Foreign Exchange Rules Revamped To Enable Ease Of Doing Business


Rohit Kulkarni

Rohit Kulkarni

Sep 14, 2024


In order to simplify rules and regulations for foreign investments, the Ministry of Finance has notified new Foreign Exchange (Compounding Proceedings) Rules 2024.

Foreign Exchange Rules Revamped To Enable Ease Of Doing Business

Finance Ministry Introduces Revised Foreign Exchange Compounding Rules to Streamline Business Processes

It is in the light of streamlining and rationalizing existing rules and regulations of ease of doing business that these new rules are aimed at. In a statement, Finance Ministry said that “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 new rule will replace the existing Foreign Exchange (Compounding Proceedings) Rules 2000. The ministry said that the government is emphasizing currently on simplifying in the provisions to expedite as well as streamline the processing of compounding applications.

In addition to above, with a focus on simplification and rationalization, the ministry is working to introduce the digital payment options for application fees as well as compounding amounts in order to eliminate ambiguity and clarify the process.

FEMA Compounding Rules Amended by the Government to Enhance Foreign Investment and Ease of Business

The ministry said that “These amendments indicate the commitment of the government towards promoting ‘ease of investment’ for investors and ‘ease of doing business’ for businesses”.

It is the Compounding of Foreign Exchange (FEMA) Proceedings Rules, 2000 that governs the process of resolving or settling offences related to violations of the Foreign Exchange Management Act (FEMA), 1999.

Compounding under these rules allows individuals or entities to admit a violation and pay a penalty to avoid protracted litigation or criminal prosecution.

It was after the emphasis of Union Finance Minister Nirmala Sitharaman that the move was taken that the government would prioritise foreign investment in the country and that it would come up with flexible rules to promote foreign investments.

In her budget speech, the minister indicated that the rules and regulations for FDIs and overseas Investments will be simplified to facilitate foreign direct investments, nudge prioritization, and promote opportunities for using Indian Rupee as a currency for overseas investments.


Rohit Kulkarni
Rohit Kulkarni
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