Under section 10 of the Foreign Exchange Management Act, 1999, firms intending to engage in money-changing activities in India are required to acquire a Full Fledged Money Changer or FFMC Licence. The FFMC licence entails additional compliances given in the provisions. Failing to comply with these regulations can result in substantial penalties for the FFMC. In this blog, we shall see the list of compliances for Full Fledged Money Changer in India.
Understanding Essentials of FFMC Licence in India
A Full Fledged Money Changer or FFMC, refers to a legally recognised entity involved in the trading of foreign currencies, offering benefits to both Non-Resident Indians (NRIs) and residents of the native country.
In accordance with the regulations outlined in section 10 of the FEMA Act of 1999, engaging in foreign exchange services is prohibited for any business without proper authorisation from the relevant governing body. Moreover, entities aspiring to partake in FFMC operations are required to obtain approval from the Reserve Bank of India. Adherence to such compliances for Full Fledged Money Changer in India is imperative, and any infringement could result in substantial penalties as outlined by the FEMA Act.
Essentials for Obtaining FFMC Licence in India
Obtaining a FFMC licence in India is subject to several essentials, which are mentioned below:
1. Companies Act, 2013 Registration
It is mandatory for the applicant company to be registered under the Companies Act, 2013 in order to be eligible for an FFMC licence.
2. Minimum Net-Owned Funds
Single Branch FFMC: The willing company must possess a minimum net-owned fund of Rs. 25 lakhs.
Multiple Branch FFMC: For companies intending to operate multiple branches as FFMCs, the minimum net-owned fund requirement is Rs. 50 lakhs.
3. Compliance with Enforcement Authorities
The applicant company should have a clean record and must not be accused of violating any provisions under the Directorate of Enforcement and Directorate of Revenue Intelligence.
4. Alignment with Core Operations
The Memorandum or object clause of the company’s legal documentation must explicitly reflect its core operation, which is the money-changing activity.
By fulfilling these prerequisites, companies can ensure their eligibility for obtaining an FFMC licence in India.
Post-Approval Requirements for Full Fledged Money Changer in India
Once an entity receives approval from the Reserve Bank of India to operate as a Full Fledged Money Changer, it is essential to adhere to the following post-approval requirements:
1. Documentation Submission
Prior to commencing business operations, FFMCs are required to furnish a copy of their registration under the Shop Act or provide other relevant documentation such as lease agreements, rent receipts, etc., to the RBI’s regional office.
2. Compliance with RBI Instructions
Newly-established FFMCs must operate their money-changing business in strict accordance with the guidelines and instructions issued by the RBI.
3. Licencing Verification
FFMCs are obligated to ensure that a copy of the RBI licence authorising their money-changing activities is prominently displayed and available at every working branch of the organisation.
4. Periodic Audit
FFMCs must conduct periodic audits of their financial activities on a concurrent basis to ensure compliance with regulatory requirements and maintain transparency in their operations.
5. Audited Balance Sheet Submission
Every FFMC operating across India is required to provide its audited balance sheet to the RBI’s regional office as part of their ongoing reporting and compliance obligations.
By adhering to these post-approval compliances for Full Fledged Money Changer in India, Full Fledged Money Changers in India can continue their operations in accordance with regulatory standards and maintain the integrity of their financial activities.
Annual Compliances for Full Fledged Money Changer in India
After obtaining the FFMC licence and initiating company operations, it is imperative to ensure adherence to the following annual compliances for Full Fledged Money Changer in India:
1. Maintenance of Records
Maintain a comprehensive purchase register pertaining to foreign currency, logbooks, and travellers’ cheques.
2. Monthly Reporting to RBI
As a part of compliances for Full Fledged Money Changer in India, submit monthly statements concerning the trading of foreign currency to RBI.
3. Reporting Large Transactions
Provide monthly receipt statements, specifically for transactions involving the purchase of US $10,000 or more, to the RBI’s regional office and the Foreign Exchange Department.
4. Quarterly Foreign Currency Statement
Furnish a quarterly statement detailing the foreign currency accounts maintained in India as a part of compliances for Full Fledged Money Changer in India.
5. Annual Audited Balance Sheet
FFMCs are obligated to submit an annual audited balance sheet along with a certificate issued by statutory auditors, highlighting the Net-Owned Funds. This submission must be made within the stipulated due date.
6. Strong Auditing Framework
Implement a strong auditing framework within the organisation to ensure transparency in financial operations and compliance with regulatory standards.
7. Timely Reporting
Ensure that the annual statements are promptly submitted to the relevant authority, such as the Regional Office of the Foreign Exchange Department (FED) of RBI, without any delay.
By diligently adhering to these annual compliances for Full Fledged Money Changer in India, FFMCs can maintain regulatory compliance, uphold transparency, and demonstrate financial responsibility in their operations.
Conditions that Support Cancellation of FFMC Licence
The Reserve Bank of India possesses the authority to cancel an authorisation granted under Section 10(1) of the Foreign Exchange Management Act, 1999 under various circumstances, including but not limited to the following:
1. Unreasonable Money Changing Activities
If the money-changing activities conducted by the authorised person are deemed unreasonable or in violation of regulatory standards.
2. Non-Compliance with Regulations
In the event that the authorised person fails to comply with the provisions, regulations, or notifications specified under FEMA 1999 or any other relevant regulatory framework.
3. Provision Violations and Statutory Compliance
The RBI retains the authority to cancel the authorisation of any of the branches of the authorised person in cases where violations of provisions or infringements of statutory compliance are observed.
4. Amendments to Provisions
The RBI has the prerogative to amend existing provisions at its discretion, without any obligation to inform the licencee. This grants the RBI the flexibility to adapt regulations to changing circumstances or emerging financial trends.
It is important for Full Fledged Money Changers to maintain strict adherence to regulatory guidelines and ensure the integrity of their money-changing activities by following the compliances for Full Fledged Money Changer in India. Failure to do so may lead to the cancellation of their FFMC licence by the RBI under the conditions outlined above.
Final Thoughts
Obtaining and maintaining a Full Fledged Money Changer licence in India is a process that demands strict adherence to regulatory guidelines and financial requirements. Non-bank entities can apply for this licence, but they must meet the minimum net-owned fund requirements, which differ for single and multiple branch FFMCs.
The compliances for Full Fledged Money Changer in India include annual licence renewal and the meticulous retention of forex trading documents are essential obligations, ensuring transparency and regulatory compliance. Additionally, the mandatory periodic audits, as per RBI’s guidelines, are crucial to maintaining the integrity of FFMC operations. Failing to comply with these compliances for Full Fledged Money Changer in India can result in the cancellation of the FFMC licence. Thus, a thorough understanding of these key points is vital for entities engaging in foreign exchange and money-changing activities in India.
