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FERA

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Objectivesof FERA,1973

Theprinci pal objectiveoftheForeignExchangeRegulationAct(FERA)isto preventtheout flow of Indiancurrencyandtoseethattheforeignexchangedueto Indiashouldbe

received.Indetail, theobjectivesoftheActareasfollows:

To regulatecertainpayments.

To regulatedealingsinforeignexchangeandsecurities

To regulatethetransactionsindirectlyaffectingforeignexchange.

To regulateimportandexportof ofcurrencyandbullion.

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Toconservetheforeignexchangeresourcesofthe

countryandtoutilisethesameintheinterestsof

theeconomicdevelopmentofthecountry. To regulatetheholdingofimmovableproperty

outsideIndia.

To regulateemploymentof foreignnationals.

To regulateacquisition, holdingetc. ofimmovable

propertyinIndiabynon-residents.

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Someinstancesof FERA violations:

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From FERA to FEMA

FERA(1973)categorisedforeignexchangelaw

violatorsascriminalsandactionsagainstthemwer

verystrict. ItwasreplacedbyFEMA(1999) whichaimedatfacilitatingexternaltradeandpayment

andlawviolatorsweretreatedascivil offenders

ratherthanascriminals.

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DifferencebetweenFERA andFEMA

FERAcameinto forceonJanuary1,1974 whereasFEMA wasintroducedintheparliamentonAugust4,1998.

FERA laidemphasisonexchangeregulationandexchangecontrol whereasFEMA laysemphasisonexchangemanagementandfacilitatesexternaltradeandpayments.

Itwasnecessaryto obtaintheReservebankspermissioninrespectofmostregulationstherunder.

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Whereasunder FEMA withtheexceptionofsection

3which relatestodealinginforeignexchangeno

other provisionof FEMAstipulatesobtainingRBIspermission.

o Acontraventionunder FERA wastreatedasa

criminal offencewhereasviolationof FEMAis

treatedascivil offence.

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FEMA,1999

Theactamendsthelaw relatingto foreignexchange

withtheobjectiveof facilitatingexternaltradeand

paymentsandfor promotingtheorderlydevelopments.

Theactappliestothewholeof India. Itshall also

applyto allbranches, officesandagenciesoutside

India ,ownedandcontrolledbya personresidentinIndia.

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FEMA, incontrast, seekstoestablish amoreliberal andorderly

regulatoryframeworkconducivetoeconomicgrowthbylimiting

itsambitto:

Dealinginforeignexchange

Holdingof foreignexchange

CurrentAccounttransactions Capital Accounttransactions

Exportofgoodsandservices

Realisationandrepatriationof foreignexchange Exemptionfromrealisationandrepatriation

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