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Statement of Objects and Reasons.-The Foreign Exchange Regulation Act, 1947 (7 of 1947) was originally enacted as a temporary measure; it was placed permanently on the Statute Book by Act 39 of 1957. There have been several amendments to the Act since then.

In the light of experience gained during the last several years, the Directorate of Enforcement and the Reserve Bank of India have suggested and the Government agreed on the need for regulating, among other matters, the entry of foreign capital in the form of branches and concerns with substantial non-resident interest in them, the employment of foreigners in India, etc.

The report of a study team appointed by the Government on the recommendation of the Public Accounts Committee in its 56th Report of 1968 to study the question of "Leakage of Foreign Exchange through Invoice Manipulation " was received in June, 1971. The 47th Report of the Law Commission on the "Trial and Punishment of Social and Economic Offences " was also received in April, 1972. These reports have been taken into consideration and the present Bill has been drafted with the object of introducing the changes felt necessary for the effective implementation of Government's policy and removing the difficulties which have been experienced in working of the Act.

The notes on clauses explain in detail the various provisions contained in the Bill.

Amendment Act 29 of 1993-Statement of Objects and Reasons.-In view of the major changes introduced in the Indian economy and the liberalisation of industrial and trade policies, consistent with the fast-changing international economic and trade relations, it has become necessary to create a better and more conducive climate for increased inflow of foreign investment and capital in the country to accelerate industrial growth and promotion of trade, especially exports.

(2) When the Foreign Exchange Regulation Act, 1973 was enacted certain special restrictions were introduced in regard to foreign investments and activities of individuals and concerns in India having non-resident interest. While it is necessary to continue to regulate the activities of foreign companies or branches of such companies and foreign citizens in India, the special restrictions need to be removed in respect of companies registered in India, and the regulations in regard to foreign investment need to be simplified to attract better flow of foreign capital and investment. Accordingly, it has become necessary to remove unnecessary restrictions and also simplify the procedure.

(3) Experience gained over the years in the administration of the aforesaid Act has shown certain provisions, meant to deal with emergencies of different kinds, are no longer relevant and require to be removed for improving the climate for investment in India. It is also proposed, inter alia, to prescribe a fee for appeals before the Appellate Board under the Act and also to enlarge the pecuniary jurisdiction of a member of that Board. The punishment prescribed in section 58 is also proposed to be increased. It is necessary to empower the Reserve Bank to impose penalties on the authorised dealers for effective monitoring and ensuring compliance of its directions.

(4) The Foreign Exchange Regulation (Amendment) Bill, 1992 to achieve the aforesaid objects was circulated in Lok Sabha in the Winter Session of Parliament but could not be introduced. As it was necessary to take immediate action and as Parliament was not in session, the President promulgated the Foreign Exchange Regulation (Amendment) Ordinance, 1993 on the 8th January, 1993.

(5) The Bill seeks to replace the aforesaid Ordinance and also seeks to achieve the aforesaid objectives.

[19th September, 1973]

An Act to consolidate and amend the law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency [* * *] [ The words " and bullion " omitted by Act 29 of 1993, Section 2 (w.e.f. 8.1.1993).], for the conservation of the foreign exchange resources of the country and the proper utilisation thereof in the interests of the economic development of the country.

Be it enacted by Parliament in the Twenty-fourth Year of the Republic of India as follows:-

Brought into force on 1.4.1974 vide S.O. 3043, dated 27.10.1973.