The origin of the Foreign Exchange Regulation Act dates back to the year of Indian independence, 1947. At that time, it was legislated as a temporary measure to regulate the inflow of foreign capital in the form of branches and concerns with the substantial non-resident interest, and the employment of foreigners and later in 1957, it was placed permanently. Gradually, there arose the need to conserve foreign exchange owing to the rapid industrialization in the country. Consequently, The Foreign Exchange Regulation Act, 1973 was passed with some important changes in the old version which contained very harsh laws. Every offence under the act was made punishable with imprisonment. Thereafter, FERA 1973 was amended in order to remove unnecessary restrictions in respect of companies registered in India and to simplify the regulations regarding foreign investment in order to attract better flow of foreign capital and investment. Finally, Foreign Exchange Management Act (FEMA) was enacted in 1999 to replace the Foreign Exchange Regulation Act, 1973. Certain provisions of the Foreign Exchange Regulation Act, 1973 still exist under the FEMA 1999, namely the provisions under Chapter 3 relating to Foreign Exchange Transactions, Chapter 4 relating to Provisions of FERA 1973 – Continued and Chapter 5 relating to Accounts of Non-Resident Banks and Inter-Bank Dealings.
