Which of the following statements about the Foreign Exchange Management Act (FEMA), 1999 is correct?

medium Q4 of 15

Economic Awareness - Sectors of Indian Economy

AFEMA prohibits all foreign exchange transactions without RBI approval

BFEMA replaced FERA to facilitate external trade and payments

CFEMA was enacted before the LPG reforms of 1991

DFEMA allows full capital account convertibility without restrictions

Step-by-Step Solution

Step 1: Understand FEMA's purpose
FEMA replaced FERA to liberalize and facilitate external trade and payments.
Step 2: Confirm purpose
FEMA replaced FERA to facilitate external trade and payments.
Step 3: Other statements incorrect
FEMA does not prohibit all transactions; enacted after 1991; does not allow full capital convertibility.
Final Answer:
FEMA replaced FERA to facilitate external trade and payments → Option B
Quick Check:
FEMA = facilitate trade and payments ✅

Quick Trick: FEMA = liberalized foreign exchange management post-1991 reforms.

Common Mistakes:

MISTAKES

Confusing FEMA with FERA or assuming it allows full capital account convertibility.

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