Current Context: The Reserve Bank of India (RBI) has capped penalties for certain Foreign Exchange Management Act (FEMA) violations at ₹2 lakh, replacing the earlier percentage-based system.

Key Highlights

• Act: Foreign Exchange Management Act (FEMA), 1999 (replaced Foreign Exchange Regulation Act (FERA), 1973)
• New Change: Penalty capped at ₹2 lakh for specific FEMA contraventions
• Earlier System: Penalties ranged from 30% to 0.75% of the violation amount

Violations Covered:

• Failure to reinvest Liberalised Remittance Scheme (LRS) proceeds within 180 days
• Delay in completing exports after advance receipts
• Gifting high-value shares to non-resident relatives without prior RBI approval

Objective:

• Reduce compliance burden for individuals and corporations
• Improve ease of doing business
• Promote a conducive environment for foreign investment