In which year did FEMA replace FERA?

Question

In which year did FEMA replace FERA?

1. A. 1990
2. B. 1998
3. C. 1994
4. D. 1999 (Correct answer)

Correct Answer

Option D — 1999

Detailed Solution & Explanation

The correct answer is 1999.

Key Points

• The Foreign Exchange Management Act (FEMA), 1999 replaced the Foreign Exchange Regulation Act (FERA), 1973, and came into force on 1 June 2000.
• The change reflected the shift in economic policy after the 1991 liberalisation: a regime built to conserve scarce foreign exchange was replaced by one intended to facilitate external trade and payments.

Additional Information

• The most consequential difference is in legal character. Under FERA a violation was a criminal offence carrying imprisonment; under FEMA it is a civil contravention attracting monetary penalty. That single change transformed how business treated foreign-exchange rules.
• FERA operated on the presumption that everything was prohibited unless permitted; FEMA reverses it, so everything is permitted unless expressly restricted.
• FEMA is administered by the Reserve Bank of India, with enforcement by the Directorate of Enforcement (ED).
• The related but distinct statute is the Prevention of Money Laundering Act (PMLA), 2002, which does carry criminal liability — FEMA and PMLA are commonly confused in questions.