RBI Revises FEMA Reporting Framework: Circular No. 17

Table of Contents

Introduction

The Reserve Bank of India has rewritten the reporting compliance calendar for every Full-Fledged Money Changer, non-bank Authorised Dealer Category-II entity, and MTSS Indian Agent operating in the country. Through A.P. (DIR Series) Circular No.17 dated June 24, 2026 (RBI/2026-27/174), the central bank has discontinued seven legacy registers, rationalised the FLM-8 return, and introduced fresh quarterly disclosure obligations for franchisee arrangements and MTSS sub-agents. Authorised Persons who fail to align their internal reporting systems with this circular risk supervisory action under the Foreign Exchange Management Act, 1999.

Legal Basis of the Circular

The circular has been issued by the Foreign Exchange Department of the RBI under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999). Section 10(4) empowers the RBI to give directions to Authorised Persons regarding the conduct of their business, while Section 11(1) allows the central bank to issue directions for securing compliance with FEMA provisions and any rules or regulations made under it. The circular expressly states that its directions operate without prejudice to any other permission or approval required under any other law, meaning that Authorised Persons cannot treat compliance with this circular as a substitute for approvals mandated elsewhere.

The changes have been prescribed pursuant to the Foreign Exchange Management (Authorised Persons) Regulations, 2026, which govern the authorisation, categorisation, and operational conditions applicable to Authorised Dealers, Forex Correspondents, and Full-Fledged Money Changers. These Regulations were notified by the RBI under Notification No. FEMA 401/2026-RB dated 30 April 2026, issued in exercise of powers under clause (h) of sub-section (2) of Section 47 read with Section 10 of FEMA, 1999. The stated objective behind the 2026 Regulations was to rationalise and simplify the framework for Authorised Persons and to ease compliance requirements. Circular No.17 must therefore be read as a subordinate, operational extension of that broader regulatory overhaul, specifically addressing the returns and reporting formats that Authorised Persons must now follow.

Three other Master Directions frame the circular: the Master Direction – Money Changing Activities, the Master Direction – Money Transfer Service Scheme (MTSS), and the Master Direction – Reporting under Foreign Exchange Management Act, 1999. Paragraph 5 of the circular confirms that the Money Changing Activities Master Direction and the Reporting Master Direction are being updated separately to formally incorporate these changes, so Authorised Persons should track both Master Directions for consolidated, updated text rather than relying on the circular in isolation.

Rationale for the Rationalisation of Returns

Paragraph 2 of the circular records that the RBI undertook a review of existing reporting requirements with the specific objective of rationalising them and prescribing or modifying reporting formats pursuant to the 2026 Regulations. This fits into a wider pattern of regulatory simplification that the RBI has pursued across FEMA reporting during 2026, where multiple legacy formats accumulated over two decades have been consolidated, replaced, or withdrawn to reduce duplicate filings and align reporting with the current authorisation architecture created by the 2026 Regulations.

Revised FLM-8: Statement of Purchases and Sales of Foreign Currency Notes

FLM-8, prescribed under paragraph 16(i) of Section V of the Master Direction – Money Changing Activities, remains the core monthly return for FFMCs and non-bank AD Category-II entities. The revised format, annexed to the circular, requires currency-wise reporting (USD, GBP, EURO, JPY, and other specified currencies) across five heads: opening balance, purchases, sales, foreign currency notes written off, and closing balance.

Two structural changes stand out. First, purchases must now be reported separately under five sub-heads: purchases from the public, purchases through franchisees or Forex Correspondents (FxCs), purchases from AD banks, purchases from other FFMCs or non-bank ADs, and imports. Sales carry a parallel five-way break-up: sales to the public, sales through FxCs, sales to AD banks, sales to other FFMCs or non-bank ADs, and exports. Second, and most significantly, the revised FLM-8 now independently captures write-off of foreign currency notes as a distinct reporting line, a category that did not exist as a standalone disclosure requirement earlier. The return also requires a purpose-code-wise break-up of purchases and sales made to the public during the month, capturing the purpose code, purpose description, currency, and amount for each transaction.

Discontinuation of Prior RBI Approval for Currency Note Write-Offs Above USD 2000

Sub-paragraph 3(i) of the circular removes a long-standing compliance burden: Authorised Persons no longer need prior approval of the Reserve Bank before writing off foreign currency notes exceeding USD 2000. Previously, any write-off beyond this threshold required specific RBI clearance before the entity could adjust its books. With this requirement discontinued, FFMCs and non-bank AD Category-II entities can process write-offs internally, provided the write-off is accurately captured under the dedicated write-off column in the revised FLM-8 return. This shifts the compliance mechanism from prior approval to post-facto disclosure, consistent with the RBI’s broader move toward returns-based supervision rather than transaction-level pre-clearance.

Exemption for Entities Reporting Through FETERS

The circular carves out a specific exemption: entities maintaining Nostro accounts and reporting the relevant transactions through the Foreign Exchange Transactions Electronic Reporting System (FETERS) shall not submit FLM-8 returns. This avoids duplicate reporting of the same underlying foreign exchange transactions through two separate channels. Entities that rely on this exemption should maintain internal documentation demonstrating that all relevant purchase and sale transactions are indeed captured through FETERS, since the exemption is conditional on that reporting being complete and accurate.

New Quarterly Disclosure: List of Franchisee Arrangements

Sub-paragraph 3(ii) introduces a fresh recurring obligation. Authorised Persons with franchisee arrangements must submit a list of such arrangements within 15 days from the end of each calendar quarter. The annexed format requires the name and address of each franchisee, city, state, PIN code, and the date of appointment as franchisee under the relevant agreement, referenced specifically under paragraph 3(ii) of this very circular rather than under an older Master Direction provision.

This obligation should be read alongside the broader trajectory of the 2026 Regulations, under which the RBI has been steering the market away from the franchisee model toward a structured principal-agent Forex Correspondent Scheme. The 2026 Regulations phase the franchisee model toward this Forex Correspondent Scheme through a transition arrangement. Quarterly franchisee reporting under this circular therefore also functions as a supervisory tool to monitor the pace of that transition. A parallel format for the List of Forex Correspondents (FxCs) appointed by Principal ADs, referenced under Regulation 14(b) of the Foreign Exchange Management (Authorised Persons) Regulations, 2026, has similarly been annexed, requiring the FxC’s name, outlet address, city, state, PIN code, date of appointment, and the specific foreign exchange facilities available at each outlet.

New Quarterly Disclosure: List of Sub-Agents Under MTSS

Sub-paragraph 3(iii) places an identical quarterly timeline on MTSS Indian Agents: the list of Sub-Agents must be submitted on a quarterly basis within 15 days from the end of each calendar quarter. This replaces the earlier requirement of separately notifying additional locations under MTSS, discussed further below, with a single consolidated quarterly submission covering the sub-agent network.

Returns, Registers, and Forms Discontinued by the Circular

Paragraph 4 of the circular withdraws four distinct categories of reporting obligations, each with its own compliance consequence.

FLM-1 to FLM-7 registers prescribed under the Master Direction – Reporting under FEMA stand discontinued in their prescribed formats. However, the circular imposes a continuing obligation on FFMCs and non-bank AD Category-II entities to maintain complete and accurate records of all foreign exchange transactions and to make those records available to the RBI for inspection or supervisory purposes whenever required. In effect, the prescribed register format has been withdrawn, but the underlying record-keeping duty survives and must still be discharged in a manner that satisfies an RBI inspection.

The Quarterly Statement showing summation of Foreign Currency Account opened in India out of export proceeds of Foreign Currency Notes/encashed Travellers’ Cheques has been discontinued entirely as a return.

The separate List of Additional Locations under MTSS, along with the requirement of quarterly confirmation regarding the veracity of the list published on the RBI’s website, has been discontinued. This obligation is effectively superseded by the new quarterly Sub-Agent list required under sub-paragraph 3(iii).

The return relating to the Statement of Collateral under MTSS has been discontinued as a filing requirement. Importantly, this does not dilute the underlying prudential obligation: Indian Agents must continue to ensure adequacy of collateral in terms of extant instructions under the MTSS Master Direction, even though they no longer need to file a separate statement confirming it.

The Fit and Proper Criteria Annexure

A separate annexed format for Fit and Proper criteria, referenced under Regulation 8(6)(c) of the Foreign Exchange Management (Authorised Persons) Regulations, 2026, requires detailed personal and professional disclosures from directors, KMPs, and promoters of an Authorised Person. The format captures personal details such as full name, designation, present and permanent address, nationality, DIN, PAN, and passport number, alongside educational qualifications and work experience. It further requires disclosure of any civil or criminal prosecution resulting in conviction or currently pending, restraint orders from courts, disqualifications under the Companies Act, 2013, regulatory sanctions, pending Directorate of Enforcement investigations, defaults or settlements with banks and financial institutions, and insolvency or bankruptcy proceedings.

The format also requires disclosure of relevant relationships of the promoter, director, or KMP, including relatives connected with any other Authorised Person as defined under Section 2(77) of the Companies Act, 2013 read with Rule 4 of the Companies (Specification of Definitions Details) Rules, 2014, and any business, financial, or employment interest that could create a conflict of interest. The declarant must sign an undertaking confirming the information is true and complete, with a continuing obligation to keep the RBI informed of any subsequent change, and the entity must separately certify that the declaration has been verified against its own records and due diligence.

Compliance Checklist for Authorised Persons

File the revised FLM-8 return monthly in the new five-head format, ensuring foreign currency note write-offs are captured under the dedicated write-off line rather than adjusted silently against the closing balance.
Confirm whether your entity qualifies for the FETERS exemption; if it reports Nostro account transactions through FETERS, FLM-8 need not be filed, but internal reconciliation between FETERS and actual transactions should be documented.
Discontinue seeking prior RBI approval for currency note write-offs up to and beyond USD 2000, and instead ensure the write-off is transparently reflected in the monthly FLM-8 filing.
Compile and submit the list of franchisee arrangements within 15 days of every calendar quarter-end, cross-checked against the entity’s own transition timeline away from the franchisee model.
Principal ADs should maintain and submit the list of Forex Correspondents under Regulation 14(b), capturing outlet-level detail rather than entity-level detail alone.
MTSS Indian Agents should submit the consolidated quarterly Sub-Agent list within 15 days of quarter-end, and discontinue any separate additional-locations filing or veracity confirmation process previously followed.
Stop filing FLM-1 to FLM-7 registers in their old formats, but retain complete transaction records internally for supervisory inspection.
Stop filing the discontinued Quarterly Statement on Foreign Currency Accounts and the MTSS Statement of Collateral, while continuing to independently monitor collateral adequacy under the MTSS Master Direction.
Update internal fit-and-proper documentation for directors, KMPs, and promoters in line with the annexed format under Regulation 8(6)(c), and ensure the continuing disclosure undertaking is actively tracked rather than treated as a one-time filing.
Track the separately updated Master Direction – Money Changing Activities and Master Direction – Reporting under FEMA, since the circular’s changes will be consolidated into those texts.

Conclusion

Circular No.17 of 2026 reflects a clear regulatory shift: fewer standalone registers, more consolidated quarterly disclosures, and a move from transaction-level prior approval to accurate post-facto reporting through the FLM-8 return. For FFMCs, non-bank AD Category-II entities, and MTSS Indian Agents, the immediate task is procedural, update return formats, recalibrate internal write-off approval workflows, and build a quarterly cadence for franchisee and sub-agent disclosures. The larger task is structural: reading this circular alongside the Foreign Exchange Management (Authorised Persons) Regulations, 2026, since the reporting simplification introduced here is inseparable from the RBI’s ongoing reshaping of who is authorised to deal in foreign exchange and under what model.

The regulatory developments examined in RBI – Credit Derivatives Directions, 2026: Legal Analysis complement the Reserve Bank’s broader efforts to modernise foreign exchange reporting and strengthen regulatory compliance across financial transactions.