27-Dec-2023
2 mins read
On Tuesday, the Reserve Bank of India unveiled its intention to create a new class of money changers called Forex Correspondents (FxCs). These FxCs will function through an agency-based model, partnering with Authorised Dealers.
Current Licensing Landscape
Presently, the Reserve Bank licenses authorised dealers, primarily banks dealing in foreign exchange, and full-fledged money changers. Licenses are also issued to various financial and other institutions for specific foreign exchange transactions linked to their operations.
Updating the Authorised Persons Framework
Since its last revision in March 2006, the FEMA, 1999 framework for Authorised Persons (APs) hasn’t been updated. In light of significant changes in the financial sector, such as FEMA liberalisation, the growth of international economic connections, advancements in digital payments, and shifts in organisational structures, the Reserve Bank of India is focusing on improving and refining the licensing process for APs.
Objectives of the Revised Licensing Strategy
The RBI’s latest initiative is designed to meet the burgeoning needs of India’s fast-growing economy. It aims to increase the efficiency of delivering foreign exchange services to the general public, tourists, and corporate entities while continuing to ensure robust regulatory oversight.
Ease of Doing Business with Forex Correspondent Scheme (FCS)
The proposal includes introducing the Forex Correspondent Scheme (FCS), operating on a principal-agency model. Here, Category-I and Category-II Authorised Dealers will serve as principals for FxCs. The primary goal of FCS is to expand the availability and accessibility of foreign exchange services. The proposed model negates the need for these entities to seek direct authorisation from the Reserve Bank.