The Ministry of Finance (Department of Economic Affairs) issued the Foreign Exchange (Compounding Proceedings) Rules, 2024 (“Rules 2024”) on September 12, 2024, thereby superseding the Foreign Exchange (Compounding Proceedings) Rules, 2000 (“Rules 2000”).
The primary objective of the new Rules 2024 is to enhance the efficiency of compounding contraventions under the Foreign Exchange Management Act, 1999 (“the Act”) by streamlining regulatory compliance and promoting greater transparency.
Below is a summary of the key amendments introduced in the Rules 2024 as compared to the Rules 2000:
| Sr No | Particulars | Rules 2024 | Rules 2000 | ||||
| Sr.no | Quantum of contravention | Rank of officer of Reserve Bank | Sr.no | Quantum of contravention | Rank of officer of Reserve Bank | ||
| 1 | Compounding authority | a) | Upto INR 60 Lakh | Assistant General Manager | a) | Less than or equal to INR 10 Lakh | Assistant General Manager |
| b) | Upto INR 2.5 Crore | Deputy General Manager | b) | More than INR 10 lakh but less than INR 40 Lakh | Deputy General Manager | ||
| c) | Upto INR 5 Crore | General Manager | c) | INR 40 Lakh or more but less than INR 100 Lakh | General Manager | ||
| d) | Above INR 5 Crore | Chief General Manager | d) | INR 100 Lakh or more | Chief General Manager | ||
| 2 | Application fees | Indian Rupees Ten Thousand plus goods and service tax, as applicable (INR 10,000 + GST) | Indian Rupees Five Thousand (INR 5,000) | ||||
| 3 | Mode of payment of fees or penalty | The payments could be made through following mode: a) Demand draft; orb) National electronic fund transfer (“NEFT”); orOther permissible electronic or online modes. | The payment could be made by demand draft only. | ||||
It is important to note that any compounding applications pending before the authority as of the commencement date, i.e., September 12, 2024, will continue to be governed by the provisions of the Rules 2000.
The Rules 2024 represent a significant step forward in simplifying the compounding process under the Act, aligning it with modern electronic payment methods and raising application fees. These changes are expected to reduce delays and increase procedural transparency. However, for any pending applications, the provisions of the superseded Rules 2000 will remain applicable, ensuring a smooth transition to the new regulatory framework.
