On April 22, 2025, RBI issued A.P. (DIR Series) Circular. No 02/2025-26 (“Circular 02/2025-26”), followed by A.P. (DIR Series) Circular. No 04/2025-26 on April 24, 2025 (“Circular 04/2025-26”), addressed to Authorised Dealer Category-I banks and other Authorised banks. These circulars amend the compounding directions under FEMA, 1999, with the objective to streamline the compounding process, enhance payment reconciliation, and minimizing delays in the processing of applications.
Here are the key amendments:
- Compounding Amount for Reapplicants: Under A.P. (DIR Series) Circular No. 17/2024-25 dated October 1, 2024, if an applicant failed to pay the compounding amount pursuant to a previous compounding order and reapplied for the same transaction, the compounding amount could be increased by 50%. This provision has now been deleted by Circular 02/2025-26. Going forward, such cases will be treated as fresh applications, and the compounding amount will not be linked to the earlier order.
- Payments Reconciliation: Applicants making electronic payments are required to email to the concerned RBI office for reconciling the application fee or compounding amount with their submitted applications. To address delays caused by incorrect payments or delayed submissions, RBI has introduced additional fields in Part B of Annexure I which are as follows:
- Mobile number of the applicant or 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 submission).
- Capping of Compounding Amount: The compounding amount for contraventions under row 5 of the computation matrix of the directions i.e. for other non- reporting contraventions may now be capped at INR 2,00,000 per regulation/rule. This cap is subject to the compounding authority’s satisfaction, taking into account the nature of the contravention, exceptional circumstances, and considerations of public interest.
*The circulars from the RBI can be accessed through the following link:
- Circular 02/2025-26 – https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12838&Mode=0
- Circular 04/2025-26 – https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12842&Mode=0
