Chapter 8: Foreign Exchange Remittance Facilities for Individuals (JAIIB - Paper 2)

1. Which Act was replaced by the Foreign Exchange Management Act (FEMA), 1999?

• A. Prevention of Money Laundering Act
• B. Banking Regulation Act
• C. Foreign Exchange Regulation Act (FERA), 1973
• D. Companies Act, 1956

FEMA, 1999 replaced FERA, 1973 with the objective of facilitating external trade and promoting orderly development of the forex market.

2. FEMA, 1999 primarily aims to:

• A. Facilitate external trade and payments, and promote orderly development of the foreign exchange market in India
• B. Impose strict restrictions on foreign transactions
• C. Monitor black money transactions abroad
• D. Provide capital subsidies to exporters

FEMA is a facilitating law, unlike FERA which was restrictive. Its main objective is smooth external trade and forex market stability.

3. Under FEMA, the term “Person Resident in India” generally refers to:

• A. Any citizen holding Indian passport
• B. Any foreign tourist staying in India
• C. Any Indian working abroad
• D. A person residing in India for more than 182 days during the preceding financial year, with certain exceptions

FEMA defines “Person Resident in India” as an individual who resides in India for more than 182 days during the preceding financial year, excluding foreign diplomats, students abroad, etc.

4. Who is the regulatory authority for administration and enforcement of FEMA, 1999?

• A. Ministry of Finance
• B. Reserve Bank of India (RBI)
• C. SEBI
• D. Ministry of External Affairs

RBI regulates FEMA, while Central Government retains certain powers. RBI issues directions and regulations relating to foreign exchange.

5. Under FEMA, the current account transactions are:

• A. Fully prohibited
• B. Allowed only with prior RBI approval
• C. Generally permitted, except for a few restricted transactions
• D. Subject to 100% government approval

FEMA permits all current account transactions unless specifically restricted. Capital account transactions, however, are regulated.

6. How much Indian currency can a person resident in India take while traveling abroad (other than to Nepal and Bhutan)?

• A. ₹10,000
• B. ₹25,000
• C. ₹50,000
• D. No limit

A resident can take Indian currency notes up to ₹25,000 while traveling abroad (except Nepal and Bhutan).

7. Foreign exchange in the form of currency notes brought into India above which amount must be declared to customs at the airport?

• A. USD 2,000
• B. USD 5,000
• C. USD 7,500
• D. USD 5,000 in currency notes (or equivalent), and/or USD 10,000 including travelers’ cheques

Any person bringing foreign currency exceeding USD 5,000 in notes, or USD 10,000 including TC, must file a Currency Declaration Form with Customs.

8. Indian residents traveling to Nepal and Bhutan can carry Indian currency notes up to:

• A. ₹10,000
• B. ₹25,000
• C. ₹100 denomination notes and coins only (higher denominations prohibited)
• D. No restriction

Travelers to Nepal and Bhutan are permitted to carry Indian currency in small denominations (up to ₹100 notes and coins). Higher denominations are prohibited.

9. Under Liberalised Remittance Scheme (LRS), how much foreign exchange can a resident individual remit abroad per financial year?

• A. USD 250,000
• B. USD 100,000
• C. USD 500,000
• D. USD 50,000

Under LRS, a resident individual can remit up to USD 250,000 per financial year for permissible current or capital account transactions.

10. A non-resident visiting India can take back foreign exchange not exceeding the amount declared on arrival. If not declared, the limit is:

• A. USD 2,000
• B. USD 5,000 (currency notes) or USD 10,000 including TC
• C. USD 7,500
• D. No limit

Without declaration, foreign exchange up to USD 5,000 in notes or USD 10,000 including TC can be taken out. Above this, declaration is mandatory.

11. Which of the following is the most common channel for inward remittances to India?

• A. RTGS
• B. IMPS
• C. NEFT
• D. SWIFT / Exchange Houses tie-up

Most inward remittances from abroad come through SWIFT network or authorized Exchange Houses with tie-ups with Indian banks.

12. Under FEMA, inward remittances to India are classified under which type of account transaction?

• A. Current account transaction
• B. Capital account transaction
• C. Hybrid account transaction
• D. Restricted account transaction

Inward remittances like gifts, payments, and maintenance are generally treated as current account transactions, unless specifically falling under capital account items.

13. What is the maximum amount that can be received as inward remittance under the Money Transfer Service Scheme (MTSS) per transaction?

• A. USD 5,000
• B. USD 7,500
• C. USD 2,500
• D. USD 10,000

Under MTSS, a beneficiary in India can receive up to USD 2,500 per transaction, with a maximum of 30 transactions per calendar year.

14. Which of the following is NOT permitted as inward remittance under MTSS?

• A. Family maintenance payments
• B. Foreign Direct Investment (FDI)
• C. Personal remittances
• D. Remittances towards education expenses

MTSS is only for personal remittances such as family maintenance. Investments like FDI or commercial remittances are not permitted under MTSS.

15. If an NRI sends inward remittance to his family in India for maintenance, how is it treated under FEMA?

• A. Permitted current account transaction
• B. Prohibited transaction
• C. Requires RBI prior approval
• D. Treated as capital account inflow

Family maintenance and other personal remittances from abroad are freely permitted under current account rules of FEMA.

16. Under the Liberalised Remittance Scheme (LRS), what is the maximum amount an Indian resident can remit abroad in a financial year?

• A. USD 100,000
• B. USD 500,000
• C. USD 250,000
• D. USD 50,000

LRS allows resident individuals to remit up to USD 250,000 per financial year for permissible capital and current account transactions.

17. Which of the following is not a permitted purpose under the Liberalised Remittance Scheme (LRS)?

• A. Margin money for overseas derivative trading
• B. Education abroad
• C. Medical treatment abroad
• D. Family maintenance abroad

LRS permits expenses like education, travel, maintenance, gifts, and investments abroad. Speculative purposes such as margin trading and lottery are prohibited.

18. Outward remittances for education abroad exceeding USD 250,000 in a financial year require:

• A. Prior approval of Ministry of Finance
• B. Prior approval of the Reserve Bank of India
• C. Approval from SEBI
• D. No approval needed

While LRS allows remittance up to USD 250,000 freely, any amount beyond this limit for education or other purposes requires RBI's prior approval.

19. Outward remittances for medical treatment abroad up to what limit are freely allowed under LRS?

• A. USD 25,000
• B. USD 50,000
• C. USD 100,000
• D. USD 250,000 per financial year

Medical treatment abroad is covered under LRS up to USD 250,000 per financial year. Higher remittances require RBI approval.

20. A resident Indian wishes to gift USD 30,000 to his son studying abroad. This transaction under FEMA is classified as:

• A. Permitted outward remittance under current account transaction
• B. Capital account transaction – prohibited
• C. Requires RBI special permission
• D. Not covered under FEMA

Gifts to close relatives abroad are permitted outward remittances under current account transactions within the LRS limit of USD 250,000 per year.

21. What is the maximum amount that can be remitted from India to Nepal under the Indo–Nepal Remittance Scheme (INRS)?

• A. ₹25,000 per transaction
• B. ₹50,000 per transaction
• C. ₹1,00,000 per transaction
• D. No limit

Under INRS, an individual can remit up to ₹50,000 per transaction to Nepal.

22. Which Indian bank has been designated as the nodal bank for managing the Indo–Nepal Remittance Scheme?

• A. State Bank of India
• B. Bank of Baroda
• C. Punjab National Bank
• D. Reserve Bank of India (through SBI as nodal bank)

RBI manages the scheme with State Bank of India as the nodal bank in India to facilitate Indo–Nepal remittances.

23. Under INRS, how can the beneficiary in Nepal receive the funds?

• A. Direct credit to bank account in Nepal
• B. Cash payout at designated payout locations in Nepal
• C. Either bank account credit or cash payout
• D. Only through money order

Beneficiaries in Nepal can receive money either by credit to their bank account in Nepal or by cash payout at designated centers.

24. What is the maximum cash payout limit under INRS for beneficiaries in Nepal?

• A. ₹10,000 per transaction
• B. ₹15,000 per transaction
• C. ₹25,000 per transaction
• D. ₹50,000 per transaction

Beneficiaries in Nepal can receive cash up to ₹25,000 per transaction. Higher amounts must be credited to their bank account.

25. Which of the following is the main objective of the Indo–Nepal Remittance Scheme?

• A. To promote exports between India and Nepal
• B. To provide a safe and cost-effective channel for migrant workers to remit money to Nepal
• C. To facilitate tourism between India and Nepal
• D. To control black money movement

The scheme was introduced to provide migrant workers and individuals an economical and secure way to send money to Nepal.