Key change: The Reserve Bank of India has decentralised FEMA compounding. With immediate effect, applications to compound contraventions linked to overseas investments, borrowing and lending, and guarantees no longer go to RBI's Central Office in Mumbai — they go to eight select Regional Offices, routed by UIN prefix for overseas-investment cases and by registered-office jurisdiction for borrowing and guarantee cases.
What happened
On 23 October 2026, the RBI's Foreign Exchange Department issued A.P. (DIR Series) Circular No. 28/2026-27 (RBI/FED/2026-27/298), addressed to all Authorised Dealer Category-I banks and other Authorised Persons. Its subject line is plain: "Delegation of Compounding of certain Contraventions under FEMA, 1999 to Regional Offices of the Reserve Bank."
Compounding — the mechanism by which a person who has contravened FEMA can voluntarily admit the contravention and pay a compounding fee instead of facing adjudication — has, for these transaction categories, been a Central Office affair. Overseas-investment, borrowing-and-lending, and guarantee compounding applications landed on the desk of the Foreign Exchange Department's Central Office. Certain categories of foreign-direct-investment transactions were already being compounded at Regional Offices, but the ODI/borrowing/guarantee bucket was not.
The circular changes that. RBI states the delegation is being made "as a measure for promoting customer service" — the logic is simple: applicants file closer to home, and the Central Office sheds a caseload that had been funnelling to a single desk. The directions were issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, and they are effective immediately — the circular carries no deferred date.
The delegation builds on two earlier instruments the circular expressly invokes: A.P. (DIR Series) Circular No. 17/2024-25 dated 1 October 2024 and the Master Directions on Compounding of Contraventions under FEMA, 1999, dated 22 April 2025. RBI says the Master Directions "shall accordingly be updated to reflect the above changes."
Old vs new: where compounding applications go
Overseas investment: the UIN-prefix routing table
For overseas-investment contraventions, the filing office is decided not by where the applicant sits but by the Unique Identification Number (UIN) assigned to the foreign entity, overseas joint venture or overseas wholly-owned subsidiary. The circular maps UIN prefixes to Regional Offices:
The instruments covered are broad: the old FEMA 19/RB-2000 and FEMA 120/RB-2004 regulations on transfer or issue of foreign securities, the current Overseas Investment Rules, 2022 (22 August 2022), the Overseas Investment Regulations, 2022 (FEMA 400/2022-RB), and — via a catch-all — any other provision of the Act, rules and regulations "as far as the contraventions are related to underlying overseas investments transactions." If no UIN was ever allotted to the foreign entity, the application goes to the Cell for Effective Implementation of FEMA (CEFA), Foreign Exchange Department, Central Office, RBI, 11th floor, Central Office Building, Shahid Bhagat Singh Road, Fort, Mumbai – 400001.
Borrowing, lending and guarantees: the jurisdiction rule
For borrowing-and-lending and guarantee contraventions, the routing logic is different — it follows the applicant, not the transaction. Applications go to the Regional Office having jurisdiction over the registered office of the Indian company or entity concerned, or the place of domicile, as the case may be. The RO jurisdictions themselves are set out in Part C of Annexure I to the 22 April 2025 Master Directions.
The regulations covered: FEMA 3/2000-RB (borrowing or lending in foreign exchange), FEMA 4/2000-RB (borrowing and lending in rupees), FEMA 3(R)/RB-2018 (borrowing and lending, 2018), FEMA 8/RB-2000 (guarantees, 2000) and FEMA 8(R)/RB-2026 (guarantees, 2026). And there is one important carve-out in the form of a Note: where the contravention pertains to lending or guarantee transactions undertaken by the applicant towards the foreign entity in which the applicant has made overseas direct investment, the application is routed under the ODI (UIN-prefix) rule instead.
The two cases that still go to CEFA, Central Office
Decentralisation is not total. Two buckets stay in Mumbai at the Cell for Effective Implementation of FEMA (CEFA), Foreign Exchange Department, Central Office:
- No-UIN cases: overseas-investment contraventions where no UIN was allotted to the foreign entity — CEFA, Central Office, Mumbai.
- Multi-category cases: applications involving contraventions of multiple categories of transactions governed by different sets of rules or regulations, where the power to compound has been delegated to different offices — CEFA, Central Office, Mumbai.
The address for both: Cell for Effective Implementation of FEMA (CEFA), Foreign Exchange Department, Central Office, Reserve Bank of India, 11th floor, Central Office Building, Shahid Bhagat Singh Road, Fort, Mumbai – 400001.
Who is affected
The immediate audience is AD Category-I banks and other Authorised Persons — the circular is addressed to them, and it asks them to bring the guidelines to the notice of their constituents. But the practical impact falls on:
- Indian companies and entities with overseas JVs/WOSs that have incurred FEMA contraventions on their overseas investments — they now file compounding applications at a Regional Office, and must first identify the correct office from the UIN prefix.
- Borrowers, lenders and guarantors under ECB, trade-credit and guarantee frameworks — they file at the RO of their registered-office jurisdiction.
- Company secretaries, CFOs and FEMA consultants advising on compounding strategy — the first practical question on every new mandate ("where do we file?") now has a table-driven answer instead of a single Mumbai address.
- AD banks themselves, which route and often vet compounding applications for their constituents — their internal checklists and client advisories need updating.
What to do next
- Pin down your filing office before you draft. For ODI matters, pull the UIN of the foreign entity and match its prefix to the table above. For borrowing/lending and guarantee matters, confirm which RO covers your registered office under Part C of Annexure I to the 2025 Master Directions.
- Check the two CEFA exceptions. No UIN, or contraventions spanning categories handled by different offices — both go to CEFA, Central Office, Mumbai. Filing a multi-category application at a Regional Office will only cost you a redirect.
- Apply the own-ODI carve-out. If the lending or guarantee contravention relates to the foreign entity in which you made the ODI, the application follows the UIN-prefix (ODI) routing, not the registered-office rule.
- Watch for the Master Directions update. RBI says the 22 April 2025 Master Directions on Compounding will be updated to reflect the delegation — treat the circular as the operative text until then, and cite it in your application.
- AD banks: update client advisories. The circular expressly asks AD Category-I banks and Authorised Persons to bring the guidelines to their constituents' notice — circulate the routing table internally now.
FAQs
Q: From when does the new filing arrangement apply?
A: Immediately. The circular is dated 23 October 2026 and carries no deferred effective date — applications from that date follow the new routing.
Q: My overseas JV never got a UIN. Where do I file?
A: At CEFA, Foreign Exchange Department, Central Office, RBI, Mumbai (11th floor, Central Office Building, Shahid Bhagat Singh Road, Fort, Mumbai – 400001) — the circular keeps no-UIN cases in Mumbai.
Q: My application involves both an ODI contravention and a borrowing contravention. Which office?
A: CEFA, Central Office, Mumbai. Multi-category applications governed by different sets of rules/regulations — where compounding powers sit with different offices — go to CEFA.
Q: Does this change the compounding fee or the underlying compounding rules?
A: No. The circular delegates the power to compound to Regional Offices; it does not amend the compounding framework itself, which continues to be governed by the 22 April 2025 Master Directions (which RBI says will be updated to reflect the delegation).
Q: We have an FDI contravention. Does this circular affect us?
A: Not directly — the circular notes that compounding for certain FDI-related transaction categories was already being carried out by Regional Offices. The change extends the same decentralised logic to overseas investment, borrowing/lending and guarantee contraventions.
Q: Under which law was the circular issued?
A: Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, and "without prejudice to permissions/approval, if any, required under any other law."
Sources
- A.P. (DIR Series) Circular No. 28/2026-27 — "Delegation of Compounding of certain Contraventions under FEMA, 1999 to Regional Offices of the Reserve Bank", RBI/FED/2026-27/298, dated 23 October 2026 (rbi.org.in — official; full text read and verified): https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13745
- A.P. (DIR Series) Circular No. 17/2024-25 dated 1 October 2024 (rbi.org.in — cited in the circular as the prior instrument)
- Master Directions on Compounding of Contraventions under FEMA, 1999, dated 22 April 2025 (rbi.org.in — cited in the circular; to be updated for this delegation)
