Speaking at a round-table discussion on the FEMA Bill organised by the Council of EU Chambers of Commerce in India on Friday in Mumbai, HDFC Bank chairman SS Thakur pointed out that that FEMA will also cover the foreign banks, which until now were regulated only by the Reserve Bank of India (RBI) forcing these entities to approach various authorities for obtaining approvals.

He said that FEMA will cover all branches, offices and agencies outside the country, owned or controlled by an Indian resident. "Many banks and companies have foreign branches and offices. They should have the freedom to operate complying with the laws of the country, where they are located. Applying FEMA to these branches would constitute an extra-territorial jurisdiction," Thakur said.

According to him, the clause prohibiting non-authorised persons from dealing in foreign exchange and securities may lead to every such transaction landing at the central bank's doorstep with parties applying for the status of `authorised persons'.

He further said that the present defination of `resident' in the present Foreign Exchange Regulation Act (FERA) should be retained as the proposed defination will make people who go abroad beyond a period of 182 days for higher studies, medical treatment or business purposes as non-residents, though under the present laws they are treated as residents.

The HDFC Bank chief expressed the hope the the rupee may become fully convertible on the capital account under the purview of FEMA, provided the new piece of legislation is `flexible'. "The rupee is already fully convertible for current account transactions. It should be convertible on the capital account as and when the time comes," he said.