(FERA) Act. • FERA was introduced at a time when foreign exchange (Forex) reserves of the country were low, Forex being a scarce commodity. • FERA therefore proceeded on the presumption that all foreign exchange earned by Indian residents rightfully belonged to the Government of India and had to be collected and surrendered to the Reserve bank of India (RBI). The main objective of the FERA 1973 was to consolidate and amend the law regulating:- certain payments, dealings in foreign exchange and securities, transactions, indirectly affecting foreign exchange, the import and export of currency, for the conservation of the foreign exchange resources of the country, the proper utilization of this foreign exchange so as to promote the economic development of the country. The basic purpose of FERA was: a) To help RBI in maintaining exchange rate stability. b) To conserve precious foreign exchange. c) To prevent/regulate foreign business in India. Why there was a need to scrap FERA? The Foreign Exchange Regulation Act was replaced by the Foreign Exchange Management Act as it was an impediment in India to go global. FERA was enacted in 1973 when Indian economy was facing crisis & forex has become precious commodity. But by the nineties, FERA had outlived its utility and was in fact, an impediment in India's effort to go global and compete with other developing countries. Thus, there was a need to scrap FERA and the FEMA, 1999 came into effect on June 1, 2000. The Foreign Exchange Regulation Act of 1973 (FERA) in India was repealed on 1st June, 2000. It was replaced by the Foreign Exchange Management Act (FEMA), which was passed in the winter session of Parliament in 1999.
FEMA has brought a new management regime of
Foreign Exchange consistent with the emerging frame work of the World Trade Organization (WTO). Objectives and Extent of FEMA The objective of the Act is to consolidate and amend the law relating to foreign exchange with the objective:- of facilitating external trade and payments and for promoting the orderly development & maintenance of foreign exchange market in India. It applies to all branches, offices and agencies outside India owned or controlled by a person who is a resident of India, Also to any contravention there under committed outside India by any person to whom this Act applies. Similarities & Differences between FERA & FEMA
Similarities in FERA &
FEMA The similarities between FERA and FEMA are as follows:-
•The Reserve Bank of India and central government
would continue to be the regulatory bodies.
•Presumption of extra territorial jurisdiction as
envisaged in section (1) of FERA has been retained.
•The Directorate of Enforcement continues to be the
agency for enforcement of the provisions of the law such as conducting search and seizure. S. Difference FERA FEMA No
1. PROVISIONS FERA consisted of 81 FEMA is much simple, and
sections, and was more consist of 49 sections complex. only.
2. FEATURES Presumptions of negative These presumptions have
intention & joining hands in been excluded in FEMA offence existed in FEMA.
3. NEW TERMS in Terms like Capital Account Terms like Capital
FEMA Transaction, current Account Account Transaction, Transaction, person, service current account etc. were not defined in Transaction person, FERA. service etc., have been defined in detail in FEMA. S. Difference FERA FEMA No 4. DEFINITION OF Definition of "Authorized The definition of AUTHORIZED Person" in FERA was a Authorized person has PERSON narrow one 2(b) been widened to include banks, money changes, off shore banking Units etc. (2 (c) 5. PUNISHMENT Any offence under FERA, was Here, the offence is a criminal offence , considered to be a civil punishable with offence only punishable imprisonment as per code of with some amount of criminal procedure, 1973 money as a penalty. Imprisonment is prescribed only when one fails to pay the penalty
6. QUANTUM OF The monetary penalty Under FEMA the quantum
PENALTY payable under FERA, was of penalty has been nearly the five times the considerably decreased to amount involved. three times the amount involved.