Foreign Exchange Management Act 2000 (FEMA) is an act passed by the Indian government to manage foreign exchange transactions in India. The act came into effect on 1st June 2000 and replaced Foreign Exchange Regulation Act (FERA) 1973. FEMA has been enacted to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and promoting the orderly development and maintenance of foreign exchange market in India.

Main Provisions of FEMA

1. Regulation of Foreign Exchange Transactions
FEMA regulates all foreign exchange transactions in India. It prohibits any person from dealing in foreign exchange or any foreign security without the permission of the Reserve Bank of India (RBI).

2. Dealing in Foreign Exchange
FEMA allows authorized dealers (banks) to deal in foreign exchange. They are required to follow the rules and regulations laid down by RBI in this regard.

3. Current Account Transactions
Current account transactions are permitted freely under FEMA. This includes all transactions related to trade and services such as payments for imports and exports, travel expenses, and remittances.

4. Capital Account Transactions
Capital account transactions such as investments, loans, and other capital-related transactions are also regulated under FEMA. These transactions require prior approval from RBI.

5. Contraventions and Penalties
FEMA lays down strict penalties for contraventions of its provisions. Any person who contravenes the provisions of FEMA shall be liable to penalty up to three times the amount involved in the contravention.

Conclusion
FEMA has been enacted with the objective of facilitating external trade and payments and promoting the orderly development and maintenance of foreign exchange market in India. The act regulates all foreign exchange transactions in India and lays down strict penalties for contraventions of its provisions. Authorized dealers (banks) are allowed to deal in foreign exchange subject to the rules and regulations laid down by RBI. Current account transactions are permitted freely under FEMA, while capital account transactions require prior approval from RBI.