An Overview of FFMC License
FFMC License holders are the authorized entities who purchase foreign exchange from non-residents and residents of India and sell that foreign exchange for private and business travel purposes only to the people visiting abroad.
As per the provisions of Section 10 of the Foreign Exchange Management Act, 1999, authorized money changers are the only entities in India dealing in money-changing activities and providing the necessary foreign exchange services. Some firms and hotels have also been provided with the Registration to deal in the foreign currency notes, coins and traveller’s cheques subject to the directions issued by RBI from time to time to remove the difficulties faced by the foreign visitors and tourists.
Further, to work as an authorized money changer in India, one must apply for a valid FFMC License which the RBI issues and if any individual or any organization is found to be operating money charging activities without the valid License will be License to be penalized as per the laws. Every year the RBI publishes the guidelines for FFMC in the Form of a master circular called the MoI (Memorandum of Instruction) on money-changing activities. Every entity intending to enter or already indulge in money-changing activities in India must follow these guidelines and the provisions prescribed under the FEMA Act, 1999.
Different types of FFMC License
- Authorized Dealer Category -I Banks (AD Category–I Banks);
- Authorized Dealers Category-II (ADs Category–II) and;
- Full Fledged Money Changers (FFMCs).
Regulatory Framework for FFMC License in India
RBI is the governing authority and it has issued the guidelines mentioned below to regulate the operation and license process of FFMCs:
- Issuance of new FFMC License
- Renewal of FFMC License;
- Branch Licensing;
- Approval for the appointment of Agents or Franchisees;
- Know Your Customer (KYC) / Anti Money Laundering (AML);
- Combating Financing of Terrorism (CFT)
- Guidelines for Authorized Persons (AP)
Conditions to be satisfied to apply for FFMC License in India
- The entity that applies for a Full-Fledged Money Changer License should be registered under the Companies Act, 2013.
- The Company or entity should have a minimum Net Owned Fund (NoF) of Rs.25 lakhs to apply for a single branch and Rs.50 lakhs for multiple branches.
- The object clause of the Memorandum should reflect the activity of money changing to be pursued by the Company.
- There should not be any civil/criminal case pending against the Company with the Department of Enforcement or Department of Revenue Intelligence.
- After obtaining FFMC License, the Company should carry out its business activity within six months from the date of issuance of the Forex License and should intimate RBI.
Documents required for making the Application for FFMC License
- Copy of the Certificate of Incorporation.
- Memorandum and Articles of Association containing a provision for undertaking money-changing business or an appropriate amendment to this effect.
- Copy of the latest audited accounts with a Certificate from the Statutory Auditors certifying the Net Owned Funds as on the date of Application.
- Copies of the audited Balance Sheet and Profit & Loss Account of the Company for the last three years, wherever applicable.
- Confidential Report from the applicant's banker in a sealed cover.
- Details of sister / associated concerns operating in the financial sector like NBFC etc.
- A copy of the board resolution for undertaking money-changing business.
What all are the Activities FFMC can undertake?
- FFMCs can enter into Franchise Agreements at their option for the purpose of performing the Restricted Money Changing business, i.e. conversion of foreign currencies or travellers’ cheques into Indian Rupees.
- FFMC’s/Franchisees may freely purchase foreign currency notes, coins and traveller’s cheques from residents as well as non-residents.
- FFMCs may sell Indian Rupees to foreign tourists/visitors against International Credit Cards/International Debit Cards and take prompt steps to obtain reimbursement through normal banking channels.
- FFMCs may sell foreign exchange for the following purposes:
- Private visits.
- Business visits.
- Forex Pre-Paid cards.
Procedure for FFMC License from RBI
- A detailed Application is submitted to the respective Regional Office of RBI.
- 'Fit and proper criteria for the applicant/Director of applicant FFMC's is checked and if everything is as per the satisfaction of RBI, Full Fledged Money Changer License shall be issued within a period of 2-3 months.
- Clearance by Empowered Committee is essential & the decision of the RBI on the subject of issuing approval or not would be final & binding.
- Note: If any case by any law enforcing authorities is initiated/pending against any Company / its Directors, the Company will not be considered as 'fit and proper and its Application will not be considered as eligible for FFMC License.
Post Approval Requirements for FFMC License
- A copy Shops & Establishment Act Registration Certificate or any other documentary evidence such as Rent Receipt, Lease Agreement etc., must be submitted to the respsective Regional Office of RBI before the commencement of the business.
- New FFMCs must perform their activities as per the instructions given by the RBI from time to time.
- FFMCs should, at each of their business places, show a copy of the Money Changing License issued by the RBI.
- FFMCs must have a system of Concurrent Audits of all the transactions commenced by them.
- All FFMCs must submit their annual audited Balance Sheet to the respective Regional Office of the RBI.
Renewal of FFMC License in India
An Application for the renewal of a Full-Fledged Money-Changers License shall be made before one month from the expiry date of the License. No application for renewal of a Money Changer's License shall be made after the expiry of the License.
What are the Records and Registers to be maintained by FFMCs?
AMC shall maintain the following Registers in respect of their money-changing transactions:
- Daily Summary and Balance Book of Foreign currency notes/coins in Form FLM 1 and Travellers’ cheques in Form FLM 2.
- Register of purchase of foreign or overseas currencies from the public in Form FLM 3.
- Register of purchase of foreign currency notes or coins from the authorized dealers and money changers in Form FLM 4.
- Register of Sale of foreign currencies & foreign currency travellers’ cheques to the public in Form FLM 5.
- Register of Sale of foreign currencies to the authorized dealers / Full Fledged Money Changers / foreign banks in Form FLM 6.
- Register of Travellers’ cheques surrendered to the certified dealers / money changers / exported in Form FLM 7.
Revocation of FFMC License in India
RBI can revoke or cancel the FFMC License at any time if RBI is satisfied that:
- It’s in the public interest to do so or
- The FFMC has failed to comply with any condition or any of the provisions of the Foreign Exchange Management Act, 1999.
Who are Franchisees?
RBI authorizes one more intermediary to deal in foreign exchange, i.e., Agents and Franchisees.
Authorized Dealer Category- I Banks, Authorized Dealers Category - II and FFMCs can appoint their Agents and Franchisees to deal in money-changing activities. Following are the important points in this regard:
- The AD Category – I Banks,
- AD Category - II Banks and
- FFMCs have been permitted by the Reserve Bank of India to enter into Franchise Agreements at their option for the purpose of carrying on Restricted Money Changing business. Any person proposing to opt for Franchisee of any AMC may do so after entering into the Franchise Agreement.
Following are some important points in this regard:
- A Franchise can be any entity which has a place of business in India.
- An entity should have a minimum Net Owned Fund of Rs.10 lakh.
- Franchisees can undertake only restricted money-changing business.
- A Franchisee Agreement shall be executed between the parties.
- The Franchisees should display the names of their Franchisers, exchange rates and that they are authorized only to purchase foreign currency prominently in their offices.
- The foreign currency purchased by the Franchise should be surrendered only to its Franchiser within 7 working days from the date of purchase. You can also start your currency exchange business in India.
- The maintenance of a proper record of transactions by the Franchise.
Role of Authorized Dealers in Foreign Exchange
Authorized dealers play an important role in Forex transactions. RBI grants authorization in the Form of Licenses to deal in foreign exchanges to the banks which are well equipped to undertake foreign exchange transactions in India. RBI has granted authorization to certain financial institutions to undertake specific types of foreign exchange transactions incidental to their main business.
FFMC License FAQs
As per section 10 of the FEMA 1999, the entities that are allowed by the Apex bank or RBI to carry out money changing business.
Any entity other than banks can become a Full Fledged Money Changer.
Any entity or business that is enlisted under the provisions of the Companies Act 2013 is qualified to apply for FFMC permit in India.
Yes, any entity or company registered under the provisions of the Companies Act having a base NOA (Net Owned Asset) of Rs 10 lakhs and one the object clause of the Company is money changing business can get the Franchise permit from an existing FFMC.
Yes, it is necessary to get the FFMC license renewed each year by giving the application documents to the Reserve Bank of India.
No, a Franchise is only permitted to carry out limited money changing activities according to the master circular of RBI.
The term “Authorised Money Changer” denotes entities that are authorized by Reserve Bank of India or RBI under Section 10 of the FEMA 1999 to deal in Foreign exchange for the specified purposes.
The Application, along with the required documents, should be submitted to the respective Regional Office of Foreign Exchange Department of Reserve Bank under whose jurisdiction the Registered Office of the applicant falls.
The term “circumstances” include in the interest of public and if an AMC or Authorised Money Changer fails to comply with the provisions of the FEMA 1999.
FFMC should commence its operations within a period of six months from the date of issuance of the License.
For a single branch, the NOF (Net Owned Fund) of the company has to be at least Rs 25 lakh or above. However, for multiple branches, the NOF (Net Owned Fund) of the company has to be at least Rs 50 lakh or more.
A company registered with the Registrar of Companies having NOF of Rs 10 lakh or more is eligible to obtain a Franchise License from an “Operational FFMC”. Further, the money changing activity must be the “main object” of the company.
No, it is not possible to work as Money Changer without FFMC License.
The person or organization will be held liable or will be penalized if in case found to be operating money changing business without an FFMC license.
Yes, an entity other than a bank can apply for a Full Fledged Money Changers License.
An FFMC or Full Fledged Money Changer License is approved by the regional office of the RBI on the basis of the “Clearance by an Empowered Committee”. However, the decision passed by the RBI or Reserve Bank of India will be considered final and binding.
After obtaining approval from the Reserve Bank of India, the said entity is required to furnish a copy of registration under the Shops and Establishment Act to the Regional Office of the RBI prior to the commencement of operations.
The main objective of an FFMC License is to confirm customers that will get the best services despite the competitive environment.
Section 10 (1) of the Foreign Exchange Management Act 1999 deals with the filing of Application for FFMC License at the Regional Office of the RBI.
The three types of FFMC License are Authorised Dealer Category 1 (Banks), Authorised Dealer Category 2 (Authorised Dealers), and Full Fledged Money Changers (FFMC).
The purposes for which the AMC or FFMC has got the Authority to Sell Foreign Exchange are Business Visits, Private Visits, and Forex Prepaid Cards.
One should file an application for the Renewal of an FFMC (Full Fledged Money Changer) License at least 1 month prior to the expiry date of the license.
No, the request for the restoration of an FFMC (Full Fledged Money Changer) license shall be not be considered after its expiry.