Overview of FFMC License

All the Individuals or Business Entities who want to deal in Foreign Currencies need to obtain FFMC License from the Apex Bank, i.e., RBI. Such a license gives the holders the authority to purchase foreign exchange from NRIs (Non Resident Indians) and sell the same for business and travel purposes to the Indians visiting abroad.

Based on the provisions and stipulations of Section 10 of the FEMA 1999, it shall be noted that only an AMC (Authorised Money Changer) is eligible to deal in the activities concerning Money Changing and Foreign Exchange.

Some of the firms and hotels have also been provided Full Fledged Money Changer License by the RBI to deal in Foreign Currency, Traveller’s Cheques, and Coins. The same is done to avoid the difficulties faced by the foreign tourists and visitors.

Role of Authorised Money Changers in Forex Transactions

Authorised Money Changers play a pivotal role in the transactions concerning Foreign Exchange. The Reserve Bank of India grants approval to the banks in the form of Licenses to deal in activities of foreign exchanges. The said license is granted to only those banks which are well equipped to carry out foreign exchange transactions in India.

Also, it shall be noted that other than banks, certain financial institutions are granted authorisation by the apex bank to undertake prescribed types of foreign exchange transactions that are incidental to their main business.

Benefits of FFMC License

The key benefits of the Full Fledged Money Changer License are as follows:

• An AMC License Holder has the Capability to provide sale facilities and services for foreign exchange;
• FFMC license holder can offer encashment certificates in case of the Travellers Cheques, Foreign Currency Notes from the Non Residents and Residents;
• An FFMC License Holder can undertake foreign exchange activities for the foreign tourists visiting India;
• An AMC License Holder is able to address dealings in coins, travellers’ cheques, foreign currency, at the prevailing exchange rate;

Different Kinds of Full Fledged Money Changer License

The different kinds of Full Fledged Money Changer License are as follows:

• Authorised Dealer Category I – Banks;
• Authorised Dealer Category II;
• FFMCs;

Conditions for Applying Money Changer License in India

The conditions to be fulfilled for applying for Money Changer License in India are as follows:

• The business entity applying for FFMC License must have been duly incorporated under the provisions of the Companies Act 2013;
• In the case of a single branch, the said company must have a minimum of Rs 25,00,000 as NOF (Net Owned Funds);
• In case of multiple branches, the said company must have a minimum of Rs 50,00,000 as NOF (Net Owned Funds);
• The object clause of the MOA (Memorandum of Association) must reflect the activities of money changing;
• The company must not have any pending case with the Department of Revenue Intelligence and Department of Enforcement;
• It is compulsory for the company to start its business operations within six months of obtaining an AMC License from RBI;

Regulatory Framework for Authorised Money Changer License

The Reserve Bank of India has the utmost authority to issue Authorised Money Changer License. Also, the Apex Bank can prescribe directions and guidelines for the associated matters of AMC License as follows:

• Issuance of new AMC License;
• Renewal of AMC License;
• Branch Licensing;
• KYC (Know Your Customer) Matters;
• AML (Anti Money Laundering) Matters;
• Approval for the appointment of Franchisees or Agents;
• CFT (Combating of Financing Terrorism) Norms;
• AP (Authorised Persons) Guidelines;

What are the RBI Permitted FFMC Activities?

The RBI permitted FFMC Activities are as follows:

• An AMC or FFMC is eligible to enter into Franchise Agreements for the purpose of undertaking the restricted money changing activities, i.e., Conversion of Foreign Currency Notes and Coins, Traveler’s Cheques into Indian Currency, etc.;
• An FFMC License holder can freely purchase Traveler’s Cheques, Foreign Currency Notes and Coins from both residents and non-residents;
• An AMC License holder is allowed to sell the Indian Currency to foreign travellers/ visitors/ or tourists against the International Debit and Credit Cards. Also, to obtain reimbursement from the normal banking channel, the same can take required steps as well;
• An FFMC is eligible to sell foreign currency for the purposes as follows:

  i. Private Visits;

  ii. Business Visits;

  iii. Forex Prepaid Cards;

Documents Required for Applying for FFMC License

The documents required for applying FFMC License are as follows:

• A copy of the COI (Certificate of Incorporation);
• A copy of the MOA (Memorandum of Association), having the relevant provisions concerning the activities of Money Changing Business;
• A copy of the AOA (Articles of Association), having the relevant provisions concerning the activities of Money Changing Business;
• A copy of the latest Audited Accounts, together with the certificates from the Statutory Auditors confirming the NOF as on the date of application;
• A copy of the latest Audited Balance Sheet;
• A copy of the last three years Profit and Loss Account;
• A Sealed Confidential Report from the applicant’s bank;
• Details of all the associated/ sister concerns operating in the financial market, such as NBFCs;
• A duly certified copy of the Board Resolution passed for carrying out the operations of money changing business;

Procedure for Obtaining Full Fledged Money Changer License from RBI

The steps included in the procedure for obtaining Full Fledged Money Changer License from RBI are as follows:

• Submit an Application to the Reserve Bank of India

  In the first step of the procedure, the applicant company needs to submit an application along with the required documents at the regional office of the Apex Bank in the format prescribed. Annexure-II deals with the format prescribed by the RBI.

• Fulfil the Fit and Proper Criteria

  For acquiring an Authorised Money Changer License from the Reserve Bank of India, a company needs to fulfil a Fit and Proper Criteria. Consequently, the Board of Directors needs to undergo the process of Due Diligence to confirm that the prescribed Fit and Proper criteria is duly met.

  Further, one of the main functions of the Fit and Proper Criteria is to assist in determining the expertise, integrity, qualifications, and previous track record of the person proposed to be appointed as Director.

Key Requirements of the Fit and Proper Criteria

The key requirements of the Fit and Proper Criteria can be summarised as:

• The proposed individual shall not be more than the age of 70 years;
• He/ she must not be a Member of Legislative Assembly;
• Must not have any history of Fraudulent Practices;
• He/ she should not be an MP (Member of Parliament);
• Should not have any previous Criminal Record;
• Shall not have received any Sanction or Permission from Regulatory Bodies;

Obtain Clearance from Empowered Committee Clearance

In the next step of the procedure of acquiring an AMC License, the directors of the applicant company require to obtain a clearance from the EC (Empowered Committee). However, it shall be noted that the same will be based only on proper verification.

Review by the Reserve Bank of India

Now, the Reserve Bank of India will review the application and documents submitted by the company. If the RBI is satisfied that the application and documents furnished successfully fulfil the fit and proper criteria, it will issue an Authorised Money Changer or FFMC License to the applicant within a period of 2 to 3 months.

Commencement of Business Operations

After obtaining a Full Fledged Money Changer license, the business entity requires to commence its commercial operations within a period of 6 months, beginning from the date of the issuance of the license.

Further, the said entity requires to submit a duplicate copy of the Possession Certificate, Shop and Establishment License, and Lease Agreement with the Reserve Bank of India before the commencement of business operations.

What are the Post Approval Requirements of FFMC License?

The Post-approval Registration Requirements of Full Fledged Money Changer License are as follows:

• The directors of the applicant company need to submit a duplicate copy of the Possession Certificate, Shop and Establishment License, and Lease Agreement with the Reserve Bank of India before the commencement of business operations;
• The applicant company requires to adhere to all the directions, guidelines, and circulars as issued by the Apex Bank;
• The license holder company needs to display a copy of the acquired Money Changer License at every place of its registered office;
• For undertaking the activities and operations of forex exchange smoothly and hassle free, the applicant company needs to implement a robust mechanism of Concurrent Audit;
• The registered license holder company requires to furnish its Annual Audited Balance Sheet and last three years Profit and Loss Account at the RBI’s regional office.

Concept of Franchisees

The term Agents or Franchisees means there is more than one intermediary authorized by the RBI to engage in foreign exchange activities.

Further, Authorized Dealer Category-I Banks, Authorized Dealers Category-II, and FFMCs are allowed to appoint their Agents and Franchisees to engage in the money changing activities.

The points to remember in this regard are as follows;

• A Franchise or an Agent can be any business entity that has its place of business in India;
• Such a business entity must have a minimum NOF (Net Owned Funds) of Rs 10 lakh;
• Franchisees are allowed to undertake only the restricted money changing business;
• A Franchise Agreement will be executed between the parties;
• It is compulsory for the Franchisees to display the names of their Franchisers, prevailing exchange rates, and that they are only authorized to purchase foreign currency, conspicuously in their offices;
• The foreign currency purchased by a Franchise must be surrendered only to its Franchiser within a period of 7 working days, starting from the date of purchase;
• It is amust for every franchisee to maintain proper records of transactions;

Revocation of Authorised Money Changer License

In India, the utmost authority to revoke/ suspend/ or cancel an issued Authorised Money Changer License is with the Reserve Bank of India. The same is possible in the situations as follows:

• In the interest and benefit of the General Public;
• If in case an Authorised Money Changer is unable to successfully comply with the statutory provisions of the FEMA Act 1999 and the circulars, guidelines, and directions issued by the RBI;

Further, it shall be noted that the Apex bank reserves the right to modify/ change/ or revoke any of the prevailing terms, conditions, or regulations concerning AMC License in India.

Process for Renewal of the FFMC License in India

To renew the expired FFMC or Full Fledged Money License, the directors of the License Holder Company requires to submit an application for the renewal one month prior to the expiry date of such license.

However, if, in case the said company is not able to submit the application for renewal within the stipulated time frame, the RBI will then reject it whenever filed.

It shall be considerate to mention that the previously issued license will remain in existence till the time company receives the rejection notice. However, the said company will not be eligible to furnish the application for license renewal after the expiry date.

Different Records and Registers to be maintained by FFMC License Holder

An Authorised Money Changer needs to maintain the Registers and Records in respect of their money changing transactions as follows:

Daily Summary and Balance Book

The daily summary and balance book needs to be for the following:

• Foreign currency notes or coins in Form FLM 1;
• Travellers' cheques in Form FLM 2.

Data Register

The data register is required to be made for the following:

• Purchase of foreign currencies from the general public in Form FLM 3;
• Purchase of foreign currency notes or coins from the authorized money changer dealers in Form FLM 4;
• Sale of foreign currency notes or coins to the public in Form FLM 5;
• Sale of foreign currency travellers' cheques in Form FLM 5;
• Sale of foreign currency notes or coins to the authorised Full Fledged Money Changers or overseas banks in Form FLM 6;
• Details of the surrendered Travellers’ cheques to the authorized money dealers / full-fledged money changers or exporters in Form FLM 7;