Introduction

Foreign exchange (forex trading in India) plays a crucial role in India's economic landscape, enabling international trade, investments, and financial transactions. The Indian forex market is regulated under the Foreign Exchange Management Act (FEMA), 1999, replacing the earlier Foreign Exchange Regulation Act (FERA), 1973.

Regulatory Framework

The foreign exchange market in India is governed by multiple authorities:

1. Reserve Bank of India (RBI) – The apex body responsible for managing forex reserves in India, exchange rates, and foreign currency transactions. RBI forex guidelines regulate the forex market through FEMA and circulars that outline permitted transactions, exchange control policies, and compliance requirements.
2. Securities and Exchange Board of India (SEBI) – Regulates forex derivatives trading and forex brokers in India.
3. Directorate General of Foreign Trade (DGFT) – Oversees export and import forex transactions and international trade policies.

Exchange Rate System in India

India follows a managed float exchange rate system, where currency exchange rates are primarily determined by market forces but are monitored and occasionally adjusted by RBI to maintain forex market stability.

Read More:

1. Introduction to Forex

2. Regulatory Framework

3. Exchange Rate System in India

4. Factors Influencing Exchange Rates in India

5. Foreign Exchange Transactions in India

6. Transactions through Authorised Dealer (AD) Category II

7. Documents Required for Forex Transactions

8. Role of FEMA in Forex Management

9. Liberalized Remittance Scheme (LRS) in India

10. TCS on Foreign Remittances

11. Challenges in Forex Transactions in India

12. Resolutions for a Smooth Forex Experience