Procedure and Documentation for obtaining Licence of Full Fledged Money Changer (FFMC) By CS Mohit Saluja

FFMC i.e. Full Fledge Money Changer is a business under which a concern use to change the particular currency of one country into the currency of another country. This is mainly helpful in cases of tourism where the resident individuals when intend to travel into other countries and for which they require the foreign currency of that particular country. Or whenever the foreign travelers comes to India and carry the foreign currency with them and they want Indian Currency, then they move to the FFMCs or any other persons who carry the business of changing the foreign currency.

Other than FFMCs mainly there are AD Banks which deal in changing the currency of the countries specially authorized by the RBI to carry money changing activities along with other specified activities as authorised and permitted by RBI from time to time.

Here we shall not be discussing about AD banks as FFMC Licence holder rather only about Companies as Full Fledged Money Changer (FFMCs) Licence Holder, the procedure to apply for FMC Licence with RBI, eligibility for obtaining Licence of FFMCs and various other related issues in the form of FAQ:

1. Who are authorized OR the Authorised Persons to carry business of Full Fledged Money Changer?

Authorised Dealer Banks of Category I, II, III are authorized to carry the business activities of FFMC.

2. Can an Indian Person/ Natural Person is also authorized to carry the FFMC business?

Yes, a natural person is also authorised through becoming the director by registering a private/ public Limited companies as Full Fledged Money Changers (FFMC) companies to undertake purchase of foreign exchange and sale of foreign exchange for specified purposes viz. private and business travel abroad.

3. What is the objective behind allowing FFMCs to do business?

To widen the access of foreign exchange facilities to residents and tourists while ensuring efficient customer service through competition.

4. What are the money changing facilities presently available in India?

At present, the conversion of foreign currency or travellers' cheques designated in foreign currency into Indian Rupees and vice versa is possible through AD Category-I banks, ADs Category-II and Full Fledged Money Changers (FFMCs). Further, AD Category-I banks, ADs Category-II and FFMCs may appoint franchisees (also known as agents) to undertake purchase of foreign currency.

5. Whether a licence is mandatory for carrying out money changing business?

Yes. Money changing business can be undertaken by entities authorised by the Reserve Bank under Section 10 of the Foreign Exchange Management Act, 1999. No person shall carry on money changing business without the possession of a valid licence issued by the Reserve Bank. Any person found undertaking money changing business without a valid licence is liable to be penalised under the Act.

6. Who can apply for an FFMC licence?

The applicant has to be a company registered under the Companies Act 1956/2013

7. How much capital is required for a FFMC Company

For a FFMC, there must be requirement of at least minimum Net Owned Funds (NOF) of Rs. 25 Lakhs to apply a single branch FFMC. So we can say that a company must be incorporated with minimum capital of Rs. 26 lakhs since after deduction of pre-liminary expenses and other various other expenses of the company, there must be at least balance of Rs. 25 lakhs in hands of the company in its Bank account.

Also be noted that for applying Multiple Branch FFMC, the NOF requirement is Rs. 50 Lakhs.

8. Where can one submit the application for an FFMC licence?

Application in the prescribed form as issued and amended by the RBI from time time, along with the required documents should be submitted to the respective Regional Office of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the applicant company falls.

9. What are the basic documents required for obtaining the FFMC Licence?

  • PAN, Aadhaar Card and address proof of all the Directors of the company
  • Copy Certificate of Incorporation and proof of filing and approval of Certificate of Commencement of Business of the company;
  • Memorandum and Articles of Association containing a provision for undertaking money changing business or an appropriate amendment to this effect filed with the ROC;
  • Copy of the latest audited accounts with a certificate from the Statutory Auditors certifying the Net Owned Funds as on the date of application. Copies of the audited Balance Sheet and Profit & Loss Account of the company for the last three years, wherever applicable;
  • Confidential Report from the applicant’s banker in a sealed cover;
  • A declaration to the effect that no proceedings have been initiated by / are pending with the Directorate of Enforcement (DoE) / Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities, against the applicant company or its directors and that no criminal cases are initiated / pending against the applicant company or its directors;
  • A declaration to the effect that proper policy framework on KYC / AML / CFT, in accordance with the guidelines issued vide A.P.(DIR Series) Circular No. 17[ A.P.(FL/RL Series) Circular No. 04] dated November 27, 2009, as amended from time to time, will be put in place on obtaining the approval of the Reserve Bank and before commencement of operations;
  • A certified copy of the board resolution for undertaking money changing business.
  • Proof of Registered Office of the company and of branch of the company which can be either Rent Deed or be the Registry Copy along with Utility bill not older than 2 months
10. How to calculate Net Owned Funds (NOF)?

Applicant companies should calculate their Net Owned Funds (NOF) of as per the following:

  • Owned Funds :- (Paid-up Equity Capital + Free reserves + Credit balance in Profit & Loss A/c) minus (Accumulated balance of loss, Deferred revenue expenditure and Other intangible assets)
  • Net Owned Funds :- Owned funds minus the amount of investments in shares of its subsidiaries, companies in the same group, all (other) non-banking financial companies as also the book value of debentures, bonds, outstanding loans and advances made to and deposits with its subsidiaries and companies in the same group in excess of 10 per cent of the Owned funds.
11. What is the time frame within which a newly licensed FFMC should commence operations?

A newly licensed FFMC should commence operations within a period of six months from the date of issuance of licence. A copy of the registration under Shops & Establishment Act or any other documentary evidence such as rent receipt, copy of lease agreement, etc. should be submitted to the Reserve Bank before commencement of business.

12. When should an application for licence renewal be made?

An application from an FFMC/non-bank AD Category-II for renewal of licence shall be made two months before expiry of the licence or such other period as the Reserve Bank may prescribe. Where an application for licence renewal is submitted as above, the licence shall continue in force until the date on which the licence is renewed or the application is rejected, as the case may be. No application from an FFMC/non-bank AD Category-II for renewal of licence shall be made after expiry of the licence.

13. Under what circumstances can Reserve Bank revoke an FFMC licence?

An authorisation granted under Section 10(1) of FEMA 1999 may be revoked by the Reserve Bank at any time if the Reserve Bank is satisfied that -

  1. it is in public interest so to do; or
  2. the authorised person has failed to comply with the condition subject to which the authorisation was granted or has contravened any of the provisions of the Act or any rule, regulation, notification, direction or order made thereunder
Reserve Bank also reserves the right to revoke the authorisation of any of the offices of the authorised person for infringement of any statutory or regulatory provision. The Reserve Bank may at any time vary or revoke any of the existing conditions of an authorisation/licence or impose new conditions.
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