FEMA Compounding: ODI, Borrowing Cases Move to RBI Regional Offices
October 24, 2026 · Other News Alerts / Articles
Most FEMA compounding applications for ODI, borrowing, lending and guarantee lapses now go to select RBI Regional Offices under RBI's October 23, 2026 circular.
FEMA compounding applications for overseas investment, borrowing and lending, and guarantee lapses now go to select Reserve Bank of India (RBI) Regional Offices, not the Central Office in Mumbai, under A.P. (DIR Series) Circular No. 28/2026-27 dated October 23, 2026. Let us follow one company through it.
Quick answer: most ODI, borrowing and guarantee compounding cases now go to an RBI Regional Office.
A story to start: two lapses found at year end
Consider a hypothetical example. A Pune-based auto parts maker has a wholly owned subsidiary abroad and an External Commercial Borrowing (ECB). At year end, its finance head, call her Meera, finds two problems: the subsidiary's Annual Performance Report (APR) was filed late, and some monthly Form ECB 2 returns were delayed.
Her questions: what now, and where to file?
What is FEMA compounding, in plain English?
Compounding is basically settling a FEMA lapse by admitting it and paying a compounding amount, instead of facing adjudication proceedings. It is voluntary.
The legal basis: section 15 of the Foreign Exchange Management Act, 1999 (FEMA) allows a contravention under section 13 to be compounded on an application by the person who committed it. Under the Foreign Exchange (Compounding Proceedings) Rules, 2024, RBI officers can compound such contraventions, other than those under section 3(a).
The alternative is adjudication, where section 13(1) of FEMA allows a penalty of up to thrice the sum involved, where quantifiable.
First check: the late submission fee route
Many overseas direct investment (ODI) reporting delays (Form ODI, APRs, share certificates) can be regularised by paying a Late Submission Fee through the Authorised Dealer (AD) bank within three years of the due date. Delayed Form ECB 2 returns have a similar route. Compounding is generally needed where that route is not available or not used.
Back to our example: Meera's company did not use that route for either lapse, so both need compounding.
Where applications used to go
Until now, these applications were filed with the Cell for Effective implementation of FEMA (CEFA), Central Office, Mumbai, under the Master Direction dated April 22, 2025. Regional Offices already handled specified foreign direct investment (FDI) cases. The circular now delegates these powers to select Regional Offices "as a measure for promoting customer service".
Where to file now
Overseas investment lapses: follow the UIN
For lapses under the overseas investment rules and regulations, or any provision linked to an underlying overseas investment, the office depends on the prefix of the Unique Identification Number (UIN) given to the foreign entity, joint venture or wholly owned subsidiary.
Regional Office
Prefix of the UIN
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
Where no UIN was allotted, the application still goes to CEFA, Mumbai.
Back to our example: suppose the subsidiary's UIN starts with BY. The APR lapse goes to the Mumbai Regional Office.
Borrowing, lending and guarantee lapses: follow the registered office
For lapses under the borrowing and lending, or guarantees, regulations, the application goes to the Regional Office with jurisdiction over the registered office of the Indian entity, or the applicant's place of domicile.
One exception: if the lending or guarantee was given to the foreign entity in which the applicant has made ODI, the UIN route applies.
Back to our example: the ECB lapse goes to the Regional Office with jurisdiction over the company's registered office.
One application, two kinds of lapses
If a single application covers contraventions under different sets of rules or regulations whose compounding powers sit with different offices, it may be filed with CEFA, Central Office, Mumbai. The circular does not say how applications already pending at the Central Office will be handled.
Back to our example: if the Regional Office for Meera's registered office is different from the one mapped to the subsidiary's UIN, one application covering both lapses may be filed with CEFA. If both lapses fall with the same Regional Office, that office is the natural place to file.
Key dates and changes
Category
Earlier position
Revised position
Effective from
Overseas investment contraventions (UIN allotted)
Filed with CEFA, Central Office, Mumbai
Filed with the Regional Office mapped to the UIN prefix
October 23, 2026 (date of circular; no separate effective date stated)
Overseas investment contraventions (no UIN)
CEFA, Central Office, Mumbai
No change: CEFA, Central Office, Mumbai
Not applicable
Borrowing and lending, and guarantee contraventions
Filed with CEFA, Central Office, Mumbai
Regional Office with jurisdiction over the registered office or place of domicile
October 23, 2026 (date of circular; no separate effective date stated)
Applications covering multiple categories
Not separately addressed in the Master Direction
May be filed with CEFA, Central Office, Mumbai
October 23, 2026 (date of circular; no separate effective date stated)
Compounding application fee
INR 10,000 plus GST at 18%
No change
Master Direction dated April 22, 2025
Payment of compounding amount
Within 15 days of the compounding order
No change
Master Direction dated April 22, 2025
FEMA compounding procedure: what stays the same
The circular changes only where to file. For Meera, the rest looks like this.
Fix first: an application is returned unless corrective steps, such as pending reporting, are complete.
File: physically or through RBI's PRAVAAH portal.
Pay the fee: INR 10,000 plus GST (18% at present), with intimation of payment within 2 hours.
Get the order: within 180 days of receipt of a complete application.
Pay the compounding amount: within 15 days of the order. If it is not paid, the applicant is deemed never to have applied.
What cannot be compounded
RBI does not compound contraventions of section 3(a) of FEMA, transactions where the amount involved is not quantifiable, transactions attracting section 37A, cases where the Adjudicating Authority has already passed a penalty order under section 13, and cases the Directorate of Enforcement considers serious. A similar contravention within three years of an earlier compounded one is also not compounded. For Meera, a similar lapse compounded in the last three years would close this route.
Practical impact of the RBI circular
For companies and LLPs with overseas investments
Confirm each overseas entity's UIN prefix first. Where one application covers UINs mapped to different Regional Offices, the circular is silent, so applicants may seek guidance from their AD bank or RBI.
For borrowers, lenders and guarantors
ECB lapses not regularised through the late submission fee route, such as drawdown before obtaining the Loan Registration Number (LRN), now go to the jurisdictional Regional Office. Guarantee lapses under the Guarantees Regulations, 2026 follow the same route. For individual applicants, the place of domicile decides.
For related foreign exchange developments, see our Knowledge Hub article on RBI Foreign Exchange Risk Reserve and the new hedging rules .
Key takeaways
Check the late submission fee route before compounding.
ODI cases follow the UIN prefix; no UIN means CEFA, Mumbai.
Borrowing, lending and guarantee cases follow the registered office or domicile.
Fees, timelines and the three-year repeat bar are unchanged.
Frequently asked questions
Where should an ODI compounding application be filed now?
With the RBI Regional Office mapped to the UIN prefix of the foreign entity. If no UIN was allotted, it goes to CEFA, Central Office, Mumbai.
What is the FEMA compounding application fee?
INR 10,000 plus applicable GST, currently 18%, as per the Master Direction dated April 22, 2025. The circula