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•What is FERA?

• The Foreign Exchange Regulation Act, 1973, is


(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(FERA) in India was repealed on 1st June, 2000.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.

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