Foreign Exchange, FDI and External Debt (External Sector) Part-III

Total Questions: 37

21. Baht is the currency of: [M.P.P.C.S. (Pre) 1990]

Correct Answer: (b) Thailand
Solution:Baht is the currency of Thailand. Turkiye's - Turkish Lira, Vietnam's-Dong, Iran's - Rial.
  • Recently, the Reserve Bank of India (RBI) liberalized FEMA regulations, 1999 to encourage use of Indian Rupee (Internationalization of Rupee) for settlement of cross border transactions.
  • Internationalization of Rupee refers to a process that involves increasing the use of the rupee in cross-border transactions.
  • It involves promoting the rupee for import and export trade and then other current account transactions, followed by its use in capital account transactions.

22. Currency of China is: [M.P.P.C.S. (Pre) 1990]

Correct Answer: (a) Yuan
Solution:Currency of China is Yuan (a unit of official currency Renminbi), while Lira (at present Euro) is the currency of Italy. Japan's currency is Yen and India's currency is Rupee.

Chinese money is referred to by two names: the Chinese yuan (CNY) and renminbi (RMB), which translates to "People's Currency." The distinction between CNY and RMB is subtle. RMB is the official currency of China.

The yuan is the principal unit of account for that currency. Chinese currency defines the economy of one of the world's biggest superpowers. It's also central to one of the most debated issues involving China: its perceived mercantilist policy of
artificially undervaluing currency against the U.S. dollar. This is believed to give its exports an unfair price advantage.

23. Yuan is the currency of which country? [Chhattisgarh P.C.S. (Pre) 1999]

Correct Answer: (c) China
Solution:Currency of China is Yuan (a unit of official currency Renminbi), while Lira (at present Euro) is the currency of Italy. Japan's currency is Yen and India's currency is Rupee.

Chinese money is referred to by two names: the Chinese yuan (CNY) and renminbi (RMB), which translates to "People's Currency." The distinction between CNY and RMB is subtle. RMB is the official currency of China.

The yuan is the principal unit of account for that currency. Chinese currency defines the economy of one of the world's biggest superpowers. It's also central to one of the most debated issues involving China: its perceived mercantilist policy of
artificially undervaluing currency against the U.S. dollar. This is believed to give its exports an unfair price advantage.

24. Dinar/New Dinar is not the currency of: [I.A.S. (Pre) 1999]

Correct Answer: (c) U.A.E.
Solution:Among the given countries, Dinar/New Dinar is not the currency of U.A.E. The currency of U.A.E. is Dirham.

The AED is the currency abbreviation for the United Arab Emirates dirham, the official currency of Dubai and other Emirates. It is often presented with the symbol Dhs or DH. The United Arab Emirates dirham has been used since 1973, when it replaced several currencies, such as the Dubai riyal and the Qatar riyal.

25. 125. Match List I with List II and select the correct answer using the codes given below the lists: [I.A.S. (Pre) 1998]

List IList II
A. Ringgit 1. Indonesia
B. Baht2. South Korea
C. Rupiah 3. Thailand
D. Won 4. Malaysia

Codes:

OptionABCD
(a)1342
(b)4312
(c)1243
(d)4213
Correct Answer: (b)
Solution:The correctly matched lists are as follows:
CountryCurrency
MalaysiaRinggit
ThailandBaht
IndonesiaRupiah
South KoreaWon

26. Match List 1 (Country) with List 2 (Currency) on the basis of given codes: [Chhattisgarh P.C.S. (Pre) 2008]

List 1List 2
A. Mexico1. Yen
B. Austria2. Peso
C. Japan3. Riyal
D. Saudi Arab4. Schilling

Codes:

OptionABCD
(a)2134
(b)2413
(c)2341
(d)2314
Correct Answer: (b)
Solution:The correctly matched lists are as follows:
List 1List 2
A. MexicoPeso
B. AustriaSchilling
C. JapanYen
D. Saudi ArabRiyal

27. Which one of the following statements is correct with reference to FEMA in India? [I.A.S. (Pre) 2003]

Correct Answer: (c) Under FEMA, violation of foreign exchange rules has ceased to be a criminal offence.
Solution:The Foreign Exchange Regulation Act (FERA), 1973 was replaced by the Foreign Exchange Management Act (FEMA), 1999 on June 1, 2000. Under FEMA, violation of foreign exchange rules has ceased to be a criminal offence.

If there was a violation of FEMA rules, then it is considered as civil offence instead of criminal offence as under FERA Act. Apart from removing criminal prosecution for non-compliance of foreign exchange norms, FEMA also introduced a sunset clause of two years till 31 May, 2002 to enable Enforcement Directorate to complete the Investigation of pending issues. Hence, option (c) is the correct answer.

28. From which year the FEMA came into force? [M.P.P.C.S. (Pre) 2006]

Correct Answer: (c) 2000
Solution:The Foreign Exchange Regulation Act (FERA), 1973 was replaced by the Foreign Exchange Management Act (FEMA), 1999 on June 1, 2000. Under FEMA, violation of foreign exchange rules has ceased to be a criminal offence.

If there was a violation of FEMA rules, then it is considered as civil offence instead of criminal offence as under FERA Act. Apart from removing criminal prosecution for non-compliance of foreign exchange norms, FEMA also introduced a sunset clause of two years till 31 May, 2002 to enable Enforcement Directorate to complete the Investigation of pending issues. Hence, option (c) is the correct answer.

29. The Government t of India has replaced FERA by: [U.P.P.C.S. (Mains) 2007]

Correct Answer: (b) The FEMA
Solution:The Foreign Exchange Regulation Act (FERA), 1973 was replaced by the Foreign Exchange Management Act (FEMA), 1999 on June 1, 2000. Under FEMA, violation of foreign exchange rules has ceased to be a criminal offence.

If there was a violation of FEMA rules, then it is considered as civil offence instead of criminal offence as under FERA Act. Apart from removing criminal prosecution for non-compliance of foreign exchange norms, FEMA also introduced a sunset clause of two years till 31 May, 2002 to enable Enforcement Directorate to complete the Investigation of pending issues. Hence, option (c) is the correct answer.

30. FEMA (Foreign Exchange Management Act) was finally implemented in the year: [U.P.P.C.S.(Pre) 2013]

Correct Answer: (c) 2002
Solution:Foreign Exchange Management Act (FEMA), 1999 with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance foreign exchange market in India, came into force on June 1, 2000 with a sunset clause of two years. It was finally fully implemented in the year 2002 after the period of sunset clause was over.

Objectives of FEMA

  • Regulation & Management of Foreign Exchange: FEMA governs all aspects of foreign exchange transactions in India, including:
    Acquisition & Holding of foreign exchange.
    Payment & Settlement of foreign exchange transactions.
    Export & Import of currency.
  • Liberalizing Foreign Exchange Policies: Unlike FERA, which was restrictive and criminalized violations, FEMA is more transparent and promotes globalization.
  • Empowerment of RBI: The Reserve Bank of India (RBI) is the key authority under FEMA. The RBI can frame rules, issue guidelines, and regulate foreign exchange transactions.
  • Civil nature of offences: Violations under FEMA are civil offences (unlike FERA, where they were treated as criminal offences). Penalties and fines can be imposed for non-compliance.