RBI Caps FEMA Compounding Penalty at ₹2 Lakh
Why in the news
In April 2025 RBI eased the penalty regime for certain Foreign Exchange Management Act breaches with a flat ceiling.
Key facts
- New cap: ₹2 lakh per contravention, whatever the transaction size, applied per rule cited in a compounding application.
- Old system: 0.30% to 0.75% of the amount involved.
| Covered violation | Trigger |
|---|---|
| Liberalised Remittance Scheme misuse | Proceeds not reinvested within 180 days |
| Advance export receipts | Exports not done within one year |
| High-value share gifting | No prior RBI approval |
Reasoning
- Simplify compounding, encourage voluntary compliance, cut litigation; applied case by case in the larger public interest.
Exam angle
- Law: FEMA.
- Cap: ₹2 lakh versus 0.30%-0.75% earlier.