With the rapid rise in foreign travel, establishing a money changer business is currently a growing trend. Any individual or entity looking to engage in money exchange operations must acquire the Full Fledged Money Changer Licence from the Reserve Bank of India. The FFMC Licence, an abbreviation for Full Fledged Money Changer Licence, is issued in accordance with the regulations specified in section 10 of FEMA 1999. In this blog, we shall elaborate on the concept and benefits of FFMC Licence from RBI.
Understanding FFMC Licence
The concept of the Full Fledged Money Changer Licence revolves around authorisation granted by the Reserve Bank of India to companies aspiring to engage in foreign currency exchange activities. This authorisation, in the form of the FFMC Licence, is a prerequisite for conducting such operations. The issuance of this licence aligns with the regulations specified in section 10 of FEMA 1999.
It’s essential to emphasise that the FFMC Licence permits activities as outlined and permitted by the apex bank. Furthermore, entities involved in the business of currency exchange, holding this licence, are recognised as Authorised Money Changers.
Regulatory Framework for Authorised Money Changer Licence
Individuals or entities seeking to engage in money or foreign exchange activities are required to obtain an Authorised Money Changer Licence in accordance with the provisions outlined in Section 10 of the Foreign Exchange Management Act of 1999. It is imperative to emphasise that conducting money exchange operations without a valid AMC Licence is a violation of FEMA 1999 and may lead to legal liability.
Conditions to Avail Benefits of FFMC Licence from RBI
To enjoy the benefits of FFMC Licence from the Reserve Bank of India, certain conditions must be met:
1. Registration under the Companies Act 2013:
Prospective FFMCs must be duly registered under the Companies Act of 2013.
2. Minimum Net Owned Fund Requirements:
For establishments with a single branch, a minimum NOF of Rs 25 lakhs is mandatory.
In the case of entities with multiple branches, the NOF requirement increases to a minimum of Rs 50 lakhs.
3. Inclusion of Money Changing Activities in Memorandum of Association:
The object clause of the MOA should explicitly state the intent to engage in money-changing activities.
4. Absence of Pending Proceedings or Investigations:
Applicants should not have any ongoing legal proceedings or investigations involving the Department of Enforcement or the Department of Revenue.
5. Commencement of Business Operations:
FFMC licence holders must initiate their business operations within six months from the date of issuance of the licence by the RBI.
Meeting these conditions is crucial for entities seeking to avail themselves of the benefits of FFMC Licence granted by the RBI.
Permitted Activities for Authorised Money Changers
Authorised Money Changers are granted specific activities they can engage in, as mentioned below:
1. Currency Exchange Services:
An Authorised Money Changer is authorised to engage in activities related to currency, including the conversion of foreign currency into Indian currency, dealing with currency notes, and accepting travellers’ cheques.
2. Restricted Activities Approval:
For engaging in restricted activities, a money changer is required to seek prior approval from the Reserve Bank of India in the form of a Franchise Agreement.
3. Handling Travellers’ Cheques and Coins:
Authorised Money Changers have the eligibility to handle Travellers’ Cheques, as well as coins and currencies of both Non-Resident Indians and Indian residents.
4. Dealing with International Debit or Credit Cards:
Holders of an AMC licence are permitted to transact with international debit or credit cards of foreigners.
5. Foreign Currency Sales:
Registered Authorised Money Changers can sell foreign currency in exchange for Forex Prepaid Cards for both personal visits and business transactions.
Benefits of FFMC Licence in India
A Full-Fledged Money Changer licence in India offers a range of significant benefits, reinforcing its role in facilitating currency exchange and promoting trustworthy financial transactions. Here are the major benefits of FFMC licence:
1. Competitive Edge:
The FFMC licence, issued by the Reserve Bank of India provides a competitive edge in the foreign exchange market. Customers are inclined to choose authorised FFMCs over unregulated entities due to the assurance of legality and credibility. This competitive advantage enables FFMCs to secure a fair market share and establish themselves as reputable players in the industry.
2. Foreign Exchange Services:
FFMCs have the capability to facilitate both the purchase and sale of foreign exchange. They offer sales facilities for foreign exchange and enable individuals and businesses to bring in or take out foreign currency, enhancing convenience and accessibility for customers in the country.
3. Authorised Money Exchange:
FFMCs allow both residents and visitors to sell their foreign currency notes, coins, and travellers’ cheques. Moreover, FFMCs can exchange Indian Rupees for international credit or debit cards used by foreign visitors, facilitating seamless transactions through standard banking channels. Transactions involving travellers’ checks and foreign currency notes are conducted at exchange rates aligned with prevailing market circumstances.
4. Diversification of Services:
The FFMC licence encourages diversification of services beyond currency exchange, enabling FFMCs to offer a wide range of financial products. These services may include remittances, prepaid travel services, and other financial-related products. Diversifying services not only expands revenue streams but also fosters customer loyalty and satisfaction.
5. Certificate of Encashment:
FFMCs with a valid licence can issue a certificate of encashment for purchases of foreign currency notes, coins, and travellers’ cheques made by both residents and non-residents. This certification adds a layer of legitimacy to transactions and enhances customer trust.
The benefits of FFMC licence not only distinguishes an entity from unlicenced operators but also establishes it as a reliable and compliant participant in the foreign exchange market. This credibility attracts more customers and contributes to long-term success and growth in the industry.
Final Thoughts
There are many benefits of FFMC Licence in the foreign exchange market. This ensures legality and credibility, giving FFMCs a competitive edge over unlicenced competitors. Customers prefer the security of authorised FFMCs for currency exchange transactions. Beyond this, FFMCs enable the exchange of foreign currency, offering convenience to residents and visitors alike.
Their ability to diversify services, including financial products and certificates of encashment, promotes loyalty and revenue streams. So, the benefits of FFMC licence distinguishes entities, attracts customers, ensures compliance, and promises long-term success in the evolving global economy.
