Getting a forex licence in India means gaining official access to currency trading in one of the most strictly regulated markets in the Asian region. The jurisdiction is characterised by strict control over cross-border transactions with monetary units, which makes a licence a prerequisite for legal participation in the forex sector. Without obtaining the relevant status, any activity related to foreign currency trading is regarded as a violation of financial legislation and entails administrative and criminal consequences.
Only those entities authorised by the Reserve Bank of the country (RBI) are allowed to provide services in this sector. For this purpose, it is necessary to be registered in the jurisdiction in the status of an offshore bank, currency dealer, exchange office or other financial intermediary that meets the requirements of the regulator. In other words, obtaining a licence to provide forex services in India means obtaining a permit to operate for the relevant category of applicant (e.g. a full-fledged foreign exchange bureau).
The applicant is required to fulfil the criteria set by the regulator, which include capital adequacy, proven management qualifications and a transparent ownership structure. The authorisation for foreign exchange trading in India is based on the nature of the transactions, the level of risk and the degree of involvement in the transactions. Fulfilment of regulatory requirements is a prerequisite for admission to legal activities and interaction with regulated market participants.
Forex licensing in India: legislative framework
Legal regulation of the foreign exchange market in India is based on a system of strict restrictions aimed at protecting economic stability and preventing uncontrolled capital outflows. The regulatory model was formed under the influence of conservative currency policy and the peculiarities of domestic financial regulation. The legal regime of forex licensing in India is based on the provision that any foreign exchange transactions carried out without the express authorisation of the Reserve Bank are considered abusive.
The key act that defines the framework for permitting transactions in the forex market in India is the Foreign Exchange Management Act - FEMA, which came into force in 1999. This act replaced the previous regulatory model and introduced the principle of permissive approach, whereby any foreign exchange action is only possible if there is a clearly defined basis as stipulated in the regulatory guidelines. In 2024, an updated version of the RBI guidelines - Master Direction No.3/2015-16 - came into force, which sets out the detailed conditions for currency trading approvals in India, including requirements for brokers and companies planning to become authorised market participants.
The country's central bank fulfils the role of a single currency control authority and at the same time acts as a regulator of the financial sector in terms of intercurrency transactions. It is the RBI that determines the list of acceptable instruments, establishes the procedure for obtaining permits for forex services in India, and controls compliance with limits and disclosure of information by participants. Any company claiming to be a legal operator of these services must not only obtain approval from the RBI, but also strictly adhere to all established regulations, including technical requirements, transparency, competence and operational restrictions. In parallel, SEBI, the Securities and Exchange Board of India, is responsible for monitoring market discipline in the foreign exchange derivatives segment.
Under the current legal regime, legal currency trading in the jurisdiction is only possible with the Indian Rupee as part of a currency pair. This means that only a limited number of instruments such as USD/INR, EUR/INR, GBP/INR, and JPY/INR are permitted. The use of any other non-Rupee combinations, as well as referring to products such as contracts for difference (CFDs), binary options, digital tokens and cryptocurrencies, is expressly prohibited. Such instruments are not recognised as regulated and their distribution or offering to customers within the country is considered a violation of currency and financial laws. The restrictions under forex licensing in India are aimed at protecting private investors and preventing citizens from engaging in high-risk schemes with opaque structures. This approach creates a narrow but controlled corridor for the activities of legal operators and excludes the possibility of unlicensed platforms operating in the legal framework of the country.
Who can obtain a forex licence in India
Registration for a forex licence in India is available to a strictly limited number of entities that meet the criteria set by the regulator. Registration is possible only within the national jurisdiction, with mandatory compliance with the requirements for corporate structure, professional qualifications and sources of capital. Permission to provide foreign exchange services in India is granted only to applicants who fit into one of the statutory categories, ranging from authorised dealers to specialised financial institutions approved by the Reserve Bank.
Who are the authorised persons
Currency regulation in the jurisdiction is based on the differentiation of the status of participants who have the right to perform transactions with foreign monetary units. RBI issues permission for forex services only to those entities that are included in the list of authorised persons. The said companies are given a set of competencies depending on the type of financial services it is authorised to provide. Below is a table with the main types of authorised entities and a brief description of their functionality.
|
Name of authorised person |
Description of legal status and functions |
|
Authorised Dealer – Category I |
A commercial bank authorised by the RBI to carry out all types of monetary transactions, including settlement of foreign trade contracts, opening of foreign currency accounts and purchase and sale of financial assets. |
|
Authorised Dealer – Category II |
A non-banking financial institution with the right to carry out limited foreign exchange transactions, such as exchanges for individuals or carrying out transfers on prescribed grounds. |
|
Full-Fledged Money Changer (FFMC) |
A licensed company engaged in foreign cash exchange and sale of rupees to non-residents within the scope and purposes specified by the RBI. |
|
Offshore Banking Unit (OBU) |
A specialised unit of a bank established in an international financial zone (e.g. GIFT City) authorised to carry out cross-border foreign exchange transactions with non-residents. |
This structure allows the regulator to accurately control the circulation of foreign exchange funds and exclude the participation of uncontrolled intermediaries in cross-border transactions. In order to obtain a forex licence in India, an applicant must select the appropriate category and complete the authorisation process according to the scope of the proposed activity.
Requirements for registration of a legal entity
Licensing of foreign exchange operations in India is possible only for legal entities officially registered in the jurisdiction in the prescribed form. The legal framework governing the establishment and operation of such organisations is represented by two key acts: “On Companies” of 2013 and “On Registration of Companies” of 1956, the provisions of which continue to be applied to the extent that they do not contradict the current regulatory framework. In order to obtain an Indian forex licence, the legal status of the applicant must be in the form of a limited liability company or a JSC, as other legal forms are not considered permissible for the purposes of RBI approval.
The procedure for incorporation of a legal entity includes selection of name, approval of incorporation documents and entry of details in the state register under the supervision of the Ministry of Corporate Affairs. These stages are accompanied by the submission to the competent authority of a dossier, including the project charter, information on ultimate beneficiaries and personal data of future directors. Upon completion of the registration procedure, the organisation is assigned a corporate identification number, only then does it become a full-fledged participant in the legal turnover.
After entering the data into the MCA (Ministry of Corporate Affairs) system, the company may apply for admission to the Indian foreign exchange market. Lack of official registration automatically excludes the possibility to initiate the licensing procedure and gain access to operations with foreign financial assets. Thus, the primary and mandatory condition for registration of an Indian forex licence is proper registration of corporate status in accordance with the local legislation.
Capital Requirements
The jurisdiction has differentiated Net Owned Funds (NOF) regulations that are mandatory for all categories of persons applying for a forex licence in India. The amount of capital required depends on the type of licence and the size of the proposed business. The NOF is calculated according to a prescribed methodology, taking into account the actual solvency of the applicant and not the formal amount of assets. Below are the current minimum NOF values for different types of applicants for foreign exchange licences in India.
|
Participant Category |
Minimum NOF, INR (USD) |
|
FFMC (single section) |
2,500,000 (approx. 30,000) |
|
FFMC (with multiple points) |
5,000,000 (approx. 60,000) |
The NOF calculation methodology excludes from total capital all investments in subsidiaries and affiliates, as well as a portion of assets belonging to a group of non-banking financial institutions if their share exceeds 10% of equity. This assessment system reflects the realistic ability of an applicant for a forex licence in India to meet its obligations and maintain resilience in the face of market fluctuations.
The capital requirement is in effect at the time of application and must be adhered to throughout the period of authorisation. For applicants from the non-banking sector, it serves as a filter to weed out undercapitalised companies that are unable to guarantee the financial security of client funds and settlement stability.
Competency and Integrity Criteria
Admission to foreign exchange transactions in India is not possible without first assessing the professional qualifications and integrity of the key participants of the applicant company. This check covers not only the legal entity as such, but also its beneficiaries, board members, senior management, and in some cases, controlling shareholders. RBI does not look at formal data, but at a set of attributes that allow it to judge business reputation, sources of funds, transparency of ownership structure and real experience of financial activities.
For a forex licence in India, the regulator requires proof that board members have sufficient competence and are able to ensure compliance with regulatory requirements. Particular attention is paid to the absence of negative records against applicants such as involvement in financial disputes, regulatory offences, admin sanctions, or links with unauthorised companies. Previous experience in the financial sector is also important, especially in areas related to risk management, foreign exchange regulation, or global settlement.
Integrity checks under forex licensing in India are aimed at excluding persons who may use the foreign exchange platform to evade controls or engage in non-transparent transactions. If there is information of past dishonest behaviour or attempts to conceal facts relevant to the assessment, no authorisation document will be issued, irrespective of the financial health of the company. RBI's approach in this matter is not based on formal criteria but on the principle of utmost prudence when authorising transactions potentially affecting the stability of the foreign exchange market.
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Forex Licensing Procedure in India: Step-by-Step Algorithm
The procedure for obtaining a forex licence in India is a regulated process that involves the sequential fulfilment of legal, financial and organisational requirements. Each action is carried out within the framework of the procedure established by the regulator, with the mandatory submission of supporting documentation and passing the preliminary check. The algorithm of sending a request, obtaining approval and registration as an authorised participant of the foreign exchange market is based on the principle of formal admissibility, financial stability and transparency of the corporate structure.
Preparing Documentation
The preparatory stage of obtaining an Indian forex licence requires the submission of a comprehensive package of documentation, the contents of which are defined by the RBI regulations. Each of the elements plays the role of a tool to verify the legal capacity, financial stability and transparency of the future participant of the foreign exchange market. The regulator does not consider a request until the entire list of mandatory materials, in the prescribed form and submitted with proper evidence, is received.
List of documents to be submitted with the petition:
- A certified copy of the company's certificate of incorporation confirming its formal existence under local corporate law.
- Memorandum of Association and Articles of Association containing provisions expressly providing for admission to foreign exchange transactions in India.
- Confirmed copies of balance sheet and financial statements for the last three periods, supplemented by an auditor's report of sufficient net equity at the time of the request.
- Confidential feedback from the servicing bank, sent in a sealed envelope, confirming the bona fides of the applicant for the Indian forex services licence.
- A signed statement certifying that neither the company nor its management is under investigation by law enforcement, tax or other regulatory authorities.
- An assurance on the implementation of KYC/AML/CFT policy drafted in accordance with RBI regulations and effective prior to commencement of operations.
- Description of corporate interconnectedness with other entities, including non-banking financial companies, reflecting the presence of related or affiliated entities in related sectors.
- A certified copy of the minutes of the board of directors' meeting recording the decision to enter the foreign exchange market and apply for a financial broker licence in India.
All documents are to be legally executed in accordance with RBI requirements and must be submitted in full at the same time as the application. Failure to comply with the composition or form of submission may result in rejection without consideration of the merits.
Applying to RBI
Having finalised the necessary documentation, the applicant moves on to the next mandatory step - making an application to the Reserve Bank for permission to conduct foreign exchange transactions in India. The regulator requires the submission of the request to be made through a specialised digital platform, APConnect, which is integrated with RBI's in-house processing system and provides unified data routing. The request shall be sent to the regional branch of the bank in whose territorial jurisdiction the legal entity is registered.
The APConnect digital platform functions as a secure channel of interaction between the applicant and the regulator, allowing the applicant to upload a set of documents in electronic form and automatically distribute them to the appropriate department for review. Each submitted application receives a unique identification number, which is used to track the current status of consideration.
During the registration process, basic information about the company is entered into the system, including registration data, ownership structure and contact details. After that, electronic copies of all accompanying materials in the required format are attached to the application form. The documents are checked against the list prescribed by the Reserve Bank for registration of a forex licence in India and only if there are no technical and substantive comments, the request is sent for substantive evaluation.
Review of the request
Once the application is received by the Reserve Bank's regional office, the in-depth screening stage begins, which involves a comprehensive assessment of the applicant for forex authorisation in India. At this stage, both the submissions and the actual performance affecting the eligibility for forex clearance are analysed. Priority attention is given to the capital structure and sources of capital formation, as stability of the financial base is considered as a basic condition for entering the market with higher operational risks. Deviations in the capital structure or insufficiency of liquid assets are regarded as grounds for suspension of the review until the violations are eliminated.
In parallel, the personal composition of the management team is assessed, where the level of professional training and relevant experience in the financial sector are important criteria. During the review process, biographical data, business reputation, absence of disciplinary or judicial sanctions, and participation in projects related to licensed financial services are analysed. The presence of negative information or incomplete information regarding board members is considered as a barrier to further progress in the registration process for forex authorisation in India.
The final element of this stage is a legal assessment of the integrity of all affiliated parties and the transparency of the corporate structure. Particular attention is paid to the presence of links with organisations whose activities have previously been subject to regulatory restrictions, as well as to the analysis of the sources of invested funds from the point of view of their legal origin. Only if all aspects of the verification process confirm that the applicant meets the established criteria, the procedure proceeds to the final stage of making a decision on the authorisation to trade in foreign exchange in India.
Obtaining an authorisation document
The Regulator takes a decision in the form of a written notification confirming the authorisation to conduct foreign exchange transactions in India under the designated category. This document is legally binding and serves as a basis to start preparations for launching the business.
Having received the approval, the company must record the fact of obtaining permission to provide forex services in India in the minutes of the governing bodies and notify the regulator of the readiness to begin operations within a specified period of time. In some cases, confirmation of implementation of transaction recording system and technical integration with RBI compliant banking platforms may be required. Only after fulfilment of all the prescriptions specified in the authorisation letter, actual operations may commence within the limits of the authority granted.
What are the penalties for operating without a licence
Transactions in foreign currencies without an Indian forex permit are considered a gross violation of financial legislation and carry serious legal consequences. The regulator considers such activities as unauthorised interference in the foreign exchange turnover, which can affect the stability of the balance of payments and threaten the transparency of cross-border settlements.
In case of detection of transactions without a forex licence in India, the authorised authorities initiate administrative proceedings with the imposition of monetary penalties, the amount of which is determined depending on the scale of violations and the period of illegal activity. The amount of the fine may significantly exceed the economic effect obtained from illegal transactions. In addition, the blocking of current and operational accounts is applied, which automatically stops the possibility of carrying out any transactions.
Foreign exchange violations are also considered in the context of criminal liability, especially where there is evidence of illicit enrichment, financing of prohibited entities or evasion of cross-border capital controls. Directors and managers of companies found to have circumvented the forex licensing process in India are liable for prosecution up to and including arrest and prohibition from doing business in the financial sector.
Conclusion
Obtaining a foreign exchange licence in India is a prerequisite for entry into a regulated market with a high degree of supervisory activity. Unlike jurisdictions with minimal barriers to entry, the local control system relies on a tiered admission model where each authorisation is accompanied by an analysis of the applicant's capital structure, business reputation and operational arrangements. This model eliminates the possibility of opaque players and creates an environment with predictable rules, which is particularly important for participants operating in the high-risk segment.
A properly structured Indian foreign exchange authorisation process becomes the entry point to a sustainable growth model, allowing business relationships to be built on a foundation of trust and institutional predictability. In Indian jurisdictions, a licence is no longer just a regulatory requirement, but an asset that builds reputation and long-term financial stability.
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