Foreign Exchange Regulation Act 1973 (FERA)
FERA was enacted in September 1973 and it came in force from January 1, 1974. It was amended by the Foreign Exchange Regulation (Amendment) Act 1993 and later in 2000, was replaced by FEMA.
- FERA applied to all citizens of India, all over India.
- The idea was to regulate the foreign payments, regulate the dealings in Foreign Exchange & securities and conservation of Foreign exchange for the nation.
Important features of FERA are as follows:
- RBI can authorize a person / company to deal in foreign exchange.
- RBI can authorize the dealers to do transact the Foreign Currencies, subject to review and RBI was given power to revoke the authorization in case of non-compliancy
- RBI would authorize the persons as Money Changers who will convert the currency of one nation to currency of their nation at rates “Determined by RBI”
- NO person, other than “authorized dealer” would enter in any transaction of the foreign currency.
- For whatever purpose Foreign exchange was required, it was to be used only for that purpose. If he feels that he cannot use the currency of that particular purpose, he would sell it to a authorized dealer within 30 days.
- No person in India, without “permission from RBI” shall make payments to a person resident outside India and receive any payment from a person from outside India.
- No person shall draw issue or negotiate any bill of exchange in which a right to receive payment outside India is created.
- No person shall make any credit in an account of a person resident out of India.
- No person except authorized by RBI shall send foreign currency out of India.
- A person who has right to receive the foreign exchange would have not to delay the receipt of the foreign exchange.
To sum up, in FERA “anything and everything” that has to do something with Foreign Exchange was regulated. The Experts called it a “Draconian Act” which hindered the growth and modernization of Indian Industries. The important aspect of FEMA, in contrast with FERA is that it facilitates Trade, while that of FERA was that it “prevented” misuse. The focus was shifted from Control to Management.