called a foreign currency account maintained abroad?
20. From which entity, does PCR collects the data?
21. What does the speculation in the foreign exchange market refer to?
22. Do ‘Bills of exchange drawn in Indian currency but payable in any foreign currency’ include in foreign exchange?
23. What is the other word for the buying rate and selling rate?
24. Who maintains the Forex?
25. What is Arbitrageur in a foreign exchange market?
26. What does the maxim ‘buy low; sell high’ mean?
27. Under whose chairmanship a 10-member High-Level Taskforce was constituted by RBI on Public Credit Registry?
28. At which place the UIDAI data centre is located?
29. What does ‘American Quotation’ in foreign exchange markets refer to?
30. Is ‘Niti Ayog’ a statutory body of UIDAI?
31. Through which services Direct Benefit Transfer or DBT beneficiaries can withdraw money?
32. Which body investigates violations of the FEMA provisions?
33. Exemption from realisation and repatriation in certain instances is dealt with in which section of the FEMA?
34. In Mumbai, US Dollar is quoted as under USD 1 = Rs. 43.6725/6875. What does this mean?
35. The transaction where the exchange of currencies takes place two days after the date of the contract is known as?
36. What is not included under the external methods of hedging transaction exposure?
37. How and to who maintaining a foreign currency account is helpful?
38. Which method does not result in sharing of exchange risk between importer and exporter?
39. As per FEDAI Rules, the rupee value of all foreign exchange transactions should be rounded off too?
40. What is the rate applied when payment of telegraphic transfers is drawn on the bank where the bank’s Nostro account is already credited?
41. What is the rate used for all the transactions that do not involve the handling of documents by the bank?
42. In India, how does the exchange rates for foreign currencies other than the US Dollars are calculated?
43. What is the name of the system under which maintenance of the external value of a currency is at a predetermined level?
44. Which thing causes a reduction in the value of a currency due to market forces?
45. Is Rupee partially convertible? If yes, then on which account?
46. What does a credit in the balance of payment indicate?
47. What does the current account of the balance of payment include?
48. Where do the autonomous transactions in the balance of payments take place?
49. What is the ideal time for launching a product in the foreign market?
50. Which method cannot be used for managing translation exposure?
YLCC would like to thank Nikunj Arora for his valuable insights in this article.
