By Notification No. FEMA 401/2026-RB dated 30 April 2026, the RBI issued the Foreign Exchange
Management (Authorised Persons) Regulations, 2026. This is a structural redesign of India's entire foreign
exchange intermediation ecosystem — affecting every entity involved in forex services: AD Category-I banks,
NBFCs, Urban Co-operative Banks, FFMCs, and fintech platforms offering forex-adjacent services.
The Two Headline Structural Changes
(a) RBI will no longer accept fresh applications for Full-Fledged Money Changers (FFMCs) — phasing out a
category that has served retail forex needs for decades. (b) All existing franchisee arrangements between
ADs/FFMCs and third-party outlets must be wound down or transitioned to the new Forex Correspondent (FxC)
framework within two years
The New Three-Tier Authorised Dealer Framework
AD Category I — Full Scope (Unchanged)
Retains the widest operational mandate: all current account and capital account transactions permissible
under FEMA. Exclusively banks licensed by the RBI. The category scope is unchanged, but the new
framework introduces cleaner documentation, digital licensing processes, and a formalised appeal
mechanism.
AD Category II — Expanded Scope (Significant Change)
Previously limited to a narrow set of retail forex and personal remittance transactions, AD Category II entities
now have significantly expanded scope: any non-trade current account transaction permissible under FEMA
(excluding gifts and donations), plus foreign trade transactions up to Rs 25 lakh per transaction. Minimum Rs
50 crore annual forex turnover required.
AD Category III — Brand New Innovation Category
A newly created tier designed for fintech platforms, travel companies, and entities for whom forex is incidental
to their core business. Category III entities may offer forex services tied to their primary business activities, or
novel forex products, subject to prior SEBI approval where applicable.
URGENT — Q1 Quarterly Return Due 15 July 2026
Banks with Forex Correspondents must submit the first quarterly FxC return to their RBI regional office by 15 July
2026 (15 days after the 30 June quarter end). This is a brand-new report with no existing template. Build this
reporting capability immediately — this deadline is less than 7 weeks away.
FFMC Transition Timeline
| Date | Event |
| 6 May 2026 | Regulations in force. No new FFMC licence applications accepted. No new franchisee arrangements permitted. |
| 15 Jul 2026 | Q1 Forex Correspondent quarterly return due to RBI regional office |
| By 6 May 2028 | All existing franchisee arrangements must be discontinued. Former franchisees may apply to become Forex Correspondents. |
Bank Systems and Reports Impacted
| System / Report | Required Change | Urgency |
| Forex Correspondent Quarterly Return (NEW) | New report — no template. Capture: FxC identity, appointment date, transaction scope, volumes. Due 15 days after each quarter end | 15 Jul 2026 |
| AD Categorisation System | Three-tier classification parameterized across trade finance, forex, and compliance systems with correct permissions and limits | Now |
| Forex / Treasury System | FxC appointment and monitoring workflows. FFMC transaction routing deprecation. New AD Category III workflow for fintechs | Now |
| Trade Finance Portal | Forex routing logic updated for new AD hierarchy. Customer forex service menu updated for expanded AD Cat-II scope | Now |
| Licensing / Authorisation System | Digital workflow for AD authorisations, renewals, FxC appointment management, appeal mechanism tracking | Near-term |
Compliance Action Plan
• Immediately audit all existing franchisee arrangements — map each to transition timeline, determine Forex Correspondent eligibility
• Build the FxC quarterly reporting module NOW — first return due 15 July 2026 (15 days after 30 June quarter end) • Update the AD categorisation in all systems — three-tier classification with correct permissions and transaction limit enforcement
• Update trade finance portal — forex routing logic for new AD hierarchy; customer portal for expanded Cat-II scope (Rs 25L per transaction)
• For banks with fintech partners — assess whether partnerships qualify as FxC arrangements or require AD Category III authorisation
• Notify all Forex Correspondents of their obligations — banks bear compliance responsibility under the principal-agent model