A Full-Fledged Money Changer (FFMC) is an approved entity that can buy foreign exchange from non-residents or residents of India and sell it to those going overseas for private and business travel purposes alone. As outlined in Section 10 of the Foreign Exchange Management Act (FEMA) 1999, only an Authorised Money Changer is permitted to engage in activities related to money changing and foreign exchange.
Additionally, some firms and hotels have been granted FFMC Licences by the RBI. This allows them to deal in foreign currency, traveller’s cheques and coins, aiming to facilitate foreign tourists and visitors, streamlining their currency-related transactions within India. This initiative helps in addressing the challenges faced by foreign tourists during their visit to the country.
Functions of Authorised Money Changers in the Forex Transactions
Authorised Money Changers have an important role in facilitating transactions related to foreign exchange. The Reserve Bank of India grants licences to banks, allowing them to engage in foreign exchange activities. These licences are specifically awarded to banks that possess the necessary capabilities to conduct foreign exchange transactions within India.
It's important to highlight that, apart from banks, specific financial institutions also receive authorisation from the apex bank to conduct designated types of foreign exchange transactions that align with their primary business objectives. This authorisation allows them to handle prescribed foreign exchange activities, aiding in the overall functioning of the foreign exchange market and the broader financial system.
Benefits of FFMC Licence
A Full Fledged Money Changer Licence offers various advantages, making it a valuable asset for financial service providers. The key benefits associated with holding an FFMC Licence are:
1. Foreign Exchange Sale Facilities and Services
A Full Fledged Money Changer Licence Holder possesses the capability to provide comprehensive sale facilities and services for foreign exchange. This includes facilitating the exchange of foreign currency for Indian rupees as well as vice versa, for the needs of both our own residents and non-residents.
2. Encashment Certificates for Travellers Cheques and Foreign Currency
Full Fledged Money Changer Licence holders have the authority to issue encashment certificates for Travellers Cheques and Foreign Currency Notes, serving both non-resident and resident individuals. This enables them to easily convert these instruments into Indian rupees as needed.
3. Foreign Exchange Services for Tourists
One of the significant benefits of holding a Full Fledged Money Changer Licence is the ability to conduct foreign exchange activities for foreign tourists visiting India. This allows licence holders to offer convenient and competitive exchange rates to tourists, enhancing their travel experience.
4. Handling Various Currency Transactions
Full Fledged Money Changer Licence Holders are equipped to handle a wide range of currency transactions, including coins, travellers' cheques and foreign currency. They can conduct these transactions at prevailing exchange rates, ensuring transparency and efficiency in dealings.
Different Kinds of FFMC Licences
Full Fledged Money Changer (FFMC) Licences are categorised into various types to accommodate different financial institutions and entities. The different kinds of Full Fledged Money Changer Licences include:
- Authorised Dealer Category II
- Authorised Dealer Category I - Banks
- FFMCs - Full Fledged Money Changers
Eligibility for Applying for FFMC Licence in India
Obtaining a Full Fledged Money Changer Licence in India is subject to specific conditions and requirements that ensure the eligibility and credibility of the business entity. The conditions that must be fulfilled for applying for a Money Changer Licence in India are:
- Incorporation under Companies Act 2013:
The business entity seeking a Full Fledged Money Changer Licence must have been duly incorporated in accordance with the provisions of the Companies Act 2013. This legal requirement establishes the legitimacy of the entity applying for the licence.
- Minimum Net Owned Funds (NOF):
For a single branch operation, the applying company must have a minimum of Rs 25,00,000 as Net Owned Funds (NOF). This financial requirement demonstrates the financial stability and capacity of the entity.
In the case of multiple branches, the applying company must maintain a minimum of Rs 50,00,000 as Net Owned Funds (NOF).A higher NOF is mandated for entities with a broader operational scope.
- Reflecting Money Changing Activities in MOA:
The Memorandum of Association of the applying company must include an object clause that explicitly reflects its intention to engage in money changing activities. This ensures that the company's primary purpose aligns with the services it intends to provide.
- No Pending Cases with Government Departments:
The applying company must not have any pending cases, legal disputes or issues with the Department of Revenue Intelligence and the Department of Enforcement. This requirement signifies compliance with legal and regulatory obligations.
- Commencement of Business Operations:
Upon obtaining the Money Changer Licence from the Reserve Bank of India (RBI), it is compulsory for the company to initiate its money-changing business operations within six months. This condition ensures that the licence is put to productive use promptly.
Regulatory Framework for Authorised FFMC Licence
The issuance and regulation of Full Fledged Money Changer Licences in India are governed by the Reserve Bank of India, which serves as the apex regulatory authority for foreign exchange and financial services. The RBI has the utmost authority to issue and oversee Full Fledged Money Changer Licences and it prescribes directions and guidelines for various aspects related to Full Fledged Money Changer Licences. The key areas covered by the regulatory framework for Full Fledged Money Changer Licences include:
- Issuance of New Full Fledged Money Changer Licences:
The RBI has the authority to grant new Full Fledged Money Changer Licences to eligible entities.
- Renewal of Full Fledged Money Changer Licences:
Entities holding Full Fledged Money Changer Licences are required to renew their licences periodically, as per the RBI's guidelines.
Entities with Full Fledged Money Changer Licences may seek approval from the RBI to open new branches or outlets.
- KYC (Know Your Customer) Matters:
The RBI sets stringent guidelines for KYC procedures, which entities with Full Fledged Money Changer Licences must follow.
- AML (Anti Money Laundering) Matters:
Anti-Money Laundering measures and guidelines are established by the RBI to prevent the illegal conversion of illicit funds through money-changing activities.
- Approval for the Appointment of Franchisees or Agents:
Entities with Full Fledged Money Changer Licences may seek RBI approval for appointing franchisees or agents to extend their services.
- CFT (Combating of Financing Terrorism) Norms:
Combating the Financing of Terrorism norms are implemented to prevent the use of money-changing services for terrorist financing.
- AP (Authorised Persons) Guidelines:
The RBI may issue guidelines and directives pertaining to Authorised Persons (AP) who are authorised to undertake specific foreign exchange transactions on behalf of entities with Full Fledged Money Changer Licences.
RBI Permitted FFMC Activities
The Reserve Bank of India permits Full Fledged Money Changers (FFMCs) to engage in specific activities related to foreign exchange. These activities are essential for facilitating currency exchange and catering to the needs of residents and non-residents. The RBI permitted FFMC activities are the following:
1. Franchise Agreements for Restricted Money Changing Activities:
AMCs (Authorised Money Changers) and FFMCs are eligible to enter into franchise agreements to undertake restricted money changing activities. These activities include the conversion of foreign currency notes and coins, as well as travellers’ cheques into Indian currency. This enables FFMCs to expand their reach and offer convenient currency exchange services through franchise partners.
2. Purchase of Traveller’s Cheques, Foreign Currency Notes and Coins:
Full Fledged Money Changer Licence holders have the authority to purchase travellers’ cheques, foreign currency notes and coins from both residents and non-residents. This allows them to accumulate foreign currency for exchange purposes, ensuring a steady supply of currency to meet customer demands.
3. Sale of Indian Currency Against International Debit and Credit Cards:
Full Fledged Money Changer Licence holders are permitted to sell Indian currency to foreign travellers, visitors or tourists against international debit and credit cards. This convenience provides travellers with the flexibility to obtain Indian currency using their payment cards. Additionally, FFMCs can obtain reimbursement from the normal banking channel for these transactions, ensuring smooth and efficient operations.
4. Sale of Foreign Currency for Various Purposes:
FFMCs are authorised to sell foreign currency for the following purposes:
- Private Visits: FFMCs can provide foreign exchange services to individuals traveling for private visits, such as vacations, family visits and personal trips.
- Business Visits: FFMCs can facilitate foreign exchange transactions for individuals traveling on business visits, ensuring they have access to the required foreign currency for their professional needs.
- Forex Prepaid Cards: FFMCs are allowed to issue and sell Forex Prepaid Cards, providing a secure and convenient means for travellers to carry foreign currency.
Documents Required for Applying for FFMC Licence
Applying for a Full Fledged Money Changer Licence in India involves a comprehensive submission of documents to demonstrate eligibility and compliance with regulatory requirements. The documents required for applying for a Full Fledged Money Changer Licence are as follows:
- Certificate of Incorporation: A copy of the Certificate of Incorporation, which shows the legal registration of the business entity under the Companies Act.
- Memorandum of Association: A copy of the MoA that includes provisions about the activities of the money-changing business.
- Articles of Association: A copy of the Articles of Association containing provisions related to the activities of the money-changing business. This further clarifies the entity's intentions and compliance with regulatory standards.
- Latest Audited Accounts: Submission of the latest audited financial accounts, along with certificates from the Statutory Auditors confirming the Net Owned Funds (NOF) as of the date of the licence application. The NOF requirement is important for financial stability.
- Audited Balance Sheet: A copy of the very recent audited balance sheet, which tells about the entity's financial condition.
- Profit and Loss Account: Copies of the Profit and Loss Account statements for the last three years, to show the financial performance of the entity.
- Confidential Bank Report: A sealed confidential report from the applicant's bank, which may include information on the entity's financial standing, banking history and creditworthiness.
- Details of Associated/Sister Concerns: Information regarding any associated or sister concerns operating in the financial market, such as Non-Banking Financial Companies. This helps assess the entity's overall financial standing and relationships within the industry.
- Board Resolution: A duly certified copy of the Board Resolution passed by the company's board of directors, authorising and confirming the intent to carry out money-changing business operations.
Procedure for Obtaining Full Fledged Money Changer Licence from RBI
The procedure for obtaining a FFMC Licence from the Reserve Bank of India is as given below:
Step 1: Submit an Application to the Reserve Bank of India
Prepare and submit an application, along with the required documents, to the regional office of the RBI. Use the format prescribed by the RBI, as outlined in Annexure-II. This marks the first step to obtain Full Fledged Money Changer Licence in India.
Step 2: Fulfil the Fit and Proper Criteria
Ensure that the applicant company and its board of directors meet the Fit and Proper Criteria set by the RBI. Also conduct Due Diligence to confirm that the prescribed criteria, including expertise, integrity, qualifications and previous track record of proposed directors, are duly met.
Step 3: Key Requirements of the Fit and Proper Criteria
Verify that the proposed individual directors meet specific requirements:
- Age not exceeding 70 years.
- Not a Member of Legislative Assembly.
- No history of fraudulent practices.
- Not a Member of Parliament.
- No previous criminal record.
- No sanctions or permissions from regulatory bodies.
Step 4: Obtain Clearance from Empowered Committee Clearance
Directors of the applicant company must obtain clearance from the Empowered Committee (EC). This clearance is subject to proper verification and therefore proper care must be taken when complying with this step.
Step 5: Review by the RBI
The RBI will review the application and documents submitted by the company.
If the RBI is satisfied that the application and documents meet the fit and proper criteria, it will issue an Authorised Money Changer or Full Fledged Money Changer Licence to the applicant. This process typically takes 2 to 3 months.
Step 6: Start your Business Operations
After obtaining the Full Fledged Money Changer Licence, the business entity must commence its commercial operations within 6 months from the date of licence issuance. Submit a duplicate copy of the Possession Certificate, Shop and Establishment Licence and Lease Agreement to the RBI before initiating business operations.
Post-Approval Requirements of FFMC Licence
After obtaining a Full Fledged Money Changer Licence, the licence holder is obligated to adhere to various post-approval requirements to maintain compliance and ensure the smooth operation of foreign exchange activities. These post-approval registration requirements for a Full Fledged Money Changer Licence include:
1. Submission of Documents:
The directors of the applicant company must submit a duplicate copy of the Possession Certificate, Shop and Establishment Licence and Lease Agreement to the Reserve Bank of India before commencing business operations. This documentation verifies the company's readiness to operate within the regulatory framework.
2. Compliance with RBI Directions and Guidelines:
The licence holder company is obliged to comply with all the directions, guidelines and circulars issued by the RBI. Staying updated with RBI's regulatory updates is important to maintain regulatory compliance.
3. Display of Licence:
The company holding the Full Fledged Money Changer Licence is required to prominently display a copy of the acquired Money Changer Licence at every place of its registered office. This ensures transparency and informs customers of the company's authorisation for foreign exchange activities.
4. Implementation of Concurrent Audit Mechanism:
To facilitate smooth and hassle-free forex exchange operations, the applicant company must establish and maintain a robust mechanism for Concurrent Audit. This audit mechanism helps monitor and ensure the accuracy and integrity of financial transactions.
5. Submission of Financial Statements:
The registered licence holder company is obligated to furnish its Annual Audited Balance Sheet and the Profit and Loss Account for the last three years at the RBI's regional office. This financial reporting provides the RBI with insights into the company's financial performance and adherence to regulatory standards.
Concept of Franchisees in Money Changing Activities
The concept of franchisees in the context of money-changing activities refers to authorised intermediaries appointed by entities such as Authorised Dealer Category-I Banks, Authorised Dealers Category-II and FFMCs to engage in foreign exchange transactions. Given below are the key points to remember regarding franchisees in this context:
- Eligible Business Entities: Franchisees, also referred to as agents, can be any business entity operating within India.
- Minimum Net Owned Funds: A business entity must have minimum Net Owned Funds of Rs 10 lakh compulsorily. This financial requirement ensures that franchisees have the necessary financial stability to engage in money-changing activities.
- Restricted Money Changing Business: Franchisees are permitted to undertake only restricted money-changing business activities. This typically includes activities such as the conversion of foreign currency notes and coins, travellers’ cheques into Indian currency, etc.
- Franchise Agreement: A formal Franchise Agreement is executed between the franchisee and the franchiser.
- Display of Information: Franchisees are required to prominently display certain information in their offices. This information includes the names of their franchisers, prevailing exchange rates and a clear statement indicating that they are authorised to purchase foreign currency.
- Foreign Currency Surrender: Any foreign currency purchased by a franchisee must be surrendered only to its franchiser within a specified period, usually seven working days from the date of purchase.
- Record Keeping: Every franchisee is obligated to maintain accurate and detailed records of their foreign exchange transactions. Proper record-keeping is essential for compliance with regulatory standards and audits.
Revocation of Authorised Money Changer Licence in India
The Reserve Bank of India holds the ultimate authority to revoke, suspend or cancel an issued Full Fledged Money Changer Licence in India. Such actions are taken in specific situations as outlined below:
- In the Interest of the General Public: The RBI may revoke or suspend a Full Fledged Money Changer Licence if it thinks that it would best be in the interest and benefit of the general public.
- Non-Compliance with Statutory Provisions: An FFMC Licence can also be revoked on failing to comply with the statutory provisions of the FEMA Act 1999 and the circulars and directions of the RBI.
Process for Renewal of FFMC Licence in India
To renew an expired Full Fledged Money Changer Licence in India, the directors of the Licence Holder Company must follow a specific process:
- Timely Submission of Renewal Application: The directors of the Licence Holder Company should submit an application for renewal at least one month beforethe expiry date of the existing licence.
- Rejection for Late Applications: If the renewal application is not submitted within the stipulated time frame, the RBI may reject it when filed. Therefore, it is important to adhere to the renewal timeline to avoid rejection.
Timely renewal of the FFMC Licence is essential to ensure uninterrupted foreign exchange operations and maintain compliance with regulatory requirements. Failure to renew the licence on time can result in the cessation of money-changing activities.
Records and Registers to be Maintained by FFMC Licence Holder
An Authorised Money Changer is required to maintain various registers and records to ensure proper documentation and compliance with regulatory requirements related to their money-changing transactions. These records and registers include:
Daily Summary and Balance Book for Foreign Currency Notes and Coins
Daily Summary and Balance Book for Travellers' Cheques
Purchase Register of Foreign Currencies from the General Public
Purchase Register of Foreign Currency Notes or Coins from Authorised Money Changers and Authorised Dealers
Sales Register of Foreign Currency Notes/Coins and Foreign Currency Travellers' Cheques to the Public
Sales Register of Foreign Currency Notes or Coins to Authorised Dealers, Full Fledged Money Changers and Overseas Banks
Register of Surrendered Travellers' Cheques to Authorised Dealers, Authorised Money Changers and Exporters
Why Choose StartupFino for FFMC Licence in India?
Each type of FFMC Licence has its specific purpose and regulatory framework, allowing various financial institutions and entities to contribute to India's foreign exchange operations and financial services sector.
StartupFino is a company that specialises in offering complete services for FFMC Licence. We can help you with everything from providing advice in the initial phase to ensuring that you meet all the necessary requirements and compliances for your Full Fledged Money Changer Licence and registration.