RBI Compliance

Proposal for RBI Compounding Application

Section 13 of the FEMA Act states that if an individual contravenes any provisions mentioned in the Act or any rule, notification, regulation, order or direction issued while exercising the powers of the Act , or contravenes any condition subject to authorizations issued by the RBI, he shall be levied a penalty up to thrice the amount related to such a contravention. This amount can go to a maximum of Rs 2 lakhs, wherever the said amount is quantifiable. Whenever the amount is not quantifiable or the same is continuous in nature, the penalty may be extended to Rs 5000 per day, after the first day of the discovery of such a contravention.

In the context of law, compounding means a cordial or amicable settlement that may lead to avoiding prosecution for a past offence. However, compounding is not regarded as an intrinsic right. It is only provided/delegated by the concerned Acts of law under which the said offence has been committed.

Basic Concepts

1. As mentioned in Section 15 of the FEMA (Foreign Exchange Management Act) 1999 compounding of contraventions is permitted. It also empowers the RBI ( Reserve Bank of India) to compound as per laid down provisions of Section 13 of FEMA. However, it will exclude contraventions under section 3(a), if an application is made by the person committing the said contravention.

Besides, wherever any such contravention has been compounded, no further proceeding, continuation or initiation will be there., with respect to the contravention thus compounded.

2. Section 13 of the Act says that if an individual contravenes any provisions mentioned in the Act or any rule, notification, regulation, order or direction issued while exercising the powers of the Act , or contravenes any condition subject to authorizations issued by the RBI, he shall be levied a penalty up to thrice the amount related to such a contravention. This amount can go to a maximum of 2 lakhs, wherever the said amount is quantifiable. Whenever the amount is not quantifiable or the same is continuous in nature, the penalty may be extended to Rs 5000 per day, after the first day of the discovery of such a contravention.

3. However, by exercising the powers conferred by Section 46, along with that of Section 15, sub-section (1) of the FEMA, the Central Government has framed the Foreign Exchange (Compounding Proceedings) Rules, 2000. It relates to the compounding contraventions mentioned in Chapter IV of FEMA and has come into effect from 03.05.2020.

Documents Required for RBI Application

Good News! Just Some Basic Documents. Just See Our Checklist Below:

• Memorandum received from RBI
• All the FIRC’s & FDI report filed with RBI
• Board resolutions in respect of item 2
• FCGPR & allotment filed with RBI & ROC
• Previous compounding offences, if any
• Litigations

Procedure for RBI Compounding Application

• Preparing the compounding application and submitting to the regional office of the RBI
• Getting the order and paying the penalty with RBI