A S BANKA ADVISORS

If you run a startup that touches foreign exchange, most regulatory headlines pass you by. This one should not. On 30 April 2026 the RBI notified the Foreign Exchange Management (Authorised Persons) Regulations, 2026 (Notification No. FEMA 401/2026-RB, issued under Sections 10 and 47 of FEMA, 1999). It quietly rewrites the licensing framework for every bank, NBFC, money changer and forex intermediary that is allowed to handle your foreign exchange. If you are building a fintech, a remittance product, or you run a forex distribution business, this is not background noise. It is your operating licence being redrawn.

What actually changed

The old framework had grown into a tangle of overlapping licence classes and an accountability-weak franchisee model. The 2026 regulations do three things: simplify the categories, retire the franchisee model, and raise the net-worth and fit-and-proper gates for anyone who wants forex-dealing access. It is part of a broader FEMA reset in 2026, sitting alongside the new ECB Rules and the RBI’s withdrawal of 732 defunct circulars.

The new four-tier structure

Authorised Persons are now sorted into four tiers:

• AD Category-I: RBI-licensed banks, permitted the full range of current and capital account transactions.
• AD Category-II: banks, NBFCs and qualifying money changers or Forex Correspondents. Non-trade current account transactions and trade transactions up to Rs 25 lakh per transaction, plus money changing.
• AD Category-III: a genuinely new class for entities that need incidental forex access or offer innovative products. This is the tier fintech founders should read twice. It is a narrow, purpose-linked authorisation, approved case by case.
• FFMC: standalone money changers handling foreign currency notes, coins and traveller’s cheques.

The net-worth gates went up

The minimum net worth now sits at Rs 10 crore for AD Category-II and Rs 2 crore for AD Category-III, with FFMCs at Rs 25 lakh (single branch) and Rs 50 lakh (multi-branch). AD Category-II eligibility also expects at least two years of operation and average annual forex turnover of not less than Rs 50 crore over the preceding two financial years. If you are anywhere near these lines, model the gap now rather than at renewal.

The franchisee model is on a two-year clock

No new franchisee appointments are allowed from the effective date. Existing franchisee arrangements must be discontinued within two years. The migration path is the new Forex Correspondent Scheme: a principal-agent model where AD Category-I and II entities appoint Forex Correspondents as agents. Unlike the old exclusive franchisee, a Forex Correspondent can serve multiple principals, but the principal stays on the hook for its correspondent’s compliance. If your business runs on a franchisee network, this is a structural redesign, not a paperwork tweak.

And if you were counting on a fresh FFMC licence

The RBI will not consider fresh FFMC applications, except those already under process on the effective date, and even those applicants must furnish requested documentation within 30 days or face automatic rejection. Non-bank Authorised Persons must also hit minimum annual forex turnover levels within two years of authorisation.

What this means for your startup

For fintech and remittance founders, AD Category-III is the new door, and your licensing case should be built around it rather than around a category that no longer fits. For anyone running money-changing or forex distribution, the franchisee wind-down is a hard two-year deadline: inventory every arrangement and pick your Forex Correspondent path early. And for ordinary corporates and startups, the practical takeaway is simpler: confirm that the counterparties you route forex through are correctly re-categorised, because their licence is now your compliance exposure.

A regulatory reset like this rewards the people who move in the first quarter, not the last. If you are restructuring a forex, remittance or money-changing business under the 2026 regulations, or you are simply not sure which tier you now sit in, let’s map it before the clock runs down. Need help navigating this? Book a call: https://calendly.com/asbanka-info/30min

Talk to an Expert. CA Adityavikram Banka, Founder, A S Banka Advisors Private Limited.

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