FFMC License – Benefits, Types and Procedure

FFMC License – Benefits, Types and Procedure

FFMC License – Benefits, Types and Procedure

FFMC License in India is mandatory for certain entities to deal with foreign exchange or foreign securities. The responsibility to regulate FFMC License lies on the shoulders of Reserve Bank of India.

According to section 10 of the Foreign Exchange Management Act, 1999, authorized money changers are the only type of organizations engaged in money changing services and offer significant foreign exchange services.

FFMC License Holders purchase foreign exchange from Indian residents and non-residents and sell that foreign exchange to foreign visitors or tourists for private and business visits purposes.

Hotels, foreign visitors as well as travelers, along with the specific firms, get the registration to overcome the hindrances and also it will help them in the direction of traveler's cheques, coins, and foreign currency notes as per the RBI guidelines.

Before getting a money changer's license from the RBI end, no person has got the right to proceed or advertise that they deal in money changing activities. If there will be a person's involvement in any form of money changing business without a licit FFMC license in India, that person will amount to heavy penalties as per the Act.

 

Types of Authorized Money Changers

Here are the following types of AMCs:

  • Authorized Dealer Category- 1 Banks (AD Category 1)
  • Authorized Dealer Category- 2 Banks (ADs Category-2)
  • Full Fledged Money Changers (FFMCs)

What Activities can FFMC perform?

  • An authorized FFMC can get into a franchise agreement for carrying out restricted money changing businesses, i.e., conversion of travelers' cheque, coins, or foreign currency notes to Indian currency.
  • FFMC and their Franchise are entitled with the liberty to buy coins, foreign currency notes, and travelers' cheques from both residents as well as non-residents.
  • An FFMC has got the green light to sell foreign exchange for Forex prepaid cards, Business visits, and also for Private visits.
  • An FFMC is authorized to sell Indian currency to tourists from different countries against their International debit/credit cards.

Eligibility Criteria for Applying for the FFMC License in India

  • The entities applying for the FFMC License in India must be registered under the Companies Act 1956/ Companies Act 2013.
  • To apply for a single branch, the corporation must have minimum net owned funds of Rs. 25 Lakh, and for applying for a multiple branch license, the entity must have Rs. 50 Lakh.
  • The entity's name must not be involved in any civil or criminal case. Department of Revenue Intelligence must not hold any criminal record against the company.
  • After getting the FFMC License, the entity must continue its business within six months of the date of license issue.
  • The object clause of Memorandum must have money exchange activity by the company adequately mentioned.

 

Documents Required for Obtaining the FFMC License in India

Here, we are talking about those relevant documents that will get submitted to obtain the online FFMC License in India

  • A copy of the Certificate of Incorporation a company.
  • Copy of Memorandum along with the Articles of Association that covers the provisions for undertaking money exchange business.
  • Latest audited financial statements i.e., Balance Sheet, as well as Profit & Loss Account for the immediate three years, certified by the statutory auditor.
  • Information concerning the details of a sister or associated entities operating in the financial sector like NBFC.
  • It is mandatory for the applicant's bank to provide a duly sealed confidential report.
  • One of the declarations states that the Board of Revenue Intelligence (DRI)/ Board of Enforcement (DoE) or other law imposing authorities toward the applicant company and the directors.
  • A certified board resolution copy for running a business related to money exchange.

Procedure for Obtaining an FFMC License in India by RBI

Only those corporations are entitled to get an FFMC License in India who complies with the Requisites of Licensing. According to the Reserve Bank of India, the procedure to acquire FFMC License in India is explained step by step

  • Provide all the details in the application for FFMC License and submit the detailed application to the respective regional office of RBI's Foreign Exchange Department.
  • Reserve Bank of India would examine the director of the applicant company under the "Fit & Proper" criteria set by RBI. If everything goes according to the demand of RBI and the regulatory body gets satisfied, then the FFMC license will be issued within a period of 2 to 4 months.
  • The authority to give clearance is in the hands of the Empowered Committee along with the Reserve Bank's decision regarding the approval would be final as well as obligatory.

What are the After-approval Conditions to be fulfilled?

After getting the License, Full Fledged Money Changers fulfills the following requirements

  • Before commencing a business, a corporation needs to submit a copy of Registration under Shops and Establishment Act, or even documentary evidence like Lease Agreement copy, copy of Rent Receipt to the concerned regional office of Reserve Bank.
  • Within six months from license issue, FFMC should go for the commencement of its business venture.
  • From time to time, RBI examines their activities which should be as per the RBI guidelines.
  • At each of its business sites, they have to present a copy of money changing license issued by RBI.
  • FFMCs must set in motion a concurrent auditing system of all the transactions they've undertaken till now.
  • Another mandatory point that FFMCs must consider that they have to submit their yearly audited Balance Sheet to the concerned regional office of Reserve Bank of India.

Renewal of FFMC License in India

The company should make an application for the Full Fledged Money Changers License Renewal one month prior to 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.

Maintenance of Documents and Records by FFMC's

In connection with its money-changing transactions, FFMC must maintain the following registers of activities

Balance Book and Details Of

·         Foreign currency notes/coins in Form FLM 1

·         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/authorized dealers/Full Fledged Money Changers in the Form FLM-6.
  • Form FLM 7 comprises Travelers' cheques surrendered to the authorized dealers or authorized money changers.

When can the Reserve Bank of India utilize 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 in accordance with the provisions of Foreign Exchange Management Act, 1999

A Brief Take on Franchisees

RBI has authorized one more intermediary to trade in foreign exchange, i.e., Agents and Franchisees. To deal with money changing actions, Authorized Dealer Category- 1 Bank, Authorized Dealer Category- 2, and FFMC's can make the appointment for their Agents as well as Franchisees. Following are the key points related to this

·         The Authorized Dealer Category- 1

·         AD Category- 2, All the banks and

·         Reserve Bank of India has allowed FFMCs to put their feet in Franchise Agreements for meeting the objective of commencing the business of money changing. If any person intends to opt for Franchisee of any AMC, that person needs to enter into Franchise agreement before doing so.

Concerning This, the Following Salient Points Are

·         Any entity with a place of business can be a Franchise.

·         An entity needs to have a minimum net owned fund of Rs 10 Lakh.

·         Franchisees can carry out only those businesses that are related to restricted money changing.

·         A Franchisee Agreement must get agreed out between the parties.

·         The Franchisees must reveal their Franchisers names, exchange rate, and they have got the go-ahead signal regarding the purchase of foreign currency prominently in their offices.

·         The franchise will be surrendering the foreign currency that it has purchased only to its franchiser within the duration of 7 working days, counting will start from the date of purchase.

·         It's the responsibility of the Franchise to track and manage the existing proper transaction records.

 

Benefits of FFMC License in India

·         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 rates prevailing in the market.


FAQs

 

Q. Who is allowed to be a full-fledged money changer?

Entities other than the bank could be a Full Fledged Money Changer.

 

Q. Whether the FFMC License need to renew yearly?

Yes, the permit must be renewed each year by giving the application documents to the Reserve Bank of India.

 

Q. Where an application will be filed for FFMC License?

For the FFMC License, the application is filed along with the required documents with the foreign exchange department of the Reserve Bank of India where the registered office of the corporation is situated.

 

Q. Is there any possibility of carrying out money changing Business without the License of FFMC?

No, there is zero possibility to work as a money changer without getting the FFMC Licensing.

 

Q. Apart from getting FFMC License Approval, what are the other registrations required?

Submit all these copies to the Regional Office of RBI before commencing business

·         A copy of lease agreement

·         A copy of registration under shops

·         Rent receipt or Establishment Act

 

 

For more information visit www.taxaj.com

Posted by Pooja

Team Taxaj

 

 

 




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