Circular No. A.P. (DIR Series) Circular No. 09, Dated 06.05.2026
1. Introduction
The Reserve Bank of India (“RBI”) has issued the Foreign Exchange Management (Authorised Persons) Regulations, 2026 (“AP Regulations, 2026”) with the objective of rationalising the regulatory framework governing Authorised Persons under the Foreign Exchange Management Act, 1999 (“FEMA”). The revised framework seeks to improve the delivery of foreign exchange services while easing compliance requirements applicable to regulated entities.
The AP Regulations, 2026 have been notified vide Notification No. FEMA 401/2026-RB dated April 30, 2026 and published in the Official Gazette on May 06, 2026. Consequent to the issuance of the revised regulations, RBI has amended the Master Direction – Money Changing Activities and the Master Direction – Other Remittance Facilities. Additionally, several earlier A.P. (DIR Series) Circulars issued between 2000 and 2015 have been superseded.
2. Discontinuation of Franchisee Model
One of the significant changes introduced under the revised framework relates to the discontinuation of the franchisee model for money changing activities. Earlier, Authorised Dealer Category-I (“AD Category-I”) banks, Authorised Dealer Category-II (“AD Category-II”) entities and Full Fledged Money Changers (“FFMCs”) were permitted to enter into agency or franchisee arrangements for carrying out restricted money changing business, including conversion of foreign currency notes, coins and travellers’ cheques into Indian Rupees.
RBI has now clarified that authorised persons shall not enter into any fresh franchisee arrangements henceforth. Existing franchisee arrangements are required to be discontinued gradually, and in any event, within two years from May 06, 2026.
3. Revision in Reporting Framework
The revised framework also modifies the reporting requirements applicable to FFMCs and non-bank AD Category-II entities. Under the earlier framework, such entities were required to maintain minimum Net Owned Funds (“NOF”) on an ongoing basis and submit annual audited balance sheets along with statutory auditor certificates relating to NOF.
The AP Regulations, 2026 replace the earlier NOF-based reporting mechanism with a revised certification framework based on net worth and annual forex turnover. Accordingly, FFMCs and non-bank AD Category-II entities are now required to submit annual audited balance sheets along with statutory auditor certificates regarding net worth by October 31 every year, and separate statutory auditor certificates regarding annual forex turnover by April 30 every year.
4. Rationalisation of Existing Directions
As part of the revised framework, RBI has omitted several provisions from the Master Direction – Money Changing Activities, including provisions relating to authorisation, operational requirements and other procedural compliances. RBI has also omitted Para 2 of the Master Direction – Other Remittance Facilities.
The amendments reflect RBI’s broader objective of consolidating and streamlining the regulatory architecture governing foreign exchange and money changing activities under FEMA. Further, various earlier A.P. (DIR Series) Circulars issued between 2000 and 2015 stand superseded pursuant to issuance of the AP Regulations, 2026.
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