FEMA (Authorised Persons) Regulations 2026: How RBI Notification FEMA 401/2026-RB Overhauls Forex Licensing
Quick Summary: FEMA (Authorised Persons) Regulations, 2026
- What changed: The RBI has replaced the old framework governing forex dealers and money changers with a new, consolidated Foreign Exchange Management (Authorised Persons) Regulations, 2026.
- The notification: Notification No. FEMA 401/2026-RB dated 30 April 2026, published in the Official Gazette and effective from 6 May 2026.
- The headline moves: the franchisee model is being phased out over 2 years, a new Forex Correspondent Scheme (FCS) replaces it, fresh FFMC licence applications are frozen, and a new AD Category-III class is introduced.
- Who is affected: banks, NBFCs, Full-Fledged Money Changers (FFMCs), travel and remittance businesses, and every franchisee currently doing money-changing under an AD or FFMC.
- Action window: existing franchisee arrangements must be discontinued within 2 years, and the agents must migrate to the Forex Correspondent model.
Why the RBI Rewrote the Authorised Person Rulebook
If you run a forex bureau, a money-changing counter, an FFMC, or you advise one, the ground has shifted. On 30 April 2026 the Reserve Bank of India notified the Foreign Exchange Management (Authorised Persons) Regulations, 2026 under Notification No. FEMA 401/2026-RB, and the rules took effect on their gazette publication on 6 May 2026. These regulations consolidate and replace the earlier authorisation framework for authorised dealers and money changers under FEMA, and they are the most significant overhaul of forex licensing in India in years. This sits alongside the broader FEMA reset we have been tracking through the 2026 ECB rules and the withdrawal of 732 defunct FEMA circulars.
The intent is threefold: simplify the licence categories, phase out an accountability-weak franchisee model that had drawn supervisory concern, and tighten the fit-and-proper and net-worth gates for who gets to deal in foreign exchange.
The New Four-Tier Structure of Authorised Persons
The regulations classify authorised persons into four clear categories:
| Category | Who It Covers | Broad Scope |
|---|---|---|
| AD Category-I | Banks licensed by the RBI | Full range of current and capital account transactions |
| AD Category-II | Banks, NBFCs, and qualifying FFMCs / Forex Correspondents | Specified non-trade current account transactions and money changing |
| AD Category-III (new) | Entities that need forex incidentally or offer innovative products | A narrow, purpose-linked authorisation |
| Full-Fledged Money Changer (FFMC) | Standalone money changers | Purchase and sale of foreign currency notes, coins and travellers cheques |
The introduction of AD Category-III is the structural novelty. It gives the RBI a lighter-touch licence for players who need foreign exchange access for a specific, incidental purpose rather than as a core business.
The Big Change: Franchisee Model Phased Out
For years, ADs and FFMCs extended their reach by appointing franchisees to run money-changing counters. The 2026 regulations end that model:
- No fresh franchisee appointments are permitted from the effective date.
- Existing franchisee arrangements must be discontinued within 2 years from the date the regulations came into force.
- After discontinuation, franchisees can transition to operating as Forex Correspondents under the new scheme, subject to the specified conditions.
This is a hard deadline for a large, distributed segment of the market. Every travel-money kiosk and franchise-run counter has a finite runway to either wind down or re-paper itself as a Forex Correspondent.
What Is the Forex Correspondent Scheme (FCS)?
The Forex Correspondent Scheme is the replacement channel. It works on a principal-agent model:
- AD Category-I and AD Category-II entities (the principals) may appoint Forex Correspondents as their agents.
- Forex Correspondents can undertake restricted money-changing activities, including the purchase and sale of foreign currency notes and coins, and sub-agency functions under the Money Transfer Service Scheme (MTSS).
- A Forex Correspondent may act for more than one principal, which gives operators more flexibility than the old exclusive-franchisee tie-up.
- The principal remains responsible for the conduct and compliance of its Forex Correspondents, which is precisely the accountability the RBI wanted to reinforce.
New Net-Worth Thresholds
The regulations reset the minimum net-worth gates for authorisation. Based on the notification and professional analyses, the key thresholds are:
| Category | Minimum Net Worth |
|---|---|
| AD Category-II | Rs 10 crore |
| AD Category-III | Rs 2 crore |
| Single-branch FFMC | Rs 25 lakh |
| Multi-branch FFMC | Rs 50 lakh |
Confirm the exact net-worth figure applicable to your specific category and situation against the text of Notification FEMA 401/2026-RB, as thresholds can carry category-specific conditions and transition timelines.
FFMC Licensing Is Effectively Frozen
One of the sharpest signals in the regulations is the treatment of new FFMC licences. The RBI has stated that it will not consider fresh applications for authorisation as a Full-Fledged Money Changer, except for applications already under process as on the date the regulations came into force. Even those pending applicants must furnish any additional documentation requested within 30 days or face automatic rejection.
The direction of travel is unmistakable: the RBI wants forex retail distribution routed through banks, ADs and their Forex Correspondents, rather than a growing population of standalone FFMCs.
Compliance Checklist for Existing Authorised Persons
- Identify your category under the new four-tier structure and confirm which activities you remain authorised to do.
- Map your net worth against the new minimum for your category and plan to close any gap.
- Inventory every franchisee arrangement and set a wind-down or migration plan within the 2-year window.
- Decide the Forex Correspondent path: which principals will you appoint or be appointed by, and paper the principal-agent agreements accordingly.
- Refresh fit-and-proper documentation for directors and key management.
- Track minimum forex turnover requirements, which must be met within the transition period.
- If you have a pending FFMC application, respond to any RBI query within 30 days without fail.
- Renew existing authorisations in line with the new conditions.
Frequently Asked Questions
When did the FEMA (Authorised Persons) Regulations, 2026 come into force?
They were notified vide Notification No. FEMA 401/2026-RB dated 30 April 2026 and came into force on publication in the Official Gazette on 6 May 2026.
I run a money-changing counter as a franchisee. What happens to me?
No new franchisee appointments are allowed, and existing franchisee arrangements must be discontinued within 2 years of the regulations coming into force. Your realistic path is to migrate to the Forex Correspondent Scheme as an agent of an AD Category-I or AD Category-II principal.
Can I still apply for a fresh FFMC licence?
Generally no. The RBI will not consider fresh FFMC authorisation applications except those already under process when the regulations came into force, and even those must furnish requested documents within 30 days.
What is new about AD Category-III?
AD Category-III is a new class for entities that require foreign exchange incidentally or that offer innovative products, giving the RBI a narrower, purpose-linked authorisation option distinct from full AD status.
Can a Forex Correspondent work with more than one principal?
Yes. Unlike the old exclusive franchisee model, a Forex Correspondent may act for more than one principal, though the principal remains responsible for the correspondent’s compliance.
The Bottom Line
The Foreign Exchange Management (Authorised Persons) Regulations, 2026 are a structural reset of forex distribution in India. The two-year franchisee wind-down and the freeze on new FFMC licences are the items that demand board attention now. If your business touches foreign-currency retail, remittances or money changing, the time to choose your lane, AD category, FFMC renewal or Forex Correspondent, is well before the transition window closes.
Disclaimer: This article is for general information based on RBI Notification No. FEMA 401/2026-RB dated 30 April 2026 (the Foreign Exchange Management (Authorised Persons) Regulations, 2026) and reputable public analyses, as understood at the date of publication. Specific net-worth figures, transition timelines and conditions should be confirmed against the primary text of the notification. This is not legal or professional advice. Please consult a professional before acting.
Restructuring a forex, remittance or money-changing business under the new FEMA rules? Tax Update India helps businesses and their advisers navigate FEMA authorisation, transition planning and cross-border compliance. Schedule a Strategy Session to map your path under the 2026 regulations.
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