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Ministry of Finance has notified new rules for compounding under FEMA.

 These new rules supersede the 24 year old Foreign Exchange (Compounding Proceedings) Rules and aims to make the process of compounding contraventions under FEMA more efficient.


- Under new rules, threshold for compounding has been raised. Now for a sum that is not more than 60 lakhs, RBI Asst. General Manager has the authority (earlier this threshold was 10 lakhs) and Deputy General Manager will handle cases upto 2.5 crores.

General Manager RBI will handle cases upto Rs. 5 crores (earlier it was 40 lakh to 1 crore) and Chief General Manager RBI will handle cases above Rs. 5 crore.

- Compounding order can be passed upto 180 days from receiving application and such fees can be paid via NEFT and RTGS (earlier payments could only be done through demand draft)

- Application fees have been increased from Rs. 5,000 to Rs. 10,000 + GST

 - The rule does not apply to contraventions committed within three years of a similar previously compounded contravention.

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