Navin Law

Under Section 3 of FEMA, the Reserve Bank of India (RBI) has been designated as the principal regulator to oversee foreign exchange matters not specifically governed by the Act. In a significant policy shift, the RBI—via Master Direction No. 04/2025-26 (Circular No. RBI/FED/2025-26/135)has introduced a more lenient approach to penalizing certain contraventions under FEMA. The update caps the compounding penalty at a maximum of INR 2 lakh, replacing the earlier range of 0.30% to 0.75% of the violation amount.