CURRENT AFFAIRS : BANKING & FINANCE.
RBI plans to introduce a new category of money changers
- In a move aimed at enhancing the ease of doing business and adapting to the evolving economic landscape, the Reserve Bank of India (RBI) has proposed the introduction of a new category of money changers.
Key Highlights :
- This new category, known as Forex Correspondents (FxCs), would operate through an agency model, conducting money-changing business on behalf of Category-I and Category-II Authorised Dealers.
- The existing framework involves the issuance of licences to authorised dealers, which are banks authorised to engage in foreign exchange transactions and full-fledged money changers.
- The proposed category of Forex Correspondents seeks to streamline and simplify the licensing framework for Authorised Persons (APs) under the Foreign Exchange Management Act, 1999 (FEMA).
- The current framework, last reviewed in March 2006, is undergoing changes to align with the progressive liberalisation under FEMA, the increased integration of the Indian economy globally, and the digitization of payment systems.
- The new category, Forex Correspondents, will operate under a principal-agency model.
- In this model, AD Category-I or AD Category-II will act as the principal entity, overseeing the operations of the FxCs.
- One notable aspect is that such entities will not be required to seek authorisation from the Reserve Bank separately.
- The central bank has invited comments and feedback from stakeholders on the draft Licensing Framework for Authorised Persons (APs) under FEMA till January 31, 2024.
