FEMA to be enforced from May 1

The new law of FEMA was introduced in Parliament in December 1999 by simultaneously repealing the 1973 FERA Act. With the enforcement of FEMA, a new management regime for foreign exchange suiting the emerging frame work of the WTO, will come into force.

The Law Ministry in the department of Legal Affairs will meanwhile issue two notifications which will pave the way for dismantling of the office of the FERA appellate board, and in place constitute the FEMA appellate board. Its complementary law, to be known as Money Laundering Act, is yet to be passed by Parliament. It is pending passage in the Rajya Sabha after getting the nod from the Lok Sabha.

These two laws will be administered by the department of revenue in the Finance Ministry with the help of the Enforcement Directorate and FEMA board.

The spirit of FEMA is in keeping with prevailing market forces and the law has been designed to ultimately delink rupee from the clutches of the Reserve Bank of India for its linking with hard currency worldwide.

It will function under market mechanism where purchasing power of the rupee is evaluated day to day. While FEMA is soft and in tune with opening up of the Indian economy to the world economy, Money Laundering Bill is regarded as the harsher part dealing with more heinous crimes.

The two together are to replace the draconian FERA.