The Foreign Exchange Regulation Act (FERA) was passed in 1973 to strictly control foreign exchange transactions and minimize dealings in foreign exchange due to India's low foreign reserves. It assumed all foreign exchange belonged to the government. The Foreign Exchange Management Act (FEMA) replaced FERA in 1999 to relax controls and manage rather than regulate foreign exchange as India opened up. FEMA allowed more foreign capital transactions and separated current and capital account transactions, specifying permissible capital transactions.

1. Foreign Exchange
Regulation Act

2. Introduction
 The Foreign Exchange Regulation Act (FERA) :
 It was a legislation passed by the Indian Parliament in 1973 and came
into force with effect from January 1, 1974.
 FERA emphasized strict exchange control over everything that was
specified, relating to foreign exchange.
 Law violators were treated as criminal offenders.
 Aimed at minimizing dealings in foreign exchange and foreign
securities.

3. Reasons
 Low foreign exchange (Forex) reserves
 Forex is 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).
 FERA primarily prohibited all transactions, except one’s permitted by
RBI.

4. Foreign Exchange
Management Act

5. Introduction
 The FEMA was an act passed in the winter session of
Parliament in 1999 which replaced FERA
 FERA did not succeed in restricting activities. The act
would become FEMA
 To relax the control on foreign exchange in India.
 The deals in Foreign Exchange were to be ‘managed’ instead
of ‘regulated’
 The switch to FEMA shows the change on the part of the
government in terms of the foreign capital.

6. Main Features
 Dealing in foreign exchange- As per the Act no person shall-a)
deal in or transfer any foreign exchange or foreign security to any
person not being an authorized person;
b) make any payment to or for the credit of any person resident
outside India in any manner;
c) receive otherwise through an authorized person, any payment by
order or on behalf of any person resident outside India in any
manner.
d) enter into any financial transaction in India as consideration for or in
association with acquisition or creation or transfer of a right to
acquire, any asset outside India by any person.

7. Current account transactions
 Any person may sell or draw foreign exchange to or from an
authorized person if such sale or drawl is a current account
transaction:
 Provided that the Central Government may, in public interest and
in consultation with the Reserve Bank, impose such reasonable
restrictions for current account transactions as may be prescribed.

8. Capital account transactions
Subject to certain provisions, any person may sell or draw foreign exchange to
or from an authorized person for a capital account transaction.
The Reserve Bank may, in consultation with the Central Government, specify –
(a) any class or classes of capital account transactions which are permissible;
(b) the limit up to which foreign exchange shall be admissible for such
transactions:

9. Export of goods and services
Every exporter of goods shall famish to the RBI or to such other authority
the following
(a)A declaration specified
1. True and correct material particulars
2. Amount representing the value of full export of goods
3. The time of the export
4. The value which exporter having regard to the prevailing market
conditions expects to receive on the sale of the goods in a market
outside India
(b) Other information
-That may be required by RBI for the purpose of ensuring the realization
of the export proceeds by such exporter

10. Administration of the Act
 The rules regulations and norms pertaining to many sections are laid
down by RBI in consultation with central Government.
 The Act requires central Government to appoint,
Adjudicating Authorities for holding enquires related to the
contravention of the Act
one or more Special Directors (appeals) to hear appeals against the
order of the Adjudicating authorities
 Central Government shall have to establish
1. An Appellate Tribunal for foreign Exchange to hear appeals against
the order of the Adjudicating Authorities and the Special Directors
2. A Director of Enforcement with a Director and such officers or class
of officers fit for taking up investigation of the contravention under this
Act