Foreign Exchange Management Act
FEMA is an acronym for the Foreign Exchange Management Act, 1999 and is an act of the Indian parliament. It is the regulation relating to foreign exchange, external trade and payments in the country. It replaced the earlier foreign exchange regulation law known as the FERA (Foreign Exchange Regulation Act). FERA was considered draconian while FEMA is more accommodating and intended to facilitate external trade and payments rather than control it.
The FEMA in contrast to its predecessor, makes foreign exchange-related offenses civil offenses instead of criminal. FERA had become unsuited for the government of India’s pro-liberalisation policies. FEMA allows the Reserve Bank of India and the union government to pass laws and rules concerned with foreign exchange in line with the country’s foreign trade policy.