Foreign Exchange Regulation Act

Foreign Exchange Regulation Act
Status: Repealed

The Foreign Exchange Regulation Act (FERA) was legislation passed in India in 1973 that imposed strict regulations on certain kinds of payments, the dealings in foreign exchange (forex)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.

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.

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. In 2016 December, following the RBI's demonetization, the Supreme Court of India ordered that as per FERA guidelines, no transaction amount greater than Rs. 1200 can be made through online payment gateways like PayTM. The matter was taken to court and is currently sub-judice.

FERA was repealed in 1998 by the government of Atal Bihari Vajpayee and replaced by the Foreign Exchange Management Act, which liberalised foreign exchange controls and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

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