RBI Draws The Line: Non-Banks Denied Entry Into AD Cat-I Forex Market

On May 6, 2026, RBI issued its final notification under the Foreign Exchange Management (Authorised Persons) Regulations. The decision draws a clear boundary between banks and non-banks in forex markets, while introducing operational reforms to improve efficiency and compliance.

RBI’s Decision

The central bank explicitly declined proposals to extend AD Cat-I licences to non-banks. This means NBFCs, fintechs, and other financial entities cannot access the highest tier of forex dealing privileges. Instead, they can participate under AD Cat-II, which has an expanded scope but stricter eligibility criteria.

Operational Reforms

While rejecting non-bank entry into AD Cat-I, RBI accepted several industry suggestions:

Removal of prior approval requirements for opening new business locations, replaced with a reporting mechanism.

Permission for forex correspondents (FxCs) to partner with multiple authorised dealers, improving reach and competition.

Legacy full-fledged money changers (FFMCs) can continue if they meet the ₹10 crore turnover threshold.

Compliance And Governance

RBI maintained strict thresholds for AD Cat-II licences, including a ₹50 crore turnover and ₹10 crore net worth requirement. The regulator emphasized that only “fit and proper” entities should operate, with ongoing compliance and digital applications streamlined via the Pravaah portal.

Key Highlights

•⁠  ⁠RBI rejects non-banks’ entry into AD Cat-I forex dealing

•⁠  ⁠AD Cat-I licences remain exclusive to banks

•⁠  ⁠AD Cat-II scope expanded but strict eligibility norms retained

•⁠  ⁠Operational reforms include easier branch expansion and multi-dealer partnerships

•⁠  ⁠Legacy FFMCs allowed to continue under turnover thresholds

Sources: Mint, Reserve Bank of India