What RBI's Published Compounding Orders Reveal About APR Defaults

Most advice on missed filings stays theoretical: "penalty up to three times the sum involved," followed by a shrug. The better evidence is what RBI and the Enforcement Directorate actually did. RBI publishes its compounding orders, and read side by side, they show how APR defaults really play out. Five patterns come up often enough to be worth knowing before your next filing cycle.

How to read a compounding order

A compounding order is RBI's record that a person admitted a contravention, applied to settle it, and paid a sum fixed by the authority. Each one names the regulation breached, describes the facts, states the amount involved and gives a single payment figure. For ODI compliance, the regulation is usually the reporting provision, which required the Annual Performance Report to be submitted by a set date each year. The orders are procedural: the underlying investment was usually permitted, and the filing was late.

Pattern one: the APR delay rarely travels alone

In the orders I could trace, the APR is usually one item on a list. In a case involving a resident individual, RBI recorded several contraventions together: an investment made when the individual was not permitted to make it, holding the investment in an unsuitable entity, late reporting of the investment itself, and delay in submitting the APRs. The late APR came last.

The lesson for FEMA compliance is that an APR default tends to expose the rest of the file. Once an examiner opens the folder, everything else from the original remittance onwards is on the table.

Pattern two: years of delay get bundled into one order

The same individual's order records delays for the years ended March 2008 onwards, in one application. Each missed year is its own contravention, but they are compounded together. That means the cost of waiting is cumulative: every year added to the pile increases the duration and sum involved, and the same questions about the underlying structure apply to each year.

It also explains why a single missed APR is usually easier to repair than a run of them. The late submission route, which allows a flat fee of ₹7,500 per return when exercised within three years of the due date, exists for exactly this window.

Pattern three: the payment is small compared with the sum involved

This is the surprise. The Myntra case, reported in June 2026, involved a delay in submitting APRs with an amount involved of ₹42.85 crore. The order, dated 20 April, compounded the matter for ₹2.88 lakh. A separate commentary on non-reporting contraventions describes a matter with roughly ₹25.74 crore involved that was compounded for about ₹16 lakh, with RBI taking a lenient view because the applicant said the lapse was inadvertent. (That matter was not necessarily an APR case.)

The pattern follows the arithmetic. RBI's compounding framework sets a ceiling at 300% of the sum involved but computes the actual figure from a matrix that grades by the amount and the duration of the delay. For certain reporting contraventions, the compounding amount is reportedly capped at ₹2 lakh per regulation. So the headline "three times" figure is the legal maximum, not the usual outcome of a voluntary application.

Pattern four: new investment made while APRs were pending

In the Myntra matter, RBI separately noted a financial commitment of ₹3.03 crore made by way of ODI while APRs were still outstanding. Overseas investment is conditional on the investor's earlier reports being up to date, so this is a second contravention layered on the first.

For anyone planning a fresh round of funding into a subsidiary, this is the pattern with the most practical bite. Clear every pending APR before you remit anything new. A bank may refuse the remittance anyway, but if one goes through, you have created a fresh breach.

Pattern five: the route depends on who found it first

The Myntra order came after an ED investigation and a no-objection from the Directorate before RBI compounded. Generally, matters under the more serious category, such as Section 3(a), are not compounded by RBI at all and go to the Enforcement Directorate. Reporting delays that you identify and bring forward yourself sit in the more comfortable lane.

There are also exclusions to know about. Compounding is generally unavailable where the amount involved cannot be quantified, where an adjudication order has already been passed, or where a similar contravention was compounded in the preceding three years. And if the compounding amount is not paid within 15 days of the order, RBI treats the application as if it had never been made.

What this means for APR filing in India

Taken together, the patterns point to a few practical conclusions for APR filing for foreign subsidiaries:

1. File the oldest missing year first. Duration drives the amount, and gaps invite scrutiny of everything else.

2. Audit the structure while you clear the backlog. If the file is open, check that the original remittance, UIN, step-down subsidiaries and shareholding are all correctly reported.

3. Stop new remittances until you are current. This is where a second breach starts.

4. Come forward early. Self-identified delays are routinely settled through the late submission route or compounding. Delays found by an investigator travel a harder road.

Late fee or compounding?

When in doubt, a FEMA professional can tell you which lane your facts fit.

Where the audit sits in all of this

Backlogs in practice are often audit backlogs. The APR for a controlled subsidiary needs audited statements of the foreign entity, and the audit of a foreign subsidiary of an Indian company is done by a licensed auditor in the host country. If a subsidiary's local audit has lapsed for a few years, the Indian filing lapses with it. Fixing the audit first is usually the quickest way to unlock the filing.

Frequently asked questions

1. Does RBI publish compounding orders?

Yes. They are listed on RBI's website, and each names the contravention and the amount paid.

2. Is a late APR always compounded?

No. Many are cleared through the late submission fee. Compounding applies to older or combined contraventions.

3. Does a small payment mean low risk?

Not necessarily. The payment can be modest while the process takes months and may block fresh investment in the meantime.