EFFORTS BY – VIDUSHI

BHAVYA SETHI

Foreign Exchange transactions were earlier regulated in India by the Foreign Exchange Regulation Act, 1973.

It was widely described as a draconian and obnoxious law.

After Liberalization in 1973, some amendments to FERA were affected in 1991.

The main objective of FERA was conservation and proper utilization of the foreign exchange resources of the country.

FEMA replaced FERA in 1999.

Came into effect from Jan 1, 2000.

It extends to the whole of India and also applies to all branches , offices and agencies outside India , owned or controlled by a person resident in India.

Deals in foreign exchange under the current account by an authorised 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.

Exporters are needed to furnish their export details to RBI.

To facilitate external trade and payments. To promote the orderly development and

maintenance of Foreign exchange market .

To regulate certain payments. To regulate the dealings in foreign

exchange and securities. To regulate import and export of currency

and bullion. To regulate foreign companies. To regulate acquisition, holding etc of

immovable property by non – residents.

Section 3 of FEMA imposes restrictions on dealings in foreign exchange. Accordingly no person shall :

• Deal in any foreign exchange or foreign security with any person other than authorized person.

• Make any payment to or the credit of any person resident outside India in any manner.

• Enter into any financial transaction in India as a consideration for or in association with creation of right to acquire, any assets outside India.

• Receive otherwise through an authorized person, any payment on behalf of any person resident outside India.

FEMA permits dealings in foreign exchange through authorized persons for current account transactions.

However, the Central Government can impose reasonable restrictions in public interest.

Any person may sell or draw foreign exchange to or from an authorized person for a capital account transaction permitted by the RBI in consultation with the Central Government.

The RBI specify class or classes of capital account transaction permissible and limit up to which foreign exchange shall be allowable for such transaction.

Any kind of contravention under this act is liable to a penalty up to thrice the amount involved where it is quantifiable or up to 2 lakh where it is not quantifiable.

Further penalty may extend up to five thousand rupees for every day during the first day during which contravention continues.

In FERA there was provision for imprisonment and no limit on fine.

In FEMA a person will be liable to civil imprisonment only if he does not pay the fine within 90 days from the date of notice.

Administration of this act.

FEMA provides for the establishment of an Enforcement Directorate for investigating the contraventions under this act.

1. Anything and everything that has to do with foreign exchange was controlled .

2. Aim of FERA is to prevent misuse of Foreign Trade.

3. Theme of FERA was “Everything that is specified is under control.

4. FERA had 81 sections.

1. Only the specified acts related to foreign exchange are regulated .

2. The aim of FEMA is facilitating Trade.

3. Theme of FEMA is, “Everything other than what is expressly covered is not controlled.”

4. FEMA has only 49 sections.

Many provisions of FERA like Indians taking up employment abroad, employment of foreign technicians in India etc. have no appearance in FEMA.

With the advent of Liberalization and privatization , all these laws have undergone a tremendous change.

The provisions of MRTP Act, 1969 were amended after 1991 to make it more reform oriented and remove its provisions related to Monopolies restriction .

The FERA was totally scrapped and it gave way to FEMA. The Industries Development and regulation act 1951 had also undergone through various amendments to make way for reforms.

In short it can be said that all these laws and constitutional provisions which earlier played a regulatory role were transformed to play a facilitator role for Industrial development.