Authorised Money Changer License: Concept and Scope in India

In India, RBI has the authority to hold all the essential assets, such as Forex or Foreign Exchange Reserves in the form of Foreign Currencies. Further, these assets are responsible for influencing country’s International Trade, Monetary Policy, and Exchange Rate. So, to carry out the activities concerning currency or foreign exchange, one needs to acquire FFMC License or Authorised Money Changer License from RBI.

In this blog, we will discuss about the concept and scope of Authorised Money Changer License

Concept of Authorised Money Changer License

In India, any company or individual who wants to start a money exchange business needs to first obtain Full Fledged Money Changer License from RBI. Further, for obtaining license, the applicant requires to comply with all the guidelines and regulations given in the Master Circular issued by the Apex Bank.

Also, the rules and regulations concerning AMC (Authorised Money Changers) and Foreign Currency are given under FEMA 1999^[1], which acts as the regulatory law for forex in India as well.

Concept of Authorised Money Changers

According to section 2 of FEMA 1999, the term “Authorised Person” denotes an individual or a business entity that deals with the activities and operation related to foreign exchange. Further, it includes Authorised Dealer and Off-shore Banking Units as well.

Also, an AMC is eligible to buy forex from the tourists visiting India and can then sell the same against some approved activities, such as Currency Notes, Traveler’s Cheque, and Conversion of Coins.

Different Types of Authorised Money Changers

The different types of Authorised Money Changer are as follows:

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

Scope of Authorised Money Changer License

Any individual or business entity who wants to undertake activities concerning money or foreign exchange needs to acquire FFMC License under section 10 of Foreign Exchange Management Act 1999.

Also, it shall be considerate to note that any person or business carrying out operations of money exchange without obtaining a valid AMC License, then the same will be held liable under the provisions of FEMA 1999.

Requirements of Money Changer License

The key requirements of an Authorised Money Changer License are as follows:

1. The applicant company needs to registered under the Companies Act 2013;
2. For operating a single branch, the applicant company needs to have NOF (Net Owned Funds) of atleast Rs 25 lakhs;
3. For operating multiple branches, the applicant company needs to have NOF (Net Owned Funds) of atleast Rs 50 crores;
4. The object clause of the company must state its intention to operate as money exchanger;
5. There must not be any pending criminal or civil case against the directors of the company with the Department of Revenue Intelligence;
6. After acquiring FFMC license, the business entity must commence the operations of Authorised Money Changer within 6 months, starting from the date of issuance of license;

Permitted Activities for FFMC License Holders

The activities permitted for FFMC License Holders are as follows:

1. An AMC License Holder can undertake activities concerning Currency Notes, Travelers’ Cheque, and Conversion of Foreign Currency into Indian Currency;
2. For carrying out restricted money changing activities, an AMC License Holder requires to enter into a Franchise Agreement;
3. An FFMC License Holder is eligible to freely deal in Travelers’ Cheque, Foreign Currency andCoins with both NRIs and Indian Residents;
4. An Authorised Money Changer License Holder can easily sell Indian Currency against International Credit or Debit card of foreigners;
5. A registered FFMC can sell forex currency in return of business transactions, personal visits, and forex prepaid cards;

Documents Required for Obtaining Authorised Money Changer License

The documents required for obtaining Authorised Money Changer License are as follows:

1. A copy of Certificate of Incorporation;
2. A copy of Certificate of Commencement;
3. A copy of MOA (Memorandum of Association) and AOA (Articles of Association);
4. Latest Audited Financial Statements;
5. A copy of the Certificate from Statutory Auditors regarding company’s NOF;
6. Audited Balance Sheet and Profit and Loss Account of the company for the previous 3 financial years;
7. Confidential Report of Bank in a sealed cover;
8. Details concerning nature of the activities undertaken;
9. Details concerning the associated companies operating in the Financial sector;
10. A copy of the Board Resolution passed for carrying out money changing activities;
11. A copy of the Declaration concerning Policy Framework on KYC (Know Your Customer)/ AML (Anti Money Laundering)/ and CFT (Combating the Financing of Terrorism Customer Data);
12. A copy of the Declaration from DRI (Department of Revenue Intelligence) stating that it has never conducted any investigation against the Directors of the Company;

Also, Read: How to Apply for FFMC License?

Process to Obtain Authorised Money Changer License in India

The steps involved in the process to obtain Authorised Money Changer License are as follows:

File Application to RBI

In the first step, the applicant company requires to file an application in the format prescribed under Annexure – II with RBI’s regional office. Further, the said application needs to be filed with the required documents.

Fit and Proper Criteria

For obtaining Money Changer License from RBI, the company needs to satisfy a Fit and Proper Criteria. Therefore, the Board of Director need to undertake the process of Due Diligence to confirm that the Fit and Proper criteria is duly met.

Also, the Fit and Proper criteria helps in determining the integrity, expertise, track record, qualifications of the person being appointed as Director.

Requirements of Fit and Proper Criteria

The key requirements of Fit and Proper Criteria are as follows:

1. Must not be more than 70 years in age;
2. Must not a Member of Legislative Assembly ;
3. Must not be the Member of Parliament;
4. Must not have any Past Criminal Record;
5. Must not have received any Permission from Regulatory Bodies;
6. Must not have History of Fraudulent Practices;

Empowered Committee Clearance

In the next step, the process of AMC License proceeds further only after obtaining a clearance from the Empowered Committee. However, the same will be provided after making proper verification.

Review by RBI

Now, the RBI will review the application and documents furnished by the company.Further, if the apex bank is satisfied that all the documents submitted are and the fit and proper criteria is successfully met, it will grant Authorised Money Changer License to the applicant within 2 to 3 months.

Commencement of Business

After acquiring FFMC license, the business entity must commence the operations of Authorised Money Changer within 6 months, starting from the date of issuance of license. Also, the said company requires to furnish a duplicate copy of the Shop and Establishment License, Possession Certificate, and Lease Agreement with the apex bank before commencing the business operations.

Post-Registration Requirements

The post-registration requirements for an Authorised Money Changer License are as follows:

1. The directors of the company requires to furnish a duplicate copy of the Shop and Establishment License, Possession Certificate, and Lease Agreement with the apex bank before commencing the business operations;
2. The company needs to adhere with all the guidelines, circulars, directions as issued by the Apex Bank;
3. The company must display the copy of the Money Changer License issued at every place of business;
4. For carrying out the activities and operations of foreign exchange smoothly and hassle free, the company requires to implement a mechanism of Concurrent Audit;
5. The registered company requires to submit its Annual Audited Balance Sheet at the RBI’s regional office.

Revocation of Authorised Money Changer License

In India, RBI has the authority to cancel or revoke the Full Fledged Money Changer License issued to the Authorised Money Changers in the situations as follows:

1. In the Interest of the General Public;
2. If the said Authorised Money Changer is not able to comply with the provisions of the FEMA Act 1999, and the guidelines, circulars, directions issued by the RBI;

Further, the Apex bank reserves the right to change/ modify/ revoke any of the prevailing terms, conditions or regulations for obtaining AMC License in India.

Renewal of AMC License

To renew the Full Fledged Money License or FFMC License, the directors of the applicant company requires to furnish an application for renewal 1 month prior to the date of the expiry of such license.

However, if in case, the company is not able to file the application for renewal within the prescribed time frame, RBI will then reject the application whenever filed.

However, it shall be considerate to state that the previous license will remain valid till the time company receives the notice of rejection. However, it will not be qualified to file the application for renewal after the expiry of FFMC License.

Conclusion

In a nutshell, any company or individual who wants to start a money exchange business needs to first obtain Authorised Money Changer License from RBI.

However, it shall be considerate to note that the process and documentation for acquiring FFMC License is a tough, intricate, and back-breaking task, as it involves a lot of compliance and documentation requirements.

Also, the apex bank has become more stringent in in terms of issuing Full Fledged Money Changer License, as the companies are directly dealing with the money of public.

Therefore, it is significant to for a company to consult and take advice from RBI and FEMA experts prior to under taking the process of registration. The reason behind the same is to have knowledge concerning post-license requirements that a AMC holder needs to meet.

Also, Read: What is the Regulatory Framework for FFMC License?