Question : The Foreign Exchange Management Act (FEMA) replaced which earlier act?
Option 1: Foreign Exchange Regulation Act (FERA)
Option 2: Foreign Investment Promotion Board (FIPB)
Option 3: Industrial Development and Regulation Act (IDRA)
Option 4: Companies Act
Correct Answer: Foreign Exchange Regulation Act (FERA)
Solution : The correct answer is (a) Foreign Exchange Regulation Act (FERA).
The Foreign Exchange Regulation Act (FERA) was enacted in 1973 in India to regulate foreign exchange transactions, currency dealings, and related matters. FERA imposed strict controls on foreign exchange transactions, including restrictions on the possession, holding, and transfer of foreign currency. It aimed to conserve and manage India's foreign exchange reserves and prevent illegal activities such as money laundering and unauthorized foreign exchange dealings.
FEMA replaced FERA and brought significant changes to the regulatory framework for foreign exchange transactions in India. It aimed to promote external trade and payments, facilitate foreign investments, and simplify the procedures for foreign exchange transactions. FEMA introduced a more liberal and transparent regime, allowing greater flexibility in foreign exchange transactions and reducing bureaucratic controls.
