Infringement is defined as the violation of the Foreign Exchange Management Act, 1999 and the rules promulgated thereunder. According to Section 13 of FEMA, 1999, compounding is the process of acknowledging a violation and requesting remedies. It also holds true for parts that conflict with the Reserve Bank. Contravening can be reduced if you acknowledge your error and pay less for transactions. The RBI will not, however, compound significant offences.
Who May Request Compounding?
Imagine someone breaking a FEMA, 1999 requirement or accompanying rule. If so, one may approach the Reserve Bank to request compounding. Consider a request to compound for infractions under section 3(a) of the FEMA, 1999. In that situation, the Directorate of Enforcement should get it.
What Information Must Be Provided on the Application Form?
Except for those who breached Section 3(a) of the FEMA, 1999, anyone can apply for compounding to avoid having a FEMA infraction. The applicant may submit an application with 5000 once they have received notification from the Reserve Bank of India or another statutory authority.
Document Submission: Send an RBI application for compounding
You must complete the relevant application and include all necessary information, including your name, address, phone number, email address, and authorized representative information.
When compounding, the following documentation must be submitted:
- To international direct investment, overseas direct investment, external commercial borrowings, and branch offices/liaison offices provide the appropriate information in accordance with Annex II.
- a certified copy of the association’s memorandum
- Send the recently audited balance sheet together with documentation demonstrating your innocence of any legal or administrative proceedings or inquiries, including those from the CBI.
- Imagine that such an event occurs after the application has been submitted. In that situation, you must notify RBI prior to the date the compounding order is issued.
To avoid returning and stopping the compounding process, you should submit your application with the necessary information and documentation. Once the application is finished, all the required information is provided, and a demand draught for 5000 is submitted once more, the RBI compounding application will be handled on the date of submission.
Serious infractions or contraventions, such as financing of terrorism, money laundering, or anything that compromises the sovereignty of the country, are immediately reported to the investigative directorate for additional investigation. Within a certain time frame, the applicant must pay for the violation.
If the applicant violates any similar laws within three years of the compounding order’s passage, they might not be eligible for a second compounding order. Following this three-year window, offences will be handled in accordance with FEMA, 1999.
When Is the Best Time to Submit a Compounding Application?
If the Reserve Bank, another statutory body, the auditors, or another party makes the applicant aware of a violation of the terms of FEMA, 1999, the applicant may submit an application for compounding. One of the statutory authorities with the power to disclose this information is the Reserve Bank. One may also submit a request for compounding in accordance with the suo moto procedure as soon as one become aware of the infraction.
What Procedures Must Be Followed to File an Application for RBI Compounding?
Applying for compounding is feasible by using the described reporting and other form requirements. The aforementioned Master Direction may be downloaded from the Reserve Bank’s website by going to https://www.rbi.org.in/scripts/FS Notification.aspx?fn=5&fnn=2764; the supporting documents listed therein should also be submitted with the application.
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