A majority of people travel abroad for a variety of purposes. Be it a purpose of a business meeting, vacation, studies, onshore opportunities and many more. A significant proportion of this consists of business travelers. So how do they manage despite having their domestic currency? All you need is to consult a company which will convert your currency into the currency of the country which you are visiting. But what are the things which you can not overlook at any cost? The company which carries out the business of forex currency exchange in India must have the FFMC License. Here, we will see in detail the Procedure for obtaining the FFMC License.
What is the FFMC License?
The RBI must authorise the entities or the companies which perform the business of money exchange under Section 10 of the Foreign Exchange Management Act[1] (FEMA), 1999. After the licensing approval, these companies will be considered as AMC (Authorized Money Changer). Any business entity undertaking the money-changing business without the valid FFMC License is liable to a hefty penalty under the FEMA Act. The objective behind the business entity to get the FFMC license is that it helps the residents and tourists to access the foreign exchange facilities at ease.
Full Fledged Money Changer commonly known as FFMC License, is the license required by the companies which intend to carry out the business of Forex currency exchange.
What is AMC?
AMC is a Full Fledged Money Changer which are of following types:
- Authorised Dealer Category -I Banks,
- Authorised Dealers Category – II
- Full Fledged Money Changers (FFMCs).
Who can apply for the FFMC license?
To apply for the FFMC license, the company or the entity must be registered under the following acts:
- Companies Act 2013
- Registration of Companies (Sikkim) Act, 1961
The Net Owned Fund Requirement (NOF) for the companies is as follow:
- For a single-branch FFMC license – INR 25 Lakh
- For a multiple-branch FFMC – INR 50 Lakh
What are the Documents required for FFMC License?
The application must be in the prescribed form as given in Part 1: Annex 1 of the FED Master Direction No. 18/2015-16 on Reporting under FEMA 1999. The following documents must be submitted to the respective regional office of the Foreign exchange Department of the RBI under whose jurisdiction the registered office of the company/entity falls.
- Incorporation Certificate of the Company/entity.
- Memorandum of Association (MOA) and Articles of Association (AOA) of the company. The AOA of the company must contain a provision for undertaking money changing business.
- A copy of the latest audited accounts along with a certificate of certifying the NOF (Net Owned Funds) as on the date of application from the Statutory Auditors.
- A copy of the Profit & Loss Account of the company and the audited Balance Sheet of the last three years.
- Applicant (Company/entity) Banker’s confidential report.
- A declaration to give an effect that no proceedings have been initiated by / are pending with the any Authority.
- A certified board resolution for undertaking the money exchanging business.
When can a licensed FFMC commence its operations?
A newly licensed FFMC should start its operations within a period of six months from the date of issuance of the license. Under the Shops & Establishment Act, other documents such as rent receipt, copy of lease agreement, etc. needs to be submitted to the Reserve Bank before the commencement of business.
What is the Procedure for obtaining the FFMC license?
The Procedure for obtaining the FFMC license is mentioned below:
Apply for the FFMC License
The applicant that is the company or the entity needs to apply to the respective regional office of the RBI along with the documents.
“Fit and Proper” Criteria
The application that is the entity must fulfil the “Fit and Proper” criteria, which states that no proceedings are pending with the DOE (Directorate of Enforcement) or DRI. Further, if any such proceeding is in pending condition, then the application won’t be escalated further for the issuance of the FFMC license. In addition to this, the Director of the company must fulfil the same criteria.
- If the “Fit and Proper” criterion is satisfied, then the request for the FFMC license will be granted by the Regional Office.
- After obtaining the approval from the RBI, the applicant company is required to submit the following documents to the Regional office concerned of the RBI –
- Rent Receipt.
- Lease Agreement
- Copy of the Registration under Shops and Establishment Act
What powers are given to the FFMC by the RBI?
- The FFMCs has the authority to deal in foreign exchange, and they can widen the access of foreign exchange facilities to residents and tourists.
- They have the power to purchase foreign exchange from the residents and non-residents of India.
- FMCs should keep a register containing purchase of foreign currency like balance book of traveller’s cheque or daily summary and coins.
- The Full Fledged Money Changers shall submit the consolidated statements of purchase or sale of the foreign currency notes to Reserve Bank every month.
- There must be a suitable system of Concurrent Audit of the FFMCs transactions.
- The proposed Company should have the Net Owned Funds (NOF) of at least INR 25 Lakh for a single-branch License while extending to INR 50 Lakh for a multiple-branch License.
What are the Annual Compliance Requirements for FFMC?
- The FFMC has to maintain the balance book of foreign currency coins, register of daily summary, a record of the purchase of foreign currency etc.
- The FFMC has to furnish the purchase of foreign currency notes to the RBI within the 10th of the next month after the licensing is approved.
- The FFMC has to submit an annual statement to the respective Regional Offices of the FED of the Reserve Bank of India.
- The FFMC has to submit the certificate issued from the statutory auditors along with an annual audited balance sheet regarding the NOFs as on the date of the balance sheet to the respective Regional Office of the Reserve Bank.
How to Renew the FFMC License in India?
A month before the expiry of the FFMC License, the applicant has to apply for the renewal of the license. Any application for renewal after the expiry of license will not be entertained.
Final Thoughts
The final thoughts suggest that it is necessary to obtain the FFMC License if you wish to carry out the foreign currency Exchange activity in India. And from the perspective of an individual, you must cross-check whether the company is FFMC licensed or not. The FFMCs authorized by the Reserve Bank of India deals in foreign exchange for the specified purpose like the purchase of foreign exchange form the residents and non-residents visiting our country. Also, you need to follow the post requirements and compliances after obtaining the FFMC license.
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