1. By BG B-5 Batch.
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.  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.
Objectives

4. 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.

5. Example
Coca –Cola Example:
 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.

6. Foreign Exchange
Management Act

7.  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.
Introduction

8. Main Features
 FEMA gives the central government the power to impose the
restrictions.
 The transactions should be made only through an authorized person.
 Deals in foreign exchange under the current account by an authorized
person can be restricted by the central government
 Deals in foreign exchange under the current account by an authorized
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.