What changed
RBI delegated additional compounding powers to all Regional Offices (except Kochi and Panaji) for six specified FEMA contraventions without any upper limit on the contravention amount. Kochi and Panaji Regional Offices can compound these contraventions only if the amount is below ₹1 crore; cases above that threshold remain with CEFA, Mumbai.
What it means for you
Banks and their customers can now approach their local RBI Regional Office for compounding of common FDI-related violations like delayed reporting of share issuance or pricing guideline breaches, instead of having to go to Mumbai. This decentralization should speed up resolution and reduce compliance burden for entities in most regions, though Kochi and Panaji still face a cap.
What you must do
- Update your internal FEMA compliance manuals to reflect the expanded compounding powers at Regional Offices.
- Advise customers with pending FDI contraventions to apply to their respective Regional Office for eligible cases.
- Ensure customers understand that Kochi and Panaji offices can only handle contraventions below ₹1 crore; larger cases go to CEFA, Mumbai.
- Monitor RBI circulars for any further delegation or changes to compounding procedures.
Who it affects
All Category-I Authorised Dealer Banks, Entities with FEMA contraventions related to FDI (share issuance, pricing, instruments), RBI Regional Offices (especially Kochi and Panaji), CEFA, Mumbai
Which specific FEMA contraventions can now be compounded at Regional Offices?
Six contraventions: delay in reporting inward remittance for share issue, delay in filing FC-GPR, delay in issuing shares or refunding application money beyond 180 days, violation of pricing guidelines, issue of ineligible instruments like non-convertible debentures, and issue of shares without RBI or FIPB approval.
Is there any monetary limit for compounding at Regional Offices?
For most Regional Offices (excluding Kochi and Panaji), there is no limit. For Kochi and Panaji, the limit is below ₹1 crore; above that, cases go to CEFA, Mumbai.
When did this change take effect?
The circular was issued on April 4, 2014, and the modifications came into force with immediate effect.