Team Blitz India
THE Reserve Bank of India (RBI) is planning to introduce a new category of money changers who can conduct money changing business through an agency model. Under the model, the money changers will be allowed to become Forex Correspondents (FxCs) of Category-I and CategoryII Authorised Dealers (ADs).
Plans are also afoot to allow AD Category-II entities to additionally facilitate trade-related transactions up to a value of ₹15 lakh (per transaction).
This move is aimed at facilitating ease of foreign exchange transactions. Such entities will not be required to seek authorisation from the Reserve Bank, RBI said in its “Draft Licensing Framework for Authorised Persons (APs) under the FEMA (Foreign Exchange Management Act).
Money changers provide access to foreign exchange facilities to residents and tourists. ADs are entities authorised by the RBI to deal in foreign exchange.
“With the objective of increasing the reach of foreign exchange services, it is proposed to introduce a scheme, i.e., Forex Correspondent Scheme (FCS), which will be based on a principal-agency model where AD Category-I or AD Category-II will act as the principal for the FxCs,” says the Draft.
Accordingly, the FxCs would enter into agency agreements with a AD Category-I or AD Category-II under the FCS.
The Draft is the result of a review of the extant authorisation framework under FEMA to further improve the ease with which foreign exchange transactions can be undertaken by users and at the same time strengthen the regulatory oversight / framework governing APs. Currently, the RBI issues authorisation in the form of a licence to APs, which includes authorised dealers and FullFledged Money Changers.
Under FEMA, the RBI may, on an application made to it, authorise any person to be known as AP to deal in foreign exchange or in foreign securities, as an AD, money changer or off-shore banking unit or in any other manner as it deems fit.’
