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ARTICLE · 10 OCTOBER 2022

Uniformity In The Late Settlement Fee Across Foreign Exchange Transactions

Khaitan & Co.
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Formerly, the FEMA regulations only provided for compounding as the sole remedy for regularizing a delayed reporting, the process of which was extremely time consuming.

IndiaGovernment, Public Sector
Moin Ladha
Moin Ladha
Anusha Rao
Anusha Rao
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Background

On 30 September 2022, the Reserve Bank of India (RBI) issued a circular (LSF Circular) to bring about uniformity in the imposition of a Late Submission Fee (LSF) for reporting delays across foreign investment, external commercial borrowings (ECB) and overseas investment.

The concept of LSF was introduced by the RBI vide notification dated 7 November 2017, wherein the payment of LSF was provided as an option for applicants to regularize reporting delays in relation to foreign investment matters, without undergoing the cumbersome process of compounding. Initial notification provided that where a person responsible for making filings and submissions under the Foreign Exchange Management Act, 1999 (FEMA), fails to make the same, such reporting can be made with a late submission fee in the manner as directed by the RBI.

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