RBI releases draft licensing framework for authorised persons under forex law

Reserve Bank of India

The Reserve Bank of India (RBI) on December 26 released a draft 'Licensing Framework for Authorised Persons (APs)' under Foreign Exchange Management Act (FEMA), 1999.

The focus of the draft norms is on rationalising the authorisation framework for money changers in view of the widespread availability of banking services to public, to look at alternate models for facilitating foreign exchange related services and improve the scope of services being offered by AD-Category II entities, a release stated.

It will also review the regulatory framework for APs, the release added.

The RBI had, in its June monetary policy meeting, said that the central bank decided to rationalise and simplify the licensing framework for APs to effectively meet the emerging requirements of the rapidly growing Indian economy.

The objective is to achieve operational efficiency in the delivery of foreign exchange facilities to common persons, tourists and businesses, while maintaining appropriate safeguards.

The central bank said comments or feedback on the draft framework are invited from all stakeholders till January 31, 2024.

In the draft framework, the RBI said it  proposed to introduce a new category of money changers who may conduct money changing business through an agency model by becoming Forex Correspondents (FxCs) of Category-I and Category-II Authorised Dealers. This was to enhance the ease of doing business.

"Such entities shall not be required to seek authorisation from the Reserve Bank," release said.

In terms of perpetual authorisation, the central bank  proposed to renew an existing authorisation as an AD Category-II on a perpetual basis, subject to meeting the revised eligibility criteria laid down in the new framework.

It is also proposed to allow AD Category-II entities to additionally

facilitate trade-related transactions up to a value of Rs 15 lakh (per transaction). It is with a view to expand the scope of business, and to encourage innovation/competition leading to better consumer experience, release added.

It is proposed to introduce a scheme, i.e., FCS, which will be based on a principal-agency model where AD Category-I or AD Category-II will act as the principal for the FxCs. Accordingly, the FxCs would Review of authorisation framework under FEMA enter into agency agreements with a AD Category-I or AD Category-II under the FCS, release said.