Requirements to Avail of New FFMC License: A Complete Guide

In India, the authority to hold the essential financial assets, like Foreign Exchange Reserves or Forex, in the form of foreign currencies is with the Apex Bank. These foreign assets are responsible for affecting the International Trade, Monetary Policy, and Exchange Rate of a Country. Also, it shall be significant to note that to carry out the activities pertaining to Foreign Exchange or Currency, one requires to avail of new FFMC License or AMC (Authorised Money Changer License) from RBI.

In this blog, we will discuss the concept and procedure to avail of new FFMC License in India.

Concept of FFMC License

The term FFMC or Full Fledged Money Changer License denotes a permit that is needed for starting a Money Changer Business in India. However, it shall be considerate to note that to avail of new FFMC License, the applicant needs to abide by the directions and guidelines provided under the Master Circular issued by RBI.

Moreover, the provisions of the FEMA 1999, together with the rules and regulations concerning AMC or FFMC License, operate as the regulatory framework for forex in India.

Concept of Full Fledged Money Changer

As per the provisions of section 2 of the FEMA 1999, the term “Full Fledged Money Changer” signifies an individual or a business entity that trades in the operations and activities pertaining the activities and operations related to foreign exchange. Also, the same includes Off-shore Banking Units as well.

Further, an AMC is qualified to buy forex from the tourists or travellers visiting India and can, after that, sell the same against certain approved activities, like Currency Notes, Currency and Coins Conversion, and Traveler’s Cheque.

Different Types of Money Changers

The different types of Money Changers in India are as follows:

1. Authorised Dealer Category- I Banks;
2. Authorised Dealer Category- II;
3. Full Fledged Money Changer;

The ambit of AMC License

Any person or a business entity that wants to commence the operations of a money changer requires to avail of new FFMC License under the provisions of section 10 of the Foreign Exchange Management Act 1999.

Moreover, it shall be pertinent to mention that any person or entity carrying out the operations of money exchanger without acquiring a valid AMC License, then, in that case, the same will be penalized under FEMA 1999.

Conditions to Avail of New FFMC License

The conditions to avail of New FFMC License in India are as follows:

1. The applicant business entity requires to obtain registration under the provisions of the Companies Act 2013^[1].
2. For managing a single branch, the business entity requires to have at least Rs 25 lakhs as the Net Owned Funds (NOF).
3. For managing multiple branches, the business entity requires to have at least Rs 50 crores as the Net Owned Funds (NOF).
4. The object clause of the company’s MOA must state about the intention to work as a money exchanger.
5. It shall be significant to consider that there must not be any pending civil or criminal case against the company’s directors with the Department of Revenue Intelligence.
6. After availing of the new FFMC License, the business entity should commence its business operations and affairs within a period of six months, commencing from the date of granting the license.

Activities Permitted for AMC License Holders

The activities permitted for AMC License Holders in India are as follows:

1. A Full Fledged Money Changer License Holder can carry out activities pertaining to Conversion of Foreign Currency, Currency Notes, and Travelers’ Cheque.
2. It is necessary for a Full Fledged Money Changer License Holder to obtain a Franchise Agreement to carry out the restricted money changing authorities.
3.  An AMC License Holder is qualified to freely operate in Conversion of Foreign Currency, Currency Notes, and Travelers’ Cheque with NRI (Non Residents of India) and Indian Residents.
4. An AMC License Holder can easily deal in Indian Currency against the foreigners International Debit or Credit Card.
5. A registered AMC License Holder can sell foreign currencies against different business transactions, forex prepaid cards, and personal visits.

Situations under Which RBI can Revoke FFMC License

The situations under which RBI can revoke FFMC License are as follows:

1. In the Interest of the General Public.
2. If the FFMC License Holder fails to comply with the provisions of the FEMA 1999.

Documents Required to Avail of New FFMC License

The documents required to Avail of New FFMC License in India are as follows:

1. A copy of the Certificate of Incorporation (COI);
2. A copy of the Certificate of Commencement (COC);
3. A copy of the company’s MOA (Memorandum of Association);
4. A copy of the company’s AOA (Articles of Association);
5. Latest Audited Financial Statements of the company;
6. A copy of the certificate received from the Statutory Auditors pertaining to the company’s NOF;
7. Audited Balance Sheet, together with the Profit &Loss Account of the company for the last three financial years;
8. Banks’s Confidential Report in a sealed cover;
9. Details pertaining to the nature of the activities undertaken;
10. Details pertaining to the associated companies operating and working in the Financial sector;
11. A copy of the Board Resolution (BR) passed at the company’s general meeting for carrying out money changing operations;
12. A copy of the Declaration pertaining to the Policy Framework on KYC (Know Your Customer)/ CFT (Combating the Financing of Terrorism Customer Data)/ and AML (Anti Money Laundering);
13. A copy of the Declaration given by DRI (Department of Revenue Intelligence) mentioning that it has never carried out any investigation pertaining to the Directors of the Company;

Post-Registration Requirements of New FFMC License

The post-registration requirements of New FFMC License are as follows:

1. The directors of the company need to furnish a duplicate copy or Xeroxof the documents as follows to the Apex Bank prior to commencing its business operations :
2. Shop and Establishment License;
3. Possession Certificate; and
4. Lease Agreement;
5. The company requires to abide by all the guidelines, directions, and circulars, as issued by the Reserve Bank of India;
6. The company needs to mandatorily display the copy of the AMC License granted at every place of business;
7. The registered company needs to furnish its Annual Audited Balance Sheet at the regional office of the Reserve Bank of India;
8. For carrying out the activities, affairs, and operations of foreign exchange or forex smoothly and hassle-free, the company needs to implement the mechanism of Concurrent Audit;

Conclusion

In a nutshell, FFMC license assists in complying with the legality and foundation of money changer business. Further, it helps in availing of the Certificate of Encashment during the sale and purchase of Foreign Currency Notes, Coins, and Travelers’ Cheques.

Also, it shall be relevant to consider that an individual or a business entity must avail of New FFMC License to grow its footprint in the realm of foreign exchange business. Therefore, any person or entity carrying out the operations of money exchanger without acquiring a valid AMC License, then, in that case, the same will be penalized under FEMA 1999.

At Swarit Advisors, our FEMA Experts will not only guide you with the requirements but will provide end to end assistance as well in the process to avail of new FFMC License.

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