Definition

As per the section 10(1) of the of the Foreign Exchange Management Act, 1999 the Reserve Bank of India issues authorization to selected registered companies as Full Fledged Money Changers (FFMC) to undertake purchase of foreign exchange and sale of foreign exchange for specificied purposes viz. private and business travel abroad. The main objective behind allowing the FFMCs to do the business is to widen the access of foreign exchange facilities to residents and tourists while ensuring efficient customer service through competition.

Question:- Now the question arises that whether it is mandatory to get a license for carrying out money changing business

Answer is 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 ibid.

Activities To Be Carried Out By FFMC

• An FFMC may enter into a franchise agreement at their convenience for the purpose of carrying on the Restricted Money Changing business which basically involves the conversion of foreign currency notes, coins or travellers’ cheques into Indian Rupees (INR).
• An FFMC or its franchisees may freely purchase any foreign currency notes, coins or traveller’s cheques from the residents as well as the non-residents of India.
• An FFMC may sell Indian Rupees (INR) to foreign tourists or visitors against International Debit Cards/ International Credit Cards and take prompt actions in order to obtain reimbursements through normal banking channels.
• FFMCs may choose to sell foreign exchange for the following purposes.
  • Business Visits
  • Private Visits
  • Forex Pre-Paid Cards

Eligibilty For FFMC

1. The applicant has to be a company registered under the Companies Act, 1956/ Companies Act 2013/ Registration of Companies (Sikkim) Act, 1961.
2. Applicant must have a minimum Net Owned Funds (NOF) of INR 25 lakh to apply for a single-branch FFMC licence and INR 50 lakh to apply for a multiple-branch FFMC licence.
3. The object clause of the Memorandum must reflect the activity of money changing that is to be undertaken by the Entity.

Note:- Net Owned Funds (NOF) will be calculated as per the following.

1. 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.

• Further it must be noted that the prescribed minimum NOF needs to be maintained on an ongoing basis.

Submission of Application and Documents Required

Application in the prescribed form as issued and amended by the RBI from time to 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 along with the following documents:-

1. PAN, Aadhaar Card and address proof of all the Directors of the company

2.  Copy Certificate of Incorporation and proof of filing and approval of Certificate of Commencement of Business of the company;

3. Memorandum and Articles of Association containing a provision for undertaking money changing business or an appropriate amendment to this effect filed with the ROC;

4. 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;

5.  Confidential Report from the applicant’s banker in a sealed cover;

6. 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;

7. 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;

8.  A certified copy of the board resolution for undertaking money changing business.

9. 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.

 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 license. 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.

Time Limit for renewal of FFMC License

An application from an FFMC/non-bank AD Category-II for renewal of license shall be made two months before expiry of the license or such other period as the Reserve Bank may prescribe. Where an application for license renewal is submitted as above, the license shall continue in force until the date on which the license 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 license shall be made after expiry of the license.

Circumstances Under which Reserve Bank Can Revoke The FFMC License

An authorization 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 authorized person has failed to comply with the condition subject to which the authorization 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 authorization of any of the offices of the authorized 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 authorization/license or impose new conditions.