Summary
India's FEMA 2026 reform, formalized under Notification No. FEMA 401/2026-RB, represents the most significant structural change to the country's foreign exchange market in two decades. By expanding AD Category-II licenses to include trade-linked international payments and Nostro account access, the RBI has ended the bank monopoly on trade remittances and opened the market to well-capitalized non-bank entities. The reform also phases out the Full-Fledged Money Changer model, consolidating the market around fewer, digitally capable players.
Key Points
- What changed: AD Category-II entities can now process foreign trade transactions up to ₹25 lakh (~$26,000 USD) per transaction, family maintenance remittances, and all permissible non-trade current account transactions (except gifts and donations). Previously, trade payments were the exclusive province of banks (AD Category-I).
- Nostro account access: The most consequential technical change. Nostro accounts (foreign-currency accounts held at banks in other countries) allow non-bank entities to settle trade payments directly without routing through a correspondent bank intermediary. EbixCash World Money was the first AD-II entity to gain this capability (July 21). GlobalPay's expanded license positions it to build toward the same capability.
- FFMC phase-out: No new Full-Fledged Money Changer licenses being issued. Existing licenses valid until expiry but not renewable. Current franchisee arrangements must transition to Forex Correspondent structure within 2 years. This consolidates the market around established AD-II entities.
- Entry standards: Non-bank AD entities must meet prescribed net worth thresholds and achieve minimum annual forex turnover of ₹50 crore (~$525,000 USD) within 2 years of authorization. Designed to screen out undercapitalized operators.
- Market size: India has 63M registered MSMEs accounting for 43% of total export value. The trade remittance market was previously a bank monopoly with limited competition on pricing and service.
- GlobalPay's position: 40-year-old company (founded 1986), BSE-listed, 21 branches, 850+ corporate clients, 500+ channel partners. FY26 revenue ₹107.94 crore ($1.13M), up 25% YoY. FPaaS (Forex Platform as a Service) model enables API-based distribution through partners.
- Template for other markets: India's approach — expanding non-bank access to domestic payment infrastructure while raising entry standards — mirrors trends in Singapore, the UK, and the EU. Emerging markets with large MSME export sectors may follow similar paths.