Beginning a currency exchange business in India is a very good business opportunity for entrepreneurs and job seekers alike. With India’s forex reserve approaching USD 600 billion, the timing for a currency exchange business startup has never been much better. The fundamentals of setting up a currency exchange business which includes licensing and procedures are explained.
What is the FFMC License?
The first step to starting a currency exchange business in India is getting a (Full Fledged Money Changer) FFMC license. This particular license is given by the Reserve Bank of India (RBI) and businesses can engage in foreign exchange. Firms which hold the license are called Authorized Money Changers and therefore are permitted to carry out all kinds of money exchange, including forex trading.
Eligibility Criteria for FFMC License
Your business should meet specific criteria to qualify for an FFMC license. The breakdown is below:
- Corporate Structure: Only Companies registered under the Companies Act 2013 can apply for an FFMC license. This makes the entity a structured and legitimate organization.
- Net Owned Funds (NOF): For single-branch license, the company should have a NOF of Rs 25 lakhs. For multiple branches, the requirement is Rs 50 lakhs. This financial stability is vital for the RBI to make certain the business can handle the operational demands of exchange.
- Legal Compliance: The entity shall have no continuing criminal or civil cases pending against it, including any concerning the Directorate of Revenue Intelligence. A clean legal record is crucial for RBI approval.
- Memorandum of Association: The company’s MOA should specify the business concerning currency exchange. This clause must be specific and exact and demonstrate the company intends to engage in money changing operations.
- Operational Timeline: The business should start currency exchange within six weeks after the FFMC license is given. This ensures the license is utilized quickly and the business contributes to the financial ecosystem.
Documents Required for FFMC License Application
Preparing the necessary documentation is a key step in the currency exchange business setup. The following are a list of mandatory documents for the FFMC license application:
- Incorporation Certificates: Copy of the business incorporation and commencement certificates.
- MOA & AOA: Copy of Memorandum & Articles of Association describing procedure for doing currency exchange.
- Financial Statements: Audited Balance Sheets and Profit and Loss Accounts for the last 3 years. A recent audited account with a certification of the Statutory Auditors verifying the NOF as at the application date.
- Legal Statements: Declarations that there are no ongoing criminal actions against the business with the DRI and DoE.
- KYC/CFT/AML Policies: A statement confirming that proper policy frameworks on KYC, CFT and AML consistent with RBI guidelines will be in place after receipt of the license.
- Board Resolution: A certified copy of the board resolution authorizing the company to participate in a money-changing enterprise.
Application Process for FFMC License
The application procedure for the FFMC license is discussed below:
- Application Submission: Draft a comprehensive application for the FFMC license and submit to the Reserve Bank of India’s local office.
- Committee Review: An Empowered Committee created for that purpose will review the application. This particular committee decides on the application based on RBI ‘fit and proper’ criteria.
- Approval & Issuance: In case the application qualifies, the RBI will issue the FFMC license within 2 to 3 months.
- Post-Issuance Requirements: After you have the license, you must provide a copy of the business registration and document evidence of operation such as a lease agreement or rent receipt to the Regional Office for processing before you begin running.
Compliance & Record Keeping for FFMC License
Respecting currency exchange business regulations is essential to keep the FFMC license and operation running smoothly. The key compliance requirements are outlined below:
1. Daily Registers:
Keep daily registers and balance books for international currency coins/notes and travelers’ cheques. Acquisitions & transactions must be entered in forms like FLM 1, FLM 2, and FLM 3.
2. Transaction Registers:
Keep accurate registers of foreign currency purchases and sales to the public and other authorized money changers or dealers. They include forms like FLM 4, FLM 6, FLM 5 & FLM 7.
3. Regular Audits:
Verify the up-to-dateness of all the books and registers and have frequent inspections to check for compliance with RBI guidelines.
4. Separate Registers for Multiple Branches:
In case you have multiple branches, keep separate registers for each branch to make financial records clear and correct.
Consulting Services for FFMC License
Given the intricacy and stringent requirements for beginning a currency exchange business, professional currency exchange business consulting might be beneficial. Consultants like StartupFino can advise on preparing of application, eligibility criteria and regulatory compliance.
Seeking professional currency exchange business consulting services can assist with both the process and the complexities. With increasing demand for foreign exchange services, it is right to enter this expanding segment and add to India’s strong financial stand.
Consultants may also help with:
- Business Registration: Advising on company incorporation and preparing legal documentation.
- Regulatory Compliance: Respecting all RBI guidelines and other pertinent regulations.
- Operational Setup: Advising on best practices concerning the setting & management of the business activities.
Conclusion
The currency exchange business registration and license procedure in India is complicated and needs preparation and compliance with RBI regulations. Comprehending the eligibility criteria, creating the proof and following the application procedure will enable you to launch your currency exchange business.
Regardless of whether you’re an entrepreneur seeking to enter the forex market or a job seeker wanting to tap into this lucrative business, getting the licensing requirements will be the very first step towards a profitable currency exchange company startup.
FAQs
How to get a currency exchange license in India?
The application has to be a business registered under the Companies Act, 1956 / Companies Act 2013 / Registration of Companies (Sikkim) Act, 1961 and have a minimum Net Owned Funds (NOF) of Rs 25 lakh for single branch FFMC license & Rs 50 lakh for multiple branch FFMC license.
What is the eligibility of FFMC license?
The company seeking an FFMC license has to be registered under the Companies Act of 2013. To apply for an FFMC license, the entity must possess: Rs 25 Lakhs for one-branch license. Rs 50 Lakhs for multi-branch license as minimum net-owned fund.
How much will the FFMC license cost in India?
Private Limited Company Registration will Cost around Rs. 25000 -30000 and FFMC License is going to Cost around Rs. 90000- 100000.
Who can sell foreign exchange in India?
Foreign exchange may be purchased from any authorized person (AD Category-I bank, AD Category II bank). Full-Fledged Money Changers also can release exchange for business and private visits.
How foreign exchange is regulated in India?
The Reserve Bank licenses banks and regulates organizations and Authorized Dealers in the foreign exchange market. In step with the liberalization agenda, the Reserve Bank has considerably removed licensing, quantitative restrictions along with other regulatory and discretionary controls.
