Foreign Exchange Regulation Act
The Foreign Exchange Regulation Act (FERA) was legislation passed by the Indian
Parliament in 1973 by the government of Indira Gandhi. It came into force with effect from January 1,
1974. FERA imposed stringent regulations on certain kinds of payments. It deals 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 purpose of the act, inter alia, was to "regulate certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency, for the conservation of foreign exchange resources of the country".
FERA was repealed in 1999 by the government of Atal Bihari Vajpayee. It replaced by the Foreign
Exchange Management Act, which liberalised foreign exchange controls and restrictions on foreign investment.
Foreign Exchange Management Act
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.• It extends to the whole of India.• FEMA, which replaced Foreign Exchange Regulation Act(FERA).• It had become the need of the hour since FERA had become incompatible with the pro-liberalisation policies of the Government of India.• FEMA has brought a new management regime of Foreign Exchange consistent with the emerging framework of the World Trade Organisation(WTO).• It is another matter that the enactment of FEMA also brought with it the Prevention of Money Laundering Act 2002, which came into effect from 1 July 2005.
Objective of F.E.R.A &F.E.MA
1) To help RBI in maintaining exchange rate stability.
2) To conserve precious foreign exchange.
3) To prevent/regulate Foreign business in India.
4) To consolidate and amend the law relating to foreign exchange with the object to facilitating external trade and payments and for promoting the foreign exchange market in India.
5) So the new law is for the management of foreign exchange instead of regulation of foreign exchange.
6) The draconian provisions were droped out in new enactment.
7) The size of the bare act got reduced to 49 sections in place of 81 sections in FERA
8) To facilitate external trade and payment
9) To promote the orderly development and maintenance of foreign exchange market
DIFFERENCE BETWEEN FERA AND FEMA
1) The objective of FERA was to conserve forex and to prevent its misuse. The objective of
FEMA is to facilitate external trade and payments and maintenance of forex market in india.
2-Violation of FERA was a criminal offence• whereas violation of FEMA is a civil offence.
3- Offences under FERA were not compoundable• Offences under FEMA are compoundable.
4- Citizenship was a criteria to determine the residential status of a person underFERA.• while stay of more than 182 days in India is the criteria to decide residential status under FEMA.
5- Almost all current account transactions are free, except a few.

FERA & FEMA• Object to conserve and • To facilitate external prevent misuse trade and payments• Violation was Criminal • Violation is a civil Offence and was non offence and is compoundable compoundable• It was a draconian • It is a civil law police law 9.
Current Account and Capital Account transactionsUnder the FEMA regime, the thrust was on regulationand control of the scarce foreign exchange, whereasunder the FEMA, the emphasis is on the managementof foreign exchange resources.Under FERA it was safe to presume that anytransaction in foreign exchange or with a non-residentwas prohibited unless it was generally or speciallypermitted.FEMA has formally recognised the distinction betweencurrent account and capital account transactions.