RBI Overhauls FEMA Reporting Obligations for Authorised Persons and MTSS Agents

The Reserve Bank of India has significantly simplified the compliance framework under the Foreign Exchange Management Act, 1999 for Authorised Persons by issuing A.P. (DIR Series) Circular No. 17 dated 24 June 2026 (RBI/2026-27/174). This circular is aligned with the recently notified Foreign Exchange Management (Authorised Persons) Regulations, 2026 and introduces a more concise, risk-focused reporting regime.

The changes directly impact:

  • Authorised Dealer Category-I banks (insofar as they act as Principal ADs with Forex Correspondents)
  • Full-Fledged Money Changers (FFMCs)
  • Authorised Dealer Category-II entities (non-bank)
  • Indian Agents functioning under the Money Transfer Service Scheme (MTSS)
  • Franchisees / Forex Correspondents associated with Authorised Persons

The revised framework rationalises existing returns, introduces updated formats, and discontinues several legacy registers and statements, all while retaining the obligation to maintain complete and verifiable records for supervisory review.

1.1 Key FEMA Regulations and Master Directions Referred

The circular draws attention to the following regulatory instruments:

  • Foreign Exchange Management (Authorised Persons) Regulations, 2026
  • Master Direction – Money Changing Activities
  • Master Direction – Money Transfer Service Scheme (MTSS)
  • Master Direction – Reporting under Foreign Exchange Management Act, 1999

These Master Directions are dynamic and have been updated periodically. The 2026 circular is a focused intervention to:

  1. Align reporting with the new Authorised Persons Regulations, 2026;
  2. Eliminate redundant or overlapping reporting; and
  3. Simplify formats to reduce operational burden while preserving regulatory oversight.

Note: All directions in this circular are issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and do not override or dilute requirements under any other legislation.

2. Core Objective of the 2026 Circular

At its core, A.P. (DIR Series) Circular No. 17 aims to:

  • Rationalise FEMA-related returns filed by various categories of Authorised Persons;
  • Introduce a revised FLM-8 format with expanded coverage;
  • Remove the need for prior RBI approval for specific operational matters (e.g., write-off of foreign currency notes above set thresholds); and
  • Discontinue multiple registers and returns that have become redundant in light of improved systems and existing reporting (such as FETERS).

The overall theme is “simplification with accountability”—reducing form-filling while ensuring that underlying records are properly maintained and available for RBI inspection.

3. Revised FLM-8 Return – Expanded Scope and Relaxed Approval

3.1 Key Modifications to FLM-8

The circular prescribes a revised format of the FLM-8 return, which now:

  • Continues to capture purchases and sales of foreign currency notes; and
  • Additionally requires details of write-off of foreign currency notes.

Under the new regime:

  • The earlier requirement to seek prior approval of the Reserve Bank for write-off of foreign currency notes exceeding USD 2000 has been withdrawn.
  • The write-off details must now be incorporated in the FLM-8 itself under a dedicated line item, thus shifting from an ex-ante approval model to an ex-post reporting model through the return.

Important: This change offers greater operational flexibility to FFMCs and non-bank AD Category-II entities but at the same time increases their responsibility to ensure that write-offs are properly documented and justifiable for supervisory review.

3.2 Exemption for Entities Using FETERS

Entities that:

  • Maintain Nostro accounts, and
  • Report relevant foreign exchange transactions through FETERS (Foreign Exchange Transactions Electronic Reporting System)

are exempted from filing FLM-8 returns.

This is a substantial reduction of reporting overlap, as FETERS already captures critical transaction-level data.