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FEMA And FERA Full Form

FEMA And FERA Full Form

Edited By Team Careers360 | Updated on Feb 25, 2023 04:48 PM IST

What is Full Form of FEMA And FERA ?

The full form of FEMA is “Foreign Exchange Management Act” and the full form of FERA is the “Foreign Exchange Regulation Act”. The foreign reserve of India is very low, and to maintain a satisfactory foreign reserve, FERA was introduced in 1973. The main aim of FERA was to control foreign exchange to preserve the foreign reserve. In 1999, FEMA was introduced and it replaced FERA. Its main purpose is to manage foreign exchange to promote and facilitate growth. FEMA promotes dealing in foreign exchange to liberalize the economy and help in growth and development. FERA had a rigid approach towards foreign exchange transactions, whereas FEMA is flexible.

FEMA And FERA Full Form
FEMA And FERA Full Form

FEMA:

  • FEMA rules provide freedom to residents of India to own or transfer any kind of foreign commodity.

  • It prohibits seven types of current account transactions such as travel to Nepal or Bhutan, a person resident in Nepal or Bhutan, lottery winnings, banned magazines, football pools, sweepstakes, etc.

  • It empowered the Central Government to regulate and place limitations on payments from persons outside India, currency, and foreign security transactions.

  • It classified foreign exchange transactions into two categories- capital account and current account transactions.

FERA:

  • It is applicable to the whole of India and also to all the citizens outside India.

  • It restricted import/export of currencies.

  • It authorized the conversion of currencies as per the rates determined by the Reserve Bank of India.

  • The RBI has the power to call for information required and seize documents whenever or wherever required.

Difference Between FEMA And FERA:

  • FERA was lengthier as it had 81 sections as compared to FEMA, which had 49 sections.

  • Violation of FERA is a criminal offense, whereas FEMA is a civil offense.

  • The punishment for violation of FERA was imprisonment, whereas, for FEMA, it is either a fine or imprisonment.

  • There was no provision for IT in FERA but FEMA has this provision.

  • In FERA, RBI(Reserve Bank of India) permissions were required for any transaction, whereas FEMA does not require RBI’s approval except for forex transactions.

  • The residential status of a person in FERA was citizenship, whereas in FEMA it is based on a person’s stay which should be a minimum of 6 months.

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