RBI Compliance

Proposal for RBI Compounding Application

A violation of any provision in the FEMA Act or any rule, notification, regulation, order or direction issued while exercising its powers will result in a penalty up to thrice the amount related to such a violation. If the individual violates any condition subject to RBI authorizations, he shall be penalized. Wherever there is a quantifiable amount, this amount cannot exceed Rs 2 lakhs. It is possible to extend the penalty to Rs 5000 a day after the discovery of the contravention whenever the amount is not quantifiable or is continuous.

When it comes to the law, compounding refers to an amicable or cordial settlement that avoids prosecution for a past offence. Compounding, however, is not considered an intrinsic right. In this case, it is only provided/delegated by the relevant laws under which the offence was committed.

Basic Concepts

1. It is permissible to compound contraventions, as stated in Section 15 of the FEMA. In addition, Section 13 of FEMA provides the RBI ( Reserve Bank of India) with authority to compound. If the person who committed the contravention applies, contraventions under section 3(a) will be excluded.

The contravention, thus compounded, will not be subject to further action, continuation, or initiation.

2. According to Section 13 of the Act, any individual who violates the provisions of the Act, any rules, notifications, regulations, orders, or directions issued while exercising the powers of the Act, or violates any condition subject to RBI authorizations, can be fined up to thrice the amount of the violation. Where there is a quantifiable amount, this amount can reach a maximum of 2 lakhs. The penalty may be extended to Rs 5000 per day after the first day of discovery of such a violation if the amount isn’t quantifiable or continuous.
3. Accordingly, the Central Government has framed the Foreign Exchange (Compounding Proceedings) Rules, 2000, to exercise the powers conferred by Section 46 and Section 15, sub-section (1) of the FEMA. This rule applied to compounding contraventions listed in Chapter IV of FEMA and was enacted on 3.05.2020.

Documents Required for RBI Application

The following documents are required for RBI Application.

• Memorandum received from RBI
• All theFIRC’ss & FDI report filed with RBI
• Board resolutions in respect of item 2
• FCGPR & allotment filed with RBI & ROC
• Previous compounding offences, if any
• Litigations

Procedure for RBI Compounding Application

• Submit the duly filled compounding application to the regional office of RBI
• Receive the order from RBI and pay the prescribed penalty

Frequently Asked Questions