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Foreign Exchange Regulation Act,
(FERA), 1973 controls India’s foreign exchange control regime.
Comprehensive amendments have been made to FERA, especially with respect
to foreign investment, to add strength to the liberalizations announced
in the economic policies. FERA provisions that imposed restrictions on
locally incorporated companies with foreign equity holding in excess of
40 per cent (known as "FERA companies") have been removed.
Such companies are now permitted to operate in India without any special
restrictions, effectively placing them on par with wholly Indian owned
companies.
Foreign exchange controls have been substantially relaxed. Effective
from August 20, 1994, India announced its movement to Article VII status
in the IMF: the Indian Rupee is now fully convertible on the current
account. For authorized foreign investors, the Indian Rupee is already
convertible on the capital account. Full capital account convertibility
is expected in the coming years.
Although the Indian foreign exchange market is not yet fully developed,
a variety of instruments have been introduced in the recent past. The
dollar rupee forward market is very active, and firms have access to
cross-currency options.
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