Paul Merchants' Perpetual AD-II Licence: FEMA Framework Allows Rs 25 Lakh Forex

For legal and regulatory professionals, the granting of a perpetual Authorised Dealer Category II licence to Paul Merchants under the freshly minted Foreign Exchange Management (Authorised Persons) Regulations, 2026 represents a pivotal case study in how RBI is reshaping the licensing architecture for forex intermediaries. The move from renewable to perpetual authorisations and the explicit expansion of permitted activities to include non‑trade current account transactions (excluding gifts/donations) underscore a regulatory shift toward streamlining compliance while tightening oversight, with potential precedents for other non‑banking forex players.

On August 8, 2026, Paul Merchants Limited announced that the Reserve Bank of India (RBI) had granted it a perpetual Authorised Dealer (AD) Category II licence under the Foreign Exchange Management (Authorised Persons) Regulations, 2026. This landmark regulatory approval comes as India redefines its framework for foreign exchange intermediaries, and it places Paul Merchants in a select group of non‑bank entities empowered to handle a broader range of cross‑border transactions without the previous hurdles of periodic licence renewals. The decision has profound implications for the company’s competitive positioning, for the structure of India’s forex market, and for the regulatory precedent it sets.

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On August 8, 2026, Paul Merchants Limited announced that the Reserve Bank of India (RBI) had granted it a perpetual Authorised Dealer (AD) Category II licence under the Foreign Exchange Management (Authorised Persons) Regulations, 2026.

The newly obtained licence authorises Paul Merchants to undertake additional non‑trade current account transactions permissible under the Foreign Exchange Management Act (FEMA)—excluding gifts and donations—and to process foreign trade transactions up to ₹25 lakh (approximately US$30,000) per transaction. Previously, the company operated largely as a money changer and remittance service provider, focused on travel‑related forex, education remittances, medical treatment remittances, and small outward remittances. The upgrade to AD Category II effectively transforms it into a full‑fledged forex dealer for current account trade, bridging the gap between traditional banks and standalone money changers. With a network spanning 65 offices across India—from Leh to Kochi—and a three‑decade track record of compliance, the company is well positioned to exploit this expanded mandate.

The 2026 regulatory overhaul is central to understanding this shift. The RBI’s Foreign Exchange Management (Authorised Persons) Regulations, 2026 replaced the earlier Money Changing Activities Regulations and several other circulars, consolidating the licensing categories and introducing perpetual licences for AD Category II entities. This move aligns with the central bank’s objective of formalising the forex intermediary space, reducing the role of informal channels, and fostering greater ease of doing business for compliant players. Under the previous regime, licences were typically granted for limited periods and required frequent renewal, creating uncertainty and administrative burden. The perpetual nature of the new licence not only eliminates that risk but also signals a high level of regulatory confidence in Paul Merchants’ governance, anti‑money laundering (AML) safeguards, and operational integrity.

From a business perspective, the licence expansion opens new revenue pools. India’s outbound remittances under the Liberalised Remittance Scheme (LRS) have been growing at a rapid pace, with education and travel forming the bulk of flows. Additionally, small and medium enterprises (SMEs) increasingly need cost‑effective forex services for imports, exports, and service payments. By being able to execute trade transactions of up to ₹25 lakh per transaction, Paul Merchants can now serve a much larger client base—including importers, exporters, and professionals requiring cross‑border payments for conference participation or consulting fees—without having to refer them to a bank. This capability, combined with its extensive physical network and technology‑driven platforms, positions the company to gain market share in the lucrative B2B forex segment.

The regulatory signal also carries competitive implications. India’s forex market is dominated by banks, but a handful of non‑bank AD Category II licence holders (such as Thomas Cook India and EbixCash) have already demonstrated the viability of the model. Paul Merchants’ entry into this tier intensifies competition, potentially lowering margins but expanding the overall pie. For consumers and small businesses, the increased availability of regulated, non‑bank forex dealers should translate into better pricing, speedier service, and a more diverse product offering. For the company, the perpetual licence serves as a foundation for long‑term investments in fintech, digital on‑boarding, and international partnerships.