What changed
RBI issued a Master Circular that consolidates all existing instructions on money changing activities into one document, replacing multiple earlier circulars. The circular includes a sunset clause, meaning it will be withdrawn on July 1, 2012, and replaced by an updated version. It provides detailed guidelines on licensing, branch approvals, appointment of agents/franchisees, and KYC/AML/CFT compliance for Authorised Money Changers.
What it means for you
For banks and lenders acting as Authorised Dealers (AD Category-I/II), this circular streamlines the regulatory framework for money changing activities, making it easier to reference all rules in one place. It reinforces that only licensed entities can conduct money changing, with strict KYC/AML norms to prevent misuse. Banks must ensure their franchisees comply with the 10-km border restriction for selling foreign currency near Pakistan and Bangladesh.
What you must do
- Review and update internal policies to align with the consolidated Master Circular on money changing activities.
- Ensure all money changing operations, including franchisees, comply with KYC/AML/CFT guidelines as per Annex-I.
- Verify that franchisees near Pakistan/Bangladesh borders have prior RBI approval for selling foreign currency.
- Prepare for the sunset clause by tracking the July 1, 2012 expiry and subsequent updated circular.
- Train staff on the consolidated guidelines to avoid penalties for unauthorized money changing.
Who it affects
Authorised Dealer Category-I Banks, Authorised Dealer Category-II Banks, Full Fledged Money Changers (FFMCs), Franchisees of ADs and FFMCs, All Authorised Persons in Foreign Exchange
Can franchisees of AD Category-I banks sell foreign currency?
Generally, franchisees can only purchase foreign currency. However, those within 10 km of Pakistan or Bangladesh borders may sell the currency of the bordering country with prior RBI approval.