What Exactly Is The Foreign Exchange Regulation Act (FERA)?
FERA, or the Foreign Exchange Regulation Act, is a piece of legislation that was created in 1973. The Act attempts to control specific foreign exchange transactions, set limitations on specific payment methods, and keep an eye on any actions that could affect currency import and export. Since the beginning of time, banks and major organisations have been consider to be the sole owners of the foreign exchange market. Additionally, it is currently the largest market in the globe.
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It was seen to be of utmost importance to bring foreign exchange under the purview of regulation in light of the market’s growing significance, where currency gyrations might determine the fortunes of all. The Foreign Exchange Regulation Act (FERA) is a piece of legislation that was pass with the aim of regulating specific foreign exchange dealings, placing limitations on particular payment types, and keeping an eye on transactions that could affect foreign exchange and the import and export of money.
Key characteristics of FERA
The FERA was intend to conserve the nation’s foreign exchange resources and was applicable to all Indian nationals. The following are some of the act’s salient characteristics:
- RBI approval for any individual or business to engage in foreign exchange trading
- The Reserve Bank of India has granted permission to the dealers to transact in foreign currencies, subject to review & revocation in the event of non-compliance.
- Giving money changers permission to convert currencies at the rates specified by the RBI
- restrictions on currency import/export
- restriction on who can engage with the financial currency other than the authorized merchants
- the restrictions on bearer securities issues
- restrictions on owning or purchasing real estate outside of India
- Restrictions on sending or receiving money from an Indian resident abroad
- RBI’s authority to request information and seize papers anytime and wherever necessary
Comparison between FERA and FEMA
The Foreign Exchange Reserves Act (FERA), an Act of the Parliament passed in 1973 with the goal of managing and conserving India’s foreign reserves, has been expand by the Foreign Exchange Management Act (FEMA). FEMA was passed with the intention of not just regulating and facilitating foreign exchange, but also of increasing international trade and payments and growing India’s foreign exchange reserves. Unlike the previous law, which was promulgate in 1999, FEMA significantly loosen the limits on foreign investment and foreign exchange controls.
Additionally, the latter emphasized the need for the country’s forex market to be develop and managed properly. In contrast to FERA, the violation of FEMA is a punishable offence that can have its charges dropped. In addition, there are a variety of penalties for breaking FERA and FEMA rules.
Property acquisition under FERA & FEMA
Regarding the purchase of property in India, FERA and FEMA differ significantly from one another. While “citizenship” was the criterion for obtaining property under FERA, “residence” is the criterion under FEMA. This suggests that a person who is an Indian citizen could purchase property in India under the FERA regulations, but a foreign citizen could not (with the exception of NRIs). An Indian resident, however, is eligible to purchase property in India under FEMA, whereas non-residents are not. FEMA has specifically been established as a substitute for or enhancement of the previous FERA.
Additionally, in accordance with the FERA/FEMA laws, a foreign corporation with a branch office or other place of business in India may purchase immovable property in India that is incidental and ancillary to engaging in such activity.
In conclusion, the Foreign Exchange Regulation Act governed everything that had to do with foreign exchange. Even though it was passed with the greatest of intentions. The law’s extremely onerous regulations prevented the expansion of Indian industries. However, the situation quickly evolved from control to management after the creation of FEMA. Which also helped the Indian foreign exchange market flourish and be manage in an orderly manner.
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