Rationalisation Of Authorised Dealer Framework: Forex Correspondents

I. INTRODUCTION

Dealing in foreign exchange by entities is tightly regulated in India. To deal in foreign exchange in India, a person must be specifically permitted by the Reserve Bank of India ("RBI") under the Foreign Exchange Management Act (FEMA), 1999 ("FEMA"). The RBI, for the first time in 2006, had rationalised the regulatory framework governing such entities and specified the various licences for entities that may deal in forex exchange and undertake money-changing activities:

1. authorised dealers (Authorised Dealer Category – I, Authorised Dealer Category – II, Authorised Dealer Category – III) ("Authorised Dealers"); and
2. full-fledged money changers ("FFMCs").