RBI forex rules 2026: No new FFMC licences, 3-tier

What the RBI changed and why it matters

The Reserve Bank of India has notified the Foreign Exchange Management (Authorised Persons) Regulations, 2026, revising the licensing, renewal, and operating framework for entities that deal in foreign exchange. The rules are intended to rationalise authorisation and renewal and make compliance more streamlined, while keeping checks and balances in place. The 2026 regulations replace older frameworks and introduce clearer classification of authorised persons. They also formalise how retail money-changing and remittance services can be delivered through an expanded principal-agent model.

A key policy signal in the notification is that the RBI will not consider fresh authorisation applications for full-fledged money changers (FFMCs), except applications already under process on the date the regulations come into force. Alongside this, the RBI has directed authorised persons to stop entering into new franchisee arrangements and to phase out existing franchisee tie-ups within two years.

No fresh FFMC approvals, with limited grandfathering

The RBI’s norms state that fresh authorisation as an FFMC will not be considered, except for applications already under process when the regulations take effect. Existing money changers can continue to operate, but renewals and ongoing operations will be tied to updated eligibility and compliance conditions. The shift effectively narrows the route for new standalone money-changing businesses, while retaining a pathway for regulated entities and structured agent models to expand distribution.

The RBI also moved to reorganise how money-changing activity sits within the authorised dealer structure. Under the final norms, FFMCs that were earlier under an authorised dealer category-III framework are now included under category-II, reflecting a tighter alignment with wider operational and governance requirements.

Three-tier structure replaces earlier classifications

The 2026 regulations introduce a three-tier structure for authorised persons: Authorised Dealer (AD) Category I, Category II, and Category III. Banks licensed by the RBI continue to qualify as AD Category I entities and can undertake all permissible current and capital account transactions.

AD Category II licences may be granted to banks, non-banking financial companies (NBFCs), and eligible money changers or forex correspondents with an operational track record, under criteria specified by the RBI. A new and reworked AD Category III has been created for entities that need to undertake forex transactions as part of their underlying business, or offer products involving foreign exchange, with specific activities to be notified by the RBI.

Minimum net worth thresholds for non-bank applicants

Eligibility conditions have been revised, especially for applicants other than banks and RBI-regulated NBFCs. Such applicants must be incorporated as companies and meet minimum net worth thresholds. The RBI specified minimum net worth of ₹10 crore for AD Category II and ₹2 crore for AD Category III.

For existing entities seeking renewal, meeting the prescribed net worth criteria is also required. The Informist report further noted that existing money changers can continue operations subject to renewal conditions, including minimum net worth requirements ranging from ₹0.25 crore to ₹0.5 crore, depending on branch network size.

Turnover requirements and operating track record

The framework introduces operational thresholds linked to annual forex turnover. Authorised persons other than banks and NBFCs must achieve minimum annual forex turnover within two years. The RBI specified ₹50 crore for AD Category II entities and ₹10 crore for FFMCs, and these levels must be maintained thereafter.

For money changers now falling under category-II, the RBI also stated they should have been functioning for at least two years and have an average annual foreign exchange turnover of ₹50 crore during the previous two financial years.

Principal-agent model formalised via the Forex Correspondent framework

A central operational feature of the new rules is the expansion of the Forex Correspondent (FxC) framework. The RBI has formalised the FxC model as a principal-agent structure for retail forex services. AD Category I and AD Category II entities are permitted to appoint FxCs to undertake permitted money-changing and remittance-related transactions.

Under this structure, all transactions undertaken by correspondents must be reflected in the principal’s books. The RBI also placed responsibility on the principal entity for governance, customer protection, compliance, and data security. The intent is to widen access through agents while ensuring accountability stays with the regulated principal.

Franchisee arrangements barred, existing ties to end in two years

The rules prohibit authorised persons from entering into fresh franchisee arrangements. Existing franchisee arrangements must be discontinued within two years, or transitioned to the FxC framework within the same period. Franchisee arrangements typically refer to tie-ups where authorised dealers or FFMCs appoint third-party outlets to undertake money-changing on their behalf to expand retail reach.

By requiring a wind-down or conversion to FxCs, the RBI is shifting distribution away from franchise-like models and towards a formal principal-agent structure with clearer oversight obligations.

Fit-and-proper checks and enforcement-related disclosures

The regulations lay down fit-and-proper requirements for promoters, directors, and key managerial personnel, including experience in financial services and regulatory track record. Entities under investigation by enforcement agencies will be required to furnish a no-objection certificate. The rules also require entities to report changes in management, ownership, or regulatory status to the RBI within stipulated timelines.

Non-bank entities must commence operations within six months of receiving authorisation, and prior approval is required for significant changes in ownership or control.

Process, portals, and validity of authorisation

The RBI said applications for authorisation will be processed through the PRAVAAH portal. Ongoing reporting, including details of business locations and agents, will be filed through the APConnect system. Authorisations will remain valid until revoked or surrendered, subject to compliance with RBI conditions.

The RBI retains the power to impose additional conditions or revoke an authorisation in case of non-compliance or if required in public interest.

Key numbers and operational changes at a glance

Market impact and what to watch

The regulatory changes reshape how retail forex distribution expands in India. A freeze on fresh FFMC approvals reduces the likelihood of new standalone money-changing licences, while the strengthened AD categories and FxC framework point to growth through principal-led agent networks. The added net worth and turnover thresholds also raise the eligibility bar for new non-bank entrants and make renewals more rules-driven.

The immediate next milestones for the sector will be how quickly authorised persons transition franchisee networks into the FxC model within the two-year window, and how applicants adapt to the net worth and turnover requirements, alongside the RBI’s portal-based reporting and supervision.