The concept of the Full Fledged Money Changer Licence revolves around authorisation granted by the RBI 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. In this blog, we shall see the procedure of FFMC licence in India.
Activities of FFMCs in India
Full Fledged Money Changers engage in various activities within the financial sector. These activities encompass the following:
1. Franchise Agreements for Restricted Money Changing Business
FFMCs have the flexibility to enter into franchise agreements to conduct Restricted Money Changing business. This core activity involves the conversion of foreign currency notes and coins or even travellers’ cheques into Indian Rupees.
2. Purchase of Foreign Currency
FFMCs and their franchisees enjoy the freedom to purchase foreign currency notes, coins, or travellers’ cheques from both residents and non-residents of India.
3. Sale of Indian Rupees to Foreign Tourists
FFMCs are authorised to sell Indian Rupees to foreign tourists or visitors using International Debit Cards and International Credit Cards. They are also responsible for initiating prompt actions to secure reimbursements through conventional banking channels.
4. Sale of Foreign Exchange
FFMCs may sell foreign exchange for the given purposes:
- Private Visits
- Business Visits
- Forex Pre-Paid Cards
By adhering to these activities, FFMCs play a vital role in facilitating currency exchange transactions and supporting the needs of both domestic and international travellers.
Eligibility Criteria for Obtaining FFMC Licence
In order to register as Full-Fledged Money Changer as per the procedure of FFMC licence in India, entities must meet specific eligibility criteria as outlined below:
1. Registration Under Companies Act of 2013
The entity seeking an FFMC Licence must be duly registered under the Companies Act of 2013.
2. Minimum Net-Owned Fund Requirement
To apply for an FFMC Licence, the entity must possess:
- INR 25 Lakhs for a single-branch licence
- INR 50 Lakhs for a multiple-branch licence as a minimum net-owned fund.
3. Reflecting Money Changing Activity in the Memorandum
The object clause of the Memorandum of the entity must explicitly state its intention to undertake money-changing activities or include an appropriate amendment to this effect.
4. Clean Legal Record
There should be no pending civil or criminal cases against the entity with the Department of Revenue Intelligence.
5. Commencement of Business
After obtaining the FFMC Licence, the entity must commence its money-changing business within 6 months from the date of licence issuance and promptly notify the Reserve Bank of India.
Documents Required for FFMC Licence
Entities seeking to register as Full-Fledged Money Changer as per the procedure of FFMC licence must submit the following documents:
1. Certificate of Incorporation
A copy of the Certificate of Incorporation of the entity.
2. Memorandum and Articles of Association
The Memorandum and Articles of Association, which should explicitly permit money-changing activities or include an appropriate amendment reflecting the same.
3. Audited Financial Records
- Copies of the latest audited accounts of the entity along with a certificate from Statutory Auditors certifying the Net-Owned Funds as of the Date of Licence Application.
- Audited Balance Sheets and Profit and Loss Accounts of the entity for the immediate three years preceding the Licence Application, if applicable.
4. Confidential Bank Report
A confidential report from the entity’s banker, sealed for security.
5. Information on Associated Concerns
Details of sister or associated concerns operating in the financial sector, such as Non-Banking Financial Companies.
6. Board Resolution
A certified copy of the Board Resolution approving the undertaking of money-changing business.
Meeting these eligibility criteria, providing the required documentation and following the procedure of FFMC licence is essential for obtaining the Licence, which enables entities to engage in money-changing activities as per regulatory guidelines.
Procedure of FFMC Licence in India
The steps involved in the procedure of FFMC licence are as follows:
1. Application Submission:
The first step in the procedure of FFMC licence entails the submission of a comprehensive and detailed application for the FFMC Licence. This application is submitted to the appropriate regional office of the Reserve Bank of India.
2. Director’s Review – “Fit and Proper” Criteria:
Director of the applicant entity undergoes a thorough review based on the “fit and proper” criteria established by the RBI. This step in the procedure of FFMC licence ensures that the individual meets the necessary standards set by the RBI. If the assessment aligns with RBI’s satisfaction, the FFMC Licence is considered for issuance.
3. Licence Issuance:
Upon satisfactory review and approval of the application, in this step of the procedure of FFMC licence, the RBI proceeds to issue the FFMC Licence. The issuance typically occurs within a period of 2 to 3 months, provided all criteria and requirements are met.
4. Empowered Committee Clearance:
Clearance from the Empowered Committee is an essential step in the procedure of FFMC licence. The Reserve Bank’s decision regarding granting approval for the FFMC Licence is contingent upon the clearance by this committee. The Reserve Bank’s decision in this regard is final and binding.
5. Compliance Requirement:
It’s imperative to note that an entity will be deemed ineligible to obtain an FFMC Licence if any case initiated or pending against the entity or any of its directors by law-enforcing authorities.
The procedure of FFMC licence is meticulous and aims to ensure that entities operating as Full-Fledged Money Changers comply with the set regulatory standards and guidelines, providing a reliable and secure environment for foreign exchange transactions.
Post-Approval Requirements and Record Keeping by FFMCs
After following the procedure of FFMC licence and acquiring the licence, FFMCs are obligated to comply with certain conditions and maintain specific records as outlined by the Reserve Bank of India. The post-approval requirements and record-keeping obligations for FFMCs are:
Post-Approval Requirements:
1. Business Commencement Documentation:
Before initiating any business activity, FFMCs must submit a copy of their registration under the Shops and Establishment Act or other relevant documentary evidence, such as a rent receipt or a copy of the lease agreement, to the Regional Office directed by the RBI.
2. Compliance with RBI Instructions:
FFMCs must diligently adhere to the instructions and guidelines specified by the Reserve Bank of India on an ongoing basis.
3. Display of Licence:
FFMCs are required to prominently display a copy of the money-changing licence issued by the RBI at each of their business premises.
4. Concurrent Audit System:
FFMCs must establish and maintain a system for Concurrent Audit to oversee all transactions undertaken by them.
5. Submission of Audited Balance Sheets:
All FFMCs are mandated to submit their annual audited balance sheets to the respective Regional Office of the RBI.
Record Keeping:
FFMCs must maintain the following registers and records concerning their money-changing activities:
1. FLM-1: Daily Summary and Balance Book of Foreign Currency Notes/Coins
2. FLM-2: Daily Summary and Balance Book of Travellers’ Cheques
3. FLM-3: Register of Purchases of Foreign Currencies from the Public
4. FLM-4: Register of Purchases of Foreign Currency Notes/Coins from Authorised Dealers and Authorised Money Changers
5. FLM-5: Register of Sales of Foreign Currency Notes/Coins and Foreign Currency Travellers’ Cheques to the Public
6. FLM-6: Register of Sales of Foreign Currency Notes/Coins to Authorised Dealers/Full Fledged Money Changers/Overseas Banks
7. FLM-7: Register of Travellers’ Cheques Surrendered to Authorised Dealers/Authorised Money Changers/Exported
Renewal of FFMC Licence
Full-Fledged Money Changers are required to initiate the renewal of their licence at least one month prior to the expiration date of their existing licence. It’s important to note that requests for the restoration of a money changer’s licence will not be entertained once the FFMC licence has expired.
Final Thoughts
The procedure of FFMC Licence in India is a structured process overseen by the RBI. It involves a comprehensive application, a rigorous review of the applicant’s “fit and proper” criteria, clearance from the Empowered Committee, and eventual licence issuance. Compliance with RBI guidelines and a clean legal record are imperative. Once approved, FFMCs have ongoing responsibilities, including business commencement documentation, compliance with RBI instructions, and prominently displaying their licence.
Moreover, FFMCs are obligated to maintain detailed records of their foreign currency exchange activities, covering purchases, sales, and transactions with the public, authorised dealers, and money changers. The annual submission of audited balance sheets is mandatory. Overall, the FFMC Licence process ensures compliance with regulatory standards and record-keeping practices to maintain a secure and reliable foreign exchange environment in India.
