The RBI has delegated authority to its regional offices to compound certain contraventions under FEMA, streamlining enforcement and reducing delays. This shift is expected to expedite compliance resolutions for AD banks and authorised persons.
RBI Delegates FEMA Compounding Powers to Regional Offices
In a significant procedural reform, the Reserve Bank of India has delegated compounding powers for certain contraventions under the Foreign Exchange Management Act (FEMA), 1999, to its regional offices, effective October 23, 2026. The move, detailed in A.P. (DIR Series) Circular No. 28/2026-27, builds on earlier guidance from October 1, 2024, and aims to decentralise enforcement actions and accelerate dispute resolution.
Authorised Dealer Category-I banks and other authorised persons are now advised that minor procedural contraventions—particularly those involving reporting delays or documentation discrepancies—may be compounded at the regional level without requiring escalation to central RBI authorities. This is expected to reduce pendency and administrative burden on financial institutions with cross-border operations.
Legal practitioners must note that while the delegation improves operational efficiency, serious violations—such as large-scale capital account contraventions—will likely remain under central oversight. The change reflects RBI’s ongoing shift towards risk-based supervision and faster compliance closure under FEMA.
