Foreign Exchange Regulation Act

Foreign Exchange Regulation Act
Status: Repealed

The Foreign Exchange Regulation Act (FERA) was legislation passed in 1973 that imposed strict regulations on certain kinds of payments, the dealings in foreign exchange and securities and the transactions which had an indirect impact on the foreign exchange and the import and export of currency. The bill was formulated with the aim of regulating payments and foreign exchange.

History

FERA was passed by the Indian Parliament in 1973 by the government of Indira Gandhi and came into force with effect from January 1, 1974.

FERA was introduced at a time when foreign exchange (Forex) reserves of the country were low, Forex being a scarce commodity. FERA therefore proceeded on the presumption that all foreign exchange earned by Indian residents rightfully belonged to the Government of India and had to be collected and surrendered to the Reserve Bank of India (RBI). FERA primarily prohibited all transactions not permitted by RBI.

The objective of FERA was to regulate certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange, the import and export of currency and to conserve precious foreign exchange and to optimize the proper utilization of foreign exchange so as to promote the economic development of the country.

Coca-Cola was India's leading soft drink until 1977 when it left India after a new government ordered the company to turn over its secret formula for Coca-Cola and dilute its stake in its Indian unit as required by the Foreign Exchange Regulation Act (FERA). In 1993, the company (along with PepsiCo) returned after the introduction of India's Liberalization policy.

FERA was repealed in 1998 by the government of Atal Bihari Vajpayee and replaced by the Foreign Exchange Management Act, which liberalised foreign exchange controls and restrictions on foreign investment.