Ans. Contravention is a breach of the provisions of the Foreign Exchange Management Act (FEMA), 1999 and rules/ regulations/ notification/ orders/ directions/ circulars issued thereunder. Compounding refers to the process of voluntarily admitting the contravention, pleading guilty and seeking redressal. The Reserve Bank is empowered to compound any contravention as defined under section 13 of FEMA, 1999 except the contravention under section 3(a) ibid, for a specified sum after offering an opportunity of personal hearing to the contravener. It is a voluntary process in which an individual or a corporate seeks compounding of an admitted contravention. It provides comfort to any person who contravenes any provisions of FEMA, 1999 by minimizing transaction costs. Further, cases falling under Rule 9 of Foreign Exchange (Compounding Proceedings) Rules, 2024, shall not be eligible for compounding by the Reserve Bank.

Ans. Any person who contravenes any provision of the FEMA, 1999 [except section 3(a)] or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act or contravenes any condition subject to which an authorization is issued by the Reserve Bank, can apply for compounding to the Reserve Bank. Applications seeking compounding of contraventions under section 3(a) of FEMA, 1999 may be submitted to the Directorate of Enforcement (DOE).

Ans. When a person is made aware of the contravention of the provisions of FEMA, 1999 by the Reserve Bank or any other statutory authority or the auditors or by any other means, she/he may apply for compounding. One can also make an application for compounding, suo mo-to, on becoming aware of the contravention.

Ans.  A contravener may submit a compounding application form, physically or through PRAVAAH Portal of the Reserve Bank along with the documents/formats provided as Annexure I, Annexure II and Annexure III of the Directions – Compounding of contraventions under FEMA, 1999.

Ans. Yes. All compounding applications shall be submitted along with the prescribed fee of ₹10,000/- (plus applicable GST, which at present is 18%) by way of demand draft in favour of “Reserve Bank of India” and payable at the concerned Regional Office/ CO Cell, New Delhi/ Central Office or through National Electronic Fund Transfer (NEFT), or other permissible electronic or online modes of payment. The necessary details for making the payment through electronic mode is provided in Annexure I in Directions – Compounding of contraventions under FEMA, 1999. In case application fee is paid through NEFT or other permissible electronic mode of payment, it may be ensured that intimation of payment of applications fee, to respective RO, CO Cell, or Central Office, as case may be, shall be made as soon as possible but not later than 2 hours from time of payment, through an email as per the template provided in Para B of Annexure I of Directions – Compounding of contraventions under FEMA, 1999.

It may further be noted that in case compounding application is returned for any reason, The application fee, if paid, shall not be returned in case of return of the compounding application. However, in case such applications are re-submitted, then the application fee need not be paid again.

Ans. Along with the application in the prescribed format, the applicant may also furnish the details as per the Annexures- relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as applicable, (Annexures available in the Directions – Compounding of contraventions under FEMA, 1999, as mentioned in answer to Q. 4 above) along with an undertaking that they are not under investigation of DOE,., a cancelled cheque copy, a copy of the Memorandum of Association while applying for compounding of contraventions under FEMA, 1999. Application submitted to the Reserve Bank must contain contact details i.e., name of the applicant / authorised official or representative of the applicant, telephone/ mobile number and email ID.

Ans.   A contravener may submit compounding application form along with relevant documents/ Annexures to the Reserve Bank as provided in paragraphs 2.1, 2.2, 2.3 and 2.4 of Directions – Compounding of contraventions under FEMA, 1999.

Ans. No. All requisite approvals should be obtained, and compliances should be completed before seeking compounding of contravention. Compounding can be done only after all the necessary administrative action is complete as mentioned in Paragraph 4.2 of Directions – Compounding of contraventions under FEMA, 1999, Copies of approvals and other compliances should be enclosed along with the application.

Ans. Cases involving serious contravention suspected of money laundering, terror financing or affecting sovereignty and integrity of the nation are categorized as sensitive contraventions. These contraventions shall not be compounded by the Reserve Bank of India.

Ans. Personal Hearing can either be on physical basis or through virtual mode. However, it is not mandatory to attend/opt for the personal hearing. In case a person opts not to attend the personal hearing he//she may indicate his/her preference in writing. The application would be disposed of on the basis of documents submitted to the Compounding Authority. It may be noted that appearing for, or opting out of the personal hearing does not have any bearing, whatsoever, on the compounding amount that may be mentioned in the compounding order, as the compounding amount is calculated based on the Para 5.4 of Guidance note on computation matrix as contained in the Directions - compounding of contraventions under FEMA, 1999.