FERA TO FEMA

Objectives To facilitate external trade and payments To promote the orderly development and maintenance of foreign exchange market.

Main Features - Activities such as payments made to any person outside India or receipts from them, along with the deals in foreign exchange and foreign security is restricted. It is FEMA that gives the central government the power to impose the restrictions. - Restrictions are imposed on people living in India who carry out transactions in foreign exchange, foreign security or who own or hold immovable property abroad. - Without general or specific permission of the Reserve Bank of India, FEMA restricts the transactions involving foreign exchange or foreign security and payments from outside the country to India – the transactions should be made only through an authorized person.Reserve Bank of India

- Deals in foreign exchange under the current account by an authorized person can be restricted by the Central Government, based on public interest. - Although selling or drawing of foreign exchange is done through an authorized person, the RBI is empowered by this Act to subject the capital account transactions to a number of restrictions. - People living in India will be permitted to carry out transactions in foreign exchange, foreign security or to own or hold immovable property abroad if the currency, security or property was owned or acquired when he/she was living outside India, or when it was inherited to him/her by someone living outside India.

- Exporters are needed to furnish their export details to RBI. To ensure that the transactions are carried out properly, RBI may ask the exporters to comply to its necessary requirements.

FERA VS FEMA – FERA consists of 81 complex sections, while FEMA has only 49 which are relatively simpler. – Some terms like Capital Account Transaction, current Account Transaction, person, service etc were not defined at all in FERA while they have been defined in detail in FEMA. – Definition of “Authorized person” as per FERA was limited while in FEMA it has been extended to include money changes, off shore banking Units etc.

– Under FERA, any offence was a criminal one which included imprisonment as per code of criminal procedure, Under FEMA, offence is treated as civil offence. A penalty has to be paid in terms of money and imprisonment is only for those people who do not pay the penalty. – The amount of money paid as penalty was quite large in FERA. It was five times the amount involved. In FEMA, the amount has been considerably reduced to three times the amount involved.

– Any appeal against the order of "Adjudicating office", before Foreign Exchange Regulation Appellate Board went before High Court. The appellate authority under FEMA is the special Director (Appeals). Appeal against the order of Adjudicating Authorities and special Director (appeals) lies before "Appellate Tribunal for Foreign Exchange”. An appeal from an order of Appellate Tribunal would lie to the High Court. – FERA does not have any provision for the complainant to take any legal help whereas FEMA clearly recognizes the right of the complainant to take help from a lawyer or a chartered accountant. – With FERA, police officers (Deputy Superintendent of Police and above rank officers) were granted extensive powers of search and seizure while FEMA has restricted the power to a great extent.