Module: | MODULE A: INTERNATIONAL BANKING
Q185: Consider the following statements regarding the legislative transition to the Foreign Exchange Management Act of 1999:
1. The Act came into force in the year 2000, repealing the earlier Foreign Exchange Regulation Act of 1973.
2. The primary objective shifted from the conservation of foreign exchange resources to facilitating external trade and promoting an orderly foreign exchange market.
3. Under the new legislative framework, all foreign exchange offenses were upgraded to strict criminal offenses punishable by mandatory imprisonment.
Which of the statements given above is or are INCORRECT?
2. The primary objective shifted from the conservation of foreign exchange resources to facilitating external trade and promoting an orderly foreign exchange market.
3. Under the new legislative framework, all foreign exchange offenses were upgraded to strict criminal offenses punishable by mandatory imprisonment.
Which of the statements given above is or are INCORRECT?
✅ Correct Answer: C
🎯 Quick Answer:
Option C is correct because only statement 3 is incorrect.Structural Breakdown: The Act emphasizes managing rather than policing foreign exchange.
Statement 1 is correct as the new Act took effect on June 1, 2000.
Statement 2 is correct, highlighting the shift in the preamble's objective.
Statement 3 is fundamentally incorrect because the new Act decriminalized foreign exchange violations, treating them as civil contraventions subject to monetary penalties, whereas the old 1973 Act treated them as severe criminal offenses.
Historical Context: The economic liberalization of 1991 rendered the draconian 1973 Act obsolete.
As India integrated with global markets, it needed a business-friendly legal environment that did not treat honest corporate missteps as criminal acts.
Causal Reasoning: The causal logic for decriminalization was to remove the climate of fear among foreign investors and Indian businesses.
By treating offenses civilly, the government encouraged transparent cross-border trade and significantly boosted the inflow of foreign direct investment.