Franchisee arrangements refer to tie-ups where authorised dealers or FFMCs appoint third-party outlets to undertake money-changing activities on their behalf, typically to expand retail reach. The new rules prohibit any fresh such arrangements and require existing ones to be wound down or transitioned to the Forex Correspondent (FxC) framework within the stipulated period.
The regulations are aimed at rationalising the authorisation and renewal framework for authorised persons and extending the principal-agent model for delivery of foreign exchange facilities while maintaining appropriate checks and balances, the central bank said on Wednesday.
“Application for fresh authorisation as an FFMC shall not be considered by the Reserve Bank, except those under process as on the date of coming into force of these regulations,” the norms said.
The regulations introduce a three-tier structure for authorised persons — Authorised Dealer (AD) Category I, II and III — replacing the earlier framework with a clearer classification of entities permitted to deal in foreign exchange. A new category, AD Category III, has been created for entities that undertake foreign exchange transactions as part of their underlying business or offer products involving forex, with activities to be specified by the RBI.
The FxC framework has been formalised as the principal-agent model for retail forex services. AD Category I and II entities can appoint FxCs to undertake permitted money-changing and remittance-related transactions, with all such transactions accounted for in the books of the principal.
Eligibility conditions have been revised. Applicants, other than banks and non-banking financial companies (NBFCs) already regulated by the RBI, are required to be companies and meet minimum net worth thresholds of ₹10 crore for AD Category II and ₹2 crore for AD Category III. Existing entities seeking renewal will also need to meet the prescribed net worth criteria.
Authorised persons, other than banks, will be required to achieve minimum annual forex turnover within two years — ₹50 crore for AD Category II and ₹10 crore for FFMCs — and maintain these levels thereafter.
The regulations also lay down ‘fit and proper’ requirements for promoters, directors and key managerial personnel, covering experience in financial services and regulatory track record. Entities under investigation by enforcement agencies will be required to furnish a no-objection certificate.
Applications for authorisation will be processed through the PRAVAAH portal, while ongoing reporting, including details of business locations and agents, will be submitted through the APConnect system.
Authorisations will remain valid until revoked or surrendered, subject to compliance with conditions specified by the RBI, which retains the power to impose additional conditions or revoke authorisation in case of non-compliance or in public interest.
 "Reserve Bank of India (RBI)")