Compounding is the process of settling a violation of any rules, regulations or guidelines issued by the Reserve Bank of India (RBI) through payment of a certain amount of money. The compounding process allows the violator to avoid legal proceedings or penalties by paying a fee, which is generally less than the cost of litigation.
Process of Applying for Compounding with the Reserve Bank of India.
Step 1: Identify the Violation
The first step in the compounding process is to identify the violation of RBI rules, regulations or guidelines. This may include violations of Foreign Exchange Management Act (FEMA) regulations, Prevention of Money Laundering Act (PMLA) regulations, or other RBI guidelines. It is important to carefully review the violation to ensure that it is eligible for compounding.
Step 2: Prepare the Application
Once the violation has been identified, the next step is to prepare the application for compounding. The application must include a detailed explanation of the violation, along with any mitigating circumstances. The application must also include a statement of the amount being offered for compounding.
The application for compounding can be submitted online on the RBI’s website. The applicant must first register on the RBI’s Online Compounding Portal, and then complete the online application form. The application must include all relevant details such as name and address of the applicant, the details of the alleged violation, and the amount being offered for compounding.
Step 3: Pay the Compounding Amount
Once the application has been submitted, the next step is to pay the compounding amount. The compounding amount is generally a percentage of the amount involved in the violation, and it is determined by the RBI on a case-by-case basis. The amount must be paid within 15 days of the submission of the application.
The payment can be made online through the RBI’s Online Compounding Portal. The applicant must provide details of the payment, such as the name of the bank, the amount being paid, and the date of payment.
Step 4: Wait for Approval
Once the application and payment have been submitted, the RBI compounding application will review the application and make a decision on whether to approve the compounding. This process may take several weeks or even months, depending on the complexity of the case.
If the compounding is approved, the applicant will receive a letter from the RBI confirming the same. If the compounding is not approved, the applicant may be subject to legal proceedings or penalties.
Compounding is an important process for companies or individuals who have violated RBI rules, regulations or guidelines. The process allows the violator to avoid legal proceedings or penalties by paying a fee. The process of applying for compounding with the Reserve Bank of India involves identifying the violation, preparing the application, paying the compounding amount, and waiting for approval. It is important to carefully follow the process to ensure that the application is successful.