RBI Rationalises FEMA Reporting Requirements and Simplifies Compliance
Framework
1.
RBI issues new FEMA reporting circular
o
The Reserve Bank of India (RBI) has issued A.P.
(DIR Series) Circular No. 17 dated June 24, 2026 to rationalise reporting
requirements under FEMA.
2.
Objective: Simplification of compliance
o
The circular reviews existing reporting obligations
under the Foreign Exchange Management (Authorised Persons) Regulations, 2026,
Money Changing Activities, MTSS, and FEMA reporting framework, with the aim of
reducing redundant compliance requirements.
3.
Revised FLM-8 reporting format introduced
o
A revised FLM-8 (Statement of Purchases and
Sales of Foreign Currency Notes) has been prescribed. It now includes
reporting of foreign currency notes written off.
4.
Prior RBI approval for write-offs removed
o
The requirement to obtain prior RBI approval for
writing off foreign currency notes exceeding USD 2,000 has been
discontinued.
5.
Exemption for Nostro-account entities
o
Entities maintaining Nostro Accounts and
reporting transactions through FETERS are exempt from submitting FLM-8
returns.
6.
Quarterly reporting of franchise arrangements
o
Authorised Persons with franchisee arrangements
must submit a list of franchisees within 15 days after the end of each
calendar quarter.
7.
Quarterly reporting of MTSS sub-agents
o
Indian Agents operating under the Money Transfer
Service Scheme (MTSS) must submit lists of sub-agents quarterly within 15
days of quarter-end.
Returns
and Requirements Discontinued
8.
FLM-1 to FLM-7 registers discontinued
o
The prescribed formats of registers FLM-1 to FLM-7
are withdrawn.
o
However, FFMCs and Non-bank AD Category-II entities
must continue maintaining complete transaction records for RBI inspection and
supervisory purposes.
9.
Quarterly Foreign Currency Account return abolished
o
The return titled “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.
10.
MTSS location reporting simplified
o
Separate submission of Additional Location lists
under MTSS and quarterly confirmation of their accuracy are no longer required.
11.
Collateral reporting under MTSS removed
o
The Statement of Collateral return under MTSS has
been discontinued.
o
Indian Agents must nevertheless continue
maintaining adequate collateral as per existing regulations.
12.
Master Directions to be updated
o
RBI will separately update the Master Directions on
Money Changing Activities and FEMA Reporting to reflect these changes.
13.
Legal authority
o
The circular has been issued under Sections
10(4) and 11(1) of FEMA, 1999.
Key
Implications
·
Reduces compliance burden on
Authorised Persons, FFMCs, and MTSS operators.
·
Streamlines FEMA reporting architecture by
eliminating redundant returns and registers.
·
Improves ease of doing business in
foreign exchange and remittance operations.
·
Retains regulatory oversight through
record-maintenance requirements while reducing routine reporting.
·
Reflects RBI’s broader strategy of moving toward a
more efficient and risk-based regulatory framework.
Key
Takeaway
The RBI has significantly simplified FEMA-related
reporting by revising the FLM-8 return, removing several outdated returns and
registers, and easing approval requirements for foreign currency note
write-offs. The move is aimed at reducing regulatory burden while maintaining
adequate oversight of foreign exchange activities.