Govt to raise foreign exchange quota for travel abroad

Govt to raise foreign exchange quota for travel abroad

NEW DELHI, MAY 13: The Government will soon raise annual foreign exchange quota for travel abroad by $ 2000 to 5000 with the much delayed notification of the Foreign Exchange Maintanence Act (FEMA) which will be operative from June 1.

The sources said ceilings for Gift remittance and donations by Non Resident Indians are also expected to be raised to $ 5000 from the present $ 1000.

FEMA, passed by Parliament in November last, has been inordinately delayed because innumerable number of rules and regulations in FERA needed to be redrafted, the sources said. FEMA which dilutes practically all provisions of FERA makes foreign exchange violations a civil offence from the earlier criminal offence.

Its notification has been partly delayed as at one time the thinking in the government was to notify FEMA along with Prevention of Money Laundering Bill which has now been referred to Parliamentary standing committee.

The decision to raise the ceiling on foreign exchange drawals follows a meeting of senior RBI officials with the Finance Ministry officials on Friday.

A detailed presentation was given by RBI officials on these as well as several other aspects of liberalisation of foreign exchange rules which would be notified early next week.

Fema also provides for Appellate Tribunals to deal with FEMA violations and their constitution was still awaited, the sources said adding it would be sometime before Parliament passes the Prevention of Money Laundering BIll.

The government therefore decided go ahead with the notification of FEMA in the face of RBI and Finance Ministry completing the work on drafting the notifications.

With the notification of the rules and regulations, RBI will issue detailed instructions to authorised foreign exchange dealers. Even as FEMA becomes operative from June 1, there will be an overlapping period of two years for FERA from that date to enable enforcement authorities to complete investigations on pending cases of FERA violoations.

According to FEMA any person could sell or draw foreign exchange from authorised dealers for current account transactions. Indian rupee is fully convertible on current account. Though liberalised substantially for foreign institutional investors, rupee is not fully convertible on capital account.

So FEMA provides for RBI to specify any limit for capital account transactions in consultations with the central government. Under FEMA, Reserve Bank could regulate, restrict and prohibit transfer or issue of any foreign security by a person resident in India. It could also prohibit and regulate borrowing in foreign exchange. Reserve Bank could also direct any exporter to comply with certain requirements.