The Foreign Exchange Management Act, 1999 came into effect from 1st June 2000. With the legislation of this Act, the focus of the foreign exchange policy shifted from control and conservation foreign exchange to that of effective management in order to facilitate external trade or payment and promote the orderly development and maintenance of the foreign exchange market in India. The scope of this Act extends to the whole of India and applies to all branches, offices and agencies outside India owned or controlled by any person resident in India. It is also applicable to any contravention committed outside India by any person to whom this Act is applicable. The Central Government has established the Directorate of Enforcement to enforce and investigate due compliance of the provisions of the Foreign Exchange Management Act, 1999 and to prevent leakage of foreign exchange which generally occurs through malpractices. The Act prohibits dealings in foreign exchange without general or special permission of the RBI with a view to facilitating external trade and promoting orderly development of foreign exchange market in India.
