RBI Tightens Forex Rules with ₹10 Crore Cap for Money Changers
RBI Tightens Forex Rules with ₹10 Crore Cap for Money Changers
RBI introduces tighter norms for money changers, sets a ₹10 crore turnover cap, shifts oversight to principal dealers, and bans fresh franchises to boost compliance and customer protection.
The Reserve Bank of India has rolled out new rules for the money changing sector, stressing banking principles and setting a ₹10 crore annual turnover threshold for authorized dealers to continue their foreign exchange operations. The move signals a shift in accountability toward principal authorized dealers, typically banks, to strengthen customer protection and anti-money laundering controls in cross-border retail forex.
Under the revised guidelines, entities with RBI approval to deal in forex must obtain prior clearance for any change in management involving more than a 50% stake, reinforcing the regulator's fit-and-proper standards. The RBI also prohibits fresh franchise arrangements for forex entities with approval, mandating existing franchise networks to wind down within two years. To accommodate arrangements where forex dealing is incidental to a business or where innovative forex-linked products are offered, the RBI introduced a new AD Category-III license.
The regulator’s norms confer broader discretion to scrutinise licence applications and reject those with misleading information or that fail eligibility tests. By shifting oversight to principal authorized dealers, the RBI aims to bolster accountability around compliance, customer protection, and anti-money laundering controls in critical forex transactions.
