4th August, 2012
The Reserve Bank of India through its circular no. 11 dated July 31, 2012 has clarified the position on compounding of contraventions under the Foreign Exchange Management Act, 1999 (FEMA).
According to the circular, once the compounding application is filed suo motu by the applicant, admitting to the contravention, the RBI shall not classify the violation as a technical or minor contravention. It would proceed for compounding as per procedure laid down under Section 15 (1) of the FEMA read with Rule 9 of the Foreign Exchange Management (Compounding Proceedings) Rules, 2000. The provisions require the passing of compounding order within 180 days from the date of receipt of completed application. Payment of sum as per the compounding order should be made within 15 days of its pronouncement.
The position with regard to the cases brought to RBI’s notice, other than by filing a suo motu application, has been reiterated in the latest circular. In such cases, the RBI would continue to decide course of compounding proceeding based on the seriousness of the contravention. Matters which are of a technical or minor nature will be dealt with by way of cautionary or administrative advice while for serious matters, RBI will forward the same for proper compounding procedure. Application will be referred to Enforcement Directorate in cases of money-laundering and those involving national and security concerns due to serious infringement of the regulatory framework.
The Reserve Bank of India through its circular no. 11 dated July 31, 2012 has clarified the position on compounding of contraventions under the Foreign Exchange Management Act, 1999 (FEMA).
According to the circular, once the compounding application is filed suo motu by the applicant, admitting to the contravention, the RBI shall not classify the violation as a technical or minor contravention. It would proceed for compounding as per procedure laid down under Section 15 (1) of the FEMA read with Rule 9 of the Foreign Exchange Management (Compounding Proceedings) Rules, 2000. The provisions require the passing of compounding order within 180 days from the date of receipt of completed application. Payment of sum as per the compounding order should be made within 15 days of its pronouncement.
The position with regard to the cases brought to RBI’s notice, other than by filing a suo motu application, has been reiterated in the latest circular. In such cases, the RBI would continue to decide course of compounding proceeding based on the seriousness of the contravention. Matters which are of a technical or minor nature will be dealt with by way of cautionary or administrative advice while for serious matters, RBI will forward the same for proper compounding procedure. Application will be referred to Enforcement Directorate in cases of money-laundering and those involving national and security concerns due to serious infringement of the regulatory framework.