TaxTMI 
TaxTMI 
AUTHORISED PERSONS UNDER ‘FEMA’
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....UTHORISED PERSONS UNDER ‘FEMA’<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>FEMA - Foreign Exchange Management<br>Dated:- 3-9-2026<br>Authorised person The expression 'authorised person' is defined under Section 2(c) of the Foreign Exchange Management Act, 1999 ('Act' for short) as an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under sub-section (1) of section 10 to deal in foreign exchange or foreign securities. Regulations The Reserve Bank of India made the Regulations called as 'Foreign Exchange Management (Authorised Persons) Regulation, 2026 ('Regulations' for short) and notified the same vide No. FEMA 401/2026-RB, dated 30.04.2026. The provisions of t....
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....hese regulations came into effect from 30.04.2026. RBI to authorise Section 10 of the Act provides that the Reserve Bank of India ('RBI' for short) may, on an application made to it, authorise any person to be known as 'authorised person', in writing, to deal in foreign exchange or in foreign securities, as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit. This authorisation is valid until it is cancelled. But the RBI may revoke the authorisation, if it is satisfied that- • it is in public interest so to do; or • the authorised person has failed to comply with the condition subject to which the authorisation was granted or has contravened any of the provisio....
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....ns of the Act or any rule, regulation, notification, direction or order made thereunder. The authorisation shall be revoked on any ground only after giving the authorised person a reasonable opportunity of making a representation in the matter. Types of authorised person There are 3 types of authorised persons as detailed below- • AD - Category I - A bank licensed by the RBI is eligible under this category; • AD - Category II - • A bank licensed by or a Non-Banking Financial Company ('NBFC' for short) registered with the Reserve Bank; • A Full-Fledged Money Changer ('FMCC' for short) or a Forex Correspondent ('FxC' for short) functioning for at least 2 years with an average annual....
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.... forex turnover of Rs.50 crore during the previous two financial years. • AD - Category III - An entity that is required to deal in foreign exchange incidental to the activities undertaken by it; or intends to offer innovative products and services that may involve dealing in foreign exchange. Eligibility The applicant shall be a company incorporated under the Companies Act, 2013. The Memorandum of Association of the applicant should include the foreign exchange related activity for which the authorisation is being sought. The applicant, at the time of commencement of business as an authorised person shall have a minimum positive net worth, based upon its latest audited balance sheet as mentioned below and shall ....
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....submit a certificate to this effect from its Statutory Auditors- • AD category - Rs.10 crores; • AD III Category - Rs. 2 crores. KMP The applicant, its promoters, directors and Key Managerial Personnel (KMPs) shall be 'fit and proper' on the following aspects: • qualification and experience in the financial services industry; • integrity, reputation and character; • absence of convictions or restraint orders from a court of law, disqualifications under the Companies Act, 2013 or other applicable corporate law, sanctions imposed by a regulatory body, or expulsion from a professional body. At least 50% of the directors and KMPs have qualification and exp....
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....erience in the financial services industry. If any investigation is launched against the KMP, the applicant shall furnish 'No Objection Certificate' from the Directorate of Enforcement. Existing Authorised Person Any entity which is having authorisation may apply for renewal of authorisation after 30.04.2026, ie., the date of effect of these regulations, if it has a minimum net worth of- (a) Rs.25 lakh, in case of a single branch FFMC; (b) Rs.50 lakh, in case of a multiple branch FFMC; (c) Rs.10 crore, in case of an AD Category-II; (d) Rs. 2 crore, in case of an AD Category-III: The application for renewal of existing authorisation shall be made at least 2 months before expiry of the existing aut....
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....horisation. The existing authorisation shall continue till renewal is granted under these regulations or the application is rejected. Wherever additional information and/or documents have been sought by the RBI for processing such applications, the same shall be provided within 30 days from the date of coming into force of these regulations; else the applications shall be deemed to have been rejected Application A person seeking authorisation as an authorised person may apply to the RBI through its PRAVAAH portal (https://pravaah.rbi.org.in) to its Regional Office concerned under whose jurisdiction the registered office of the applicant is established. The Reserve Bank shall consider application for fresh authorisation und....
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....er 3 categories. The application shall be processed in accordance with these regulations. Any additional information and/or documents as may be required by the RBI to process an application shall be submitted by the applicant within the time specified by the RBI. The RBI shall examine all matters which it deems relevant, including but not limited to the eligibility conditions and in case of entities regulated by the RBI, the inputs of the respective regulatory and supervisory departments of the RBI. Rejection of application Any application, for grant or renewal of authorisation, may be rejected by RBI, if - • the application is incorrect, false or misleading in nature; or • the applicant is not in co....
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....mpliance with the eligibility requirements as set out under these regulations; or • the applicant or any of its promoter or director or KMPs is not a 'fit and proper person' in compliance with the eligibility requirements; or • it is not in public interest. If the application is rejected for any reason or voluntarily surrendered or the RBI rejected the application or if any KMP is having influence in the said companies, the application for authorisation shall not be considered for a period of one year from the date of revocation or voluntary surrender or rejection of application. Activities The following are the activities to be performed by the Authorised Dealers- • AD Category - I - Any ....
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....current account and capital account transaction permissible under the Act; • AD Category - II - • Any non-trade current account transaction permissible under the Act, other than gift and donation. • Foreign trade transactions up to Rs.25 lakh per transaction. • AD Category-III - As mentioned in the authorisation issued by the RBI. • FFMC - Purchase of foreign currency notes and travellers' cheques, Sale of foreign currency notes and travellers' cheques for foreign travel purposes; • Functioning as an agent under the Money Transfer Service Scheme ('MTSS' for short) in accordance with the guidelines on MTSS. Conditions of Authorisation The authorisation shall ....
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....be granted subject to the following conditions- • The RBI may at any time vary or revoke any of the existing conditions of authorisation or impose new conditions. • An authorised person, other than a bank or an NBFC, shall achieve minimum annual forex turnover as given below, within 2 years from the date of coming into force of these regulations or from the commencement of forex business, whichever is later, and shall maintain the minimum annual forex turnover thereafter on an ongoing basis- • AD - Category II - Rs.50 crores; • FMCC - Rs. 10 crores. • The requirements, including minimum net worth, turnover and 'fit and proper' status, shall be fulfilled on an ongoing basis and....
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.... any deviation shall be immediately brought to the notice of the RBI. • If the net worth of the authorised falls below the required level, the same shall be restored within 6 months or at the extended time given by RBI, failing which the authorisation may be revoked. • Any authorised person, other than a bank shall commence its business within a period of 6 months from the issue of authorisation. • The authorised person shall seek prior approval before any change is management control or ownership of more than 50%. • If there is any change in KMP and events that may affect the 'fit and proper' status of the KMP, it should be reported to the Regional Office of the RBI. • The de....
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....tails of investigations carried out by the Directorate of Enforcement within 30 days from the date of aware about the said program. • The RBI may cancel the authorisation if the authorised person fails to comply with the provisions of the Act and the regulations and also in the public interest. Appeal If the authorisation is rejected or revoked by the RBI, then the authorised person may file an appeal before the Executive Director in charge of the Foreign Exchange Department, Central Office, Reserve Bank of India, Mumbai, the Appellate Authority within 30 days from the date of receipt of the said order. The Appellate Authority shall decide the appeal within 60 days from the date of receipt of the appeal. Powers of RBI ....
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.... RBI is having power to give to the authorised person, any direction in regard to making of payment or the doing or desist from doing any act relating to foreign exchange or foreign security. The Reserve Bank may, for the purpose of ensuring the compliance with the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, direct any authorised person to furnish such information, in such manner, as it deems fit. The Reserve Bank may, after giving reasonable opportunity of being heard, impose on the authorised person a penalty which may extend to Rs.10000/- and in the case of continuing contravention with an additional penalty which may extend to Rs.2000/- for every day during which such cont....
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....ravention continues. The RBI may, after giving reasonable opportunity of being heard, impose on the authorised person a penalty which may extend to Rs.10,000/- and in the case of continuing contravention with an additional penalty which may extend to Rs.2,000/- for every day during which such contravention continues. The RBI may obtain any information or particulars which such authorised person has failed to furnish on being called upon to do so and secure compliance with the provisions of this Act or of any rules, regulations, directions or orders made thereunder. It is the duty of the authorised person or its officers to comply with the directions of RBI and to furnish the required information/documents within the time stipulated as....
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.... directed by the RBI. =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....