FERA Full Form

FERA full form is Foreign Exchange Regulation Act. With the help of FERA, the foreign exchange reserve is conserved. To facilitate the foreign exchange and trade and payment, FEMA Act was regulated in the Indian Parliament. With the help of this act, the economic growth and development is conceptualized.

What is the Full Form of FERA?

FERA full form is Foreign Exchange Regulation Act. Earlier, FERA was an Indian law that came into effect in 1973 with the sole objective of regulating and managing the foreign exchange transactions and protecting the country’s foreign exchange resources. To control and administer the misuse and illegal activities involving foreign exchange such as unauthorized foreign currency transactions, smuggling and illegal transfers of money outside India, FERA act came into existence.

Under the ambit of FERA, stringent controls and restrictions were imposed on various aspects of foreign exchange that are punishable under the act. Few of the activities upon which the control was necessary included currency conversions, remittances, acquisitions of foreign assets and transactions involving non-residents. The act also empowered the Reserve Bank of India, known as RBI to monitor and regulate these activities. RBI is also responsible to preserve the stability of India’s external trade and maintain balance of payments.

FERA, as an act, was known to adopt for its strict enforcement measures which included provisions for heavy penalties, imprisonment, and even confiscation of assets in cases of non-compliance with the regulations and failure to abide by the policy. The act played a crucial role in shaping and developing India’s foreign exchange landscape for several decades since its inception.

However, FERA faced criticism for its complex procedures, intricate rules, stringent penalties and abrupt hindrance to the process of economic liberalization. In response to different changing economic and regulatory needs and scenarios, FERA was eventually replaced by the Foreign Exchange Management Act, known as FEMA in 2000.

Which Act was Replaced by FERA?

FEMA was established in India in 2000 to facilitate the external trade and payments.  Earlier, the FERA Act was prevalent which maintained and regulated the trade system in India. Some of the other important objectives of FEMA, full form of which is Foreign Exchange Management Act which should be studied are listed below:

• FEMA was also formulated in order to support the already recorded growth and maintain the Indian Forex market.
• The processes and procedures for all foreign exchange transactions in India are outlined and defined by FEMA.
• After the implication of FEMA, both capital account transactions and current account transactions have been listed and regularized in the classification of these foreign exchange transactions.
• According to the FEMA Act, the balance of payment is a record of transactions and statements involving goods, services and assets between citizens of various nations. The balance of payment is basically divided into two main categories: Capital Account and Current Account.

What are the Objectives of FERA?

FERA, the full form of which is Foreign Exchange Regulation Act is a legislation that came into existence in 1973 with the main purpose to regulate certain dealings and transactions involved in foreign exchange, impose certain restrictions on different kinds of payments and to monitor the transactions  the foreign dealing with the exchange as well as the import and export of currency.

Primarily, FERA prohibits all types of transactions that are not permitted by RBI. The objective of FERA was to regulate and manage certain payment dealings in foreign exchange and securities transactions. The cross-border  transactions indirectly affect foreign exchange of import and export of currency and transactions. To conserve precious foreign exchange reserves, known as forex and to optimize and administer the proper utilization of foreign exchange so as to promote the economic growth and development of the country, FERA plays a vital role.

During the time of the legislation of law, India had an acute shortage of foreign exchange reserves (forex). As a recuperative measure, the Government of India then tried to restrict the exchanges, or dealings of India with foreign countries or carrying out cross border trade to a wholesome level. But those rules and regulations certainly had a major impact on the import and export of currency and on the economy as a whole.

Difference Between FEMA and FERA

The basic and elementary difference between FEMA and FERA act are encapsulated in the table given below: