RBI proposes to introduce new category of money changers

The Reserve Bank on Tuesday proposed to introduce a new category of money changers who may conduct business through an agency model by becoming Forex Correspondents (FxCs) of Authorised Dealers.

Currently, the Reserve Bank issues licences to authorised dealers -- banks authorised to deal in foreign exchange -- and full-fledged money changers. Licences are also granted to financial and other institutions to carry out specific foreign exchange transactions related to their business.

The framework for licensing of Authorised Persons (APs) under FEMA, 1999 was last reviewed in March 2006.

The RBI said that keeping in view the progressive liberalisation under FEMA, increasing integration of the Indian economy with the global economy, digitisation of payment systems, evolving institutional structure, over the last two decades, it has been decided to rationalise and simplify the licensing framework for APs.

The review aims to meet the emerging requirements of the rapidly growing Indian economy, and achieve operational efficiency in the delivery of foreign exchange facilities to common persons, tourists, and businesses while maintaining appropriate checks and balances, it said while issuing draft Licensing Framework for Authorised Persons (APs) under FEMA.

"To enhance the ease of doing business, it is 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. Such entities shall not be required to seek authorisation from the Reserve Bank," the draft said.

The draft also proposed to introduce Forex Correspondent Scheme (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. The objective behind FCS is to increase the reach of foreign exchange services.

The central bank has sought comments from stakeholders on the draft by January 31, 2024.

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