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Foreign Exchange Management Act
Foreign Exchange Management Act
Introduction
The Foreign Exchange Management Act, 1999 (FEMA) replaces
the Foreign Exchange Regulation Act (FERA). FERA was
introduced in 1974 to consolidate and amend the then existing
law relating to foreign exchange. FERA was amended in 1993 to
bring about certain changes, as a result of introduction of
economic reforms and liberalization of Indian Economy. But it
was soon realized that FERA had by and large outlived its utility
in the changed economic scenario and therefore replaced by
FEMA in 1999.
Meaning
FEMA was introduced by the Finance Minister in Lok Sabha on
August 4, 1998. The Bill aims to consolidate and amend the
law relating to foreign exchange with the objective of
facilitating external trade and payments and for promoting the
orderly development and maintenance of foreign exchange
market India. It was adopted by the parliament in 1999 and is
known as the Foreign Exchange Management Act, 1999. This
Act extends to the whole of India and shall also apply to all
branches, offices and agencies outside India owned or by a
person resident in India.
Objectives and Reasons for enactment of FEMA
FEMA was enacted to consolidate and amend the law relating to
foreign exchange with the objective of facilitating external trade
and payments and for promoting the orderly development and
maintenance of foreign exchange market in India (Preamble).
The statement of objects and reasons set the tone of the
enactment of new legislation:
i. The Foreign Exchange Regulation Act, 1973, was reviewed in
1993 and severalamendments were enacted as part of the
ongoing process of economic liberalization relating to foreign
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