Overseas individuals, tourists who come to India, often struggle to support their financial activities due to inadequate funds. And the funds they possess are of no use unless it is being converted in the Indian currency. And that’s where the FFMC comes into the play. They are the only registered entity in India who can provide foreign exchange services to the people in need. In this article, you will come across various aspects of FFMC and learn why they hold unprecedented value for foreigners visiting India. This article shed some light on the objectives behind allowing FFMCs to do business.
Overview on FFMC
FFMC stands for Full Fledged Money Changer. These entities work under the RBI’s guidelines, and their role is to undertake the forex trading activities in India. Without a valid FFMC license, no entities are liable to engage with such business, or else they have to confront hefty penalties. Hence, to pull off such nature of the business, an applicant to obtain a valid FFMC license from RBI. The authorized money exchanger’s job is to buy out foreign exchange from the foreigners and the Indian nationals and sell it to individuals visiting India. It is probably the one main objective behind allowing FFMCs to do business in India.
Type of AMCs in India
Three types of AMC exist in the country at present.
- Authorized Dealer Category- 1 Bank (AD Category 1) – Presently, there are 102 entities available in India working as an Authorized Dealer Category- 1 including, Canara bank, SBI, and Axis bank
- Authorized Dealer Category- 2 Banks (ADs Category-2)
- Full Fledged Money Changers (FFMCs)
Objectives behind allowing FFMCs to do business
- Provide seamless access to foreign exchange facilities to the individuals visiting India.
- Promotes forex exchange activities at a larger scale.
- Providing visitors access to home currency against the foreign currency notes, coins, and travelers’ cheques obtained from the residents as well as non- residents.
- Gaining access to international credit and debit cards from the residents as well as non- residents.
- Facilitates Store Value Card/Charge Card/Smart Card to the resident visiting abroad.
- Providing seamless cross-border transactions.
Who can raise an FFMC license in India?
Entities that are willing to undertake the FFMC business in India need to satisfy following eligibility criteria without exception.
- The company should be a legal entity and operates under the canopy of Company Act 2013
- Entity availing FFMC license for a single branch should have a net owned fund of Rs. 25 Lakhs.
- For multiple branches, the minimum threshold of a net owned fund* is Rs. 50 Lakhs.
Documentations needed for FFMC License
Application regarding the FFMC license is available on the RBI official website. An applicant seeking an FFMC license needs to fill up this application and submit it along with the following documents to the respective regional office of the foreign exchange department of RBI.
- Copy of the company’s incorporation certificate.
- Copy of Commencement certificate of the business.
- Copy of MOA along with a letter displaying clause related to the course of action that the company will undertake in this business.
- The confidential report furnished by the applicant’s bank, specifically in a CIR format.
- Audited Balance Sheet copy.
- Certificate from CA validating the company’s net owned funds.
- The declaration confirms that the company and its founding members are not engaged with felony and have no pending cases against the ED/DRI.
- A write up by the owner briefing company’s operation.
- Proof regarding the previous involvement with the FFMC business, if any.
- Once the applicant’s FFMC license is availed, the next step is to provide the following documents before the commencement of the business.
- Lease agreement copy.
- A copy of the Shops Act.
- Rent receipt.
- The FFMC license holder must display a copy of the license at the business premises.
- The financial affairs of the company must be scrutinized through a proper auditing protocol to ensure transparency.
- FFMCs must submit a copy of the audited balance sheet to the RBI in the recommended timespan to verify their net owned funds.
Read our article: An Outlook on Benefits, Types and Procedure of FFMC License
Pointers worth to remember
- Indian nationals can visit the respective AMC office and avail International debit or credit cards to cater to their financial needs in the overseas location.
- Only RBI driven entities are entitled to pursue money changing activities in India. Hence, it’s an offense to conduct such a business without the approval of RBI.
- While going through the initial phase of the registration process, applicants need to attach a copy of the audited balance sheet validated by the company secretary.
- After availing the FFMC license, the applicants need to furnish documents such as a copy of the shop act and rent receipt before they initiate the business activity. It’s worth noting that it is mandatory, and any violation in this context could incurs hefty penalties.
- Anyone who intends to avail FFMC license. First, needs to avail an application that is available on the RBI’s website.
Authorized money changes play a vital role in the upliftment of the economy. AMC has simplified the process of currency conversion for the visitors coming from abroad. AMC not only helps the foreign nationals but also enables local residents to reap the benefit of their services. Hence, we can conclude that the sole purpose of FFMC in India is to provide hassle-free forex trading services to the residents and non-residents. FFMC Registration can be done through the simple online process. If you seek some technical advice on this topic, i.e., Objectives behind allowing FFMCs to do business, feel free to contact CorpBiz‘s expert anytime.
Read our article:Regulatory Framework for FFMC License: A Comprehensive Overview