EFFORTS BY

VIDUSHI
BHAVYA SETHI
Foreign Exchange transactions were earlier
regulated in India by the Foreign Exchange
Regulation Act, 1973.

It was widely described as a draconian and
obnoxious law.

After Liberalization in 1973, some amendments to
FERA were affected in 1991.

The main objective of FERA was conservation and
proper utilization of the foreign exchange resources
of the country.
FEMA replaced FERA in 1999.

Came into effect from Jan 1, 2000.

It extends to the whole of India and also
applies to all branches , offices and
agencies outside India , owned or
controlled by a person resident in India.
Deals in foreign exchange under
the current account by an authorised
person.
Can be restricted by the Central
Government, based on public interest.
The RBI is empowered by this Act to
subject the capital account transactions to
a number of restrictions.
Exporters are needed to furnish their
export details to RBI.
To facilitate external trade and payments.
To promote the orderly development and
maintenance of Foreign exchange market .
To regulate certain payments.
To regulate the dealings in foreign exchange
and securities.
To regulate import and export of currency and
bullion.
To regulate foreign companies.
To regulate acquisition, holding etc of
immovable property by non residents.

Section 3 of FEMA imposes restrictions on
dealings in foreign exchange. Accordingly
no person shall :
Deal in any foreign exchange or foreign security with
any person other than authorized person.
Make any payment to or the credit of any person
resident outside India in any manner.
Enter into any financial transaction in India as a
consideration for or in association with creation of right
to acquire, any assets outside India.
Receive otherwise through an authorized person, any
payment on behalf of any person resident outside
India.

FEMA permits dealings in foreign
exchange through authorized persons for
current account transactions.

However, the Central Government can
impose reasonable restrictions in public
interest.
Any person may sell or draw foreign
exchange to or from an authorized
person for a capital account transaction
permitted by the RBI in consultation with
the Central Government.

The RBI specify class or classes of
capital account transaction permissible
and limit up to which foreign exchange
shall be allowable for such transaction.
Any kind of contravention under this act is
liable to a penalty up to thrice the amount
involved where it is quantifiable or up to 2
lakh where it is not quantifiable.

Further penalty may extend up to five
thousand rupees for every day during the first
day during which contravention continues.

In FERA there was provision for imprisonment
and no limit on fine.
In FEMA a person will be liable to civil
imprisonment only if he does not pay the
fine within 90 days from the date of notice.

Administration of this act.

FEMA provides for the establishment of an
Enforcement Directorate for investigating
the contraventions under this act.
1. Anything and everything
that has to do with foreign
exchange was controlled .

2. Aim of FERA is to prevent
misuse of Foreign Trade.

3. Theme of FERA was
Everything that is
specified is under control.


4. FERA had 81 sections.
1. Only the specified acts
related to foreign
exchange are regulated .

2. The aim of FEMA is
facilitating Trade.

3. Theme of FEMA is,
Everything other than
what is expressly covered
is not controlled.

4. FEMA has only 49
sections.
Many provisions of FERA like Indians
taking up employment abroad,
employment of foreign technicians in India
etc. have no appearance in FEMA.
With the advent of Liberalization and
privatization , all these laws have
undergone a tremendous change.

The provisions of MRTP Act, 1969 were
amended after 1991 to make it more
reform oriented and remove its provisions
related to Monopolies restriction .
The FERA was totally scrapped and it
gave way to FEMA. The Industries
Development and regulation act 1951 had
also undergone through various
amendments to make way for reforms.

In short it can be said that all these laws
and constitutional provisions which earlier
played a regulatory role were transformed
to play a facilitator role for Industrial
development.