FEMA stands for Foreign Exchange Management Act, 1999, which is governed by RBI (Reserve Bank of India) through various Rules, Regulations, Notifications, Circulars, Directions etc. As, the name signifies, FEMA is a law in relation to foreign exchange transactions. However, more precisely, FEMA is in relation to current account and capital account transactions undertaken by Person Resident in India and Person Resident Outside India. Hence, the key words of FEMA law are:
- Person Resident In India (PRI)
- Person Resident Outside India (PROI)
- Current Account Transactions
- Capital Account Transactions
As per the provisions of FEMA, all current account transactions are allowed unless restricted, and all capital account transactions are restricted unless allowed. Hence, in general, FEMA is mainly about capital account transactions. In this regard, Reserve Bank of India has issued various regulations, which governs:
- Capital account transactions in India by Person Resident Outside India
- Capital account transactions outside India by Person resident in India.