The business entity which carries out foreign exchange business should have a Full Fledged Money Changer license. Many people who travel abroad for different purpose needs to convert their domestic currency into the currency of the country which they are visiting. FFMC license is mandatory for all the currency exchange business entities in India.
What is the FFMC license?
Full-fledged money changer license is the type of license acquired by the company that is willing to carry out business related to foreign exchange of currency or any money-related changing activity in India.
As per Section 10(1) of the Foreign Exchange Management Act,1999, AMCs (Authorized Money Changer) are the one who is authorized by RBI. No one can carry out the business of money exchange unless they have an FFMC license approved by RBI.
What are the types of FFMC license?
Any business to operate, the following licenses can be obtained:
Authorized dealer category – I (Banks)
Authorized Dealer Category – II
Full Fledged Money Changers (FFMCs)
What are the benefits of an FFMC License in India?
The benefits of FFMC license are-
Full Fledged Money Changer is capable of providing sales facilities for foreign exchange.
When asked for purchases of coins, foreign currency notes, and Travelers' cheques from residents and also from non-residents, FFMC is likely to issue a certificate of encashment.
Taking in and taking out of the foreign exchange is possible through the support of FFMC.
FFMC may pull off those transactions that are concerned with Travelers' cheques, coins, and foreign currency notes at rates of exchange in alignment with the prices prevailing in the market.
What are the different activities carried out by FFMCs?
FFMC can carry out various activities, they are-
FFMC can get into the Franchise agreement, which means undertaking the limited money exchange business that includes coin conversion and exchange of foreign currency into Indian currency.
FFMC has permission to trade Indian currency to foreign currency for visitors against their International cards.
FFMC are allowed to purchase coins or any traveler's cheques or any foreign currency.
An FFMC has permission to sell foreign exchange for:
Business Visits
Forex prepaid cards
Private Visits
What are the eligibility criteria for getting FFMC Registration?
As per RBI guidelines, the applicant must attain the following requirements-
The applicant must have a company registered under the Companies Act, 2013.
The minimum Net-owned Fund for a single branch must be Rs. 25 lakhs while Rs. Fifty lakhs with multiple departments.
There must not be any criminal or civil cases ongoing or pending against the company.
The object clause in Memorandum of association must state the money-changing activity, which is to be followed by the company.
The business should carry out the activity within six months after acquiring the license.
What are the documents required for getting FFMC?
Incorporation certificate of the entity;
The Memorandum of Association and Article of Association should include provisions related to carrying money exchange business in India.
Copy of the Audited accounts
Copy of the Balance Sheet
Copy of Profit & Loss Account of the company for the last three years
Sealed and confidential report from the applicant Banker.
A declaration that provides information related that no criminal cases are initiated or pending against the applicant as well as the directors.
Should providing the detail concerning any sister or associated entities that are dealing in the financial sector.
A Certified Board of Resolution which consists of the information related to the money exchange business.
What is the process for acquiring FFMC License?
Step-1
Apply for an FFMC license
Submit the detailed application to the concerned regional office of the RBI with the required documents.
Step-2
'Fit and Proper’ criteria
The applicant must fulfill fit and proper criteria, which means there should not be any pending proceedings against the entity.
Step-3
Review of application by RBI
RBI will examine the application for fit and proper criteria for the director. If the RBI finds the form up to mark, the application will be considered.
Step-4
Certification for Registration
If RBI is satisfied and everything is fine with the application, the RBI will allow the grant of license within two or three months.
Step-5
Clearance by the Empowered Committee
The applicant requires prior approval from the authorized, empowered committee that is set up for the purpose.
What are the Annual Compliance Requirements for FFMC License?
The annual compliance requirements for FFMC license are-
FFMC has to maintain a balance book of all the foreign currency-related activities, register them daily summary and proof of the purchase of foreign currency, etc.
FFMC has to provide the details related to the purchase of foreign currency notes to the RBI within the 10th of the next month
FFMC has to submit an annual statement to the concerned Regional Office of the Reserve Bank of India.
FFMC has to provide the certificate issued by the statutory auditors with a yearly audited balance sheet to the respective Regional Office of the Reserve Bank of India.
What is the process for the renewal of the FFMC License in India?
The company should make an application for the Full Fledged Money Changers License Renewal one month before the License expiry date. After the expiry of the License, Application for renewal of a Money Changers License is of no use as no restoration can take place.
What Documents and Records should be maintained by FFMC License?
In connection with its money-changing transactions, FFMC must maintain the following registers of activities-
Balance Book and Details Of
Foreign currency notes or coins
Form FLM 2 stores Travelers' cheques
Register Of
Form FLM 3 reserves the information related to the purchase of foreign currencies from the public.
All the purchases of notes, foreign currency, coins from the authorized money changers, and the authorized dealers in the form FLM 4.
Details of the sale of foreign currency notes/coins and travelers' cheque to the public in FLM 5 Form.
Register of sales of coins and foreign currency notes to the overseas banks or authorized dealers or Full Fledged Money Changers in the Form FLM-6.
Form FLM 7 comprises Travelers' cheques surrendered to the authorized dealers or authorized money changers.
How can the Reserve Bank of India use its Rights to revoke the license given to any FFMC?
As RBI has the power and right to revoke FFMC License in India, RBI can go for canceling if it is convinced that-
It is in public benefit
The FFMC has failed to act under the provisions of Foreign Exchange Management Act, 1999
Conclusion
It is mandatory to obtain an FFMC license to anyone who wishes to carry the money exchange business in India. The FFMC entity registered by the Reserve Bank of India can deal with foreign exchange for a distinct purpose like the purchase of foreign exchange from the residents as well as non-residents visiting India. And the business entity also needs to follow the requirements as well as compliances after obtaining the FFMC license online in India. For any query, contact Corpbiz.