Looking for the answer to the question below related to Financial Management ?
As per FEMA, no person, other than ________ would enter in any transactions of the foreign currency.
|A. Offshore banks
D. Authorized Dealer
The Correct Answer Is:
- D. Authorized Dealer
The correct answer is D. Authorized Dealer because, as per the Foreign Exchange Management Act (FEMA) in India, no person, other than an Authorized Dealer, is allowed to enter into foreign currency transactions.
An Authorized Dealer is a financial institution that is authorized by the Reserve Bank of India (RBI) to deal in foreign exchange and undertake foreign exchange transactions on behalf of individuals and businesses.
Let’s explore in detail why Option D is the correct choice and why the other options (A. Offshore banks, B. Parliament, and C. Government) are not accurate in this context.
D. Authorized Dealer (Correct):
In the context of FEMA and foreign exchange regulations in India, an Authorized Dealer is a financial institution, typically a bank, that has been granted the authority by the Reserve Bank of India to deal in foreign exchange.
Authorized Dealers are responsible for facilitating and conducting foreign exchange transactions for their customers, including individuals and businesses. They play a crucial role in ensuring that foreign exchange transactions are conducted in compliance with the law and regulatory requirements.
Under FEMA, transactions involving foreign currency, including buying, selling, and remittances, are subject to regulation. The requirement that no person, other than an Authorized Dealer, can enter into foreign currency transactions ensures that foreign exchange transactions are conducted through regulated and authorized channels.
This helps maintain the stability of the foreign exchange market and ensures compliance with exchange control regulations.
Now, let’s examine why the other options are not correct in this context:
A. Offshore banks (Not Correct):
Offshore banks, which are banks located outside the jurisdiction of a particular country, are not the entities responsible for regulating or authorizing foreign currency transactions within India under FEMA.
While offshore banks may be involved in international banking and finance, they do not have the authority to regulate or authorize foreign exchange transactions in India. This authority rests with the Reserve Bank of India (RBI) and, specifically, with Authorized Dealers operating within the country.
B. Parliament (Not Correct):
Parliament is the legislative body of the government responsible for enacting laws and regulations. While Parliament may enact the laws that govern foreign exchange transactions, it does not directly authorize or regulate foreign exchange transactions on a day-to-day basis.
The operational and regulatory aspects of foreign exchange transactions are typically managed by the Reserve Bank of India (RBI) and Authorized Dealers, as specified under FEMA.
C. Government (Not Correct):
While the government, through its various ministries and departments, plays a role in formulating and implementing foreign exchange policies, the direct regulation and authorization of foreign exchange transactions are the responsibilities of the Reserve Bank of India (RBI) and Authorized Dealers.
The government sets the broad policy framework, but the detailed operational aspects are managed by regulatory authorities and financial institutions.
In summary, the correct answer is D. Authorized Dealer because, as per FEMA in India, only Authorized Dealers, authorized by the Reserve Bank of India (RBI), are allowed to enter into foreign currency transactions. Authorized Dealers are financial institutions responsible for facilitating and regulating foreign exchange transactions, ensuring compliance with exchange control regulations.
The other options, such as offshore banks, Parliament, and the government, do not have the specific regulatory authority and operational role in foreign exchange transactions as outlined by FEMA. Understanding the role of Authorized Dealers is crucial for individuals and businesses engaged in foreign exchange activities in India.