The FEMA (Authorised Persons) Regulations 2026 were notified by the Reserve Bank of India on 30 April 2026 and replaced the earlier framework that governed authorised dealers and money changers. They sort authorised persons into four categories, introduce the Forex Correspondent as a principal-agent replacement for the franchisee model, and stop the Reserve Bank from accepting fresh Full Fledged Money Changer applications. Existing franchisee arrangements must end within two years, and former franchisees may convert to Forex Correspondents. Money changing and remittance continue, but the licences, thresholds, and reporting behind them have been rebuilt.
This article sets out what the FEMA (Authorised Persons) Regulations 2026 change for money changing and remittance, who is affected, and the deadlines that now apply.
The rewrite did not come without warning. The Reserve Bank of India published a draft licensing framework for authorised persons on 26 December 2023 and invited comments until the end of January 2024. The stated aim was to rationalise how money changers are authorised, given how widely banking services now reach, and to open cleaner routes for other entities to offer foreign exchange services.
Anyone who buys or sells foreign currency, sends money abroad, or receives an inbound personal remittance deals with an authorised person, usually without knowing it. This piece is written for the people on the other side of that counter: compliance officers, banking and finance lawyers, existing money changers, and applicants weighing a new authorisation. Regulation numbers below are taken from published renderings of the notified text, and the points where commentary and text should be read with care are flagged as they arise.
What do the FEMA (Authorised Persons) Regulations 2026 change?
The FEMA (Authorised Persons) Regulations 2026 replace the earlier authorisation framework with a cleaner four-category structure, a new agency model for money changing, and stricter entry thresholds. The Reserve Bank of India notified them as Notification No. FEMA 401/2026-RB, dated 30 April 2026, under the Foreign Exchange Management Act, 1999, and they came into force on publication in the Official Gazette.
The instrument sits downstream of the draft licensing framework the Reserve Bank issued on 26 December 2023. That draft proposed a new class of money changer operating through an agency model, perpetual renewal for eligible Category II authorised dealers, and a rationalised cap on cash purchase and sale of foreign currency. The 2026 Regulations carry those ideas into binding form.
Three changes do most of the work. The first is the Forex Correspondent, a principal-agent arrangement that replaces the franchisee model for agency money changing. The second is a halt on fresh Full Fledged Money Changer applications, so the population of standalone money changers will now shrink or convert rather than grow. The third is a tighter set of net worth and turnover thresholds, backed by digital application and reporting through the Reserve Bank’s own portals.
Who is affected depends on where an entity sits today. Banks and registered non-banking financial companies carry on largely as before. Existing money changers face renewal under stricter standards or a move to the Forex Correspondent model. New entrants, including fintech firms in cross-border payments, gain a defined route in but must meet governance conditions before they apply. For the wider compliance map that foreign investment sits within, our note on the regulatory compliances for foreign direct investors in India gives the adjacent picture.
Who counts as an authorised person under FEMA?
An authorised person is an entity the Reserve Bank authorises to deal in foreign exchange or foreign securities, and the 2026 Regulations sort them into four categories. The categories are Authorised Dealer Category-I, Authorised Dealer Category-II, Authorised Dealer Category-III, and Full Fledged Money Changer.
Authorised Dealer Category-I is the broadest. These are banks licensed by the Reserve Bank, and they may handle any current account or capital account transaction permitted under the Act. Most cross-border banking, trade finance, and large outward remittance runs through this category.
Authorised Dealer Category-II sits a rung below. It covers licensed banks, registered non-banking financial companies, and qualifying Full Fledged Money Changers or Forex Correspondents that meet an eligibility test tied to an average annual foreign exchange turnover of ₹50 crore over two years. A Category-II entity may carry out non-trade current account transactions, other than gifts and donations, and foreign trade transactions up to ₹25 lakh per transaction.
Authorised Dealer Category-III is the narrowest and the most flexible. It is meant for entities that need to deal in foreign exchange only incidentally to their main business, or that offer an innovative foreign-exchange-related product, and the scope of authorisation is tailored to that activity rather than fixed in advance.
Full Fledged Money Changers occupy the fourth category. A Full Fledged Money Changer may purchase and sell foreign currency notes and travellers’ cheques for travel purposes and may act as an agent under the Money Transfer Service Scheme. The category is where retail currency exchange has always sat, and it is also the one the 2026 Regulations have closed to new applicants.
The four categories of authorised persons under FEMA (2026)
Who qualifies, the minimum net worth, and the key permission for each category
CategoryWho qualifiesMinimum net worthKey permission
CategoryAD Category-I
Who qualifiesBanks licensed by the RBI
Net worthSet by bank licensing
Key permissionAny current or capital account transaction permitted under the Act
CategoryAD Category-II
Who qualifiesBanks, registered NBFCs, qualifying FFMCs or Forex Correspondents (Rs 50 cr average annual forex turnover over 2 years)
Net worthRs 10 crore
Key permissionNon-trade current account transactions (excluding gifts and donations); foreign trade up to Rs 25 lakh per transaction
CategoryAD Category-III
Who qualifiesEntities needing forex dealing incidental to their main business, or offering an innovative forex product
Net worthRs 2 crore
Key permissionTailored, activity-specific authorisation
CategoryFull Fledged Money Changer
Who qualifiesMoney changers (no fresh licences granted after commencement)
Net worthRs 25 lakh single branch / Rs 50 lakh multiple branch
Key permissionBuy and sell foreign currency notes and travellers’ cheques for travel; MTSS agent
iPleaders
Net worth and eligibility thresholds under the FEMA (Authorised Persons) Regulations 2026
The 2026 Regulations set a net worth floor for each category and a set of eligibility conditions for new non-bank applicants. The net worth figures are the clearest expression of how the Reserve Bank has graded risk across the categories.
An Authorised Dealer Category-II entity must hold net worth of ₹10 crore. An Authorised Dealer Category-III entity must hold ₹2 crore. A single-branch Full Fledged Money Changer must hold ₹25 lakh, and a multiple-branch Full Fledged Money Changer must hold ₹50 lakh. These are minimums to be maintained, not one-time entry figures, and a later section deals with what happens when net worth falls below the line.
The ₹10 crore Category-II net worth figure should not be confused with a second ₹10 crore that appears elsewhere in the framework as an ongoing turnover target for Full Fledged Money Changers. One is a balance-sheet threshold, the other is an activity threshold, and several published summaries run them together. Read them separately.
A new applicant that is not already regulated by the Reserve Bank must clear governance conditions before the money is even assessed. The applicant must be incorporated under the Companies Act, 2013. At least half of its directors or key managerial personnel must have experience in financial services. If the applicant is under investigation, it must obtain a No Objection Certificate from the Directorate of Enforcement before authorisation.
Those conditions change the character of the application. Under the older regime, capital tended to be the gating factor. Under the 2026 Regulations, an applicant assembles a compliant board and a clean enforcement position first, and the net worth test follows. Anyone building the entity from scratch has to design the governance structure in advance rather than bolt it on later.
How does the Forex Correspondent model replace the franchisee system?
The Forex Correspondent model replaces the franchisee system by routing agency money changing through a principal-agent structure instead of a franchise arrangement. An Authorised Dealer Category-I or Category-II entity appoints the Forex Correspondent as its agent, and the correspondent conducts money changing and sub-agent functions under the Money Transfer Service Scheme.
The design gives the correspondent more room than a franchisee had. A Forex Correspondent may deal in foreign exchange with its customers or with other entities and may serve more than one principal at the same time. The principal issues the necessary permission for each outlet and files a quarterly report on its correspondents within fifteen days of the end of each calendar quarter. Before it appoints anyone, the principal must adopt a Board-approved policy covering selection, fit-and-proper assessment, net worth standards, due diligence, systems and controls, and customer grievance redress, and a non-bank principal must also follow the Reserve Bank’s outsourcing risk-management directions.
The franchisee model, by contrast, is being wound down. No fresh franchisee arrangements are permitted, and any arrangement in force when the Regulations commenced must cease within two years. After that, a former franchisee may be appointed as a Forex Correspondent, provided the prescribed conditions are met.
The two-year clock is the practical takeaway for existing operators. A money changer running on franchise agreements has a fixed window to convert those relationships into Forex Correspondent appointments or to end them, and the conversion is not automatic: it depends on the principal’s Board-approved policy and the correspondent meeting the fit-and-proper and net worth conditions. Firms that treat the deadline as distant risk being caught with arrangements that can no longer be renewed. The cross-border regulatory context that shapes these arrangements is covered in Skill Arbitrage’s overview of cross-border M&A in India.
Franchisee to Forex Correspondent: the two-year switch
The franchisee model compared with the Forex Correspondent model under the 2026 Regulations
FeatureFranchisee model (being wound down)Forex Correspondent model
FeatureStructure
FranchiseeFranchise arrangement with a money changer
Forex CorrespondentPrincipal-agent arrangement with an AD Category-I or II entity
FeatureNumber of principals
FranchiseeTied to the franchise
Forex CorrespondentMay serve more than one principal at the same time
FeaturePermission per outlet
FranchiseeUnder the franchise terms
Forex CorrespondentPrincipal issues permission for each outlet
FeatureReporting
FranchiseePer the franchise model
Forex CorrespondentPrincipal files a quarterly report within 15 days of quarter-end
FeatureNew arrangements
FranchiseePermitted under the old regime
Forex CorrespondentNo fresh franchisee arrangements permitted
FeatureExisting arrangements
FranchiseeIn force at commencement
Forex CorrespondentMust cease within 2 years; may convert to Forex Correspondent if conditions are met
iPleaders
What money changing rules apply to full fledged money changers now?
Money changing stays open to Full Fledged Money Changers and to Forex Correspondents, but the Reserve Bank has closed the door on new Full Fledged Money Changer licences. This is the single change most likely to affect anyone planning to enter retail currency exchange as a standalone business.
New Full Fledged Money Changer licences can no longer be granted. The Reserve Bank will not consider fresh applications, and only applications already pending when the Regulations came into force are being processed. Applicants whose pending files needed additional information were given thirty days from commencement to supply it. The route into standalone money changing, in other words, is now the Forex Correspondent appointment rather than a Full Fledged Money Changer licence.
What an existing Full Fledged Money Changer may transact has not narrowed. It may still purchase and sell foreign currency notes and travellers’ cheques for travel purposes, and it may act as an agent under the Money Transfer Service Scheme. A Forex Correspondent appointed by a principal can conduct the same money changing activity and can act as a sub-agent under that scheme.
The combined effect is a slow consolidation. Existing money changers continue, subject to renewal under the stricter net worth standards, but the category cannot add members. Over time, retail currency exchange is expected to run more through the agent networks of authorised dealers than through a growing set of independent licence-holders.
How do remittance and MTSS activities work under the new framework?
Remittance under the 2026 Regulations runs through authorised dealer authorisation and the Money Transfer Service Scheme, within defined transaction limits. The category doing the work depends on the size and type of the remittance.
Outward remittance of any real scale runs through Authorised Dealer Category-I banks, which may handle any permitted current or capital account transaction. An Authorised Dealer Category-II entity handles a narrower band: non-trade current account transactions, other than gifts and donations, and foreign trade transactions capped at ₹25 lakh per transaction. That cap is a per-transaction ceiling on the Category-II entity’s authority, not a limit on what a bank can remit.
Inbound personal remittance is where the Money Transfer Service Scheme fits. The scheme allows fast cross-border transfer of personal remittances into India through a chain of agents and sub-agents. A Full Fledged Money Changer can act as an agent under the scheme, and a Forex Correspondent can act as a sub-agent, which is how a remittance reaches a recipient in a town without a bank branch of the overseas principal. Businesses that also deal with foreign investment inflows will find the parallel compliance chain for equity set out in our guide to FEMA compliance for Indian startups, and LawSikho’s note on FEMA and FC-GPR compliance after seed funding works through a specific filing in detail.
The reporting behind remittance has moved online. Applications for authorisation go through the Reserve Bank’s PRAVAAH portal, and operational reporting of branches and outlets runs through APConnect. For a money transfer operator, that means the agent and sub-agent network is visible to the regulator in close to real time rather than through periodic manual returns.
How do you apply, comply, and appeal under the 2026 Regulations?
An applicant applies through the PRAVAAH portal, complies through a set of dated obligations, and can appeal a refusal to a named Reserve Bank authority within fixed timelines. The framework is more procedural than the one it replaced, and the deadlines are specific enough to be diarised.
Applications for authorisation are submitted through the Reserve Bank’s PRAVAAH portal. Once authorised, a non-bank authorised dealer must commence operations within six months and must reach the minimum annual foreign exchange turnover within two years, which is ₹50 crore for an Authorised Dealer Category-II entity and ₹10 crore for a Full Fledged Money Changer. If net worth falls below the required level, the entity must restore it within six months. Changes in management or governance must be reported within thirty days of the end of the financial year, and branch openings, closures, and relocations are reported in near real time through APConnect.
A refusal is not the end of the road. A rejected applicant, or an entity whose authorisation has been revoked, may appeal to the Reserve Bank’s Executive Director in charge of the Foreign Exchange Department within forty-five days, and the Executive Director must pass a reasoned decision within sixty days. This is a defined appellate route with a clock on both sides, which the older framework lacked.
One restriction bites on timing. Where authorisation is revoked, voluntarily surrendered, or an application is rejected for a reason other than inadequate net worth, the entity cannot reapply for one year. The carve-out matters: an applicant refused only for shortfall in net worth can come back as soon as the capital is in place, but an applicant that failed on fit-and-proper or compliance grounds waits out the cooling-off period. Reading the ground of refusal correctly therefore decides how quickly a second attempt is possible.
Frequently asked questions
What are the FEMA (Authorised Persons) Regulations 2026?
They are the framework the Reserve Bank of India notified on 30 April 2026, as Notification No. FEMA 401/2026-RB under the Foreign Exchange Management Act, 1999, to govern who may deal in foreign exchange in India. They replace the earlier authorisation framework, sort authorised persons into four categories, and introduce the Forex Correspondent model for agency money changing.
Can new Full Fledged Money Changer licences still be granted under the 2026 Regulations?
No. The Reserve Bank will not consider fresh Full Fledged Money Changer applications. Only applications already pending when the Regulations came into force are being processed, and those applicants had thirty days from commencement to furnish any additional information sought.
What is a Forex Correspondent under FEMA?
A Forex Correspondent is an agent appointed by an Authorised Dealer Category-I or Category-II entity to conduct money changing and to act as a sub-agent under the Money Transfer Service Scheme. It operates under a principal-agent arrangement, can serve more than one principal, and replaces the older franchisee model for agency money changing.
How long do existing franchisee money-changing arrangements have to wind down?
Two years from the commencement of the Regulations. No fresh franchisee arrangements are permitted, and existing ones must cease within that window. A former franchisee may then be appointed as a Forex Correspondent if the prescribed conditions are met.
What is the minimum net worth for an AD Category-II authorisation?
₹10 crore. For comparison, an Authorised Dealer Category-III entity must hold ₹2 crore, a single-branch Full Fledged Money Changer ₹25 lakh, and a multiple-branch Full Fledged Money Changer ₹50 lakh. These are minimums to be maintained, and a depleted net worth must be restored within six months.
How does an applicant apply for authorisation under the FEMA (Authorised Persons) Regulations 2026?
Through the Reserve Bank’s PRAVAAH portal. A non-bank authorised dealer must then commence operations within six months and reach the minimum annual turnover within two years. A rejected applicant may appeal to the Executive Director in charge of the Foreign Exchange Department within forty-five days.
References
- Foreign Exchange Management (Authorised Persons) Regulations, 2026, Notification No. FEMA 401/2026-RB, dated 30 April 2026, made under the Foreign Exchange Management Act, 1999. Text as reproduced by TaxGuru.
- Reserve Bank of India, Draft Licensing Framework for Authorised Persons under FEMA, published 26 December 2023 for public comment.
- Foreign Exchange Management Act, 1999.
- PRAVAAH portal, Reserve Bank of India, https://pravaah.rbi.org.in.
This article is for informational and educational purposes only and does not constitute legal advice. For advice on a specific authorisation or compliance question, consult a qualified professional.
