Discontinuation of Fresh FFMC Licences
Potential new market entrants, Existing Full-Fledged Money Changers (FFMCs), and Non-Bank Financial Companies (NBFCs).
The RBI will no longer accept or process fresh applications for Full-Fledged Money Changer (FFMC) licences. Only applications pending as of the regulation’s effective date will be processed. The goal is to consolidate oversight. Existing legacy FFMCs can continue functioning provided they maintain minimum turnover thresholds (₹10 crore) and net worth limits.
- Halt New Applications: Immediately cease any internal planning or capital expenditure aimed at procuring a standalone FFMC licence.
- Threshold Audit (For Existing FFMCs): Conduct an immediate internal audit to ensure the entity meets the ₹10 crore turnover threshold. Prepare a capital infusion plan if there is a shortfall.
- Strategic Upgrade: If eligible, initiate a feasibility study to upgrade the current FFMC status to an Authorised Dealer (AD) Category-II licence.
Phase-Out of Franchisee Model & Introduction of Forex Correspondents (FxC)
AD Category-I (Banks), AD Category-II (NBFCs/Forex dealers), legacy FFMCs, and all existing third-party franchisees/agents (e.g., travel agencies, retail outlets).
The traditional franchisee model is strictly discontinued. No fresh franchisee arrangements are permitted. All existing franchisee contracts must be phased out within a 2-year transition window (by May 2028). In its place, RBI has instituted the “Forex Correspondent (FxC)” framework, which allows an FxC to serve multiple principals, with direct liability and quarterly reporting mandated for the principal AD.
- Contractual Review: Instruct the legal department to review all current franchisee agreements to identify termination clauses and transition timelines.
- Board Policy Creation: Draft and ratify a comprehensive, Board-approved policy for onboarding, monitoring, and managing Forex Correspondents (FxCs) as mandated by the RBI.
- Transition Execution: Begin migrating compliant, high-performing franchisees to the new FxC model within the next 12 months. Discontinue non-compliant agents to avoid regulatory penalization.
New Three-Tier AD Framework & Turnover Norms
Banks (AD Cat-I), NBFCs and upgraded FFMCs (AD Cat-II), and Fintechs/Digital Travel Platforms (AD Cat-III).
The structure is reorganized into three categories. AD Cat-I remains exclusive to banks (RBI rejected non-bank entry here). AD Cat-II entities (minimum net worth ₹10 Crore) now have an expanded transaction scope (up to ₹25 lakh per trade transaction) but must strictly achieve an annual forex turnover of ₹50 Crore within 2 years. A new AD Cat-III is created for entities offering innovative forex-linked digital products (minimum net worth ₹2 Crore).
- Entity Classification & Capital Strategy: Categorize the firm under the appropriate AD level. Ensure ₹10 Crore net worth for Cat-II or ₹2 Crore for Cat-III is maintained continuously.
- Sales & Turnover Push (Cat-II): Implement aggressive marketing and B2B tie-ups to ensure the ₹50 Crore annual turnover threshold is met well before the 2-year deadline to prevent licence revocation.
- Product Expansion: For Cat-II entities, immediately integrate the expanded non-trade and trade current account transactions (up to ₹25 lakh) into the product portfolio to drive revenue.
Stringent Governance, Fit & Proper Norms, and Digital Reporting
Board of Directors, Promoters, Key Managerial Personnel (KMPs), and Compliance Departments of all Authorised Persons.
Strict “Fit and Proper” criteria are enforced. At least 50% of the Directors and KMPs must possess direct financial services experience. Any entity under Directorate of Enforcement (DoE) investigation requires an explicit NOC. Furthermore, prior approval for opening/closing business branches is replaced with a strict mandatory intimation within 7 calendar days via the APConnect portal. All licensing and renewals must now be processed digitally via the PRAVAAH portal.
- Board Restructuring: Evaluate the current profiles of the Board and KMPs. Recruit or replace members to ensure the 50% financial services experience mandate is strictly met.
- Clearance Protocols: Establish an internal protocol to track any legal or DoE proceedings. Secure an NOC from DoE immediately if any legacy investigations are active.
- Digital Transition SLA: Setup internal Service Level Agreements (SLAs) for the compliance team. Mandate a 48-hour reporting window internally for any branch changes to ensure the 7-day RBI APConnect deadline is never missed.
- Portal Familiarization: Train the regulatory affairs team on the PRAVAAH and APConnect portals immediately.