RBI Notifies New Forex Regulations, Stops Fresh FFMC Licences

The central bank said the revised framework was finalised after incorporating stakeholder feedback received on the draft norms released in December 2023. Three-Tier Authorisation Structure Introduced Under the new regulations, all entities undertaking foreign exchange transactions will require authorisation from the Reserve Bank of India. Applications for fresh authorisation will be considered under three categories, AD Category-I, AD Category-II, and AD Category-III. Banks licensed by the RBI will qualify under AD Category-I. AD Category-II will include banks, non-banking financial companies (NBFCs), and existing FFMCs or forex correspondents operating for at least two years with an average annual forex turnover of Rs 50 crore over the previous two financial years. Entities intending to offer innovative products or services involving foreign exchange transactions will fall under AD Category-III. The RBI clarified that fresh applications for authorisation as FFMCs will no longer be considered, except for applications already under process at the time the regulations came into effect. Operational Limits, Net Worth Criteria Specified The regulations also specify minimum net worth requirements of Rs 10 crore for AD Category-II entities and Rs 2 crore for AD Category-III entities. Under the revised framework, AD Category-I entities will be permitted to undertake all current and capital account transactions allowed under the Foreign Exchange Management Act (FEMA). AD Category-II entities can facilitate non-trade current account transactions and foreign trade transactions up to Rs 25 lakh per transaction. Existing authorised persons may continue operations until expiry of their current authorisation, subject to compliance with the new regulations and directions issued by the RBI from time to time. Applications for authorisation are to be submitted through the PRAVAAH portal to the relevant regional office of the central bank. (KNN Bureau)