The Reserve Bank of India (RBI) has introduced new rules for companies and institutions dealing in foreign exchange (forex) services.
One of the biggest changes is that the RBI will no longer issue licenses to new money changers.
The central bank says the updated rules are aimed at improving transparency, simplifying compliance, and making foreign exchange services more efficient.
The new regulations also expand the principal-agent model, which will help in providing forex services through approved agents after proper verification and due diligence.
RBI Approval Now Mandatory
Under the revised framework, every entity that wants to deal in foreign exchange must first get approval from the RBI.
The central bank has also redefined the rules for different categories of authorized dealers.
This move is expected to create a more structured system for forex-related activities in India.
The updated rules officially came into effect after being notified on April 30.
Three Categories Introduced
The RBI has divided applicants into three separate categories under the new system.
AD Category I
Banks can apply under AD Category I.
These entities will continue to handle a wide range of foreign exchange transactions.
AD Category II
NBFCs, existing full-fledged money changers (FFMCs), and forex agents can apply under this category.
However, they must meet certain conditions:
They should have been operating for at least two years
They must have an average annual forex turnover of ₹50 crore during the last two financial years
New Category for Innovative Forex Services
The RBI has also introduced AD Category III.
This category is meant for entities that want to provide new and innovative forex-related products and services.
The move is seen as an effort to encourage innovation in the foreign exchange sector while keeping regulations in place.
No New Money Changer Licenses
The most important part of the new rules is that RBI will no longer consider applications for new Full-Fledged Money Changers (FFMCs).
This means no fresh licenses will be issued to new money changing businesses going forward.
The RBI believes the revised framework will improve the delivery of forex services while ensuring better monitoring and compliance across the sector.
