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RBI’s April 2025 amendments capped penalties at ₹2 lakh for many non-reporting contraventions and set a 180-day resolution clock — but only if the application is filed correctly the first time. CS Chetna Shoor structures your compounding application to close the matter, not reopen it.
Compounding, under Section 15 of FEMA, 1999, lets a person or company admit a contravention and pay a compounding sum to close the matter without going through the Enforcement Directorate’s formal adjudication process. It’s available whether the violation was self-discovered — filed suo moto — or flagged by RBI through a Memorandum of Contravention, and it applies to most reporting delays and procedural lapses: delayed FC-GPR or FC-TRS filings, late FLA Returns, ECB reporting gaps, and pricing or valuation mismatches.
RBI overhauled the framework in April 2025: a discretionary cap of ₹2 lakh now applies to many non-reporting contraventions, applications are filed through the PRAVAAH portal, and RBI is required to dispose of a complete application within 180 days. This page is for companies and individuals who’ve identified — or been notified of — a FEMA contravention and need it compounded cleanly, from computing the likely exposure through to RBI’s compounding order. Chetna reviews the contravention, computes the likely compounding amount, and files.
Discretionary cap on the compounding amount for many non-reporting contraventions (April 2025 amendment)
Maximum penalty as a multiple of the contravened amount for quantifiable violations, under Section 13
RBI's mandated timeline to dispose of a complete compounding application
Additional penalty for continuing contraventions, on top of the base amount
Legal basis for compounding, read with the Foreign Exchange (Compounding Proceedings) Rules, 2024
RBI's mandatory digital filing gateway for compounding applications
RBI rejects over 40% of NBFC applications on the first attempt. Here’s what actually causes it.
Certain categories under Rule 4(2) and Rule 9 of the 2024 Compounding Rules are excluded from compounding altogether and go straight to adjudication. Filing a compounding application for a non-compoundable contravention wastes the window without resolving anything.
RBI's guidance note matrix weighs the amount involved, how long the contravention ran, and whether it was self-reported or discovered by RBI. Two contraventions that look similar on paper can land at very different compounding amounts depending on how the facts are presented.
A compounding application for a single delayed filing frequently draws RBI's attention to the rest of the entity's FEMA compliance history. Applications prepared without a full review of related transactions risk reopening issues the applicant didn't intend to raise.
Available for most reporting and procedural contraventions. Faster and non-adversarial, and closes the matter with a compounding order rather than prosecution — provided the application is filed and the amount paid within the timeline set.
The default route for non-compoundable contraventions, or where compounding isn't pursued. Involves a formal hearing before an Adjudicating Authority, without the negotiated, time-bound resolution that compounding offers.
Filing voluntarily, before RBI raises the issue, is generally treated more favourably in the compounding amount computation than filing after RBI has already issued a Memorandum of Contravention.
We confirm the nature of the contravention and whether it qualifies for compounding under the 2024 Rules.
A working of the likely compounding sum against RBI's guidance matrix, so there are no surprises before filing.
Full application prepared in RBI's prescribed format with supporting documentation.
Application submitted through RBI's digital portal along with the prescribed fee.
Direct response to every RBI query during the 180-day disposal window.
Compounding amount paid per RBI's order, and the contravention formally closed.
The compounding amount must be paid within the timeline specified in RBI's order — typically 15 days — for the order to remain valid.
Compounding closes the specific contravention disclosed; it doesn't cover future non-compliance of the same type.
Underlying reporting gaps should be fixed immediately, since repeat contraventions of the same nature can affect how future applications are viewed.
Records of the compounding order should be retained for future regulatory or investor due diligence.
CS Chetna Shoor’s team replies within 4 hours on WhatsApp.
Compounding is a voluntary mechanism under Section 15 of FEMA, 1999, that allows a person or company to admit a contravention and settle it by paying a compounding sum to RBI, closing the matter without a formal adjudication proceeding.
It depends on the contravention. Quantifiable violations can attract a penalty up to three times the contravened amount, plus ₹5,000 per day for continuing contraventions, though RBI’s April 2025 amendments capped many non-reporting contraventions at a discretionary ₹2 lakh.
No. Certain categories excluded under Rule 4(2) and Rule 9 of the Foreign Exchange (Compounding Proceedings) Rules, 2024 are not eligible for compounding and are instead referred to adjudication before the Enforcement Directorate.
RBI’s compounding guidelines set a 180-day timeline for disposing of a complete application filed through the PRAVAAH portal, though this can extend if RBI raises queries requiring additional documentation.
Suo moto compounding is filed voluntarily, before RBI has identified the contravention, and is generally viewed more favourably in the amount computation. Post-Memorandum compounding is filed after RBI has already issued a formal Memorandum of Contravention.
Qualified Company Secretary · ICSI Member · Founder, Expertvuw Management Pvt Ltd
Chetna has guided NBFC promoters through RBI’s COR process end to end, with particular focus on structuring the Net Owned Fund and business plan so the application survives first-round RBI scrutiny rather than coming back with a query.