Presentation

on
Fera and Fema
 FOREIGN EXCHANGE REGULATION ACT,
1973

An Act to consolidate and amend the law regulating

certain payments, dealings in foreign exchange and
securities, transactions indirectly affecting foreign
exchange and the import and export of currency, for the
conservation of the foreign exchange resources of the
country and the proper utilization thereof in the interests
of the economic development of the country.
 Foreign Exchange Management Act (FEMA)

Abstract:
The government of India has formulated the Foreign
Exchange Management Act (FEMA), which relates
to the foreign direct investment in the country.
Foreign Exchange Management Act (FEMA) has
helped the country by encouraging external payment
and trade.
 Formulation of Foreign Exchange
Management Act (FEMA):

In 1999, the Indian government formulated the Foreign Exchange

Management Act (FEMA).

The 1st of June, 2000, FEMA came into force replacing the
Foreign Exchange Regulation Act (FERA), which was formulated
in 1973. Extensive economic reforms were undertaken in India in
the early 1990s and this led to the deregulation and liberalization of
the country's economy. Foreign Exchange Management Act
(FEMA) was thus formulated in order to be compatible with the
policies of pro- liberalization of the Indian government.
 Extent of Foreign Exchange Management Act
(FEMA):

Foreign Exchange Management Act (FEMA) is applicable

to the entire country. Agencies, branches, and offices,
outside India, that are owned by Indian residents, also fall
under the jurisdiction of this act. Foreign Exchange
Management Act (FEMA) also extends to any dispute that
are committed in offices, agencies and branches outside
India that are owned by individuals covered by this act.
 Objectives of Foreign Exchange Management Act
(FEMA):

Among the various objectives of the Foreign Exchange

Management Act (FEMA), an important one is to revise
and unite all the laws that relate to foreign exchange.
Further FEMA aims to promote foreign payments and
trade in the country. Another important objective of the
Foreign Exchange Management Act (FEMA) is to
encourage the orderly maintenance and development of
the foreign exchange market in India.
Implementation of Foreign Exchange Management
Act (FEMA):

Extensive efforts have been undertaken to ensure the

effective implementation of FEMA in India. Proper
implementation measures and efficient supervision are
important preconditions for the success of the Foreign
Exchange Management Act (FEMA).
 How different is FEMA from FERA?

FERA was introduced at a time when foreign exchange (forex)

reserves of the country were low, forex being 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) expeditiously.

It regulated not only transactions in forex, but also all financial

transactions with non-residents. FERA primarily prohibited all
transactions, except to the extent permitted by general or specific
permission by RBI.
Contd…

Violation of FERA was a criminal offence.

FEMA are not regarded as criminal offences and only invite

penalties, not prosecution and imprisonment.

FEMA now codifies in the legislation and rules itself various

transactions, which had been permitted by notification under
FERA. Under FEMA, all current account transactions in forex
(such as expenses, which are not for capital purposes) are
permitted, except to the extent that the Central Government
notifies. However, so far as capital account transactions are
concerned, all capital account transactions in forex are
prohibited, except to the extent as may be notified by RBI.
Thank You

By:
Va i b h a v K a p o o r