As per the recent reports of Business Standard, the RBI (Reserve Bank of India) is soon going to draw up a new law or regulation for Non-Banking Financial Companies (NBFCs)....
According to Section 10 of the Foreign Exchange Management Act, 1999, any business that seeks to engage itself in the money changers activity must acquire Full Fledged Money Changer License in India.
Along with the license, there arises a few obligations that every FFMC must follow. In case, any FFMC fails to follow the compliances, it will be subject to heavy penalties as described in the concerned Act.
Before we leap on to compliance requirements of Full Fledged Money Changer, let’s have a brief go through on FFMC.
About Full Fledged Money Changer
Full Fledged Money Changer or FFMC is an authorized money changer entity involved in the purchase and sale of foreign exchange from both residents of India as well as NRIs to people visiting abroad.
As per Section 10 of the FEMA Act, 1999, the only entity deal in money changing activities in the country and rendering foreign exchange services is authorized money changers.
Furthermore, no entity can ever run the business of FFMC without obtaining the approval from RBI. Any individual guilty of the same will be forced to pay the prescribed penalty as per the FEMA Act.
Pre-requisites for obtaining FFMC License
Anybody who wishes to procure FFMC license in India needs to satisfy the following requirements:
- The willing company must be registered under the Companies Act, 2013.
- The minimum net owned funds (NOF) of Rs. 25 lakhs for single branch FFMC and Rs. 50 lakhs for multiple branch FFMC.
- There must not be any criminal or civil case pending against the company with the Directorate of Revenue Intelligence or the Directorate of Enforcement.
- The Memorandum or object clause must imitate the activity of money changing to be pursued by the company.
Post-approval requirements for Full Fledged Money Changer in India
On the receipt of approval from RBI, FFMCs need to comply with the following requirements:
- Submit a copy of the registration under Shops & Establishment Act or other documentary proof such as the copy of rent receipt, lease agreement, etc. to the Regional Office of the RBI even before the commencement of the business.
- New FFMCs have to carry out their operations based on the instructions as specified by the Reserve Bank of India from time to time.
- FFMCs must indicate a copy of money changing license received from the RBI at each of its business places.
- The Full Fledged Money Changer is required to put a system of Concurrent Audit of the transactions done by them in the correct place.
- Every FFMC in India must submit its audited balance sheet to the concerned regional office of the RBI.
Annual Compliances for Full Fledged Money Changer in India
Once you have obtained the FFMC license and started the company’s operation, you must consider following a few mandatory compliances. Those are as follows:
- Maintaining the register of purchase of foreign currency, balance book of foreign currency coins, register of daily summary, travelers’ cheque, etc.
- Submission of the monthly consolidated statements regarding the purchase or sale of foreign currency notes to the Reserve Bank of India by the 10th of the next month.
- The submission of the monthly statement of receipt as well as the purchase of US $10,000 or above transactions to the concerned Regional Office of the Foreign Exchange Department, RBI by the 10th of the next month.
- Submitting the quarterly statement of the foreign currency account (s) that is maintained in India.
- The submission of annual audited balance sheet including the certificate from the statutory auditors associated with the NOFs (Net-Owned Funds). Furthermore, the submission must be done as on the date of the balance sheet to the concerned Regional Office of the RBI.
- A proper system of concurrent audit of transactions done by the FFMC.
- Moreover, the submission of an annual statement to the respective Regional Office of the FED (Foreign Exchange Department), RBI.