FEMA act was replacement of FERA act.The Foreign Exchange Management Act (1999) or in short FEMA has been introduced as a replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA became an act on the 1st day of June, 2000. FEMA was introduced because the FERA didn’t fit in with post-liberalisation policies. A significant change that the FEMA brought with it, was that it made all offenses regarding foreign exchange civil offenses, as opposed to criminal offenses as dictated by FERA.
The main objective behind the Foreign Exchange Management Act (1999) is to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments. It was also formulated to promote the orderly development and maintenance of foreign exchange market in India.
The Foreign Exchange Management Act was passed in the winter session parliament. It was replaced in 1999 by Atal Bihari Vajpayee. Foreign Exchange Management Act(FEMA)came into force on the 1st day of June, 2000. This act was replacement of (Foreign Exchange Regulation act). This act seeks to make offense related to foreign exchange. FEMA Act seeks to make offenses related to foreign exchange civil offenses.
Foreign Exchange Management Act was introduced because the Foreign Exchange Management Act did not fit in with post-liberalisation policies. This act contains the orderly development and maintenance of foreign exchange market in India. Foreign Exchange Management act is applicable to the whole of India. It is applicable to any office, branch, which is situated outside India but controlled by a person resident in India. This act permits only authorised person to deal in foreign exchange. That means money changer, banking unit or any other person for the time being authorised by Reserve Bank of India.
Current Account Transactions: A person may sell foreign exchange to or from an authorized person if such sale is a current account transaction.
When an amount of foreign exchange is due to any person shall take all reasonable steps to realize and repatriate to India such foreign exchange in such manner as may be specified by the reserve bank.