JVIRAHYAS@GMAIL.

COM
FOREIGN EXCHANGE MANAGEMENT ACT 1999
The Foreign Exchange Management Act (FEMA) replaced the Foreign Exchange Regulation Act, 1973 (FERA) in 2000. It was necessary and a reflection both of changing times and the perceptions of people. The fundamental difference was that any offense under FERA was a criminal offense liable to imprisonment, whereas FEMA seeks to make offenses relating to foreign exchange civil offenses. Unlike other laws where everything is permitted unless specifically prohibited, under FERA, nothing was permitted unless specifically permitted. The tenor and tone of the Act was therefore fierce. It provided for imprisonment for even a minor offense. Under FERA, a person was presumed guilty unless he proved himself innocent. It served a purpose which was to preserve and conserve foreign exchange. With liberalization, it became necessary to be unshackled from the severity of FEMA. Liberal regulations were required and FEMA was enacted to replace FERA. FEMA extends to the whole of India. It also applies to all branches, offices and agencies outside India owned or controlled by a person resident in India and also to any contravention thereunder committed outside India by any person to whom the Act applies. In essense while FERA concentrated on not parting with foreign exchange, FEMA focuses on the management of foreign exchange and on attracting foreign exchange to the country. As bankers how has FEMA affected us? The main issue is that while earlier licenses and permits were required to make remittances, in most instances nothing is needed. Authorised dealers (bankers) are permitted to, on receipt of an application, disburse foreign exchange in most instances. The amounts that may be remitted are detailed separately for Residents and Non Residents.