Foreign exchange is the system or process of converting one national currency into another and of transferring money from one country to another.
The FERA deals with laws which relate to foreign exchange in India. The laws were made to manage foreign investments in India. The FERA has is origin at the time of Indian independence. In the beginning ,it was a temporary arrangement to control the flow of foreign exchange.In1957 that was made permanent.
In 1973, FERA was amended. FERA consists of 81 complex sections. Under FERA any offence was criminal one which included imprisonment as per code of criminal procedure,1973.
Prevent the outflow of Indian currency. To regulate dealings in foreign exchange and securities. To regulate the transaction indirectly affecting foreign exchange. To regulate import and export currency. To regulate employment of foreign nationals. To regulate acquisition, holding etc of immovable property in India by non-residents.
Regulation of dealing in foreign exchange . Restrictions on payments. Restrictions regarding assets held by non- residents and import & export of certain currency. Duty on person entitled to receive foreign exchange and payment for exported goods. Restriction on establishment of place of business in India. Restriction on immovable property.
With the advent of liberalization and privatization, approach of government towards foreign capital was not restrictive in nature. The word “management” was used in place of “regulation” FEMA replaced FERA in 1999.
FEMA was enacted in 1999 and was enforced on 1st January 2000. It is applicable to whole of India. Reasons contributing to enactment of FEMA. Liberal EXIM Policy Increased inflow of foreign investment Foreign exchange reserves had increased Commitment of government to WTO Penalty provisions of FERA were very strict
To facilitate the external trade and payment. To promote an orderly maintenance of the foreign exchange market in India. Regulation of foreign capital in India. To regulate employment business and investment of non-residents.
Dealing in foreign exchange. Full freedom to person resident in India to hold or transfer any foreign securities or immovable property situated outside India. A person resident outside India is also permitted to hold shares, securities and property acquired by him while he was resident in India. Directorate of Enforcement.
The RBI and central government would continue to be the regulatory bodies. The Directorate of Enforcement continues to be the agency for enforcement of the provisions of the law such as conducting search and seizure.
Points of Comparison FEMA-1999 FERA19731. Content There are 49 sections out There were 81 sections of which 12 section out of which 32 sections relate to operational part related to operational and rest with penal part and rest deals with provisions. penalty, appeals etc2. Nature Basically it is a civil law. It was considered as a criminal law.3. Applicability The Act applies to all The Act applied to all branches, offices and citizens of India and to branches outside India branches and agencies owned or controlled by a outsides India and to person resident in India branches and agencies outside India.4. New Terms Capital account These terms were not transactions, current defined. account transactions,
Points of Comparison FEMA-1999 FERA 19735. Penalty Limited to three times Five times at the sum the sum involved if it is involved+ imprisonment quantifiable in most of the cases.6. Object The object is to The object was to encourage external control, regulate and trade. prohibits foreign exchange transactions.7. Legal Help The complainant has a There was no provision full right to take legal for legal assistance. help from a lawyer or a chartered accountant.8. Definition of It has been extended to It was limited in case of„authorised person‟ include banks, money FERA changes etc