The Reserve Bank of India has rejected a key industry demand to allow non-banks to operate as top-tier forex dealers, saying that Authorised Dealer Category-I (AD Cat-I) licences will remain the preserve of banks under its revamped framework.
In its final notification on the Foreign Exchange Management (Authorised Persons) Regulations, the central bank explicitly declined the proposal that AD Cat-I licences be provided to non-banks.
“Not accepted. However, the scope of transactions permitted to AD Cat-II entities, which include non-banks also, has been expanded,” the central bank said in response to the industry’s demand.
This effectively draws a clear boundary: while non-banking financial companies and other entities can deepen their participation in forex markets, full capital and current account convertibility privileges under AD Cat-I will remain restricted to banks.
Operational ease and compliance
However, the RBI did accept several industry suggestions aimed at easing operations and improving flexibility. It agreed to remove prior approval requirements for opening new business locations, replacing them with a simple reporting mechanism.
The central bank also allowed forex correspondents (FxCs) to partner with multiple authorised dealers, a move that’s expected to improve reach and competition.
For legacy players, the RBI offered partial relief. Existing full-fledged money changers (FFMCs) can continue if they meet the ₹10 crore turnover threshold, and are no longer required to compulsorily transition to AD Cat-II. However, the RBI rejected demands to relax the ₹50 crore turnover and ₹10 crore net worth criteria for AD Cat-II, saying these thresholds ensure only serious players remain.
Other proposals turned down include expanding the scope of FFMCs’ activities and permitting FxCs to appoint sub-agents, with the regulator maintaining that one layer of agents is sufficient.
The broader framework aims to tighten governance while widening access in a calibrated manner. It mandates that authorised persons be fit and proper, meet minimum net worth norms, and maintain ongoing compliance, while also introducing a digital application via the Pravaah portal and clearer activity segmentation across AD categories.
