The Reserve Bank of India (RBI) has introduced a fresh set of draft norms designed to streamline and simplify the process of authorizing money changers to facilitate foreign exchange services.
The review of the current licensing framework aims to cater to the evolving needs of India's rapidly expanding economy. It seeks to enhance operational efficiency in delivering foreign exchange services to individuals, tourists, and businesses, all while maintaining necessary checks and balances, as per the RBI.
The last comprehensive review of the framework for licensing authorized persons (APs) under the Foreign Exchange Management Act (FEMA), 1999, occurred in March 2006. However, in light of the progressive liberalization under FEMA, increased integration of India's economy with the global landscape, digitization of payment systems, and evolving institutional structures over the past two decades, the RBI intends to streamline and simplify the licensing framework for APs.
The RBI has invited feedback on the proposed framework from all stakeholders by January 31, 2024.
This review aims to enhance the ease of conducting foreign exchange transactions while fortifying the regulatory oversight framework governing APs, as detailed in the official statement released recently by the Reserve Bank.
Under the proposed norms, a new category of money changers is suggested, allowing them to conduct money-changing operations through an agency model by becoming forex correspondents of Category-I and Category-II authorized dealers. Such entities wouldn't need authorization from the RBI to operate.
Additionally, to alleviate the regulatory burden and improve the ease of doing business, the RBI has proposed perpetual renewal of existing authorizations as AD Category-II.
AD Category-II entities have the authority to issue forex pre-paid cards to residents traveling abroad for private or business purposes, provided they adhere to the necessary KYC/AML/CFT requirements. However, settlements related to forex pre-paid cards need to be executed through AD Category-I banks.
(With Agency Inputs)
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