RBI to change rules for money changers?

The Reserve Bank of India (RBI) has kicked off the process for a new set of rules that will let certain people become money changers under the Foreign Exchange Management Act (FEMA). This move was first announced on June 8, 2023.

Now, the draft licensing framework for these authorized persons is up on the RBI's portal, and they want to hear what everyone thinks about it.

One cool thing in the mix is the Forex Correspondents Scheme. To make doing business easier, the RBI is thinking of adding a new category of money changers under this scheme. These money changers could do their money-changing business through different authorized dealers.

What's really interesting is that these entities won't need special permission from the Reserve Bank. They can do transactions on behalf of authorized dealers, and it'll all show up in the books of the main authorized dealer. They get a general permission to deal in foreign exchange, and they can buy and sell foreign currency notes and travelers' cheques for travel purposes. They can even distribute forex prepaid cards.

Here's the catch: One entity can't be buddies with more than one authorized dealer at a time. Also, they can only deal in foreign exchange with the public or their main authorized dealer.

Now, as of now, if a business wants to be an AD Category-II (authorized dealer category two), they get the green light for one year initially, and then it can be renewed for 1 to 5 years. But, to make things easier, there's a suggestion to make renewing that authorization a forever thing.

Of course, this comes with meeting the new eligibility criteria laid out in the fresh framework. It's all about lightening the regulatory load and making business smoother.

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