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Principles and Practices of Banking | Module A | JAIIB Unit 8 Part 2 [FREE EPDF]

Did you know that not all foreign transactions are permitted under Indian regulations? Sending money abroad for certain activities like gambling or speculative investments can land you in legal trouble!

In this video, we dive deep into foreign exchange regulations in India, covering everything from permitted transactions under FEMA to international credit and debit card usage. Whether you’re a banking professional, business owner, or a frequent traveler, this guide will help you navigate foreign exchange laws smoothly.

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  • Different categories of foreign transactions (Permitted, Restricted, and Prohibited)
  • Liberalized Remittance Scheme (LRS) limits and rules
  • How to legally invest abroad or send money for education & medical expenses
  • Common mistakes to avoid while transacting internationally

💡 Watch the full video below and drop your questions in the comments! 👇

👉 Before we dive in, watch this video for a complete breakdown:

Understanding Foreign Exchange Transactions Under FEMA

🔹 What Are Foreign Exchange Transactions? (00:01:00)

Foreign exchange transactions refer to any monetary exchange between India and other countries. These transactions fall under FEMA (Foreign Exchange Management Act), which governs all cross-border money transfers.

🔹 Categories of Foreign Exchange Transactions (00:02:00)

Under FEMA, transactions are categorized into three groups:

  1. Prohibited Transactions (Schedule 1) – These transactions are strictly forbidden by law and include gambling, lottery, and speculative trades.
  2. Restricted Transactions (Require Prior Approval) (Schedule 2) – These transactions need government or RBI approval, such as investments in overseas businesses.
  3. Permitted Transactions with Limits (Schedule 3) – Allowed under certain conditions, such as remittances for education, medical treatment, and personal travel.

🔹 The Liberalized Remittance Scheme (LRS) Explained (00:06:30)

The LRS allows resident Indians to send money abroad up to $250,000 per financial year for permitted purposes.

✅ Allowed under LRS:

  • Education, medical treatment, and travel expenses
  • Investments in foreign stocks and real estate
  • Gifts and donations to relatives
  • Emigration or job relocation

🔹 Using International Credit & Debit Cards Abroad (00:10:10)

International credit and debit cards allow Indians to transact in foreign currency, but with some restrictions:

  • ✅ Permitted Uses: Travel, education, online purchases, business expenses.
  • ❌ Restricted Uses: Lottery ticket purchases, gambling transactions, and illegal activities.

Additionally, Indian residents must ensure that credit card payments comply with FEMA laws, particularly while dealing with foreign merchants.

JAIIB PPB | Foreign Exchange Remittance Facilities | Unit 8 Part [FREE EPDF]

🔹 Common Fraudulent Remittance Scams to Avoid (00:27:30)

  • ❌ Fake emails requesting “tax clearance charges
  • ❌ Unsolicited prize-winning notifications demanding payment
  • ❌ Scammers posing as RBI officials asking for banking details

🚨 Stay alert and always verify with your bank before making international payments!

Conclusion

Understanding FEMA and foreign exchange rules is crucial for smooth international transactions. Whether you’re a banker, business owner, or an investor, staying informed helps you avoid penalties and legal issues.

📢 Got any questions? Drop them in the comments below! Don’t forget to subscribe for more banking insights and hit the 🔔 for updates.

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