FEMA Authorised Persons Regulations 2026: FFMC and AD-III
Why in the news
On 6 May 2026 the RBI issued fresh regulations that reshape how retail foreign exchange is delivered, ending new FFMC licences and phasing out the franchisee route.
Key facts
- Rulebook: the 2026 Authorised Persons Regulations, framed by RBI under FEMA, 1999.
- FFMCs: no new applications; only those pending on the effective date will be looked at.
- Franchisees: no new arrangements; existing ones must be wound up or shifted to the Forex Correspondent (FxC) model within two years.
- Aim: streamline licensing and renewals, spread the principal-agent model for forex delivery and tighten accountability.
- Customers are not affected in the short run: current FFMCs keep working during the transition window.
Three-tier AD structure
| Tier | Who | Scope |
|---|---|---|
| AD Category I | Mostly commercial banks and large entities | Broadest set of forex dealings, covering both current and capital accounts |
| AD Category II | Entities such as cooperative and urban banks and select financial firms | Specific activities such as LRS remittances and money changing |
| AD Category III (new) | Fintechs, travel firms and digital platforms | Forex services linked to their underlying business; RBI will specify the activities |
Background
- FEMA, 1999: governs forex dealings; it replaced FERA, 1973 and moved the regime from control to management.
- Authorised persons: those licensed by RBI under Section 10 of FEMA, including ADs, money changers and offshore banking units.
- FFMC: buys and sells foreign currency notes, coins and travellers’ cheques for tourists, NRIs and small remitters.
- Franchisee tie-up: ADs or FFMCs appoint outside outlets such as travel agents to change money on their behalf.
- FxC: agent-like entity working under a regulated principal such as an AD bank.
- LRS: lets resident individuals send up to USD 250,000 abroad per financial year.
Significance
- Matches the forex rules to growing outbound travel, e-commerce and digital remittances.
- Tighter, traceable channels help guard against money laundering, hawala and unreported flows.
Exam angle
- Regulator: RBI; parent law: FEMA, 1999.
- New terms: AD Category III and Forex Correspondent (FxC).
- Transition period for franchisees: two years.