Master Direction - Money Changing Activities (Updated as on June 24, 2026)

RBI/FED/2015-16/17
FED Master Direction No.3/2015-16
January 1, 2016
(Updated as on June 24, 2026)
(Updated as on May 06, 2026)
(Updated as on April 2, 2026)
(Updated as on November 28, 2025)
(Updated as on May 29, 2024)
(Updated as on February 29, 2024)
(Updated as on March 4, 2022)
(Updated as on March 29, 2019)*

To
All Authorised Persons in Foreign Exchange

Madam / Sir,

Master Direction - Money Changing Activities

In terms of Section 10 (1) of the Foreign Exchange Management Act, 1999, the Reserve Bank, on an application, may authorise any person to be known as an authorised person, to deal in foreign exchange as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit.

2. [Omitted]1

3. The directions relating to money changing activities as well as the conduct of foreign exchange transactions are being issued in a consolidated form through the Master Direction enclosed herewith, under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law.2

4. The list of underlying notifications/circulars which form the basis of this Master Direction is furnished in the Appendix. Reporting instructions are covered in the Master Direction – Reporting under Foreign Exchange Management Act, 1999 dated January 01, 2016, as amended from time to time. The Authorised Persons may refer to respective circulars/ notifications for detailed information, if so needed.

5. It may be noted that whenever necessary, Reserve Bank shall issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the rules, regulations, notifications, directions or orders or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/constituents. The Master Direction issued herewith shall be amended suitably simultaneously.

Yours faithfully,
(N Senthil Kumar)
Chief General Manager

* Since this Master Direction has been significantly amended, it has been replaced rather than showing the changes in track mode for reader convenience. The previous Master Direction – Money Changing Activities dated January 1, 2016 (updated as on December 8, 2017)

Index

Master Direction - Money Changing Activities

SECTION-I

1. Introduction

Money changing business can only be undertaken by entities authorised by the Reserve Bank under Section 10 of the Foreign Exchange Management Act, 1999 and any person found undertaking money changing business without a valid licence is liable to be penalised under the Act ibid.

This document contains the various instructions relating to the subject of money changing activities including functioning of Full Fledged Money Changers (FFMCs), non-bank Authorised Dealers Category-II as well as the conduct of foreign exchange transactions with their customers/constituents.3

2. [Omitted]4

3. [Omitted]5

SECTION II

[Omitted]6

SECTION III

Guidelines for appointment of Agents / Franchisees by Authorised Dealers Category – I Banks, Authorised Dealers Category - II and FFMCs

1. Under the Scheme, the Reserve Bank had permitted ADs Category - I, ADs Category - II and FFMCs to enter into agency or franchisee agreements at their option for the purpose of carrying restricted money changing business i.e. conversion of foreign currency notes, coins or travellers' cheques into Indian Rupees. However, franchisees of AD Category - I / AD Category - II / FFMCs functioning within 10 kms from the borders of Pakistan and Bangladesh may also sell the currency of the bordering country, with the prior approval of the Regional Office concerned of the Reserve Bank. Other franchisees of AD Category - I / AD Category - II / FFMCs cannot sell foreign currency.

Notwithstanding anything contained in these directions, an authorised person shall not enter into any fresh franchisee arrangements henceforth, and the existing franchisee arrangements shall be discontinued gradually, in any case within two years from May 6, 2026.7

2. Franchisee

A franchisee can be any entity which has a place of business and a minimum Net Owned Funds of Rs.10 lakh. Franchisees can undertake only restricted money changing business.

3. Franchisee Agreement

An AD Category-I Bank / AD Category-II / FFMC, as the franchiser, is free to decide on the tenor of the arrangement as also the commission or fee through mutual agreement with the franchisee.

The Agency / Franchisee agreement to be entered into should include the following salient features:

• (a) The franchisees should display the names of their franchisers, exchange rates and that they are authoried only to purchase foreign currency, prominently in their offices. Exchange Rate for conversion of foreign currency into Rupees should be the same or close to the daily exchange rate charged by the AD Category – I Banks / ADs Category - II / FFMC at its branches.
• (b) The foreign currency purchased by the franchisee should be surrendered only to its franchiser within 7 working days from the date of purchase.
• (c) The maintenance of proper record of transactions by the franchisee.
• (d) The on-site inspection of the franchisee by the franchiser should be conducted at least once a year.

4. [Omitted]8

5. Due Diligence of Franchisees

A franchiser, i.e. AD Category–I Bank/ AD Category–II / FFMC should undertake the following minimum checks while conducting due diligence of its franchisees:

• i. existing business activities of the franchisee/ its position in the area.
• ii. minimum Net Owned Funds of the franchisee.
• iii. Shops & Establishments / other applicable municipal certification in favour of the franchisee.
• iv. verification of physical existence of location of the franchisee, where restricted money changing activities will be conducted.
• v. conduct certificate of the franchisee from the local police authorities (certified copy of Memorandum and Articles of Association and Certificate of Incorporation in respect of incorporated entities).

Note: Obtaining of Conduct Certificate of the franchisee from the local police authorities is optional for the franchisers. However, the franchisers may take due care to avoid appointing individuals/ entities as franchisees who have cases / proceedings initiated / pending against them by any law enforcing agencies.

• vi. declaration regarding past criminal case, if any, cases initiated / pending against the franchisee or its directors / partners by any law enforcing agency, if any.
• vii. PAN Card of the franchisee and its directors / partners.
• viii. photographs of the directors / partners and the key persons of franchisee.

The above checks should be done on a regular basis, at least once in a year. The franchiser should obtain from the franchisees proper documentary evidence confirming the location of the franchisees in addition to personal visits to the site. The franchiser should also obtain a Chartered Accountant's certificate confirming the maintenance of minimum Net Owned Funds of the franchisee, i.e., Rs.10 lakh on an ongoing basis.

6. Selection of Centres

• (i) The franchiser, i.e. AD Category–I Bank / AD Category–II / FFMC may appoint franchisees within a distance of 100 kms. from their controlling branches concerned.
• (ii) However, this distance criterion is relaxed in case of a recognised group/ chain of hotels appointed as franchisees, provided the headquarters of the group/ chain of hotels falls within a distance of 100 kms. of the controlling branch of the franchiser concerned.
• (iii) Further, in case of areas declared as hilly areas (as defined by the respective State Governments/ Union Territories) and the North-Eastern States, the distance restriction given in point (i) above is not applicable.