Which one of the following statements is correct with reference to FEMA in India?

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Q: 58 (IAS/2003)
Which one of the following statements is correct with reference to FEMA in India?

question_subject: 

Current Affairs

question_exam: 

IAS

stats: 

0,10,48,29,9,10,10

keywords: 

{'fema': [0, 0, 1, 1], 'foreign exchange regulation act': [1, 0, 1, 0], 'fera': [1, 0, 1, 0], 'foreign exchange management act': [0, 0, 1, 0], 'foreign exchange rules': [0, 0, 1, 0], 'criminal offence': [0, 0, 2, 1], 'violation': [3, 0, 3, 4], 'enforcement directorate': [0, 0, 1, 1], 'india': [8, 1, 7, 13], 'investigation': [1, 0, 1, 1], 'sunset clause': [0, 0, 1, 0]}

The Foreign Exchange Management Act (FEMA) was enacted in India in 1999 to replace the Foreign Exchange Regulation Act (FERA) of 1973. Hence, option 1 is incorrect as it states the replacement year as 2001, which is not true. Option 2 is incorrect as well, FERA was actually repealed in 1999 not in 2002 as stated. Option 4 is also incorrect; while the Enforcement Directorate can investigate suspected violations of foreign exchange rules under FEMA, it is not authorized to arrest and prosecute people on its own, that`s the job of the judiciary. The correct option is 3 - Under FEMA, violators of foreign exchange rules are subject to civil penalties rather than criminal charges, as was the case under FERA. This important distinction is what makes FEMA more `management` orientated than `regulation` orientated; hence FEMA focuses more on managing the foreign exchange market rather than controlling it.

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