RBI Sends FEMA Compounding for Overseas Investment, Borrowing and Guarantees to Regional Offices
Applicants settling a foreign exchange contravention now have to think about geography before they think about anything else. The Reserve Bank has moved FEMA compounding for three large categories of transaction out of its Central Office and into named Regional Offices, and the receiving office is now fixed by a rule rather than chosen.
What Was Issued
A.P. (DIR Series) Circular No. 28/2026-27, referenced RBI/FED/2026-27/298, was issued on October 23, 2026 and is addressed to all Authorised Dealer Category-I banks and other Authorised Persons. Its subject is the delegation of compounding of certain contraventions under the Foreign Exchange Management Act, 1999 to Regional Offices of the Reserve Bank.
The background the circular gives is that compounding applications relating to overseas investments, to borrowing and lending, and to guarantees were being received at the Central Office, while certain foreign investment categories were already being handled by Regional Offices. The stated purpose of the change is to promote customer service.
Where Overseas Investment Applications Now Go
For contraventions relating to overseas investment, the office is fixed by the Unique Identification Number of the foreign entity, overseas joint venture or overseas wholly owned subsidiary. The routing set out in the circular is as follows.
Ahmedabad: Unique Identification Numbers beginning AH.
Bengaluru: BG.
Mumbai: BL, BY and PJ.
Kolkata: BN, CA, GA and GH.
New Delhi: CG, JM, JR, KA, ND, PT and WR.
Hyderabad: HY.
Chennai: KO and MA.
Where no Unique Identification Number has been allotted, the application goes instead to the Cell for Effective implementation of FEMA at the Foreign Exchange Department, Central Office, Mumbai.
Where Borrowing, Lending and Guarantee Applications Go
For contraventions relating to borrowing and lending and to guarantees, the test is not the identification number but jurisdiction. The application is to be submitted to the Regional Office having jurisdiction over the registered office of the Indian company or entity, or over the place of domicile of the applicant. The jurisdictional detail sits in Part C of Annexure I to the Master Directions on compounding.
There is a carve-out inside that rule which is easy to miss. Where the lending or the guarantee is towards a foreign entity in which the applicant has made an overseas investment, the application follows the overseas investment routing instead, which means it is governed by the identification number and not by the registered office.
What Still Goes to Mumbai
Two situations are kept at the Cell for Effective implementation of FEMA at the Central Office in Mumbai. The first is the overseas investment application where no identification number has been allotted. The second is an application that involves several categories of transaction whose compounding has been delegated to different offices.
The second of those is the practical one. A single set of facts that touches both an overseas investment and a borrowing, for instance, does not get split between two Regional Offices. It goes to the Central Office as one application.
Which Regulations Are Covered
On the overseas investment side the circular names the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2000 and the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004, the Foreign Exchange Management (Overseas Investment) Rules, 2022 and the Foreign Exchange Management (Overseas Investment) Regulations, 2022, together with other provisions under the Act and the rules and regulations made under it where they relate to an underlying overseas investment transaction.
On the borrowing, lending and guarantee side it names the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000, the Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000, the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, the Foreign Exchange Management (Guarantees) Regulations, 2000 and the Foreign Exchange Management (Guarantees) Regulations, 2026 of January 6, 2026.
Why the Routing Rule Deserves Attention
The receiving office is not an administrative detail. An application that reaches the wrong office has to be redirected or resubmitted, and the time that takes is time in which the contravention remains uncompounded.
The routing is also mechanical rather than discretionary. There is no best office and no election. The identification number or the registered office decides, and where both tests could apply the circular says which one wins.
What Has Not Changed
The circular does not alter who may apply, what the application must contain, how the compounding amount is worked out, or the consequences of not applying. The power to compound sits in section 15 of the Act and is untouched. The circular moves the filing point and nothing more, and the Master Directions on compounding are to be updated to reflect the delegation.
The legal basis is stated as section 10(4) and section 11(1) of the Act, and the circular records that it is without prejudice to any permission or approval required under any other law. Authorised Dealers and other Authorised Persons are asked to bring the guidelines to the notice of their constituents.
Key Takeaways
The instrument is a circular of October 23, 2026: A.P. (DIR Series) Circular No. 28/2026-27, referenced RBI/FED/2026-27/298.
Three categories move out of the Central Office: Overseas investment, borrowing and lending, and guarantees.
Overseas investment is routed by identification number: The prefix of the Unique Identification Number of the foreign entity, overseas joint venture or overseas wholly owned subsidiary fixes the office.
Borrowing, lending and guarantees are routed by jurisdiction: The Regional Office having jurisdiction over the registered office of the Indian entity or the place of domicile of the applicant.
There is a carve-out that reverses the test: Lending or a guarantee towards a foreign entity in which the applicant has made an overseas investment follows the overseas investment routing.
Two situations stay in Mumbai: An overseas investment matter with no identification number allotted, and an application spanning categories delegated to different offices.
The Master Directions are to be updated: The delegation is to be reflected in the Master Directions on compounding.
Nothing else in the compounding scheme is touched: The circular changes the filing point and not the substance.
Key Statutory Provisions
Section 10(4) of the Foreign Exchange Management Act, 1999: One of the two provisions under which the circular is expressly issued.
Section 11(1) of the Act: The other provision under which the circular is expressly issued, and the source of the Reserve Bank's power to give directions to authorised persons.
Section 15 of the Act: The power to compound a contravention, which the circular does not amend. The circular allocates the office at which an application under that power is to be made.
Sources and References
The Reserve Bank's circular index, listing the circular against its date
Independent report of the same circular, with the routing table and the list of regulations
The Master Directions on compounding, which carry the jurisdictional annexure
Foreign Exchange Management Act, 1999, section 10(4), section 11(1) and section 15
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.
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