Executive Summary:
This circular from the Reserve Bank of India (RBI) revises regulations regarding the compounding of contraventions under the Foreign Exchange Management Act (FEMA), 1999. It delegates compounding powers to Regional Offices/Sub-Offices for specific contraventions related to Non-Debt Instruments Rules, 2019. The circular also discontinues the classification of contraventions as 'technical' and modifies the public disclosure of Compounding Orders.
Key Points / Main Content:
Delegation of Compounding Powers:
* Compounding powers are delegated to the Regional Offices/Sub-Offices of the Reserve Bank for contraventions of:
* Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, dated October 17, 2019.
* Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, dated October 17, 2019.
Discontinuation of 'Technical' Contravention Classification:
* The classification of a contravention as 'technical' is discontinued.
* Such contraventions will now be regularized by imposing minimal compounding amounts as per the existing compounding matrix.
Modification of Public Disclosure of Compounding Orders:
* For Compounding Orders passed on or after March 01, 2020, a summary information, instead of the full order, shall be published on the Banks website.
* The summary information should include: Sr. No., Name of the Applicant, Details of contraventions, Date of compounding order, Amount imposed for compounding of compounded contraventions, and the relevant Act/Regulation/Rules.
Updated Master Direction:
* Master Direction No. 4 dated January 01, 2016, is being updated to reflect these changes.
Impact Analysis:
AD Category I Banks:
* Impact: Must note the changes in compounding powers, discontinuation of "technical" contravention classification and the revised rules for public disclosure of compounding orders.
* Action Required: Bring the contents of this circular to the notice of their constituents and customers concerned.
Constituents and Customers of AD Category I Banks:
* Impact: Affected by changes in the compounding of FEMA contraventions, especially regarding Non-Debt Instruments and the public disclosure of compounding orders.
* Action Required: Be aware of the revised regulations and ensure compliance with FEMA to avoid contraventions.
Regional Offices/Sub-Offices of the Reserve Bank:
* Impact: Exercise the delegated compounding powers for the specified contraventions.
* Action Required: Implement the new guidelines for compounding and public disclosure.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking sector and managing the country's monetary policy.
Foreign Exchange Management Act, 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
FEMA 202000RB dated May 3, 2000: Notification issued by Reserve Bank of India under the Foreign Exchange Management Act (FEMA).
FEMA 20R2017RB dated November 07, 2017: Notification issued by Reserve Bank of India under the Foreign Exchange Management Act (FEMA).
Foreign Exchange Management NonDebt Instruments Rules, 2019: Rules pertaining to Non-Debt Instruments under the Foreign Exchange Management Act.
Foreign Exchange Management Mode of Payment and Reporting of NonDebt Instruments Regulations, 2019: Regulations pertaining to the mode of payment and reporting of Non-Debt Instruments under the Foreign Exchange Management Act.
Ajay Kumar Misra: Chief General Manager-in-Charge at Reserve Bank of India.
India: The Republic of India
भारतीय�रज़व�ब�क
RESERVE BANK OF INDIA
www.r bi.org .in
RBI/2020-21/67
A.P. (DIR Series) Circular No. 06 November 17, 2020
To
All Category-I Authorised Dealer Banks
Madam / Sir
Foreign Exchange Management Act, 1999 (FEMA)-
Compounding of Contraventions under FEMA, 1999
The attention of Authorized Dealer Category-I (AD Category-I) banks is invited to paragraph 3 of
the Master Direction on “Compounding of Contraventions under FEMA, 1999”, in terms of which
the powers to compound certain contraventions of Notifications FEMA 20/2000-RB dated May
3, 2000 and FEMA 20(R)/2017-RB dated November 07, 2017 have been delegated to the
Regional Offices/Sub-Offices of the Reserve Bank for enhanced customer service and
operational conveninece. The Foreign Exchange Management (Non-Debt Instruments) Rules,
2019 and Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt
Instruments) Regulations, 2019 i.e. Notification No. FEMA.395/2019-RB, both notified on
October 17, 2019, by Government of India and Reserve Bank of India respectively have since
superseded the earlier Notification No. FEMA 20(R)/2017-RB. Accordingly, the compounding
powers stand delegated to the Regional Offices/ Sub Offices of the Reserve Bank to compound
the following contraventions.
FEM (Non –Debt Instruments) Rules, 2019 dated October 17, 2019
Rule 2(k) read with Rule 5
Rule 21
Paragraph 3 (b) of Schedule I (Issue of shares without approval of RBI or Government,
wherever required)
Rule 4 (Receiving investment in India from non-resident or taking on record transfer of
shares by Investee Company)
Rule 9(4) and Rule 13(3)FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations dated
October 17, 2019
Regulation 3.1(I)(A)
Regulation 4(1)
Regulation 4(2)
Regulation 4(3)
Regulation 4(6)
Regulation 4(7)
Regulation 4(11)
2. Please refer to para 3.5 of A.P. (DIR Series) Circular No. 56 dated June 28, 2010 and para 2
of A.P. (DIR Series) Circular No.11 dated July 31, 2012 with respect to the classification of a
contravention under FEMA by the Reserve Bank as ‘technical’ or ‘material’ or ‘sensitive/serious
in nature’. On a review it has been decided to discontinue the classification of a contravention
as ‘technical’ that was dealt with by way of an administrative/ cautionary advice and regularize
such contraventions by imposing minimal compounding amount as per the compounding matrix
as contained in the ‘Master Direction - Compounding of Contraventions under FEMA, 1999’
dated January 01, 2016, as amended from time to time.
3. Please refer to para 3(I) of A.P. (DIR Series) Circular No.73 dated May 26, 2016 with respect
to public disclosure of Compounding Orders. On a review and in partial modification of earlier
instructions it has been decided that in respect of the Compounding Orders passed on or after
March 01, 2020 a summary information, instead of the Compounding Orders, shall be published
on the Bank’s website in the following format:
Sr. Name of the Details of contraventions Date of Amount
No. Applicant (provisions of the compounding order imposed for
Act/Regulation/Rules compounding of
compounded) contraventions
4. The aforesaid Master Direction No. 4 dated January 01, 2016, as amended from time to
time, is being updated to reflect the changes. AD Category - I banks should bring the contents
of this circular to the notice of their constituents and customers concerned.
5. The directions contained in this circular have been issued under section 10(4) and 11(2) of
the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to
permissions/approvals, if any, required under any other law.
Yours faithfully
Ajay Kumar Misra
Chief General Manager-in-Charge