A company preparing to open a currency exchange counter may have enough funds, a registered office and a business plan. In 2026, the first question it needs to answer is whether the Reserve Bank of India (RBI) can consider its application for a Full Fledged Money Changer (FFMC) licence. The answer depends on whether the company already had an application under process when the rules changed or holds an existing authorisation that it wants to renew.

The Foreign Exchange Management (Authorised Persons) Regulations, 2026, which came into force on 6 May 2026, closed the fresh FFMC application route to new applicants. The RBI can still consider fresh applications that were already under process on that date, subject to the transitional conditions. Existing FFMCs can apply for renewal under a separate provision. Once an application falls within one of these routes, issues such as insufficient funds, missed deadlines and inaccurate disclosures can affect its outcome.

In this article, CA Manish Mishra talks about Common Reasons RBI Rejects FFMC Licence Applications.

How does the RBI assess an FFMC licence application?

Under Section 10(1) of the Foreign Exchange Management Act, 1999 (FEMA), the RBI can authorise entities to deal in foreign exchange as money changers. For FFMCs, the 2026 regulations distinguish between pending fresh applications and renewal applications. That distinction affects the financial test, the documents required and the relevant deadlines.

The sections below explain the issues that can prevent consideration, result in rejection or cause difficulty at renewal.

Applying after the fresh FFMC route closed

Regulation 3(6) limits fresh FFMC authorisation to applications that were already under process on 6 May 2026. A company’s incorporation date, the date it arranged its funds or the date it began preparing the paperwork does not establish that the RBI was processing its application. The company should check its application acknowledgement and RBI correspondence to verify the status of the case on the relevant date.

Imagine a travel company that incorporated in March 2026 and set aside Rs 50 lakh for a multi-branch forex business. It filed its first FFMC application in June. Even with a complete set of documents, its application would fall outside the transitional route. If the business still wants to operate a currency exchange counter, it can explore appointment as a Forex Correspondent by an AD Category-I or AD Category-II provider. Its permitted activities would depend on the scheme and the terms of the appointment.

Missing the deadline to provide additional documents

Where the RBI had sought additional information or documents for a fresh FFMC application already under process, Regulation 3(6) gave the applicant 30 days from the commencement of the regulations to submit the requested material. If the applicant failed to provide it within that period, the application was deemed rejected. An email acknowledging the request or submitting only some of the documents could leave the outstanding requirement unmet.

For example, suppose the RBI asked a company for a corrected auditor’s certificate and a certified board resolution. The company submitted the resolution within the deadline but left out the certificate. To understand whether the RBI treated the application as deemed rejected, the company would need to compare the original request with its response and proof of submission.

Falling short of the financial requirement

The financial thresholds for pending fresh applications and renewals use the same rupee amounts, but the underlying calculations differ. The transitional annex uses Net Owned Funds (NOF) for pending fresh applications. Regulation 5 uses net worth for renewal. The applicant should confirm which test applies before asking its auditor to certify the financial position.

For a pending fresh application, accumulated losses and intangible assets can reduce owned funds. Specified investments and exposures involving related entities can also lead to deductions under the NOF calculation. The amount invested by shareholders may therefore be higher than the amount recognised for licensing purposes.

For instance, a single-branch applicant with Rs 30 lakh in paid-up equity and Rs 7 lakh in accumulated losses would have Rs 23 lakh on those figures alone, assuming no other additions or deductions. Although its paid-up equity exceeds Rs 25 lakh, its calculated NOF falls below the applicable threshold.

Submitting incomplete or inconsistent documents

The transitional annex requires documents such as the Certificate of Incorporation, the relevant Memorandum and Articles of Association, a certified board resolution, audited financial records, a statutory auditor’s NOF certificate and a confidential banker’s report. It also requires declarations and details of associated concerns operating in the financial sector. The company’s constitutional documents should provide for the proposed money-changing business.

An application can also raise questions when its documents give different accounts of the same fact. Suppose the application uses the company’s current name, while the board resolution and banker’s report use its former name. The company can establish the connection by including the relevant name-change records. The same principle applies when the application, audited accounts and auditor’s certificate use different dates or financial figures. Each figure should be traceable to the supporting record.

Failing the fit-and-proper assessment

The RBI assesses the suitability of the people behind the proposed business. For pending fresh applications, the transitional annex sets out due diligence requirements for the company and its directors. Qualifications, experience, integrity and regulatory history can affect the assessment. The annex also addresses cases initiated or pending against the company or its directors before enforcement authorities.

For renewals, Regulation 5 refers to the fit-and-proper and investigation-related requirements in Regulations 4(5) and 4(6). These can apply to the applicant, promoters, directors and key managerial personnel. Where a relevant person or entity is under investigation by the Directorate of Enforcement, the applicant should check the applicable No Objection Certificate (NOC) requirement and the procedure available if the Directorate does not respond within the prescribed period.

Giving incorrect, false or misleading information

Regulation 6 allows the RBI to reject an application for grant or renewal on grounds including incorrect, false or misleading information, failure to meet eligibility requirements, failure to meet fit-and-proper criteria, or public interest. An inaccurate declaration about a promoter, a group company or a regulatory proceeding can affect the application even when the applicant meets the financial threshold.

For example, an applicant may declare that it has no associated financial-sector companies while its audited accounts disclose an investment in a group NBFC. The company should explain the relationship and correct the declaration where necessary. If a director resigns or the shareholding changes during the application process, the records should identify when the change occurred so the RBI can assess the information as of the relevant date.

Providing an inadequate KYC declaration or proposing activities outside the FFMC licence

For pending fresh applications, the transitional annex requires a declaration that the company will put the prescribed Know Your Customer (KYC) arrangements in place after approval and before operations begin. The applicant should understand how it will verify customers, record currency purchases and sales, and comply with applicable anti-money laundering requirements. Omitting the prescribed declaration leaves a gap in the application.

The proposed business should also fit the scope of an FFMC authorisation. Buying foreign currency notes and selling them for overseas travel are typical FFMC activities. An application proposing to use an FFMC licence to pay overseas suppliers or remit university fees describes services outside that licence’s scope. If the business plans to work with an Authorised Dealer, its application should make clear which entity will carry out each activity and under what authority.

Filing a renewal late or overlooking ongoing obligations

Under Regulation 5, an existing FFMC must apply for renewal at least two months before its authorisation expires. A timely application allows the existing authorisation to continue until the RBI grants renewal or rejects the application. An FFMC that misses the deadline should confirm its authorisation status before relying on a late filing to continue operations.

Existing FFMCs should also track the Rs 10 crore minimum annual forex turnover under Regulation 8. The threshold must be reached within two years from the commencement of the regulations or the start of the forex business, whichever is later, and maintained thereafter. The calculation excludes the value of inward remittances processed. The applicable deadline matters when assessing whether an FFMC has already become subject to the turnover requirement.

What should a company do after an RBI rejection?

Start with the reason stated in the RBI communication. If the issue concerns a missed document deadline, compare the RBI’s request with the documents submitted and the proof of delivery. If the issue concerns finances, reconcile the auditor’s certificate with the audited accounts and check whether NOF or net worth was the applicable measure. If the application fell outside the transitional route, supplying additional documents will not establish that it was already under process on 6 May 2026.

Regulation 9 provides an appeal route against rejection of an authorisation application or revocation of an authorisation. Where it applies, the appeal must be filed with the Executive Director in charge of the RBI’s Foreign Exchange Department within 45 calendar days from receipt of the letter communicating the decision. A company considering a later application should also check Regulation 6(3), which imposes a one-year restriction in specified cases. The exception for rejection based on failure to meet the net worth requirement does not reopen the fresh FFMC route.

Conclusion

For a pending fresh FFMC application, the most important records are the application status on 6 May 2026, the response to any RBI request and the auditor’s NOF calculation.

For a renewal, the focus shifts to the expiry date, the applicable net worth requirement, and the accuracy of governance and compliance records. A business entering the market after the fresh FFMC route closed can assess whether operating as a Forex Correspondent fits the currency exchange services it plans to offer.

Frequently Asked Questions (FAQ’s)

Q1. Can a company apply for a fresh FFMC licence in 2026?

Ans. The RBI considers only fresh FFMC applications that were already under process on 6 May 2026, subject to the transitional conditions. A company submitting its first application after that date falls outside that route.

Q2. What happens if an applicant misses the RBI’s document deadline?

Ans. For pending fresh applications covered by Regulation 3(6), failure to provide the additional information or documents sought by the RBI within 30 days from commencement results in deemed rejection.

Q3. What is the minimum NOF for a pending fresh FFMC application?

Ans. The transitional annex prescribes Rs 25 lakh for a single-branch FFMC and Rs 50 lakh for a multiple-branch FFMC. The statutory auditor’s certificate should support the NOF figure calculated under the prescribed method.

Q4. Is paid-up capital enough to meet the FFMC financial requirement?

Ans. Paid-up capital is one component of the financial calculation. Accumulated losses, intangible assets and specified exposures can reduce the final NOF figure below the required threshold.

Q5. Can an incorrect declaration lead to rejection of an FFMC application?

Ans. Yes. Regulation 6 allows the RBI to reject an application containing incorrect, false or misleading information. Applicants should reconcile their declarations with corporate, financial and regulatory records before filing.

Q6. Can an enforcement investigation affect an FFMC renewal?

Ans. Yes. An investigation involving a person or entity covered by the regulations can affect the RBI’s assessment. Depending on the circumstances, the applicant may need to follow the applicable Directorate of Enforcement NOC procedure.

Q7. When should an existing FFMC apply for renewal?

Ans. An existing FFMC must apply at least two months before its authorisation expires. A timely application allows the existing authorisation to continue until the RBI decides the renewal application.

Q8. Is Rs 10 crore the minimum annual turnover for an FFMC?

Ans. Yes. Regulation 8 prescribes Rs 10 crore in annual forex turnover, to be achieved within two years from commencement of the regulations or commencement of forex business, whichever is later. The calculation excludes inward remittances processed.

Q9. Can a company appeal an RBI decision rejecting its application?

Ans. Where Regulation 9 applies, the company can appeal to the Executive Director in charge of the RBI’s Foreign Exchange Department within 45 calendar days of receiving the rejection letter.

Q10. What option is available to a business that wants to open a forex counter now?

Ans. A business can explore appointment as a Forex Correspondent by an AD Category-I or AD Category-II provider. It can carry out the money-changing activities permitted under the scheme and the terms of its appointment.