RBI Amends FEMA Compounding Guidelines: Removes Linkage to Past Orders, Adds New Payment Reconciliation Requirements [Read Circular]

The Reserve Bank of India (RBI) issued a circular on April 22, 2025, revising the guidelines for compounding of contraventions under the Foreign Exchange Management Act (FEMA), 1999. The circular specifically addresses issues related to the compounding process, payment reconciliation, and application submission procedures to improve efficiency and reduce delays in the processing of compounding applications.

This circular modifies earlier guidelines issued through A.P. (DIR Series) Circular No. 17/2024-25 dated October 1, 2024.

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 1. Deletion of Linkage to Earlier Compounding Orders

Previously, Paragraph 5.4.II.v of the October 1, 2024, circular allowed the compounding amount (penalty) payable to be linked to any earlier compounding order in case of repeat contraventions. This has now been deleted.

• In case of repeat contraventions, the applicant will now be treated as having filed a fresh compounding application.
• The compounding amount will be calculated independently, without linking it to previous orders.
• This ensures uniformity and clarity in determining the compounding amount for each contravention.

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2. Mandatory Information for Electronic Payment Reconciliation

RBI observed that applicants sometimes:

• Paid the compounding amount to the wrong office of the RBI, or
• Delayed submission of the compounding application after making the payment.

These issues caused problems in reconciling payments with applications and delayed the processing timeline.

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To resolve this, applicants are now required to provide the following additional details along with the payment communication:

• Mobile number of the applicant or authorized representative.
• Specific RBI office (Central Office, Regional Office, or FED CO Cell) where the payment has been made.
• Mode of application submission (whether through the PRAVAAH portal or physical submission).

This requirement is now included in Part B of Annexure I of the compounding directions.

To Read the full text of the Circular CLICK HERE

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