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

1. Authorized Dealer Category -I Banks (AD Category–I Banks);
2. Authorized Dealers Category-II (ADs Category–II) and;
3. 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:

1. Private visits.
2. Business visits.
3. 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