Foreign exchange regulation act 1973 (as amended up-to-date)

Foreign exchange is in short a system or process of converting one national currency into another, and of transferring the ownership of money from one country to another. The eventuality of earning or spending in terms of foreign exchange arises particularly in course of international trade and commerce of a country being called upon to export or import goods and services. Foreign exchange is, therefore, in dispensable in international transactions.

A developing country like India has to depend to a great extent on other countries for import of various goods and services including capital goods, expertise etc., required for her developmental projects. Moreover, she is called upon to import certain essential commodities in which she happens to be deficient. Her exports, though coming up. are not adequate to balance her imports. The gap has of late become wide on account of the recent hike of petroleum crude prices which India is required to pay.

In this context, the necessity for augmenting foreign exchange earnings, and judicious use of the same have become all the more imperative. At the same time, continuous efforts are required to bring the exchange earnings to book, and plug any possible leakage of the same. With this end in view, there has been more and more rigid vigilance and control on the foreign exchange earnings and spendings through statutory restrictions and procedural regulations. While the Central Government is empowered under the Act to prescribe the broad measures of control by way of framing Rules etc. the Reserve Bank is entrusted to lay down the detailed procedures, and act as a watch dog on foreign exchange transactions. For this purpose, as authorised under the Act, the Reserve Bank has drawn up detailed procedures and forms for different matters involving earning or spending of foreign exchange, actual or potential.