The Reserve Bank of India [Get Quote] on Tuesday said persons who have flouted the Foreign Exchange Management Act will be allowed to settle the offence by paying monetary penalty and will not have to go for litigation if such a eprson acknowledges contravention.

This, however, will not apply to hawala transactions, the RBI said in a release.

The government has, in consultation with the RBI reviewed the procedures for compounding of contravention under the Fema, the central bank said.

"The procedures have been reviewed to provide comfort to the citizens and corporate community by minimising transaction costs, while taking severe view of wilful, malafide and fradulent transactions," it said.

Hence, the responsibility of administering compounding of contravention cases under Fema has been vested with the RBI, with the exception of havala transactions, which will be dealt with by the Directorate of Enforcement.

Clubbed under Section 3 (a) of Fema, these offences will continue to be dealt with by the Enforcement Directorate.

As per the new norms, the RBI will be required to conclude case proceedings within 180 days from the receipt for application for compounding and the sum worked out after compounding has to be paid within 15 days from the order of compounding.

The RBI has graded the contraventions. Offences involving up to Rs 500,000 will be handled by an officer in the rank of assistant general manager; more than Rs 500,000 by deputy general manager; Rs 2 million and above by general manager; and contravention above Rs 5 million by chief general manager.

The order passed by RBI will be applicable for a period of three years. If a second offense is committed after the expiry of three years, it will be deemed as a fresh contravention and not a repetition of the earlier one.

Similarly, for offences to be dealt by the Enforcement Directorate, the guidelines specify that offenses will dealt by officers in the rank of deputy director who will handle contravention of up to Rs 500,000.

Offences above Rs 5 million will be dealt either by the special director or deputy legal adviser of the directorate of enforcement.

In between, the offences of more than Rs 500,000, up to Rs 1 million and more will be handled by additional director and special director, respectively. No contravention shall be compounded unless the amount involved in such contravention is quantifiable.