Finance

FEMA Compounding Application 2026: RBI Circular 28 Moves ODI, ECB and Guarantee Cases to Regional Offices

CA Adityavikram Banka

Quick Summary

  • What is new: RBI A.P. (DIR Series) Circular No. 28/2026-27 (RBI/FED/2026-27/298), dated 23 October 2026, delegates the power to compound FEMA contraventions on Overseas Investment and on Borrowing and Lending, and Guarantees transactions to select Regional Offices of the Reserve Bank.
  • Before the circular: compounding applications for these transactions were received at RBI’s Central Office. Certain categories of foreign direct investment contraventions were already compounded by Regional Offices.
  • Overseas investment cases: the FEMA compounding application goes to the Regional Office set by the prefix of the UIN of the foreign entity, overseas joint venture or wholly owned subsidiary. Where no UIN was allotted, it goes to CEFA, Foreign Exchange Department, Central Office, Mumbai.
  • ECB, rupee borrowing and lending, and guarantee cases: the application goes to the Regional Office with jurisdiction over the registered office of the Indian company or entity, or the place of domicile.
  • Mixed cases: an application covering several categories governed by different rules or regulations may be submitted at CEFA, Central Office, Mumbai.

RBI has changed where a FEMA compounding application for an overseas investment, external borrowing, lending or guarantee contravention is filed. Under A.P. (DIR Series) Circular No. 28/2026-27 dated 23 October 2026, these applications now go to select RBI Regional Offices instead of the Central Office. The circular changes the filing office only. It does not change how a contravention is compounded or how the compounding amount is worked out, which remain governed by the Master Direction on Compounding of Contraventions under FEMA, 1999, dated 22 April 2025.

This matters to any Indian company, LLP or individual that is preparing a compounding application for a delayed or missed FEMA compliance on an overseas investment, an external commercial borrowing, a loan to or from a non-resident, or a cross-border guarantee. Filing at the wrong office is avoidable.

What did RBI Circular 28/2026-27 change?

Paragraph 2 of the circular records the position before 23 October 2026: applications for compounding of contraventions relating to Overseas Investments and to Borrowing and Lending, and Guarantees were received at the Central Office of the Reserve Bank, while certain categories of foreign direct investment contraventions were compounded by the Regional Offices.

Paragraph 3 states that, “as a measure for promoting customer service”, the powers to compound contraventions relating to Overseas Investments and to Borrowing and Lending, and Guarantees transactions “have also been delegated to the select Regional Offices of the Reserve Bank”. The circular is issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999. It does not state an effective date separate from its date of issue.

Where to file a FEMA compounding application for an overseas investment contravention

Part A of the circular covers contraventions of:

  1. the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2000 (Notification No. FEMA 19/RB-2000);
  2. the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 (Notification No. FEMA 120/RB-2004);
  3. the Foreign Exchange Management (Overseas Investment) Rules, 2022 dated 22 August 2022;
  4. the Foreign Exchange Management (Overseas Investment) Regulations, 2022 (Notification No. FEMA 400/2022-RB); and
  5. any other provision of the Act, rules and regulations, as far as the contravention relates to an underlying overseas investment transaction.

These applications are submitted to the Regional Office that matches the prefix of the Unique Identification Number (UIN) assigned to the foreign entity, overseas 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 is submitted at the 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.

The test is the UIN of the overseas entity, not the city of the Indian investor’s registered office. An investor in Pune whose overseas subsidiary carries a UIN with the prefix ND files in New Delhi under this table.

Where to file for ECB, borrowing and lending, and guarantee contraventions

Part B of the circular covers contraventions of:

  • the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 (Notification No. FEMA 3/2000-RB);
  • the Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 (Notification No. FEMA 4/2000-RB);
  • the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (Notification No. FEMA 3(R)/RB-2018), which, as amended in February 2026, carry the external commercial borrowing framework in Schedule I;
  • the Foreign Exchange Management (Guarantees) Regulations, 2000 (Notification No. FEMA 8/RB-2000); and
  • the Foreign Exchange Management (Guarantees) Regulations, 2026 dated 6 January 2026 (Notification No. FEMA 8(R)/RB-2026).

These applications are submitted to the Regional Office having jurisdiction over the registered office of the Indian company or entity, or over the place of domicile, as the case may be. The circular refers applicants to Part C of Annexure I to the Compounding Master Direction for the list of Regional Offices and their jurisdictions.

The ODI exception for loans and guarantees to your own overseas entity

The note to Part B is easy to miss. Where the contravention relates to a lending or guarantee transaction undertaken by the applicant towards the foreign entity in which the applicant has made ODI, the application follows Part A. It goes to the Regional Office matching that foreign entity’s UIN, not to the Regional Office for the applicant’s registered office.

What if one application covers several types of contravention?

Part C provides that applications involving contraventions of multiple categories of transactions, governed by different sets of rules or regulations for which compounding powers sit with different offices, “may be submitted” at CEFA, Foreign Exchange Department, Central Office, Mumbai. For example, an application covering both an FDI contravention and an overseas investment contravention that would otherwise go to different offices falls in this category.

What has not changed

The circular deals only with where an application is submitted. The rest of the process remains as set out in the Master Direction on Compounding of Contraventions under FEMA, 1999 (FED Master Direction No. 04/2025-26 dated 22 April 2025) and the Foreign Exchange (Compounding Proceedings) Rules, 2024:

  • Mode of filing: an application may be submitted physically or through RBI’s PRAVAAH portal, either suo motu or on a Memorandum of Contraventions issued by RBI (para 3.1).
  • Application fee: Rs 10,000 plus applicable GST (stated in the Master Direction as 18% at present), paid by demand draft or electronic mode, with intimation of payment by email within 2 hours of payment (para 3.2).
  • Documents: the application in the format appended to the Compounding Rules, 2024, the details in Annex II, a copy of the Memorandum of Association if available, and the Annex III undertaking on enquiry, investigation or adjudication by the Directorate of Enforcement (paras 3.3 and 3.4).
  • Administrative action first: no application is processed until the applicant has completed the required administrative action, such as obtaining approvals, completing pending reporting or unwinding the transaction (para 4.2).
  • Repeat contraventions: a similar contravention committed within three years of one that was compounded is not compounded (para 4.1).
  • Order and payment: the compounding order is to be passed within 180 days of receipt of a complete application (para 6.1), and the compounding amount is payable within 15 days of the order (para 7.1). If it is not paid in time, the applicant is deemed never to have applied for compounding (para 7.3).
  • Other offices: the Master Direction assigns contraventions relating to liaison, branch and project offices, NRFAD accounts and immovable property to the compounding authorities attached to the Foreign Exchange Department, Central Office Cell, New Delhi (para 2.2). Circular 28 does not address these categories.

The circular states that the Master Direction “shall accordingly be updated”. As on the date of this post, RBI’s Master Directions page still shows the Compounding Master Direction as “Updated as on April 24, 2025”. Until it is updated, Circular 28 itself is the instrument to rely on for the filing office.

The circular deals with where applications “shall be submitted”. It does not address applications already filed at the Central Office before 23 October 2026.

Who is affected

Indian companies and LLPs with overseas subsidiaries or joint ventures

Any compounding application for an overseas investment contravention, including a contravention on a loan or guarantee given to that overseas entity, now turns on the foreign entity’s UIN prefix. Keep the UIN of each overseas entity on file with the compliance papers.

Companies with ECBs, rupee loans from non-residents or cross-border guarantees

Applications go to the Regional Office for the registered office of the Indian company. Groups with entities in different states will file in different offices for each entity.

CAs and FEMA advisers

Before filing, identify the regulation contravened, the transaction category and, for overseas investment, the UIN. Use the table above for Part A cases and Part C of Annexure I to the Master Direction for Part B cases. Where the contraventions span categories handled by different offices, CEFA, Mumbai is available under Part C.

Checklist before you file a FEMA compounding application

  1. Identify each regulation or rule contravened and the transaction it relates to.
  2. For an overseas investment case, or a loan or guarantee to your own ODI entity, note the UIN prefix and pick the Regional Office from the table. No UIN: CEFA, Mumbai.
  3. For an ECB, borrowing, lending or guarantee case, identify the Regional Office for your registered office from Part C of Annexure I to the Master Direction.
  4. Where the contraventions fall under different offices, decide whether to file at CEFA, Mumbai under Part C.
  5. Complete the administrative action, pay the Rs 10,000 plus GST application fee, send the payment email within 2 hours, and attach the Annex II details and the Annex III undertaking.

FAQ

Does Circular 28/2026-27 change the compounding amount?

No. The circular only delegates the power to compound and sets out where applications are submitted. The compounding amount continues to be determined under the Master Direction dated 22 April 2025.

My company gave a corporate guarantee for its overseas subsidiary’s bank loan. Where do I file?

Under the note to Part B, a guarantee undertaken by the applicant towards the foreign entity in which it has made ODI follows Part A, so the application goes to the Regional Office matching that subsidiary’s UIN prefix.

Can I still file at the Central Office in Mumbai?

The circular sends overseas investment cases without a UIN, and applications covering several categories handled by different offices, to CEFA, Central Office, Mumbai. Other overseas investment, borrowing and lending, and guarantee applications go to the Regional Office set out in Parts A and B.

Sources

  • Source: Reserve Bank of India, A.P. (DIR Series) Circular No. 28/2026-27, RBI/FED/2026-27/298, “Delegation of Compounding of certain Contraventions under FEMA, 1999 to Regional Offices of the Reserve Bank”, 23 October 2026, rbi.org.in.
  • Source: Reserve Bank of India, Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, Notification No. FEMA 3(R)(5)/2026-RB, 9 February 2026, and A.P. (DIR Series) Circular No. 22, 16 February 2026, rbi.org.in.
  • Source: Reserve Bank of India, Master Direction, Compounding of Contraventions under FEMA, 1999, FED Master Direction No. 04/2025-26, 22 April 2025 (Updated as on 24 April 2025), rbi.org.in.

Related reading on Tax Update India: APR and FLA filing for companies with overseas investments, RBI’s ECB rules 2026 and the FEMA (Guarantees) Regulations, 2026.

Talk to an expert

Preparing a compounding application for an overseas investment, ECB or guarantee lapse, or unsure which RBI office it belongs to? Tax Update India can help you work through it. Book a quick call.

Disclaimer: This article is for general information only and reflects the law as on the date of publication. It is not legal or tax advice. Please consult a qualified professional before acting on it.

CA Adityavikram Banka
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