Foreign Exchange Regulation Act, 1973 (FERA)
[As amended by the Foreign Exchange Regulation (Amendment) Act, 1993] FERA was an Act implemented to regulate foreign exchange and foreign securities dealings. The main objective of FERA was the conservation of foreign exchange resources of India and their proper utilisation for better economic development of the nation.
An Act to consolidate and amend the law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency, for the conservation of the foreign exchange resources of the country and the proper utilisation thereof in the interests of the economic development of the country.
The main provisions of this Act were:
Restrictions on Dealing in Foreign Exchange
FERA imposed restrictions on every dealing involving foreign exchange. No dealing in foreign exchange was permitted unless allowed by the RBI. Under Section 8, except with the previous general or special permission of the Reserve Bank, no person, other than an authorised dealer, could deal in India. Also, no person residing in India, other than an authorised dealer, could outside India, purchase or otherwise acquire, borrow from, sell, transfer or exchange with any person who not is an authorised dealer, any foreign exchange.
Restrictions on Payments in Foreign Currency
FERA imposed restrictions on making payments in foreign currency. Under Section 9, any
remittance into India from abroad could be made only through an authorised dealer unless
the Reserve Bank of India gave a special or general permission to the contrary.
Payment for Exported Goods
The Act required all exporters to furnish to the prescribed authority (RBI), a declaration in
the prescribed form (Form GR) declaring the full export value of the goods
or if the full export value of the goods is not ascertainable at the time of export, the value
which the exporter, having regard to the prevailing market conditions, expects to receive on
the sale of goods in the overseas market.
The exporter also had to affirm in the said declaration that the full export value of the
goods has been, or will (within the prescribed period) be, paid in the prescribed manner.
The Act placed restrictions on import and export of certain currency, payment for
lease, hire or other arrangement, export and transfer of securities. Besides, the Act also
provided for Authorised Dealers and Moneychangers in foreign exchange.
This Act was too strict and its provisions seemed to strangulate the users, as all violations
under it were treated as criminal offenses. The Act was replaced with another more liberal
and reasonable Act, known as Foreign Exchange Management Act (FEMA), in the year
1999.