Myntra Settles FEMA Case with RBI, Concludes ED Probe

Myntra Settles FEMA Violations with RBI

Fashion e-commerce major Myntra has resolved a Foreign Exchange Management Act (FEMA) contraventions case with the Reserve Bank of India (RBI) by paying a compounding fee of ₹2.88 Lakh. This settlement effectively concludes an Enforcement Directorate (ED) investigation into the matter, according to recent reports from Inc42. The resolution highlights the government’s push for ease of doing business through mechanisms like compounding.

The RBI issued the compounding order on April 20, 2026, under Section 15 of FEMA, following a no-objection clearance from the ED. The ED had initiated its investigation based on credible information concerning FEMA contraventions by Myntra. This formal closure signifies a significant step for the company in addressing its regulatory compliance issues.

Nature of Violations and Compounding Process

The violations primarily involved a delay in submitting Annual Performance Reports (APRs) for overseas investments totaling ₹42.85 Cr. Additionally, Myntra undertook Overseas Direct Investment (ODI)-related financial commitments amounting to ₹3.03 Cr despite its pending APR submissions. These lapses triggered the regulatory scrutiny by the ED.

During the ED’s investigation, Myntra proactively approached the RBI to seek compounding of these contraventions. The central bank then referred the request to the ED, which subsequently granted its no-objection for the compounding process. This cleared the path for the RBI to finalize the matter through a one-time payment of ₹2.88 Lakh.

Compounding under FEMA serves as a mechanism allowing entities to voluntarily settle specific contraventions by paying a prescribed penalty. This route is increasingly promoted by the ED as part of the government’s broader ease-of-doing-business initiative, aiming to reduce litigation and streamline regulatory compliance. With the issuance of the compounding order, the FEMA proceedings against Myntra are resolved, and the investigation terminated.

Prior Regulatory Challenges and FDI Allegations

Notably, in July 2025, the ED had filed a separate complaint against Flipkart-owned Myntra, its related entities, and directors. This earlier case alleged violations of India’s Foreign Direct Investment (FDI) policy, amounting to a substantial ₹1,654.4 Cr. This previous action underscores a history of regulatory challenges for the company regarding foreign exchange laws.

The probe agency had alleged that Myntra was conducting multi-brand retail trading (MBRT) under the guise of a wholesale cash-and-carry business. This distinction is crucial as a wholesale model typically allows for 100% FDI under the automatic route, whereas MBRT has stricter regulations in India. The ED claimed Myntra received foreign investments and then sold a majority of its goods to its related company, Vector E-Commerce, which subsequently sold them to end consumers.

The ED further asserted that Vector E-Commerce was utilized to segment transactions into business-to-business (B2B) and business-to-consumer (B2C) flows. This arrangement, according to the agency, effectively enabled retail operations while the business was presented as wholesale. The agency also accused Myntra of violating FDI rules by exceeding the permissible 25% sales limit to group companies, consolidating the alleged contraventions.

Based on these findings, the agency alleged violations of FEMA and India’s FDI policy totaling ₹1,654.35 Cr. This significant figure highlighted the gravity of the earlier accusations against the fashion e-commerce giant and its operational structure concerning foreign investment regulations.

Myntra’s Stance and Broader Implications

Responding to the allegations at the time, Myntra had stated its commitment to complying with all applicable laws and pledged full cooperation with the authorities. The company also clarified that it had not received a copy of the complaint or supporting documents from the ED, indicating a lack of formal notification regarding the specifics of that particular case.

While the recent settlement addresses specific FEMA contraventions related to delayed APRs and ODI commitments, the context of the larger ₹1,654.4 Cr FDI policy violation case remains a significant backdrop for Myntra. The compounding mechanism allowed Myntra to close one chapter of its regulatory scrutiny, demonstrating the government’s approach to resolving certain compliance issues through penalties rather than prolonged litigation.