FEMA Compounding Rules Updated: No Link to Past Orders
Current · Source: Reserve Bank of India · RBI/FED/2025-26/29 · issued 22 Apr 2025 · ~2 min read
Quick answerRBI has deleted the rule linking compounding amounts to earlier orders for repeat FEMA contraventions. Applicants must now provide mobile number, payment office, and submission mode to speed up processing.
The rule, in the simplest words
Banks must update their FEMA compounding guidelines to reflect the deletion of a rule linking compounding amounts to earlier orders.
Customers applying for compounding must provide their mobile number, the RBI office where payment was made, and the submission mode.
Each compounding application is treated as a fresh application, with no linkage to past orders or reduced compounding amounts for repeat violations.
How it plays out — a real example
When a customer comes to me for compounding, I need to ensure they provide their mobile number, the RBI office where they made the payment, and the submission mode. This helps us process their application faster and avoid delays. I also need to remind them to make payment to the correct RBI office and submit the application promptly to avoid any issues.
What changed
Paragraph 5.4.II.v of the October 2024 circular, which linked the compounding amount for repeat contraventions to the earlier compounding order, has been deleted. Now, repeat applicants are treated as fresh applicants with no linkage to past orders. Additionally, Part B of Annexure I now requires the applicant's mobile number, the specific RBI office where payment was made, and the mode of application submission (PRAVAAH or physical).
What it means for you
Banks and their customers will no longer face reduced compounding amounts for repeat FEMA violations, as each application is treated independently. The new data requirements aim to reduce reconciliation delays and speed up processing, but applicants must ensure correct payment routing and timely submission to avoid bottlenecks.
What you must do
Update internal FEMA compounding guidelines to reflect deletion of paragraph 5.4.II.v and the new data requirements.
Advise customers to provide mobile number, correct RBI office, and submission mode when applying for compounding.
Ensure customers make payment to the correct RBI office and submit the application promptly to avoid delays.
Train staff on the revised process to assist customers with accurate application submissions.
Who it affects
All Authorised Dealer Category-I banks, Authorised banks, Customers applying for compounding of FEMA contraventions
❓ Common questions
What happens if a customer has a previous compounding order?
The earlier rule linking the new compounding amount to the previous order is deleted. The customer is treated as a fresh applicant, and the compounding amount is calculated independently.
What additional details are now required in the compounding application?
Applicants must provide their mobile number, the specific RBI office where payment was made, and the mode of submission (PRAVAAH or physical) to help reconcile payments faster.
Why did RBI make these changes?
To address delays caused by incorrect payment routing and late application submissions, improving turnaround time for processing compounding applications.
📜 Read the original circular — full text as issued by RBI
RBI/FED/2025-26/29
A.P. (DIR Series) Circular. No 02/2025-26
April 22, 2025
To,
All Authorised Dealer Category-I banks and Authorised banks
Madam / Sir,
Amendments to Directions - Compounding of Contraventions under FEMA, 1999
Attention of Authorised Dealer (AD) Category - I banks is invited to the Guidelines for compounding of contraventions under FEMA, 1999, issued vide A.P. (DIR Series) Circular No. 17/2024-25 dated October 1, 2024 .
2. The provision contained at Paragraph 5.4.II.v of the aforesaid Circular, to link the Sum for which contravention is compounded (‘compounding amount’) payable to earlier compounding order, has been reviewed. In such cases, the applicant shall be deemed to have made a fresh application, and the compounding amount payable shall not be linked to the earlier compounding order. Accordingly, Paragraph 5.4.II.v of the A.P. (DIR Series) Circular No. 17/2024-25 dated October 1, 2024 , stands deleted.
3. Further, as per the instructions laid down in Part B of Annexure I to the aforesaid Circular, when making payment through electronic mode, applicants are required to send an email communication to the concerned office of the Reserve Bank to reconcile the application fee/compounding amount received against the compounding applications submitted.
4. However, it has been observed that in some cases applicants do not make payment to the correct office of the Reserve Bank, and/or there is a delay in submitting the compounding application after making the application fee payment. These issues create difficulties in reconciling the received amounts and lead to delays in processing compounding applications. To address these challenges and improve turnaround time for processing compounding applications, it has been decided to include the following additional details in Part B of Annexure I of the above-referred circular:
Mobile number of the applicant/ authorised representative.
Office of the Reserve Bank (i.e., Central Office, Regional Office or FED CO Cell) to which the payment was made.
Mode of submission of application (through PRAVAAH/ Physical).
5. The ‘Directions on Compounding of Contraventions under FEMA, 1999’ issued vide A.P. (DIR Series) Circular No. 17/2024-25 dated October 1, 2024 , shall accordingly be updated to reflect the above changes.
6. All AD Category-I banks and Authorised banks may bring the guidelines contained in this circular to the notice of their constituents.
Yours faithfully,
(Dr. Aditya Gaiha)
Chief General Manager in Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/FED/2025-26/29 · issued 22 Apr 2025. The plain-English explanation above is BankPulse’s own independent summary.
Ensure customers make payment to the correct RBI office and submit the application promptly to avoid delays.
Train staff on the revised process to assist customers with accurate application submissions.
📜 Compliance
Update internal FEMA compounding guidelines to reflect deletion of paragraph 5.4.II.v and the new data requirements.
Advise customers to provide mobile number, correct RBI office, and submission mode when applying for compounding.
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 Authorised Dealer Category-I banks, Authorised banks, Customers applying for compounding of FEMA contraventions), your first concrete step on “FEMA Compounding Rules Updated: No Link to Past Orders” is: “Update internal FEMA compounding guidelines to reflect deletion of paragraph 5.4.II.v and the new data requirements.” (RBI issued this 22 Apr 2025).
Circular: RBI/FED/2025-26/29 -- FEMA Compounding Rules Updated: No Link to Past Orders
Issued: 22 Apr 2025
Action required: Update internal FEMA compounding guidelines to reflect deletion of paragraph 5.4.II.v and the new data requirements.
Action required: Advise customers to provide mobile number, correct RBI office, and submission mode when applying for compounding.
Action required: Ensure customers make payment to the correct RBI office and submit the application promptly to avoid delays.
Action required: Train staff on the revised process to assist customers with accurate application submissions.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
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.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
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=12838&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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