RBI Issues Revised Norms for Entities Dealing in Forex
The reserve bank of india (RBI) has introduced new regulatory norms for entities involved in foreign exchange (forex) transactions, aimed at simplifying the authorisation system while tightening oversight.Objective of the New RulesThe revised framework under the Foreign Exchange Management (Authorised Persons) Regulations, 2026 is designed to:Streamline licensing and approval of forex dealersImprove efficiency in forex service deliveryReduce compliance burden on authorised entitiesStrengthen regulatory oversight and risk controlKey Structural Change: No New Money Changer LicencesOne of the most important changes is:❌ RBI will not issue fresh licences to Full-Fledged Money Changers (FFMCs)Existing players will transition into revised categories under the new systemInstead, RBI is shifting toward a principal–agent model, where authorised banks and dealers will appoint agents for forex services.New Classification of Forex EntitiesThe RBI has introduced a tiered structure for Authorised Dealers (ADs):1. AD Category IMainly banksCan conduct full-scale forex operations2. AD Category IINBFCs and qualified forex firmsMust meet conditions like:Minimum 2 years of operationAverage forex turnover requirement3. AD Category IIIEntities offering innovative or specialised forex-related servicesEligibility and Compliance RequirementsTo operate in forex under the new regime, entities must:Be incorporated under the Companies Act, 2013Meet minimum net worth normsFollow RBI-defined reporting and compliance rulesThis ensures only financially strong and compliant firms remain in the system.Major Policy Shift: Principal–Agent ModelRBI is expanding a principal–agent framework, meaning:Banks or authorised dealers act as the “principal”Smaller entities act as “agents” for forex servicesHelps expand forex access while keeping control centralizedWhat This Means for the Forex MarketPositive impacts:Easier access to forex services for customersMore structured regulationReduced fragmentation in money-changing businessRestrictive impacts:Fewer standalone money changer licencesHigher entry barriers for new forex firmsGreater compliance burden for non-bank playersSimple SummaryRBI is modernising India’s forex ecosystem by:Phasing out standalone money changer licensingIntroducing a structured tier system for authorised dealersStrengthening oversight through banks and regulated agents Disclaimer:The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.