Muthoot FinCorp Ltd, the flagship NBFC of the Muthoot Pappachan Group, has received a perpetual Authorised Dealer Category-II (AD-II) foreign exchange licence from the Reserve Bank of India (RBI). The licence allows the company to offer a broader suite of regulated foreign exchange services, including trade remittances and family maintenance remittances, to retail customers, MSMEs, corporates, and travellers. This development follows the RBI’s landmark revision to the Foreign Exchange Management Act (FEMA) framework in May 2026, which expanded the scope of activities permitted for eligible AD-II entities.
What Is Muthoot FinCorp?
Muthoot FinCorp Limited (MFL) is the flagship financial services company of the Muthoot Pappachan Group, a 139-year-old business conglomerate headquartered in Thiruvananthapuram, Kerala. The company was incorporated on June 10, 1997 under the name “Muthoot Debt Management Services Limited” and was renamed Muthoot FinCorp Limited in March 2002. It is registered with the RBI as a non-deposit taking Non-Banking Financial Company (NBFC), bearing registration number 16.00170 dated July 23, 2002, under Section 45-IA of the RBI Act, 1934.
Muthoot FinCorp primarily engages in gold-backed lending but has diversified into business loans, housing finance, small business loans, used-car loans, two-wheeler loans, microfinance, insurance distribution, and wealth management. As of March 31, 2026, the company reported assets under management (AUM) of ₹73,444.72 crore and operated a pan-India network of 5,610 branches. Its digital platform, Muthoot FinCorp ONE, had a user base of 4.26 million customers.
The company’s gold loan AUM grew at a compound annual growth rate (CAGR) of 59.04 per cent between March 2024 and March 2026, making it the fastest-growing player among its peers, according to a Crisil report cited in its draft IPO filing. On the financial front, Muthoot FinCorp reported a consolidated profit after tax (PAT) of ₹1,847.62 crore in FY26, up from ₹607.90 crore in the previous fiscal year. The company filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on August 13, 2026, to raise ₹3,000 crore through an IPO.
What Is an AD-II Licence?
Under the Foreign Exchange Management Act (FEMA), 1999, no person or entity in India can deal in foreign exchange without specific authorisation from the RBI. The RBI classifies authorised forex dealers into three categories:
- Authorised Dealer Category-I (AD-I): Banks that can undertake any current and capital account transaction permissible under FEMA.
- Authorised Dealer Category-II (AD-II): Non-bank entities, including certain NBFCs, eligible FFMCs, and Forex Correspondents, permitted to handle specified non-trade current account transactions and foreign trade transactions up to ₹25 lakh per transaction.
- Authorised Dealer Category-III (AD-III): Institutions such as the Export-Import Bank of India (EXIM Bank), NBFC-Factors, and Standalone Primary Dealers that undertake specific forex transactions incidental to their primary business activities.
In addition to these categories, the RBI historically licensed Full Fledged Money Changers (FFMCs) to purchase and sell foreign currency notes and traveller’s cheques. However, the Foreign Exchange Management (Authorised Persons) Regulations, 2026 (notified as FEMA 401/2026-RB on April 30, 2026) has stopped accepting fresh FFMC licence applications. Existing FFMCs are being phased out as their licences expire, with the RBI signalling that the future of regulated forex distribution belongs to entities operating under the AD framework.
For NBFCs to qualify for an AD-II licence, the RBI requires them to be systemically important, non-deposit taking companies with a minimum investment grade rating. The licence allows NBFCs to deal in foreign exchange for specified purposes, including currency exchange, issuance of multi-currency forex cards, and facilitation of remittances under the Liberalised Remittance Scheme (LRS).
What Makes This Licence “Perpetual”?
Traditionally, AD-II licences were granted for a fixed period and required periodic renewal. The Foreign Exchange Management (Authorised Persons) Regulations, 2026 introduced a significant shift by allowing the RBI to grant authorisations on a perpetual basis. Under this revised framework, authorisations are valid until revoked or surrendered, and are co-terminus with the banking licence or registration certificate in the case of banks and NBFCs, respectively.
The perpetual nature of Muthoot FinCorp’s licence means the company no longer faces the operational uncertainty of periodic renewal cycles. This provides long-term business continuity, provided the company continues to comply with RBI regulations. The shift to perpetual authorisation reflects the RBI’s broader objective of rationalising the forex licensing framework and reducing regulatory burden on compliant entities.
The 2026 regulations also introduced minimum annual forex turnover requirements. Authorised persons other than banks or NBFCs must achieve a minimum annual forex turnover of ₹50 crore for AD-II entities and ₹10 crore for FFMCs within two years from the date of the regulations coming into force or the commencement of forex business, whichever is later. Since Muthoot FinCorp is an NBFC, this requirement applies differently, as its authorisation is co-terminus with its NBFC registration certificate.
Expanded Scope Under FEMA 2026
The timing of Muthoot FinCorp’s licence is significant. In May 2026, the RBI notified the Foreign Exchange Management (Authorised Persons) Regulations, 2026, which fundamentally altered what AD-II entities can do. The key changes include:
Trade Remittances Up to ₹25 Lakh
For the first time, eligible AD-II entities are now permitted to facilitate foreign trade transactions up to ₹25 lakh per transaction. Previously, trade remittances were the exclusive domain of banks and AD-I institutions. This change opens a direct, bank-free payments channel for MSMEs and small exporters and importers who previously had to navigate full banking relationships for commercial forex needs.
Family Maintenance Remittances
AD-II entities can now also handle family maintenance remittances, which involve sending money abroad to support family members. This was also a service traditionally reserved for banks and AD-I institutions. India’s remittance corridor exceeds $125 billion annually, making this a substantial market for non-bank forex operators.
All Permissible Non-Trade Current Account Transactions
AD-II entities continue to be authorised for all permissible non-trade current account transactions, which covers personal remittances, education fees, maintenance payments, and other day-to-day foreign exchange needs.
Forex Correspondent Scheme
The 2026 regulations also introduced a Forex Correspondent (FxC) Scheme, which allows authorised persons to appoint agents to distribute forex services. An FxC operates as an agent of the principal AD and does not require separate RBI authorisation. This enables AD-II entities like Muthoot FinCorp to expand their distribution reach through a network of correspondents.
Services Muthoot FinCorp Can Now Offer
With the perpetual AD-II licence, Muthoot FinCorp is positioned to offer a comprehensive range of regulated forex services:
- Foreign Currency Exchange: Buying and selling foreign currency notes for personal and business travel.
- Multi-Currency Forex Cards: Issuing prepaid forex cards loaded with multiple currencies, useful for students, travellers, and business professionals.
- Liberalised Remittance Scheme (LRS) Remittances: Facilitating outward remittances under the LRS, which allows resident Indians to remit up to USD 250,000 per financial year for permitted purposes such as education, travel, healthcare, investments, and gifts.
- Trade Remittances: Processing import and export payments of up to ₹25 lakh per transaction for MSMEs, SMEs, and corporates.
- Family Maintenance Remittances: Sending money abroad to support family members residing in foreign countries.
The company plans to leverage its existing network of 5,610 branches to expand its authorised forex operations and establish additional forex branches across the country, subject to RBI guidelines. This is expected to improve access to regulated forex services for retail customers, students pursuing overseas education, business travellers, NRIs, and partner institutions.
Significance of the Development
The perpetual AD-II licence represents a strategic milestone for Muthoot FinCorp on multiple fronts. First, it diversifies the company’s revenue streams beyond its core gold lending business. The company has been actively working to expand its non-gold portfolio, with CEO Shaji Varghese previously stating the target of doubling the non-gold revenue share to 30 per cent by FY28. The forex services business, backed by the expanded FEMA framework, contributes directly to this diversification goal.
Second, the licence strengthens Muthoot FinCorp’s competitive position in the forex services market, where it will now compete with banks and established money changers on a more level playing field. The company’s extensive branch network in Tier-II and Tier-III cities, where banking penetration for forex services remains limited, gives it a natural distribution advantage.
From a regulatory perspective, the development underscores the RBI’s intent to deepen participation in India’s foreign exchange market. By expanding the scope of AD-II entities and phasing out the FFMC regime, the RBI is pushing for a more structured, compliance-driven forex intermediation ecosystem. Non-bank entities like Muthoot FinCorp, with their strong retail footprint, are well placed to fill gaps in forex service accessibility, particularly for smaller trade transactions and personal remittances that do not require full banking relationships.
The licence also comes at a time when Muthoot FinCorp is preparing for its IPO. The expanded forex capabilities, combined with the company’s strong financial performance in FY26, add to its growth narrative as it seeks to raise ₹3,000 crore from public market investors.
Key Takeaways
- Muthoot FinCorp Ltd received a perpetual Authorised Dealer Category-II (AD-II) forex licence from the RBI, enabling it to offer regulated foreign exchange services.
- The Foreign Exchange Management (Authorised Persons) Regulations, 2026 (FEMA 401/2026-RB), notified on April 30, 2026, expanded AD-II scope to include trade remittances up to ₹25 lakh and family maintenance remittances.
- Under the revised framework, FFMC licences will no longer be issued for fresh applications, signalling a shift toward the AD framework for non-bank forex operators.
- The Liberalised Remittance Scheme (LRS) allows resident Indians to remit up to USD 250,000 per financial year for permitted current and capital account transactions.
- Muthoot FinCorp reported a consolidated PAT of ₹1,847.62 crore in FY26 and filed its DRHP with SEBI on August 13, 2026, to raise ₹3,000 crore through an IPO.
- The company operates 5,610 branches across India with an AUM of ₹73,444.72 crore as of March 31, 2026, and its gold loan AUM grew at a CAGR of 59.04 per cent between FY24 and FY26.
