Compounding of contraventions under the Foreign Exchange
Management Act, 1999 (FEMA) is governed by the Foreign Exchange
(Compounding Proceedings) Rules, 2000 and the Reserve Bank of
India's (RBI) Master Direction on Compounding of Contraventions
under FEMA, 1999 dated 1 January 2016 (Compounding Direction). On
17 November 2020, the RBI issued a circular (RBI Circular) revising
the Compounding Direction with the aim of inter alia aligning its
provisions with the latest applicable laws, simplifying the
regulatory framework, and regulating dissemination of information
in the public domain.
The changes introduced by the RBI Circular are as follows:
- Alignment with the NDI regime: Prior to the RBI
Circular, the Compounding Direction inter alia dealt with
contraventions of the provisions under Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside India)
Regulations notified in 2000 and 2017 (FEMA 20). Since the FEMA 20
regime has been
