Foreign Exchange Management Act, 1999 (“FEMA”) is a law governing Indian foreign exchange transactions. Section 13 of FEMA provides penalties in respect of contraventions committed by a person. Section 15 of FEMA empowers compounding authority to compound various contraventions committed under section 13. Accordingly, Government has notified Foreign Exchange (Compounding Proceedings) Rules, 2000, as amended from time to time laying down the process for compounding of contraventions committed under FEMA. Further, RBI has also issued Master Direction, compounding of contraventions under FEMA, 1999 (No. 4/2015-16 dated 1-1-2016), as updated from time to time laying down rules and procedures for compounding of contravention committed under FEMA.

Thus, if a person contravenes any provision of FEMA, he may approach RBI to compound the contravention committed by following prescribed procedure. After completion of compounding process, RBI passes compounding order quantifying compounding penalty to be paid by the person in respect of contravention compounded. To ensure more transparency and greater disclosure, compounding orders passed on or after June 1, 2016 are uploaded on RBI’s website (www.rbi.org.in). 

Based on the above compounding orders uploaded on RBI’s website, we have prepared summary of compounding orders for ease of reference. Our purpose of publishing the same in summarised format is to spread awareness and assist individuals and businesses in complying with provisions of FEMA.

Readers are advised to read compounding orders in light of applicable provisions, rules and regulations promulgated by RBI and Government from time to time. Since FEMA is a dynamic law, it is possible that a position taken in a particular order may not be relevant either on account of change in law or subsequent clarification from the regulator. Compounding orders have no precedence value as in case of other laws and accordingly said orders at best provides guidance on view taken by regulator. It is possible that Applicant would be asked to regularize its violation which is not reported in compounding order. Accordingly, user should undertake due diligence for each violation. 

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