Many individuals aspire to venture into the forex trading business for various reasons. Authorised Money Changers, regulated by the Reserve Bank of India, offer currency conversion services to individuals arriving from abroad. These entities operate in accordance with RBI guidelines and hold an FFMC licence or FFMC registration, which stands for “Full Fledged Money Changers.” An FFMC is an RBI-approved organisation that facilitates the purchase of foreign exchange from Indian residents and its sale to individuals traveling abroad, whether for private or business purposes. In this blog, we shall see how to avail new FFMC licence in India.
Role of AMCs under FEMA
Before going into the question of how to avail new FFMC licence, let us first see the role of AMCs. Under Section 10 of FEMA, 1999, Authorised Money Changers are exclusively authorised to conduct money-changing activities and offer foreign exchange services
Operating an FFMC business without the necessary RBI permission can be a costly endeavour. Individuals must recognise the significance of adhering to FFMC norms and regulations to avoid legal complications and financial penalties.
Activities Performed by Authorised Money Changers
Authorised Money Changers play a pivotal role in facilitating currency exchange services in accordance with the Foreign Exchange Management Act, 1999. They are entrusted with several important responsibilities, which must be known before answering the question how to avail new FFMC licence. These are outlined below:
1. Currency Conversion Services
AMCs are authorised to provide currency conversion services to both residents and non-residents. This involves exchanging one currency for another at the prevailing exchange rates. Residents may require foreign currency for international travel, business purposes, or other lawful transactions, while non-residents may need Indian currency during their stay in India.
2. Sale of Indian Currency to International Visitors
AMCs also cater to the needs of individuals arriving from abroad. They offer Indian currency against international debit/credit cards, making it convenient for foreign visitors to obtain the local currency necessary for their expenditures within India. This service helps enhance the overall travel experience for international tourists and business travellers.
3. Scope Expansion through Franchise Agreements
Authorised Money Changers have the option to expand their scope of services by entering into franchise agreements with other entities. Through such agreements, AMCs can broaden their range of activities, which may include:
a. Conversion of Coins: Under franchise agreements, AMCs may provide services for the conversion of foreign coins into the local currency or vice versa. This service is beneficial for tourists who possess foreign coins that they wish to exchange for usable currency.
b. Handling Traveller’s Cheques: AMCs can engage in the exchange of traveller’s cheques, offering travellers a secure and convenient way to access local currency during their trips. This service is valuable for individuals who prefer traveller’s cheques over cash.
c. Forex Trading: Some franchise agreements may permit AMCs to engage in forex trading activities. This involves buying and selling foreign currencies, commodities, or financial instruments in the foreign exchange market. This expansion can increase the revenue and diversity of services offered by AMCs.
Eligibility Criteria to Obtain a New FFMC Licence
The eligibility criteria needed for availing a new FFMC licence are as follows:
1. Company Registration:
The company aspiring to engage in money changing activities must be registered under the Registrar of Companies as per the Companies Act. This registration is a fundamental requirement to establish the legal entity’s existence and structure.
2. Main Activity in MOA:
The Memorandum of Association of the company must explicitly specify currency conversion as its primary activity. This ensures that the company’s core purpose aligns with its intended money-changing operations.
3. Legal Clean Record:
The company should not be involved in any criminal cases or legal disputes with the Department of Revenue Intelligence and the Department of Enforcement. Maintaining a clean legal record demonstrates the company’s compliance with financial regulations.
4. Net Owned Fund Requirements:
Depending on whether the applicant intends to operate a single branch or multiple branches, there are specific net owned fund requirements:
- For a single branch, the applicant must possess a minimum net owned fund of Rs 25 lakhs.
- For multiple branches, the applicant must have a minimum net owned fund of Rs 50 lakhs. This higher requirement is necessary when expanding the FFMC business to multiple locations.
5. Timely Commencement of Business:
Upon receiving the FFMC licence, the applicant must initiate business activities related to currency exchange within six months. This stipulation ensures that the licence is actively utilised for its intended purpose in a reasonable timeframe.
Documentation Required for Availing New FFMC Licence
The necessary documents needed to avail new FFMC licence are:
1. Commencement Certificate and Certificate of Incorporation:
Provide documents indicating the commencement of operations and the official incorporation of the company.
2. Past Three Years Audit Reports:
Furnish audit reports from the last three years pertaining to the balance sheet and Profit & Loss account.
3. Memorandum of Association (MOA) and Articles of Association (AOA):
Submit MOA & AOA reflecting money changing activities as the primary business of the company.
4. RBI-based Application Form (Annexure-II):
Complete and submit the RBI-based Application Form (Annexure-II), outlining details about money changing activities.
5. Certificate of Authorisation from Statutory Auditors:
Include a certificate issued by the Statutory Auditors, confirming the authorisation of owned funds.
6. Copy of Board Resolution:
Provide a copy of the Board Resolution demonstrating the company’s involvement with money changing activities.
7. Confidential Bank Report:
Submit a confidential bank report regarding the applicant.
8. Declaration on Customer Data Procurement and Anti-Money Laundering:
Present a declaration within the policy framework concerning the procurement of customer data and compliance with Anti-Money Laundering regulations.
How to Avail New FFMC Licence in India?
The steps on how to avail new FFMC licence in India are as follows:
Step 1: Application Filing
The first step in how to avail new FFMC licence is to access the FFMC licence application on the RBI website, download it, and attach the necessary documents as detailed in the previous section. Submit the application to the respective regional RBI office.
Step 2: Fit & Proper Criteria Verification
The next step of how to avail a new FFMC licence involves the RBI conducting a thorough verification of the firm’s Director based on the “Fit & Proper Criteria.” The RBI’s scrutiny panel will assess the Director’s qualifications and determine if they are suitable to undertake the foreign exchange business. Legal matters concerning the directors will also be examined to ensure compliance with RBI provisions.
Step 3: Candidature Evaluation by Empowered Committee
An empowered committee will evaluate the applicant’s documentation and grant approval upon satisfaction. This marks the third step of how to avail new FFMC licence in India.
Step 4: RBI Approval
In the fourth step of how to avail new FFMC licence, upon successful evaluation, RBI may grant approval to the applicant to engage in foreign exchange business.
Step 5: Submission of Additional Licences
In the fifth step of how to avail new FFMC licence, the applicant must submit additional documents such as Lease Agreement, Shop & Establishment Licence, or property papers to the relevant authority before commencing business activities.
Step 6: Commencement of Business
The company is required to initiate its business activities within 6 months from the date of licence issuance. The applicant must notify the authority before commencing business operations. This marks the end of the process of how to avail new FFMC licence in the country.
Key Points for New FFMC Licence Holders
Some key points to consider when answering how to avail new FFMC licence in India are as follows:
1. Commencement of Operations: New FFMC licence holders must initiate their operations within six months of receiving approval from the RBI.
2. Renewal Application: Licence holders should apply for the renewal of their FFMC licence at least one month before the expiry date. Restoration of the licence is not possible once it has expired.
3. Application Process: To obtain a new FFMC licence, an application must be filed with the RBI’s foreign exchange department, accompanied by the mandatory documents as specified.
Final Thoughts
The process of learning how to avail new FFMC licence in India entails meeting specific eligibility criteria, including company registration, a clear focus on currency conversion in the Memorandum of Association, a clean legal record, and the possession of the required net owned funds. Additionally, licence holders must commence business activities within six months of licence issuance to maintain compliance.
Successfully obtaining an FFMC licence requires a thorough understanding of these requirements and a commitment to operating within the framework of financial regulations. By adhering to these guidelines, individuals and businesses can engage in legitimate currency exchange services and contribute to the efficiency of the foreign exchange market in India.
