In a move aimed at enhancing the ease of doing business and adapting to the evolving economic landscape, the Reserve Bank of India (RBI) has proposed the introduction of a new category of money changers. This new category, known as Forex Correspondents (FxCs), would operate through an agency model, conducting money-changing business on behalf of Category-I and Category-II Authorised Dealers.
”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,” RBI said in a statement.
The existing framework involves the issuance of licences to authorised dealers, which are banks authorised to engage in foreign exchange transactions and full-fledged money changers. The proposed category of Forex Correspondents seeks to streamline and simplify the licensing framework for Authorised Persons (APs) under the Foreign Exchange Management Act, 1999 (FEMA). The current framework, last reviewed in March 2006, is undergoing changes to align with the progressive liberalisation under FEMA, the increased integration of the Indian economy globally, and the digitization of payment systems.How it will work
The new category, Forex Correspondents, will operate under a principal-agency model. In this model, AD Category-I or AD Category-II will act as the principal entity, overseeing the operations of the FxCs. One notable aspect is that such entities will not be required to seek authorisation from the Reserve Bank separately.
Additionally, the proposal introduces the Forex Correspondent Scheme (FCS), designed to expand the reach of foreign exchange services. The scheme aims to facilitate the delivery of foreign exchange facilities to common individuals, tourists, and businesses with operational efficiency while maintaining necessary checks and balances.
The central bank has invited comments and feedback from stakeholders on the draft Licensing Framework for Authorised Persons (APs) under FEMA till January 31, 2024.
