Foreign exchange control and regulation

2. Banning locals from possessing foreign currency

3. Restricting currency exchange to government-approved exchangers

4. Fixed exchange rates

5. Restrictions on the amount of currency that may be imported or exportedCountries with foreign exchange controls are also known as quot;
Article 14 countries,quot;
after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. Such controls used to be common in most countries, particularly poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries which still impose exchange controls are the exception rather than the rule.<br />Foreign Exchange Restrictions<br />The foreign exchange market is a diverse, over-the-counter world currency market that sees several trillion dollars per day in exchanges made. Since the market deals with so many countries on a daily basis, it is impossible to regulate each and every country, because they are all sovereign nations. As a result, each individual country has its own rules, restrictions, laws and regulations in place depending upon the nation in question.<br />1. Import/Export Restrictions:<br />Every country around the world deals with import and export restrictions. They are most commonly seen attached to the entry and exit requirements for individual countries as to how much cash is allowed to be brought in or taken out without regulation. The actual amount depends on which country you happen to be trading in, but for the United States. $10,000 can be brought into the country and removed without any questions asked or restrictions placed upon it. You can contact local embassy offices for relevant countries to determine the restrictions of a given nation.<br />2. Fixed Exchange Rates:<br />Fixed exchange rates are one of the most common types of restrictions placed on FX trading around the world. Since each country has its own currency and exchange traditions, it is important to know what the exchange rates are prior to making any transactions. While some countries rely upon fixed exchange rates, others use of floating exchange rates against one currency, while using a fixed rate against another. For example, in Bulgaria the BGN is fixed to the Euro, while against the USD it has a floating exchange rate that varies on a day-to-day basis. These restrictions keep a local currency from devaluing too drastically.<br />3. Currency Exchange Restrictions:<br />While free enterprise has slowly gained popularity around the world as more and more countries become developed, certain countries still restrict currency exchange to government-approved traders or organizations. The same is true in the United States, as every trader or broker--regardless if they are an individual or an organization--must first register with the NFA (National Futures Association) and the CFTC (Commodity Futures Trading Commission) prior to actively trading on the market. These groups are tied to the federal government and act as a watchdog to ensure that traders follow the rules and regulations of the United States when it comes to FX trades.<br />Aims of foriegn exchange control:<br /> The objectives of foreign exchange control are:<br />1. To restrict demand for foreign exchange,<br />2. To give protection to industries,<br />3. To maintain overvalued exchange rates,<br />4. To have independent monetary and fiscal policies,<br />5. To check the flight of capital, and<br />6. To earn revenue.<br />If foriegn exchange control is effective and is strict measures are taken to implement it, a lot of evasion could be avoided which takes place by country by way of overvaluation of imports, undervaluation of exports, taking domestic currency while going abroad and retaining foreign exchange receipts in foerign countries over a longer period of time then is ordinarily allowed by the RBI.<br />Use of Foreign Currency:<br />The use of foreign currency within a country's borders is generally restricted. For example, the United States only allows U.S. dollars to be used for purchasing items within its borders, while England has its own currency, the pound, and in many countries in Europe it is the Euro. The restriction to local currency only allows the governments of each country to control the value of their currency more directly.<br />FOREIGN EXCHANGE REGULATIONS IN INDIA<br />India has liberalized its foreign exchange controls. Rupee is freely convertible on current account. Rupee is also almost fully convertible on capital account for non-residents. Profits earned, dividends and proceeds out of the sale of investments are fully repatriable for FDI. There are restrictions on capital account for resident Indians for incomes earned in India.<br />The Reserve Bank of India’s Foreign Exchange Department administers Foreign Exchange Management Act 1999(FEMA). Foreign Exchange Management (transfer of securities to any person resident outside India) Regulation as amended from time to time regulates transfer for issue of any security by a person resident outside India.<br />Repatriation of investment capital and profits earned in India<br />(i) All foreign investments are freely repatriable, subject to sectoral policies and except for cases where Non Resident Indians choose to invest specifically under non-repatriable schemes. Dividends declared on foreign investments can be remitted freely through an Authorized Dealer.<br />(ii) Non-residents can sell shares on stock exchange without prior approval of RBI and repatriate through a bank the sale proceeds if they hold the shares on repatriation basis and if they have necessary NOC/ tax clearance certificate issued by Income Tax authorities.<br />(iii) For sale of shares through private arrangements, Regional offices of RBI grant permission for recognized units of foreign equity in Indian company in terms of guidelines indicated in Regulation 10.B of Notification No. FEMA.20/2000 RB dated May ‘2000. The sale price of shares on recognized units is to be determined in accordance with the guidelines prescribed under Regulation 10B(2) of the above Notification.<br />(iv) Profits, dividends, etc. (which are remittances classified as current account transactions) can be freely repatriated.<br />Acquisition of Immovable Property by Non-resident<br />A person resident outside India, who has been permitted by Reserve Bank of India to establish a branch, or office, or place of business in India (excluding a Liaison Office), has general permission of Reserve Bank of India to acquire immovable property in India, which is necessary for, or incidental to, the activity. However, in such cases a declaration, in prescribed form (IPI), is required to be filed with the Reserve Bank, within 90 days of the acquisition of immovable property.<br />Foreign nationals of non-Indian origin who have acquired immovable property in India with the specific approval of the Reserve Bank of India cannot transfer such property without prior permission from the Reserve Bank of India. Please refer to the Foreign Exchange Management (Acquisition and transfer of Immovable Property in India) Regulations’ 2000 (Notification No. FEMA.21/ 2000-RB dated May 3, 2000).<br />Acquisition of Immovable Property by NRI<br />An Indian citizen resident outside India (NRI) can acquire by way of purchase any immovable property in India other than agricultural/ plantation /farm house. He may transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a Person of Indian Origin resident outside India or a person resident in India.<br />