FERA AND FEMA

GUIDED BY : VAISHALI MAAM

Name ： HARCHAND PUROHIT

01
The Foreign Exchange Regulation Act-
enacted in 1974
• FERA emphasized strict exchange control.
• Law violators were treated as criminal offenders.
• Repealed in 1999 by govt of Atal Bihari Bajpayee.
1. To regulate dealing in foreign
exchange and securities. OBJECTIVE
2. To regulate transaction indirectly S
affecting foreign exchange.
3. To regulate import and export of
currency.
4. To regulate foreign business In India.
5. To make proper utilization of foreign
exchange.
 • Low foreign • FOREX is a scarce • FERA primarily prohibited all
exchange (FOREX) commodity transaction, except one’s permitted by
reserve RBI.

NEED TO INTRODUCE FERA

• Post liberalization, there was • Need to • Non competitive of Indian companies in
need to remove shackles of consolidate and international market.
regulatory and legal provision.. amend laws

NEED TO SCRAP FERA

02
The Foreign Exchange Management Act
The Foreign Exchange Management Act (1999) FEMA has been
introduced as a replacement for earlier Foreign Exchange Regulation
Act (FERA). FEMA came into force on the 1st day of June, 2000.
• To facilitate the external trade and
payment. OBJECTIVE
• To promote of an orderly S
maintenance of the foreign
exchange market in India. Regulation
of foreign capital in India.
• To remove imbalance of payment.
• To make strong and developed
foreign exchange market.
TO WHOM ACT IS APPLICABLE
The FEMA is applicable-

To the whole of India. Any Branch, office and agency,

which is situated outside India, but is owned or
controlled by a person resident in India.

Broadly speaking FEMA covers three different types of categories, and

deals differently with them. These categories are:
Person
Person Resident In India
Person Resident Outside India
SUBSTANTIVE PROVSIIONS.
The objective of FERA was to conserve FOREX and to prevent its misuse.

Offences under FERA were not compoundable

Citizenship was a criteria to determine the residential status of a person under FERA.

FERA VS FEMA

The objective of FEMA is to facilitate external trade and payments and maintenance of FOREX market in
India.
Whereas Violation of FEMA is a civil offence.

While stay of more than 182 days in India is the criteria to decide residential status under FEMA
CONCLUSION

• Foreign exchange “the exchange of one currency for another or the

conversion of one currency into another currency” was governed by FERA in
India, which was enacted in 1973.
• FERA was introduced at the time when FOREX reserves of the country were
very low, to deal in foreign exchange and securities and for the import and
export of currency.
• But in 90’s FERA had outlived its utility, Indian economy started facing a
crisis when foreign exchange had become a precious commodity and all that
problems discussed back. FERA was replaced by FEMA as it was an
impediment in India’s to go global in 2000.
• FEMA has brought a new management regime of Foreign Exchange. FEMA
is to consolidate and amend the law relating to foreign exchange, facilitating
external trade and payments and for promoting the orderly development and
maintenance of foreign exchange market in India.
THANK YOU