XYZ Pvt. Ltd., a startup based in Bengaluru, inadvertently committed a contravention other than Section 3(a) of the Foreign Exchange Management Act, 1999 (FEMA), involving a sum of ₹ 3.2 crore and now wishes to voluntari

As per the Foreign Exchange (Compounding Proceedings) Rules, 2024, the Reserve Bank of India designates compounding authorities based on the sum involved in the contravention (excluding Section 3(a) violations): Assistant General Manager: Does not exceed sixty lakh rupees Deputy General Manager: Above sixty lakh rupees but does not exceed two and a half crore rupees General Manager: Above two and a half crore rupees but does not exceed five crore rupees Chief General Manager: Above five crore rupees As per the Compounding Rules, based on his rank and based on the sums involved / the monetary limit of 3.2 crores, the General Manager will be the compounding authority for dealing with the contravention. Procedure for Compounding On receipt of an application, the Reserve Bank shall examine the application based on the documents and submissions made in the application and assess whether contravention can be compounded in accordance with the Foreign Exchange Management (Compounding Proceedings) Rules, 2024 and, if so, the sum involved in the contravention. The Compounding Authority may call for any information, or any other documents relevant to the compounding proceedings. In case the contravener fails to submit the additional information/documents called for within the specified period, the application for compounding shall be liable to be returned. The following factors, which are only indicative, shall be taken into consideration for the purpose of passing compounding order and determining amount on payment of which contravention shall be compounded: Undue gains i.e., the amount of gain of unfair advantage, wherever quantifiable, made as a result of the contravention (or) economic benefits accruing to the contravener from delayed compliance or compliance avoided; the amount of loss caused to any authority/ exchequer as a result of the contravention; the repetitive nature of the contravention, the track record and/or history of non-compliance of the contravener; contravener's conduct in undertaking the transaction and in disclosure of full facts in the application and submissions made during the personal hearing; and any other factor as considered relevant and appropriate.