A
proposed change that will further dilute the powers
of the Enforcement Directorate, is being sought
by simply altering the Foreign Exchange (Compounding
Proceeding Rules), ’00. The change involves
transfer of the powers of compounding a penalty
from the Directorate to the Reserve Bank of India
(RBI).
The Foreign Exchange Management Act (FEMA), 1999,
a civil law which came into force from June 1, ’00,
brought down the unrestrained powers that the Directorate
earlier enjoyed. A key aspect of FEMA which distinguishes
it from the earlier criminal law- Foreign Exchange
Regulation Act (FERA), 1973- is the provision for
compounding of penalty (Section 15). After disclosing
the violation and paying a compounding fee of Rs
5,000, the party concerned can settle the case with
the authority against a penalty payment. Technically,
the penalty could be three times the violation,
while an arrest is made only if the party fails
to pay the penalty. At present the central bank’s
compounding powers are confined to FEMA violations
relating to forex transactions on exports and imports.
For other possible violations- ranging from a wrong
declaration by a traveler to investments by corporates-
the compounding powers are bestowed with the Directorate.
This
is set to change, thanks to a widely shared perception
that both business entities and individuals will
find it easier to disclose the violation and agree
on a compounded penalty with the RBI. The proposed
move is expected to quicken settlements and go down
well in different segments — corporates, small
business, resident individuals and NRIs. The government
is also planning to identify the technical violations
(i.e those with no criminal intent), where only
RBI can exercise power.
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Our Say |
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| The
proposed winding up of the FIPB is probably
an outcome of the government’s
emerging belief that the FIPB bureaucracy
has little constructive role today,
because the present foreign investment
policy allows automatic foreign investment
up to either 74 per cent or 100 per
cent in virtually all sectors. This
being the case, it is but rational that
the RBI ought to deal with FDI inflows
as a matter of routine, thereby making
foreign investments in India a much
simpler process. |
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A
successor body to the FIPB will restrict itself
purely to promoting foreign investment activities
with the government to be content with playing the
role of facilitator for foreign investment, as was
originally envisaged. Investment proposals, above
the sectoral limit now in place will be considered
by the RBI and a negative list for FDI will be put
up shortly |
