FOREIGN EXCHANGE REGULATION ACT

PRESENTED BY
DEEPAK . V
DENNY CHERIAN
FOREIGN EXCHANGE REGULATION
ACT (FERA)
The Foreign Exchange
Regulation Act--one of the key pieces of
legislation regulating international trade in
the 1970s--helped shape the climate of the
global economy today. It was passed in India,
and it redefined how the country would
interact economically with other regions of
the globe.
EVOLUTION OF FERA
 Foreign exchange rules were introduced by
British government under the Defense of India
rules in 1939.
 Independent India used the legislative
provisions of foreign exchange control to enact
their own Foreign Exchange Regulation Act in
1947.
OBJECTIVES OF FERA 1947
• Control the activities of multinational
companies.

• Conservation and proper utilization of foreign

exchange resources of the country.

• To control and regulate the flow of foreign

capital, technology and managerial enterprises.
• To control and regulate foreign collaborations.

FERA-1947 was
amended in 1957,1965 and more significantly
in 1973 and then in 1993
PROVISIONS OF FERA ACT 1973
 All branches of foreign companies except airlines
and shipping company seeking approval under
FERA will have to convert themselves into Indian
companies.
 A Minimum of 74% foreign shareholding will be
allowed to companies manufacturing certain items
listed in Industrial policy of 1973, companies using
sophisticated technology, tea plantations, companies
producing predominantly export oriented goods.
 A foreign shareholding exceeding 74% may be
allowed in case a company is 100% export
oriented.
 A foreign shareholding of 40 % will be
allowed for companies engaged in
manufacturing items other than those listed in
Industrial policy of 1973.
 The case of foreign share holding in case of
banking companies will be governed by the
guide lines issued by the RBI and the Banking
Department.
 Foreign shareholding in case of airlines and
shipping companies (excluded from the
section 29 of the act) will be considered and
can be treated on reciprocal basis.
CONCLUSION

 FERA was revised further in 1976 with the

objective of increasing Indian participation in
some kinds of export-oriented companies.
 FERA was replaced by the Foreign Exchange
Management Act (FEMA), which was passed
in the winter session of Parliament in 1999.
 FEMA was introduced because the FERA didn’t fit in
with post-liberalization policies. A significant change
that the FEMA brought with it, was that it made all
offenses regarding foreign exchange civil offenses, as
opposed to criminal offenses as dictated by FERA.

 The main objective behind the Foreign Exchange

Management Act (1999) is to consolidate and amend
the law relating to foreign exchange with the
objective of facilitating external