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    06) Fema & Fera

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    Nishil Desai
    The Foreign Exchange Regulation Act (FERA) was passed in 1973 to regulate foreign exchange transactions and conserve India's foreign exchange reserves. It imposed strict controls on payments, foreign exchange dealings, and transactions indirectly impacting foreign exchange. Coca-Cola left India in 1977 after being required to share its formula and dilute ownership under FERA. FERA was replaced in 1999 by the Foreign Exchange Management Act (FEMA), which liberalized restrictions and aimed to manage rather than regulate foreign exchange transactions. Unlike FERA, FEMA defined terms, made offenses civil rather than criminal, and decreased penalties.

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    06) Fema & Fera

    Uploaded by

    Nishil Desai
    57 views17 pages
    The Foreign Exchange Regulation Act (FERA) was passed in 1973 to regulate foreign exchange transactions and conserve India's foreign exchange reserves. It imposed strict controls on payments, foreign exchange dealings, and transactions indirectly impacting foreign exchange. Coca-Cola left India in 1977 after being required to share its formula and dilute ownership under FERA. FERA was replaced in 1999 by the Foreign Exchange Management Act (FEMA), which liberalized restrictions and aimed to manage rather than regulate foreign exchange transactions. Unlike FERA, FEMA defined terms, made offenses civil rather than criminal, and decreased penalties.

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    06) FEMA & FERA

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    The Foreign Exchange Regulation Act (FERA) was passed in 1973 to regulate foreign exchange transactions and conserve India's foreign exchange reserves. It imposed strict controls on payments, foreign exchange dealings, and transactions indirectly impacting foreign exchange. Coca-Cola left India in 1977 after being required to share its formula and dilute ownership under FERA. FERA was replaced in 1999 by the Foreign Exchange Management Act (FEMA), which liberalized restrictions and aimed to manage rather than regulate foreign exchange transactions. Unlike FERA, FEMA defined terms, made offenses civil rather than criminal, and decreased penalties.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    57 views17 pages

    06) Fema & Fera

    Uploaded by

    Nishil Desai
    The Foreign Exchange Regulation Act (FERA) was passed in 1973 to regulate foreign exchange transactions and conserve India's foreign exchange reserves. It imposed strict controls on payments, foreign exchange dealings, and transactions indirectly impacting foreign exchange. Coca-Cola left India in 1977 after being required to share its formula and dilute ownership under FERA. FERA was replaced in 1999 by the Foreign Exchange Management Act (FEMA), which liberalized restrictions and aimed to manage rather than regulate foreign exchange transactions. Unlike FERA, FEMA defined terms, made offenses civil rather than criminal, and decreased penalties.

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    of 17

    Chapter

    FEMA & FERA


    • The Foreign Exchange Regulation Act (FERA)
    was legislation passed by the Indian
    Parliament in 1973 by the government
    of Indira Gandhi and came into force with
    effect from January 1, 1974.
    • FERA imposed stringent regulations on
    certain kinds of payments, the dealings in
    foreign exchange and securities and the
    transactions which had an indirect impact on
    the foreign exchange and the import and
    export of currency
    • The bill was formulated with the aim of
    regulating payments and foreign exchange.
    • Coca-Cola was India's leading soft drink until
    1977 when it left India after a new
    government ordered the company to turn
    over its secret formula for Coca-Cola and
    dilute its stake in its Indian unit as required by
    the Foreign Exchange Regulation Act (FERA).
    • In 1993, the company (along with PepsiCo)
    returned after the introduction of India's
    Liberalization policy.
    • FERA was repealed in 1999 by the
    government of Atal Bihari Vajpayee and
    replaced by the Foreign Exchange
    Management Act, which liberalised foreign
    exchange controls and restrictions on foreign
    investment.
    • 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).
    OBJECTIVES OF FERA
    • To regulate certain payments.
    • To regulate dealings in foreign exchange and
    securities.
    • To regulate transactions, indirectly affecting
    foreign exchange.
    • To regulate the import and export of
    currency.
    • To conserve precious foreign exchange.
    • The proper utilization of foreign exchange so
    as to promote the economic development of
    the country.
    • The Foreign Exchange Management
    Act (FEMA) was an act passed in the winter
    session of Parliament in 1999 which
    replaced Foreign Exchange Regulation Act.
    • This act seeks to make offenses related to
    foreign exchange civil offenses.
    • The enactment of FEMA also brought with it
    the Prevention of Money Laundering
    Act 2002, which came into effect from 1 July
    2005.
    • Unlike other laws where everything is
    permitted unless specifically prohibited,
    under this act everything was prohibited
    unless specifically permitted.
    • FERA did not succeed in restricting activities,
    especially the expansion of TNCs
    (Transnational Corporations).
    • The deals in Foreign Exchange were to be
    ‘managed’ instead of ‘regulated’.
    • Unlike other laws where everything is
    permitted unless specifically prohibited,
    under this act everything was prohibited
    unless specifically permitted.
    • FERA did not succeed in restricting activities,
    especially the expansion of TNCs
    (Transnational Corporations).
    • The deals in Foreign Exchange were to be
    ‘managed’ instead of ‘regulated’.
    • Citizenship was the criteria for residential
    status under FERA.
    • Number of 182 days stay in India is the
    criteria for residential status under FEMA.
    • FERA consisted of 81 sections, and was more
    complex.
    • FEMA is much simple, and consist of only 49
    sections.
    • Terms like Capital Account Transaction,
    current Account Transaction, person, service
    etc. were not defined in FERA.
    • Terms like Capital Account Transaction,
    current account Transaction person, service
    etc., have been defined in detail in FEMA.
    • Any offence under FERA, was a criminal
    offence , punishable with imprisonment as
    per code of criminal procedure, 1973.
    • Under FEMA, the offence is considered to be
    a civil offence only punishable with some
    amount of money as a penalty. Imprisonment
    is prescribed only when one fails to pay the
    penalty.
    • The monetary penalty payable under
    FERA, was nearly the five times the amount
    involved.
    • Under FEMA the quantum of penalty has
    been considerably decreased to three times
    the amount involved.

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