How to Start a Full Fledged Money Changer License

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An Overview of FFMC License

Holders of an FFMC Licence are permitted to buy foreign currency from Indian residents and non-residents and to sell that currency to foreign visitors exclusively for personal and business travel.

Authorised money changers are the only organisations in India engaged in money-changing activities and provide the requisite foreign exchange services, according to the terms of Section 10 of the Foreign Exchange Management Act, 1999. To ease the difficulties faced by international visitors and tourists, several businesses and hotels have also been granted Registration to Deal in international Currency Notes, Coins, and Traveler's Cheques pursuant to the guidelines issued by RBI from time to time.

Additionally, to operate as an authorised money changer in India, one must seek a current FFMC Licence, which is issued by the RBI. Anyone or any organisation discovered to be conducting money-changing services without a current Licence may be subject to legal repercussions. Every year, the RBI issues a master circular known as the MoI (Memorandum of Instruction) on money-changing operations that contains the rules for FFMC. Every entity seeking to engage in money-changing activities in India or one that is currently doing so must abide by these rules and the regulations established by the FEMA Act of 1999.

Different types of FFMC License

  1. Authorized Dealer Category -I Banks (AD Category–I Banks);
  2. Authorized Dealers Category-II Banks (ADs Category–II) and;
  3. Full Fledged Money Changers (FFMCs).

The reasons for the three types of AMCs to exist are the following:

  • Foreign exchange facilities are more accessible to visitors from other countries.
  • To enable residents can access more foreign exchange services.
  • Ensuring that the clients receive the best services possible.
  • To meet the demands of the market's growing competition.

The applicant needs to obtain an FFMC Licence from the Reserve Bank of India to practise as an FFMC in India. Any business that dared to conduct Forex trading without the required licence will face consequences.

Regulatory Framework for FFMC License in India

The RBI is the governing body, and it has given the directives listed below to control how FFMCs are operated and licenced:

  • New FFMC licences Issuance
  • Renewal of existing FFMC licences
  • Branch licences are issued
  • The employment of agents or franchisees is approved.
  • Guidelines for Authorised Persons (AP)
  • Know Your Customer (KYC), Anti-Money Laundering (AML)
  • Combating Financing of Terrorism (CFT)

Conditions to be satisfied to apply for FFMC License in India

  • The 2013 Companies Act requires that the organisation making an application for a Full-Fledged Money Changer Licence be registered.
  • To apply for a single branch, the company or entity must have a minimum Net Owned Fund (NOF) of Rs. 25 lakhs, and to apply for multiple branches, it must have a NOF of Rs. 50 lakhs.
  • The activity of money changing that the Company will pursue should be reflected in the object clause of the Memorandum.
  • The Department of Revenue Intelligence or the Department of Enforcement should not have any open civil or criminal cases involving the Company.
  • Within six months of the date the Forex Licence was issued, the Company must begin operating under its FFMC Licence and must inform RBI of its progress.

Documents required for making the Application for FFMC License

  • A copy of the incorporation certificate.
  • A clause in the memorandum and articles of association authorising the operation of a money-changing business, or a suitable amendment to that effect.
  • A copy of the most recent audited financial statements along with a certification from the statutory auditors attesting to the amount of net owned funds on the application date.
  • Copies of the company's most recent three years' worth of audited profit and loss accounts and balance sheets.
  • A sealed copy of a confidential report from the applicant's banker.
  • Information on related or sibling businesses that are active in the financial sector, such as NBFCs.
  • A copy of the board's decision to conduct money-changing business.

What are the Activities FFMC can undertake?

To do the Restricted Money Changing activity, i.e., converting foreign currencies or travellers' checks into Indian Rupees, FFMCs may choose to enter into Franchise Agreements.

FFMCs/Franchisees are free to buy foreign cash from both residents and non-residents in the form of notes, coins, and traveller's checks.

Foreign tourists and visitors may purchase Indian Rupees from FFMCs using their international credit cards or debit cards, and the FFMCs will quickly take the necessary measures to get paid back through standard 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 should be relevant Regional Office of RBI receives a thorough application.
  • Full Fledged Money Changer Licence shall be awarded within 2-3 months if all requirements for the applicant/Director of the applicant FFMCs are met to the satisfaction of RBI. 
  • Empowered Committee approval is required, and the RBI's decision about whether to grant approval or not is final and binding.
  • The company will not be deemed "fit and proper" and its application will not be deemed eligible for an FFMC licence in any case by any law enforcement authorities has been initiated against it or its directors.

Post Approval Requirements for FFMC License

  • Before starting a business, a copy of the Shops & Establishment Act Registration Certificate or any other documentary proof, such as a rent receipt or a lease agreement, must be delivered to the relevant RBI Regional Office.
  • The activities of new FFMCs shall be carried out by the guidelines from time to time issued by the RBI.
  • FFMCs must display a copy of the money-changing licence they received from the RBI at each location where they conduct business.
  • FFMCs are required to have a system in place for concurrent audits of every transaction they start.
  • All FFMCs are required to send the relevant RBI Regional Office their annual audited balance sheet.

What are the Records and Registers to be maintained by FFMCs?

For its money-changing transactions, AMC must keep the following Registers:

  • Daily Summary and Balance Book of Travellers' Cheques in Form FLM 2 and Foreign Currency Notes/Coins in Form FLM 1. 
  • Fill out Form FLM 3 to record public purchases of foreign or overseas currencies. 
  • Fill out Form FLM 4 to record purchases of foreign currency notes or coins from licenced dealers and money changers.
  • Register of Public Sales of Foreign Currency and Foreign Currency Travellers' Checks in Form FLM 5. 
  • Register of Foreign Currency Sales to Authorised Dealers, Full-Service Money Changers, and Foreign Banks in Form FLM 6.
  • Register of traveller's checks submitted to authorised dealers, money changers, or exporters in Form FLM 7.

FFMC License Cancellation

An FFMC licence issued to a registered company may be revoked at any time by the Reserve Bank of India if the Bank determines that:

  • The revocation of the FFMC licence is in the public interest;
  • The holder of the FFMC licence has violated any rule, regulation, notification, or direction; or The FFMC licence has violated any provision of the Act.

On the grounds of a violation of any statutory or regulatory regulation, RBI may terminate the authorization of any of the offices of an FFMC. The Reserve Bank has the authority to change or revoke any FFMC licence terms.

FFMC License Renewal.

  • An FFMC licence holder must submit a renewal application two months before the licence expires or within such other time frame as the Reserve Bank of India may specify.
  • Let's say the FFMC licence renewal application is approved by the RBI. The licence may thereafter remain in effect until its expiration date or if the application is turned down by the RBI.
  • After the licence expires, the RBI will not consider any applications for FFMC licence renewal.

Who are Franchisees?

The RBI now permits Agents and Franchisees, another type of intermediary, to do foreign currency business.Banks that fall under Authorised Dealer Category I, Authorised Dealer Category II, and FFMCs are permitted to designate their Agents and Franchisees to do money-changing operations. The following are crucial details in this regard:

The Reserve Bank of India has given the AD Category I Banks, AD Category II Banks, and FFMCs permission to enter into franchise agreements at their discretion in order to conduct Restricted Money Changing operations. After entering into the Franchise Agreement, anyone intending to become a franchisee of any AMC may do so.

Here are some crucial details in this regard:

  • Any organisation with a place of business in India might be a franchise.
  • The minimum Net Owned Fund for an organisation should be Rs. 10 lakhs.
  • Only some restricted money-changing activities are permitted for franchisees.
  • The parties must sign an agreement regarding the franchisee.
  • The names of their franchisers, exchange rates, and the fact that they are only permitted to buy foreign currency should all be conspicuously displayed in the offices of the franchisees.
  • Within seven working days of the date of acquisition, the Franchise must only surrender the foreign cash to its Franchiser. In India, you can also launch your currency exchange business.
  • The Franchise's responsibility is to keep accurate records of all transactions.

Role of Authorized Dealers in Foreign Exchange

In forex transactions, authorised dealers are crucial. Banks that are well-equipped to conduct foreign exchange operations in India are granted authorisation by the RBI in the form of licences to deal in foreign currencies. Certain financial institutions have been given permission by the RBI to conduct certain sorts of foreign exchange operations that are unrelated to their primary activity.

Why Swarit Advisors for FFMC License?

An FFMC is a money changer with authorization to buy foreign currency from foreign visitors to India and from Indian citizens, as well as to sell foreign currency for private and business travel. You must obtain an FFMC Licence in order to deal with money-changing activities. Get this by contacting Swarit Advisors. We can offer comprehensive services and guidance throughout the application process. Below are the services provided by us:

Documentation Assistance: Provide clients with a list of the necessary documents and assist them in gathering them, ensuring everything is in order before submission.

Application Preparation: Ensure correctness in all facts and walk customers through the whole application process, including filing out the relevant documents.

Regulatory Compliance: Ensure the customers satisfy all regulations required by the Reserve Bank of India (RBI) to be granted an FFMC license.

Legal Consultation: we offer clients legal guidance and assistance, answering any questions they may have about licensing laws. By providing these services we can help our clients in navigating the difficulties of the FFMC licensing procedure and improve their chances of being granted a license to operate as a full-fledged money changer.

Frequently Asked Questions

According to FEMA 1999 Section 10, the organisations which are permitted to do money-changing operations by the Apex Bank or RBI are considered Full-Fledged Money Changers.

A full-fledged money changer might be any organisation other than a bank.

Anyone who meets the requirements of the Companies Act 2013 is eligible to apply for an FFMC permit in India.

Yes, any organisation or company that is formed under the Companies Act, has a base NOA (Net Owned Asset) of Rs. 10 lakhs and declares that its goal is a money-changing business may obtain a franchise from an established FFMC.

Yes, the Reserve Bank of India must receive the application materials in order to renew the FFMC licence every year.

No, a Franchise is only allowed to engage in a limited number of money-changing operations, as per the RBI's master circular.

The term "Authorised Money Changer" refers to businesses that are permitted to deal in foreign currency for the purposes stated by Section 10 of the FEMA 1999 by the Reserve Bank of India or RBI.

The Application shall be sent to the relevant Regional Office of the Foreign Exchange Department of the Reserve Bank, under whose authority the applicant's Registered Office lies, along with the necessary supporting documentation.

The term "circumstances" includes when it is in the public interest and when an AMC, or Authorised Money Changer, disobeys the FEMA 1999 regulations.

The three categories of FFMC licences are Full Fledged Money Changers (FFMC), Authorised Dealer Category 2 (Authorised Dealers), and Authorised Dealer Category 1 (Banks).

The AMC or FFMC is authorised to sell foreign currency for the following uses: business visits, personal visits, and forex prepaid cards.

To renew an FFMC (Full Fledged Money Changer) licence, an application must be submitted two months before the licence expires.

An FFMC License's primary goal is to guarantee that clients will receive the best services despite the competitive environment.

The Foreign Exchange Management Act of 1999's Section 10 (1) addresses the submission of FFMC Licence Applications to the Regional Offices of the RBI.

The regional office of the RBI grants an FFMC or Full Fledged Money Changer Licence based on "Clearance by an Empowered Committee". The Reserve Bank of India's judgement, however, will be regarded as final and binding.

Why Swarit Advisor?

Why Swarit Advisor
Swarit Advisors Private Limited

kannan

From Mumbai Recently Purchased @NGO Registration