India Proposes New Foreign Exchange Rules
The Reserve Bank of India has invited stakeholders to provide their feedback on the draft Licensing Framework for APs under FEMA by January 31, 2024
In a move aimed at modernising and simplifying the licensing framework for Authorised Persons (APs) under FEMA, 1999, the Reserve Bank of India (RBI) has proposed the introduction of a new category of money changers known as Forex Correspondents (FxCs).
This proposed category will operate through an agency model, facilitating foreign exchange transactions without the need for separate authorisation from RBI.
As it stands, the RBI issues licenses to authorised dealers, including banks authorised to deal in foreign exchange, and full-fledged money changers.
The existing framework for licensing APs was last reviewed in March 2006. The proposed changes reflect the RBI’s commitment to adapting to the evolving financial landscape, including the digitisation of payment systems and the increased integration of the Indian economy with the global economy.
The draft Licensing Framework for Authorised Persons (APs) under FEMA outlines the RBI’s intention to rationalise and simplify the licensing process for APs, catering to the progressive liberalisation under FEMA and addressing the emerging needs of the country’s rapidly growing economy.
In a bid to enhance the ease of doing business, the RBI suggests introducing a new category of money changers, the Forex Correspondents (FxCs), operating under the agency model.
Entities falling under Category-I and Category-II Authorised Dealers can become FxCs without seeking separate authorization from the RBI.
This move aims to streamline foreign exchange operations for the benefit of common individuals, tourists, and businesses while maintaining necessary regulatory oversight.
The draft also introduces the Forex Correspondent Scheme (FCS), structured on a principal-agency model where AD Category-I or AD Category-II will act as the principal for the FxCs. The primary objective of the FCS is to extend the reach of foreign exchange services.
Stakeholders and industry participants are invited to provide their comments on the draft Licensing Framework for Authorised Persons (APs) under FEMA by January 31, 2024.
