RBI Introduces Capped Penalty Framework for FEMA Violations, Enabling Flexible Enforcement with Discretionary Compounding Provisions

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....RBI issued amendments to FEMA compounding directions, introducing a new provision capping the maximum compounding amount at INR 200,000 per contravention for specific regulatory violations. The amendment allows compounding authorities discretionary power to impose reduced penalties based on exceptional circumstances, nature of contravention, and broader public interest considerations. The modification applies to existing Master Directions on compounding contraventions, enabling more flexible enforcement mechanisms while maintaining regulatory oversight under FEMA, 1999. The circular provides guidance to Authorized Dealer Category-I banks and authorized banks for implementing these revised compounding guidelines.....