fb


FULL FLEDGED MONEY CHANGERS (FFMC) LICENCE

FULL FLEDGED MONEY CHANGERS (FFMC) LICENCE

FULL FLEDGED MONEY CHANGERS (FFMC) LICENCE

Introduction

The Reserve Bank of India (RBI) is the primary body that conducts foreign exchange in India. Under Section 10(1) of the Foreign Exchange Management Act, the RBI has the power to authorize any person to deal in foreign exchange. RBI grants a licence to deal in foreign in exchange to mainly three categories of authorized dealers (AD).

1.    Authorised Dealers Category-I which allows select banks to carry out all permissible current and capital account transactions as per directions issued from time-to-time.

2.    Authorised Dealers Category-II which allows specific entities to carry out specified non-trade related current account transactions, all the activities permitted to Full Fledged Money Changers and any other activity as decided by the Reserve Bank

3.    Authorised Dealers Category-III which includes selected financial and other institutions to carry out specific foreign exchange transactions and companies registered under Companies Registration Act 2013, to act as Full Fledged Money Changers (FFMC).

The above categories obtaining a licence for foreign exchange may appoint franchisees for carrying foreign exchange business i.e. conversion of a foreign currency note, coins or travellers’ cheques into Indian currency.

Registration Process for FFMC Licence

FFMC can sell and purchase foreign exchange only for private and business travel purposes. The registration process for FFMC licence is offline. The application form accompanied by the required documents is to be submitted to the respective Regional Office of the Foreign Exchange Department of RBI under whose jurisdiction the registered office of the applicant company falls. RBI issues certain guidelines for obtaining FFMC licence in the form of circulars.

Eligibility

1.    Applicant should be a company registered under the Companies Act, 1956/ Companies Act 2013/ Registration of Companies (Sikkim) Act, 1961.

2.    The applicant must have minimum Net Owned Funds (NOF).

a)    Single branch FFMC minimum NOF- Rs. 25 Lakh.

b)    Multiple branch FFMC minimum NOF- Rs. 50 Lakh.

The Net Owned Funds of applicants, other than banks, should be calculated as per the following:

(a) 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)

(b) 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.

Required Documents

The application for FFMC licence should be accompanied by the following documents-

1.    Copy of the Certificate of Incorporation.

2.    Memorandum and Articles of Association containing a provision for undertaking money changing business or an appropriate amendment to this effect filed with the Company Law Board.

3.    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.

4.    Confidential Report from the applicant's banker in a sealed cover.

5.    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.

6.    A declaration to the effect that proper policy framework on KYC / AML / CFT, in accordance with the guidelines issued by Reserve Bank of India, Department of Banking Regulation, Central Office as referred to in their ‘Master Direction – Know Your Customer (KYC) Direction, 2016’ and other instructions in this regard so far and from time to time in future, mutatis mutandis, applicable to APs, will be put in place on obtaining the approval of the Reserve Bank and before commencement of operations.

7.    Details of sister / associated concerns operating in the financial sector, like NBFCs, etc.

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

Clearance of Application

An Empowered Committee clears the application of FFMC licence which is then considered for issuance by the Regional office of the RBI. The decision of RBI in approving the FFMC license is final and binding. 

Once the FFMC licence is approved by the RBI, FFMC should submit a copy of the registration under Shops & Establishment Act or any other documentary evidence such as rent receipt, copy of lease agreement, etc., to the Regional Office before commencing the business.

The FFMC should commence its operations within a period of six months from the date of issuance of the licence and inform the Regional Office concerned of the Reserve Bank.

FFMC licence is to renewed two months before the date of expiry.

Franchisee

Ads and FFMC are allowed to enter into agency or franchise agreements for the purpose of carrying on restrictive money exchange business. Any entity that has a place of business and minimum NOF Rs. 10 Lakhs can be registered as a franchisee to carry out restricted money changing business. 

Application Process for franchisees

1.    Ads or FFMC should apply to the respective Regional Office of the Reserve Bank, in Form RMC-F for the appointment of franchisees.

2.    The application should be accompanied by a declaration that while selecting the franchisees, adequate due diligence has been carried out and that such entities have undertaken to comply with all the provisions of the franchising agreement and prevailing Reserve Bank regulations regarding money changing. 

3.    Approval would be granted by the Reserve Bank for the first franchisee arrangement. Thereafter, as and when new franchise agreements are entered into, these would have to be reported to the Reserve Bank in Form RMC-F on a post-facto basis along with similar declaration as indicated above. 

Franchisees are required to strictly adhere to the AML / KYC/ CFT guidelines, as applicable to ADs Category–I Banks / ADs Category – II / FFMCs.

Renewal of FFMC Licence

1. The applicant should be a company registered under the Companies Act, 1956/ Companies Act, 2013/ Registration of Companies (Sikkim) Act, 1961 having a registered office within the area of jurisdiction of the respective Regional Office of the Foreign Exchange Department.

2. The Net Owned Funds required are as follows:

CategoryMinimum NOF
Single branch FFMCRs.25 lakh
Multiple branch FFMCRs.50 lakh

3. Applications for renewal should be submitted along with the documents mentioned below.

(a) Copy of the latest audited accounts with a certificate from the Statutory Auditors regarding the position of Net Owned Funds as on date.

(b) Confidential Report from the applicant's banker in a sealed cover.

(c) A declaration to the effect that no proceedings have been initiated by/ are pending with the Directorate of Enforcement / Directorate of Revenue Intelligence 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.

(d) A copy of the KYC / AML / CFT policy framework existing in the company.

Conclusion

Sec 10(1) of the FEMA Act, 1999 gives power to RBI to authorize three categories of persons to deal in foreign exchange. No entity without a licence issued by the RBI is allowed to conduct foreign exchange business. 

Author:

eStartIndia Team



Leave a Comment



Previous Comments


Related Blogs