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The Reserve Bank of India (RBI) has introduced a key amendment to its compounding framework under the Foreign Exchange Management Act (FEMA), 1999. As per A.P. (DIR Series) Circular No. 04/2025-26, the central bank has decided to cap the maximum compounding amount at ₹2,00,000 per regulation/rule for specific contraventions, under certain conditions. The amendment, effective immediately, will be incorporated as Para 5.4.II.vi in the Master Directions on Compounding of Contraventions, updated mo
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FAQ :
The maximum penalty for certain FEMA contraventions has been capped at £2,00,000 per regulation or rule.
The Reserve Bank of India (RBI) has announced these revised rules.
The amendment is effective immediately.
These compounding rules fall under the Foreign Exchange Management Act (FEMA), 1999.
The cap applies subject to the compounding authority's satisfaction, based on the nature of the contravention, exceptional circumstances, and in the wider public interest.
This penalty cap specifically relates to contraventions categorised under row 5 of the computation matrix used for determining penalties.
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