What changed
RBI has delegated compounding powers for contraventions under the new FEM (Non-Debt Instruments) Rules, 2019 and related regulations to its Regional/Sub-Offices, superseding earlier Notification No. FEMA 20(R)/2017-RB. The classification of contraventions as 'technical' has been discontinued; such cases will now be regularized with minimal compounding amounts as per the compounding matrix. Additionally, for orders on or after March 1, 2020, only summary information of compounding orders will be published on RBI's website instead of full orders.
What it means for you
RBI Regional/Sub-Offices can now handle compounding for non-debt instrument violations, speeding up resolution. The removal of 'technical' classification means even minor errors incur a minimal compounding amount as per the matrix, reducing administrative leniency. Public disclosure of summaries rather than full orders offers some privacy to applicants while maintaining transparency.
What you must do
- Update internal FEMA compliance manuals to reflect the new compounding rules for non-debt instruments.
- Train staff on the revised classification system—no more 'technical' contraventions; all attract minimal compounding amounts as per the matrix.
- Inform customers about the new summary publication format for compounding orders from March 1, 2020.
- Ensure AD Category-I banks bring this circular to the notice of all constituents and customers.
Who it affects
All Category-I Authorised Dealer Banks, Investee companies dealing with non-debt instruments, Non-resident investors in India, RBI Regional/Sub-Offices handling compounding
What is the key change in how contraventions are classified?
The 'technical' classification for FEMA contraventions has been discontinued. Previously, such cases were handled with administrative advice; now they will be regularized with a minimal compounding amount as per the compounding matrix.
How will compounding orders be published from March 2020?
For orders on or after March 1, 2020, instead of full compounding orders, RBI will publish only a summary on its website, including the applicant's name, details of contraventions, date of order, and the amount imposed.
Which regulations now govern compounding for non-debt instruments?
The FEM (Non-Debt Instruments) Rules, 2019 and FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, both dated October 17, 2019, supersede earlier notifications. Compounding powers for these are delegated to RBI Regional/Sub-Offices.