It has been brought to the notice of the Reserve
Bank that some of the service providers like hotels etc. quote differential
tariff for foreigners in US$ and insist that the payment be made in foreign
exchange. This practice is not consistent with Foreign Exchange Management Act
(FEMA), 1999 and also undermines the legality of domestic currency in India.
Earlier, under Foreign Exchange Regulation Act
(FERA), 1973, the Government of India had issued a Notification dated August
20, 1981, requiring foreign tourists visiting India to make payment in foreign
exchange. However, the FERA, 1973 has already been repealed. The current regime
of foreign exchange regulations is framed under FEMA, 1999 which has come into
effect from June 1, 2000.
It is clarified that the Reserve Bank Notification
No.16 dated May 3, 2000, issued under FEMA, is only to enable persons resident
in India to receive payment in foreign exchange from person resident outside
India during his visit to India. For convenience of transactions, it has created
an environment where a foreigner has an option to pay either in Indian Rupees
or in foreign exchange for the services rendered to him. This does not give
a right to residents to insist on payment in foreign exchange.
Currently, there is no instruction in force
that makes it obligatory on part of non-residents to make payment in foreign
exchange in such cases. Therefore, any insistence on payment in foreign exchange
for services rendered in India is not consistent with the current foreign exchange
Press Release: 2005-2006/238