The Finance Ministry, on Thursday, came out with new rules for the processing of compounding applications under the Foreign Exchange Management Act (FEMA).

The new rules aim to further promote ease of investment, the ministry said.

This is in pursuance of the Union Budget 2024-25 announcement by Union Finance Minister Nirmala Sitharaman to simplify rules and regulations for foreign Investments.

She promised to simplify the rules and regulations for Foreign Direct Investments (FDIs) and overseas investments. The new rules, which will supersede nearly 24-year-old Foreign Exchange (Compounding Proceedings) Rules, will come into effect from Thursday.

As part of a broader initiative to streamline and rationalise existing rules and regulations to further facilitate ease of doing business, the compounding proceeding rules were comprehensively reviewed in consultation with the Reserve Bank of India.

“The emphasis has been on enabling provisions to expedite and streamline the processing of compounding applications, the introduction of digital payment options for application fees and compounding amounts, and a focus on simplification and rationalization of the provisions to eliminate ambiguity and clarify the process,” the Finance Ministry said in a statement.

Under the new rules, the threshold for compounding authorities of RBI has been raised.

Now, in a case where the sum involved in such contravention does not exceed Rs 60 lakh, an officer not below the rank of the Assistant General Manager of the RBI will be the authority. Earlier, the threshold was ₹10 lakh.

The threshold for cases to be taken up by the deputy general manager has been raised to ₹2.5 crore from ₹10 lakh-₹40 lakh.

A general manager will be assigned a case having contravention of up to ₹5 crore as against ₹40 lakh-₹1 crore. In the case of the chief general manager, the threshold would be more than ₹5 crore against ₹1 crore.

Further, there is no change in the thresholds for officers in the Directorate of Enforcement (ED) and will remain as up to ₹5 lakh (Deputy Director), ₹5-₹10 lakh (Additional Director)< ₹10-50 lakh (Special Director), ₹50 lakh-₹1 crore (Special Director along with Deputy Legal Advisor) and ₹1 crore or more (Director of Enforcement along with Special Director).