Payment Bank License

Navigating Setting up a Currency Exchange Business in India

calendar11 Apr, 2024
timeReading Time: 5 Minutes
Currency exchange business

It takes careful planning and compliance with regulations to start a currency exchange company in India. India’s economy, which is among the fastest-growing on global level, offers a rich opportunity for these kinds of businesses. To begin this venture, prospective business owners need to make sure they comply with Anti Money Laundering (AML) standards and thoroughly understand the licensing requirements set by the RBI.

Crucial actions include finding a trustworthy site, acquiring the tools you need, and forming alliances with banks or other financial organizations. Maintaining profitability in this cutthroat industry also requires competitive pricing tactics and a robust framework for risk management. Given India’s growing tourism industry and expanding globalization, there is a lot of room for success and expansion for a well-run currency exchange business. These currency exchange owners make a profit through the difference in exchange rates and commissions while exchanging those currencies.

Need of FFMC License

Full Fledged Money Changer, or FFMC, has been given the task by the Reserve Bank of India to provide licenses for individuals willing to start a currency exchange business in the country with the control and authorization of the Foreign Exchange Management Act of 1999. The businesses dealing with such currency exchange are labelled as Authorized Money Changers (AMCs).

Here are a few essential things to remember for the Authorized Money Changers –

  • Section 10 of the Foreign Exchange Management Act of 1999 states that only authorized businesses can deal in exchange of foreign currency and trading of currencies in the Forex market.
  • No individual should be involved in the currency exchange company unless and until he/ she has obtained the FFMC License through the Reserve Bank of India.
  • If such an individual is found to be indulging in the currency exchange company without acquiring the FFMC License, upon proving guilty, he/ she might face penal charges under the FEMA, 1999.
  • To provide ease to foreign tourists, the Reserve Bank of India has put guidelines for specific hotels, businesses, and restaurants to help them exchange currency.

When is a person eligible to start a currency exchange business?

The FFMC License for a currency exchange business is given to the person when he/she meets the following eligibility criteria –

  • Businesses having company registration under the Companies Act of 2013 are only eligible to apply for the FFMC License.
  • The total Net Owned Funds of the business must not be less than Rs 25 Lakhs to get the license for a single branch and Rs 50 Lakhs if the license requirement is for multiple branches.
  • The registered company should not face any charges, be they criminal or civil, with the execution of the Directorate of Revenue Intelligence.
  • In the Memorandum of Association, the object clause of the company shall reflect the actions related to the currency exchange made earlier.
  • After the company registration and grant of the FFMC License, the company should proceed with the business activities within six months of getting the License.

Mandatory Regulatory Compliances

Reserve Bank of India has made it mandatory for the applicants of the FFMC License to abide by certain regulatory compliances and run the business without any fines and penalties. These compliances are as follows –

  • The license acquirer is required to appoint a person who looks after the compliance and maintenance of the license in line with the rules and regulations set by the RBI.
  • The business commencement should be in line with the guidelines and upon that the license holder has to quarterly send reports of returns.
  • Every transaction, including the buyer and recipient’s information, the move’s value and purpose, and the foreign currency that was sold, must be recorded by the operator. These documents, which need to be retained on file for at least three years, may be viewed by RBI or any other organization it has authorized.
  • In the case where the exchange of currency from one person exceeds Rs 5 Lakhs, the currency changers are required to inform RBI, including the whereabouts of the funds and the reason why they need to be exchanged.

Benefits of the currency exchange business

The benefits of the currency exchange business are as follows –

1. Demand Surge

To start a currency exchange company is a wise idea these days since the demand is increasing day by day because of the increase in tourism and trade between foreign nations. With so much travel happening around, the currency exchange company is a great business initiative in the areas where tourism is at its peak. It not only benefits the business but also the GDP of the nation since a lot of money is spent by foreigners in the Indian market during their stay. Business travels happening around the globe also foster the merits of the currency exchange business.

2. Income Source

One of the other merits of the currency exchange business is that it is a source of constant income as either Indian citizens going abroad require currency exchange or foreigners coming to India require currency exchange. The business person earns through the spread between the currency rates and also with the commission that he takes for converting the currency.

3. Potential for Growth and expansion

The currency exchange business has so much growth potential in the Indian market since a lot of people travel in and out of the country daily. A person can scale the business and expand it to new locations with new branches under the name. With a good market reputation and adequate market, the business can boom within a period with not much trouble.

4. Business Diversification

Currency exchange company also include diversifying the service offered to the customers. The license holder can include other services in the business, like money transfers internationally, prepaid travel cards, hotel referrals, sightseeing packages linked with other businesses, and traveller’s checks.

5. International Alliance

With so many international transactions and link-ups, there can be the opportunity to form an International Alliance in some projects and foster them for more earnings. The collaboration from the business connections can lead to something big and a good earning source.

Conclusion

Strategic planning, regulatory compliance, and in-depth research are necessary when launching a currency exchange company in India. A suitable location must be secured, the regulatory framework must be understood, permissions must be obtained, and technology must be invested in. Success in this cutthroat industry also depends on building partnerships with banks, putting strong security measures in place, and offering first-rate customer service. Notwithstanding these obstacles, there is a lot of room for expansion in the Indian currency exchange market, particularly given the growing need for foreign exchange transactions brought on by globalization and worldwide travel. The company registration should be done by adhering to regulatory regulations, proper procedures, and a customer-centric approach; entrepreneurs can establish a lucrative currency exchange business in India and thereby foster the development of the financial services sector.

Corpbiz holds expertise in establishing these businesses and getting the FFMC License for the applicants. We have a dedicated team of lawyers who can assist you in the paperwork process and get you the license to start the currency exchange business. We can also help you if you already have such a business and want to expand it by opening its branches. 

Frequently Asked Questions

  1. What do you mean by FFMC?

    FFMC means Full Fledged Money Changer, which is the designated authority as per the Reserve Bank of India to carry out the money exchange business in the country as stated in Sec 10 of the Foreign Exchange Management Act of 1999.

  2. What is the requirement for opening a branch of currency exchange business in India?

    The requirement for opening a branch of a currency exchange company in India is to have a minimum net owned funds of Rs 50 Lakhs. 

  3. How can an individual benefit from the currency exchange business?

    With so much travel happening around, the currency exchange business is a great business initiative in the areas where tourism is at its peak. It not only benefits the business but also the GDP of the nation since a lot of money is spent by foreigners in the Indian market during their stay. Business travels happening around the globe also foster the benefits of the currency exchange business.

  4. How much time is required to get the FFMC License in India?

    After the application is made by the applicant and it passes all the criteria set by the RBI, then it will take around 2-3 months to get the FFMC License. You can contact the Corpbiz team for detailed knowledge about the process.

  5. What is Form FLM 4?

    Form FLM 4 is the form filled to specify the maintenance of the register of foreign currency purchase from the dealers and other authorized money exchangers.

  6. What is Form FLM 3?

    Form FLM 3 is the form filled to show the details of the foreign currency purchases done by the general public.

  7. How is the currency exchange business a reliable business source?

    The currency exchange company is a source of constant income as either Indian citizens going abroad require currency exchange or foreigners coming to India require currency exchange. The business person earns through the spread between the currency rates and also with the commission that he takes for converting the currency. 

  8. How is the target market important in the currency exchange business?

    In the currency exchange company, a businessman should look into the market he is wishing to settle his business. If there are so many competitors in the market, then there would be a lot of competition to set up the business and make potential clients since there are already big sharks in the market which will not allow you to settle the business. Hence, a perfect market should be looked at to continue the business where entry to the market is easy.

  9. For what reasons are FFMCs permitted to exchange currencies?

    The reasons for which the FFMCs are permitted to exchange currencies are as follows –
    ·         Business Trips
    ·         Private Trips
    ·         Forex Prepaid Cards

  10. What is the lower limit after which money exchange needs to be informed to RBI?

    The lower limit after which money exchange needs to be informed to RBI is Rs 5 Lakhs.

Read Our Article: Interim CFO Services: Proactive Business Choices

Request a Call Back

Are you human? : 4 + 8 =

Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality