Foreign Exchange Regulation Act (FERA)

The Foreign Exchange Regulation Act (FERA) was an act of the Parliament of India enacted in 1973 to regulate foreign exchange transactions in India. The act was replaced by the Foreign Exchange Management Act (FEMA) in 1999.

Objectives of FERA

The main objectives of FERA were to:

• Regulate the inflow and outflow of foreign exchange in India.
• Prevent the hoarding of foreign exchange.
• Promote the development of the Indian economy.

Provisions of FERA

FERA contained a number of provisions to regulate foreign exchange transactions, including:

• Restrictions on the holding of foreign exchange: Individuals and companies were prohibited from holding foreign exchange without the permission of the Reserve Bank of India (RBI).
• Compulsory surrender of foreign exchange: Exporters were required to surrender a portion of their foreign exchange earnings to the RBI.
• Restrictions on foreign investment: Foreign investment in India was subject to a number of restrictions, including limits on the amount of foreign equity that could be held in Indian companies.
• Penalties for violations: Violations of FERA were subject to a number of penalties, including fines and imprisonment.

Impact of FERA

FERA had a significant impact on the Indian economy. The act helped to stabilize the value of the Indian rupee and promote the development of the Indian economy. However, FERA was also criticized for being too restrictive and for discouraging foreign investment in India.

Replacement of FERA by FEMA

In 1999, FERA was replaced by the Foreign Exchange Management Act (FEMA). FEMA was a more liberal law that removed many of the restrictions that had been imposed by FERA. FEMA has helped to promote foreign investment in India and has contributed to the growth of the Indian economy.