Twin Bills to replace FERA

NEW DELHI, Aug 4: The much awaited bills to replace FERA were finally introduced in the Lok Sabha by Finance Minister Yashwant Sinha toda...

NEW DELHI, Aug 4: The much awaited bills to replace FERA were finally introduced in the Lok Sabha by Finance Minister Yashwant Sinha today. The Foreign Exchange Management Act FEMA and the Money Laundering Prevention Act MLPA will together put in place forex regulations which are in keeping with a liberalised atmosphere, at the same time updating the rules to check money laundering activities.

Introducing the twin bills, Sinha said that in view of the changed economic scenario, the Government had sought to repeal FERA and replace it with FEMA.The main objective of FEMA was to promote foreign trade and payments and orderly development of foreign exchange markets in the country, Sinha said in the statement of objects and reasons of the Bill.

Under FEMA, the key powers will rest with the Reserve Bank of India and not the Enforcement Directorate. All foreign exchange offences will be brought under the purview of the civil law and subject to only monetary penalties. The RBI will be made the sole monitoringagency for all capital account transactions.

The Bill also states that the existing cases will continue to be tried under FERA, which means that probes into cases such as ITC and Shaw Wallace will continue under the previous Act.

This clause was introduced to dispel the notion that FERA was being changed to suit certain business houses which were being hauled up by the Enforcement Directorate. Under FEMA, the RBI will appoint authorised persons to deal in foreign currency and securities and will also be responsible for regulating these dealers. It will classify the types and limits of capital account transactions.

Under FEMA, a person resident in India may hold, own, transfer or invest in foreign currency, security or immovable property outside India if this was acquired when he was resident outside India or had inherited it from someone resident outside India. The reverse is permissible for a person resident outside India. He can hold and transact property or Indian currency if acquired when residentin India or if inherited from a person resident in India.

The proposed MLPA is the stricter of the two acts. It will view money laundering as a cognizable and non-bailable offence. Money laundering has been described as any offence under the Indian Penal Code, Immoral Traffic Prevention Act, Arms Act, Narcotic, Drugs and Psychotropic Substances Act and the Prevention of Corruption Act. The MLPA will be activated for transactions above a certain level to be specified by the Government. Any person who commits this crime will be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and will also be liable to a fine of up to Rs 5 lakh.