What happened
The Reserve Bank of India (RBI) on 23 October 2026 issued a circular delegating the power to compound certain contraventions under the Foreign Exchange Management Act, 1999 (FEMA) to select Regional Offices. It covers contraventions linked to overseas investments, and to borrowing, lending and guarantee transactions.
Compounding is a way of settling a FEMA breach by applying to the RBI, which can then dispose of the contravention instead of it going down the longer enforcement route. The circular is addressed to Authorised Dealer Category-I banks and other Authorised Persons, and describes the change as a measure for promoting customer service.
Earlier, under a circular of 1 October 2024 and the Master Directions on Compounding of Contraventions dated 22 April 2025, these applications were received at the Central Office. Regional Offices were handling only certain categories of foreign direct investment contraventions.
Where applications now go
Overseas investment
Applications go to a Regional Office based on the prefix of the Unique Identification Number (UIN) given to the foreign entity, overseas joint venture or wholly owned subsidiary. The circular lists:
- Ahmedabad: AH
- Bengaluru: BG
- Mumbai: BL, BY or PJ
- Kolkata: BN, CA, GA or GH
- New Delhi: CG, JM, JR, KA, ND, PT or WR
- Hyderabad: HY
- Chennai: KO or MA
This covers contraventions under the older foreign security regulations of 2000 and 2004, the Overseas Investments Rules and Regulations of 2022, and other provisions tied to the underlying overseas investment. Where no UIN was allotted, the application goes to the Cell for Effective implementation of FEMA (CEFA), Foreign Exchange Department, at the Central Office in Mumbai.
Borrowing, lending and guarantees
These applications go to the Regional Office with jurisdiction over the registered office of the Indian company or entity, or the applicant’s place of domicile. The jurisdictions are in Part C of Annexure I to the April 2025 Master Directions. The rules covered include the FEMA borrowing and lending regulations of 2000 and 2018 and the guarantee regulations of 2000 and 2026.
If the breach concerns lending or guarantees given to a foreign entity in which the applicant has made overseas direct investment, the overseas investment route above applies instead.
Multiple categories
An application involving several categories of transactions under different rules, where powers sit with different offices, may be sent to the CEFA cell at the Central Office.
What it means for you
If you run an Indian company with overseas investments or foreign borrowing and need to compound a breach, you will need to identify the right office. For overseas investment, check the first letters of your UIN. For borrowing, lending and guarantees, look at where your registered office is.
Banks and other Authorised Persons have been asked to bring the circular to the notice of their customers. The RBI says the Master Directions will be updated to reflect the change. The circular does not state any change in what counts as a contravention.
Background
The circular is issued under sections 10(4) and 11(1) of FEMA, and is without prejudice to any approvals needed under other laws. Authorised Dealer Category-I banks are banks authorised to deal in foreign exchange. For banking and foreign exchange context, see our guide on how to read bank results.
