Home › Circulars › RBI/2020-21/67

FEMA Compounding: Updated Rules and Delegated Powers

Current · Source: Reserve Bank of India · RBI/2020-21/67 · issued 17 Nov 2020 · ~2 min read
Quick answerRBI has updated compounding rules for FEMA contraventions, delegating powers to regional offices for non-debt instrument violations. The 'technical' classification is discontinued; minimal compounding amounts as per the matrix now apply. Summary compounding orders will be published online for orders on or after March 1, 2020.
The rule, in the simplest words
How it plays out — a real example

Aisha, a forex & trade-finance officer in Indore, helps a customer who made a minor error in their non-debt instrument transaction. She uses the new compounding rules to resolve the issue quickly and efficiently, applying the minimal compounding amount as per the matrix. Aisha then publishes a summary of the compounding order online, maintaining transparency while protecting the customer's privacy.

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

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

❓ Common questions

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.

📜 Read the original circular — full text as issued by RBI
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(DIR Series) Circular No. 06 November 17, 2020 To All Category-I Authorised Dealer Banks Madam / Sir Foreign Exchange Management Act, 1999 (FEMA)- Compounding of Contraventions under FEMA, 1999 The attention of Authorized Dealer Category-I (AD Category-I) banks is invited to paragraph 3 of the Master Direction on “Compounding of Contraventions under FEMA, 1999” , in terms of which the powers to compound certain contraventions of Notifications FEMA 20/2000-RB dated May 3, 2000 and FEMA 20(R)/2017-RB dated November 07, 2017 have been delegated to the Regional Offices/Sub-Offices of the Reserve Bank for enhanced customer service and operational conveninece. The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 and Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 i.e. Notification No. FEMA.395/2019-RB , both notified on October 17, 2019, by Government of India and Reserve Bank of India respectively have since superseded the earlier Notification No. FEMA 20(R)/2017-RB . Accordingly, the compounding powers stand delegated to the Regional Offices/ Sub Offices of the Reserve Bank to compound the following contraventions. FEM (Non –Debt Instruments) Rules, 2019 dated October 17, 2019 Rule 2(k) read with Rule 5 Rule 21 Paragraph 3 (b) of Schedule I (Issue of shares without approval of RBI or Government, wherever required) Rule 4 (Receiving investment in India from non-resident or taking on record transfer of shares by Investee Company) Rule 9(4) and Rule 13(3) FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations dated October 17, 2019 Regulation 3.1(I)(A) Regulation 4(1) Regulation 4(2) Regulation 4(3) Regulation 4(6) Regulation 4(7) Regulation 4(11) 2. Please refer to para 3.5 of A.P. (DIR Series) Circular No. 56 dated June 28, 2010 and para 2 of A.P. (DIR Series) Circular No.11 dated July 31, 2012 with respect to the classification of a contravention under FEMA by the Reserve Bank as ‘technical’ or ‘material’ or ‘sensitive/serious in nature’. On a review it has been decided to discontinue the classification of a contravention as ‘technical’ that was dealt with by way of an administrative/ cautionary advice and regularize such contraventions by imposing minimal compounding amount as per the compounding matrix as contained in the ‘ Master Direction - Compounding of Contraventions under FEMA, 1999’ dated January 01, 2016 , as amended from time to time. 3. Please refer to para 3(I) of A.P. (DIR Series) Circular No.73 dated May 26, 2016 with respect to public disclosure of Compounding Orders. On a review and in partial modification of earlier instructions it has been decided that in respect of the Compounding Orders passed on or after March 01, 2020 a summary information, instead of the Compounding Orders, shall be published on the Bank’s website in the following format: Sr. No. Name of the Applicant Details of contraventions (provisions of the Act/Regulation/Rules compounded) Date of compounding order Amount imposed for compounding of contraventions 4. The aforesaid Master Direction No. 4 dated January 01, 2016 , as amended from time to time, is being updated to reflect the changes. AD Category - I banks should bring the contents of this circular to the notice of their constituents and customers concerned. 5. The directions contained in this circular have been issued under section 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law. Yours faithfully Ajay Kumar Misra Chief General Manager-in-Charge 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links : Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2020-21/67 · issued 17 Nov 2020. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • Train staff on the revised classification system—no more 'technical' contraventions; all attract minimal compounding amounts as per the matrix.
📜 Compliance
  • Update internal FEMA compliance manuals to reflect the new compounding rules for non-debt instruments.
  • 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.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All Category-I Authorised Dealer Banks, Investee companies dealing with non-debt instruments, Non-resident investors in India, RBI Regional/Sub-Offices handling compounding), your first concrete step on “FEMA Compounding: Updated Rules and Delegated Powers” is: “Update internal FEMA compliance manuals to reflect the new compounding rules for non-debt instruments.” (RBI issued this 17 Nov 2020).

  1. Circular: RBI/2020-21/67 -- FEMA Compounding: Updated Rules and Delegated Powers
  2. Issued: 17 Nov 2020
  3. Action required: Update internal FEMA compliance manuals to reflect the new compounding rules for non-debt instruments.
  4. Action required: Train staff on the revised classification system—no more 'technical' contraventions; all attract minimal compounding amounts as per the matrix.
  5. Action required: Inform customers about the new summary publication format for compounding orders from March 1, 2020.
  6. Action required: Ensure AD Category-I banks bring this circular to the notice of all constituents and customers.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11995&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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