Before we begin with how you can apply for FFMC License, it is pretty crucial to understand the actual meaning of FFMC license. Hence, in this blog, firstly we will talk about FFMC, and then, we will move on to the procedure for obtaining the FFMC license.
What is FFMC license?
Full Fledged Money Changer license is a permit that must be obtained by such company intending to carry on the business of forex currency exchange or any money changing activity in India.
Under Section 10 (1) of the Foreign Exchange Management Act, 1999, Authorized Money Changers are the entities authorized by the Reserve Bank of India (RBI). Authorized Money Changers (AMCs) are known as Full Fledged Money Changers.
Categorization of FFMC License
Generally, FFMC licenses have been categorized into three parts:
- Authorized Dealer Category –I banks
- Authorized Dealer Category –II banks
- Full Fledged Money Changers (FFMCs).
Checklists for obtaining FFMC License
For obtaining an FFMC license, the applicant must satisfy the following conditions:
- The applicant company must register itself under the Companies Act, 2013.
- The minimum net owned funds (NOF) must be Rs. 25 lakhs for single branch FFMC and Rs. 50 lakhs for multiple branch FFMC.
- There must not be any civil or criminal case pending against the company with the Directorate of Enforcement or the Directorate of Revenue Intelligence.
- The object clause of Memorandum should reflect the activity of money changing to be pursued by the company.
What are the documents required for Full Fledged Money Changer License?
The application form for FFMC license under Section 10 (1) of FFEMA, 1999 should be submitted to the respective Regional Office of the Foreign Exchange Department (FED) of the RBI along with the following documents:
- A copy of the Certificate of Incorporation and Certificate of Commencement of Business of the company.
- Memorandum of Association (MoA) and Articles of Association (AoA) containing a provision for undertaking money changing business or an appropriate amendment to this effect filed with the Company Law Board.
- A declaration to the effect that no proceedings are pending with or have been initiated by the Directorate of Enforcement (DoE) or Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities.
- Copy of the latest audited accounts along with a certificate from the Statutory Auditors certifying the net owned funds as on the date of application. Copies of the Profit & Loss account and audited Balance Sheet of the company for the last three years wherever applicable.
- A confidential report from the applicant’s banker in a sealed cover.
- A declaration to the effect that proper policy framework on AML (Anti-Money Laundering) / KYC (Know Your Customer) /CFT (Combating the Financing of Terrorism) will be put in place on obtaining the approval of the Reserve Bank of India and before commencement of operations.
- A certified document of the board resolution for undertaking money changing business.
The procedure for obtaining the FFMC License from RBI
The procedure for obtaining the FFMC License from RBI
- The applicant must submit the detailed application to the concerned regional office of the RBI along with the required documents described above.
- The applicant must fulfill the ‘Fit and proper’ criteria i.e. there shouldn’t be any proceedings pending with or initiated by DoE or DRI. In case, there’s any proceedings pending then the company will not be considered as ‘fit and proper’ and its application won’t be considered for issuance of FFMC license.
- Not only the company, but the directors of the company must also satisfy the fit and proper criteria.
- If the above conditions are satisfied, the request for FFMC license would be considered by the Regional Office concerned of the RBI based on the clearance by an Empowered Committee, set up for the purpose.
- Thereafter, the decision of RBI in the matter of granting approval or otherwise will be final and binding.
- Once the applicant company has obtained the approval from the RBI, then it is required to submit the following documents to the Regional Office concerned of the RBI before commencing the business:
I Rent receipt;
II A copy of lease agreement;
III A copy of the registration under Shops and Establishment Act, etc.
- The FFMC must commence its operations within the six months from the date of issuance of license and must inform the Regional Office concerned of the Reserve Bank.
- New FFMCs must carry out activities as per the instructions specified in Sections V and Sections VI.
What are the authorities given to FFMC by the RBI?
The RBI has given the following authorities to the Full Fledged Money Changers under the Authorized Dealer Category -I Banks (AD Category–I Banks) and Authorized Dealers Category – II (ADs Category–II):
- FFMCs can deal in foreign exchange for specified purposes.
- They can widen the access of foreign exchange facilities to residents and tourists while also ensuring efficient customer service through competition.
- FFMCs can purchase foreign exchange from residents and non-residents visiting India.
- They can also sell foreign exchange for certain approved purposes.
- They may also appoint franchisees to undertake the purchase of foreign currency.
Franchises of AD Category –I Banks / ADs Category – II / Full Fledged Money Changers which function within 10 kms from the borders of Bangladesh and Pakistan may also sell the currency of the bordering country, with the prior approval of the Regional offices concerned of the RBI. Other franchisees of Authorized Dealer Category –I Banks or Authorized Dealer Category –II, FFMCs can’t sell foreign currency.
Annual Compliance Requirements for FFMC
- The FFMC must maintain the register of daily summary, balance book of foreign currency coins, traveller’s cheque. register of purchase of foreign currency etc.
- The FFMC shall submit monthly consolidated statements of a sale or purchase of foreign currency notes to the RBI within 10th of the next month.
- The company must also submit the monthly statement of receipt and purchase of US $10,000 and above transactions to the Regional Office concerned of the FED, RBI within 10th of the next month.
- The Full Fledged Money Changer must submit an annual statement to the respective Regional Offices of the Foreign Exchange Department, Reserve Bank.
- There must be a proper system of Concurrent Audit of the transactions undertaken by them.
- FFMC shall submit annual audited balance sheet along with the certificate issued from the statutory auditors regarding the NOFs as on the date of the balance sheet to the respective Regional Office of the Reserve Bank.
What are the post approval requirements of FFMC license?
- A copy of the registration under Shops & Establishment Act or any other documentary evidence such as a copy of lease agreement, rent receipt, etc. must be submitted to the Regional Office concerned of the Reserve Bank of India before the commencing the business.
- New FFMCs are required to carry out their activities on the basis of the instructions specified by the RBI from time to time.
- At each of its business place, FFMCs should display a copy of the money changing license issued by the RBI.
- FFMCs must put in place a system of Concurrent Audit of the transactions undertaken by them.
- All FFMCs are supposed to submit their annual audited balance sheet to the respective Regional Office of the Reserve Bank of India.
Renewal of FFMC License in India
For the renewal of a Full Fledged Money Changer License, an application shall be made before one month from the expiry date of the license. No application for renewal will be entertained after the license expires.
From the above discussion, it’s clear that if you want to carry out the Forex currency exchange activity or money changing activity in India, then you must mandatory obtain FFMC license. FFMC entities are authorized by Reserve Bank of India to deal in many activities. FFMCs can deal in foreign exchange for specified purposes, purchase foreign exchange from residents and non-residents visiting India, etc. In order to obtain the license, you must first follow the checklists described above, then submit the required documents along with the application for FFMC license. Once you have obtained the license, you must comply by its post requirements and compliances.
In case, you still have doubts or any queries regarding the issuance of FFMC license then you can contact Swarit Advisors. We will help you with your doubts and assist in obtaining the license.