Photo of Kumar Mangalam

Kumar Mangalam

Subscribe to Kumar Mangalam's Posts

Associate in the General Corporate practice at the Delhi - NCR office of Cyril Amarchand Mangaldas. Kumar advises clients on regulatory and compliance related issues. He can be reached at kumar.magalam@cyrilshroff.com.

Compounding Under FEMA: What Has Changed Post 2025 Amendments

Introduction

The compounding mechanism under Section 15[1] of the Foreign Exchange Management Act, 1999 (“FEMA”), allows individuals and companies to voluntarily admit breach of FEMA provisions and pay a penalty to regularise their contraventions without undergoing lengthy enforcement actions. In continuation of our earlier analysis of the Foreign Exchange (Compounding Proceedings) Rules, 2024[2] (“Compounding Rules”), read with Master Directions on Compounding of Contravention under the FEMA[3] (“Compounding Directions”), notified last year, we now examine the latest amendments to the compounding mechanism under the Compounding Directions. The Reserve Bank of India (“RBI”), through A.P. (DIR Series) Circulars notified on April 22, 2025, and April 24, 2025[4] (“April Amendments”), respectively has further amended the Compounding Directions. These amendments were preceded by a press release dated April 11, 2025[5], where the RBI mandated all banks, financial companies, and other regulated entities to submit their regulatory authorisations/ licenses/ approvals exclusively through the PRAVAAH online portal on and from May 1, 2025, onwards.Continue Reading Compounding Under FEMA: What Has Changed Post 2025 Amendments

Introduction

Keeping up with the advancements in the digital payments industry and the Indian government’s initiative to promote ease of doing business, the Ministry of Finance, in consultation with the Reserve Bank of India (“RBI”), notified the Foreign Exchange (Compounding Proceedings) Rules, 2024 (“Compounding Rules”), on September 12, 2024, in supersession of the erstwhile Foreign Exchange (Compounding Proceedings) Rules, 2000 (“Erstwhile Compounding Rules”). The Compounding Rules were followed by Direction on Compounding of Contravention under the Foreign Exchange Management Act, 1999 (“FEMA”), which was notified by the RBI on October 01, 2024 (“Compounding Directions”).Continue Reading Foreign Exchange Compounding Proceedings: Baby Steps or Revamped?