Full Fledged Money Changers

What does Full Fledged Money Changers (FFMC) mean?

A business that plans to conduct forex currency exchange operations after receiving Reserve Bank of India's prior approval is deemed to be Full Fledged Money Changers (FFMC).

The Reserve Bank of India authorizes companies to trade with foreign exchange for specific purposes under Section 10 of the Foreign Exchange Management Act, 1999.

There are three different types of AMCs:

  • Authorized Dealer Category  I Banks ( AD Category I Banks)
  • Authorized Dealer Category  II (AD Category II), and
  • Full Fledged Money Changers also called as FFMCs.

The aim of the three forms of Authorized Money Changers listed above is to provide broader access to foreign exchange facilities for residents and visitors. The aim is also to insure that, despite increased competition, consumers get the best and most efficient service.

What is meant by Full Fledged Money Changers License in India?

One must apply for a legitimate full fledge money exchanger license issued by the Reserve Bank of India in order to work as a licensed money exchanger and if any person or organization found to be performing money exchanging activities without the required license is liable to be penalized in accordance with the law.

It is necessary for the company to be licensed under the Companies Act, 2013 to receive an Full Fledged Money Changer (FFMC) license in India.

The Reserve Bank of India publishes Full Fledged Money Changers Instructions periodically in the form of a master circular named the Memorandum of Instruction on Money Changing Activities. Such guidelines as well as the requirements stated in the Foreign Exchange Management Act, 1999, must be observed by any organization that plans to join or is currently engaged in money making activities in India.

What is the Full Fledged Money Changer License compliance requirement in India?

For corporations to receive the FFMC permit, the qualification requirements are:-

  • Under the Companies Act, 2013, the corporation must be licensed with the Registrar of Companies.
  • For a single branch license, the company's minimum net owned fund (NOF) must be Rs. 25 lakh. The company's total net-owned investment must be Rs. 50 lakh for a multiple branch permit. It is essential that the FFMC continually maintain this minimum NOF.
  • Single Rs. 25 lakhs Rs. 50 lakhs Multiple Rs.

Note:  The Net Owned Fund (NOF) is determined by subtracting the company's contribution from its own investments. Investments can include a share of its subsidiaries, the book value of debentures, bonds, outstanding loans and even advances made to and deposited with its subsidiaries and companies in the same group in excess of 10 percent of the owned funds. Owned investments, on the other side, are extracted from the amount of paid-up equity capital, available savings and credit balance in P&L Report by subtracting accrued expense balance, deferred income expenditure and other tangible assets. It is also critical that the main activity listed in the company's object clause should be money-changing behavior. Finally, no pending lawsuit should be filed against the business with the Justice Department or Revenue Intelligence Department.

What requirements are compulsory to full filled for Full Fledged Money Changer (FFMC) license specifications in India?

  • Annual renewal of the FFMC license is necessary.
  •  The company shall commence operations within six months of the date the FFMC license is issued.
  • Using the Franchise Agreement, all three types of AMC: AD Category  I Bank, AD Category  II and FFMC assign their franchises to extend their network to provide money-changing facilities such as foreign currency exchange, taxes, coins and traveler's check for passengers, visitors, NRIs, etc.
  • The proposed business must have a minimum net held fund of Rs. 10 lakh to be approved as a franchise and its main purpose must be money-changing operations.
  • Regular review of the franchisee's accounts is necessary to ensure that its operations conform with RBI's terms and conditions.

Which authority controls the Full Fledged Money Changer (FFMC) licensing system in India?

  • In India, under Section 10 of the Foreign Exchange Management Act, 1999, the FFMC License system is governed by the Reserve Bank of India.
  • Full Fledged Money Changer (FFMC) The owner of the permit shall not participate in any activity that does not conform with the conditions of the authorisation. If it is in the public interest, RBI may cancel the Full Fledged Money Changer license at any time.

Document inspection

  • Reserve Bank of India is allowed to audit accounts books and other FFMC records in compliance with FEMA, 1999.
  • Moreover, if the FFMC fails to produce account books or any other report or fails to answer any question asked by the authority, the regulations shall be deemed to be in violation.

What is the method to acquire the RBI Full Fledged Money Changer (FFMC) license?

The FFMC license application form must be downloaded from RBI's website. • In addition to the supporting documents necessary, the application form must be sent to the Reserve Bank of India's Foreign Exchange Department at the regional center under which the applicant's registered office falls.

What Process is defined in order to obtain the Full Fledged Money Changer (FFMC) license?

  • Business Creation in compliance with the Company Act, 2013
  • Registration and preparation of all necessary documents for filing requests for FFMC licenses in conjunction with RBI guidance;
  • Application to the RBI division of the FFMC license application along with the necessary documents;
  • Response in case of resubmission;
  • RBI liaison until the FFMC license is obtained
  •  FFMC license is granted after vigilant inspection by the RBI;.

Which documents are required to submit an application for a Full Fledged Money Changer (FFMC) license?

  • The supporting documents to be sent for the FFMC license are as follows:- Print of the company's registration certificate (Document of Incorporation and Certification of Start of Business)
  • Proof of the Partnership Memorandum with a letter pointing to the section pertaining to money-changing operations.
  • The bank's internal statement
  • Version of the company's current audited balance sheet together with the legal auditors ' certification for net held assets. Often, it is important to file audited accounts for the last 3 years.
  • Declaration to the effect that the company or its Directors are not being investigated by DOE (Directorate of Enforcement) or DRI (Directorate of Revenue Intelligence).
  • Details of the nature of the business
  • Details of  a previous application for FFMC/RMC license by the applicant
  • A Board Resolution for applying to the Full Fledged Money Changers license and undertaking money changing activity.

What are the requirements for obtaining a FFMC license to be met?

  • Some conditions must be fulfilled in order to obtain a FFMC license in India-
  • Request for a FFMC permit shall not be accepted if DOE (Directorate of Enforcement)/DRI (Directorate of Revenue Intelligence) has initiated litigation against the claimant agency or its managers / promoters;
  • The Reserve Bank of India's judgment on the issuance of the FFMC license shall be binding on the applicant company;
  • The applicant shall submit a copy of the registration under Shop and Construction, rent receipt or any other documentary evidence after receiving the FFMC license from the Reserve Bank of India;
  • Once the FFMC license has been issued by the Reserve Bank of India, company will begin within a span of six (6) months and that start-up should be reported to the RBI Regional Office concerned;

What are the Full Fledged Money Changer license renewal rules?

The FFMC license holder shall file a renewal request with the Reserve Bank of India every year along with the relevant documents. At least one month before the expiry of the FFMC license, the extension request must be submitted. Once the FFMC license renewal request has been sent, this shall remain effective until the date of expiry or the date of rejection as the case may be. If the permit for the FFMC expired, no application for renewal can be made.

What are Full Fledged Money Changer's criteria for keeping account books?

For FFMCs in India, it is necessary to keep track of money-changing events in the following registers:

Forms Description
FLM 1 Daily Summary and Balance Book (Foreign currency notes/coins)
FLM 2 Daily Summary and Balance Book (Travellers' cheques)
FLM 3 Register of purchases of foreign currencies from the public
FLM 4 Register of purchases of foreign currency notes/coins from authorized dealers and authorized money changers
FLM 5 Register of sales of foreign currency notes/coins and foreign currency travelers' cheques to the public
FLM 6 Register of sales of foreign currency notes/coins to authorized dealers / Full Fledged Money Changers / overseas banks
FLM 7 Register of travelers' cheques surrendered to authorized dealers / authorized money changers / exported

All reports must be kept up-to-date, cross-checked and balances checked on a daily basis, while payments outside the context for money-changing operations must not be mixed. In the case of more than one establishment, separate registers must be maintained.

In which situation license of Full fledged Money Changer can be revoked?

The Reserve Bank reserves the right to revoke the license granted to an AMC at any time if it is in the opinion of the Reserve Bank of India that

  • This is in the public interest or in the public interest
  • The AMC has failed to comply with any of the terms under which the authorisation is issued or has contravened any of the requirements of the Foreign Exchange Management Act, 1999 or any of its laws, legislation, instructions, guidelines or directions.
  • The Reserve Bank also reserves the right to revoke violation of any legal or regulatory clause the approval of any of the offices.
  • The Reserve Bank can revoke or impose new conditions at any time on any of the existing conditions of a money changer's license.

Who all are required to obtain the Franchise License from the existing FFMC?

To obtain the franchise license from the existing FFMC there is a requirement of two things such as:

  • An entity with the physical place of business and
  • Minimum Net Owned Funds of 10 lakhs INR;

If the above-mentioned requirements are fulfilled, the Franchise agreement will be executed. Franchisee agreement will describe the tenure which shall be decided by the FFMC and the commission and fees payable to the franchise as mutually decided between the parties.

What are the characteristics of Franchise Agreement?

  • The name of the Franchisers and the exchange rates shall be primarily displayed by the Franchisees and the exchange rates shall be in coordination with the daily exchange rates as charged by FFMCs and their branches;
  • The purchased foreign currency shall be surrendered by the franchisee to the franchiser within the period of 7 working days from the date of purchase;
  • The proper records of all transactions shall be maintained by the franchisees;
  • The Franchiser shall conduct the onsite inspection of the Franchisee at least once a year;

What is the procedure of acquiring franchise license from the existing FFMC?

For obtaining a franchise license, an application shall be made in Form RMC-F accompanied by a declaration that adequate due diligence of the entity has been carried out prior to the entering into the Franchise Agreement.

How to conduct Due Diligence of Franchisees?

  • When carrying out the Franchisees' due diligence, attention must be given to following things:
  • History of the franchisee in accordance with its current business activities;
  • Review the minimum requirements for Net Owned Funds (NOF) as prescribed;
  • Local recognition in favour of franchisees, including registering under the Shop and Establishment Act;
  • Verification of the Franchisee's physical office from which limited money-changing operations can continue;
  • Local police certification in support of the franchisee for carrying out the activity;
  • Motion of failure to comply in any criminal case;
  • Version of the franchisee's PAN, the executives and shareholders;
  • Passport length Images of the franchisee's owners, investors and other KMPs;
  • At least once a year, a private meeting.

Which reporting requirements are needed to be full filled?

  • A consolidated monthly statement of all offices for the sale and purchase of foreign currency notes shall be submitted by the FFMC in the FLM 8 form to the RBI department concerned no later than the 10th of the following month;
  • A monthly report of receipt / purchase information of US$ 10,000 (or its equivalent) and above shall be sent to the RBI Regional Office within 10 days after the end of the month;
  • The RBI Regional Office shall submit a quarterly report on the Foreign Currency Account / s held in India in their names with AD Category I banks;
  • An Annual Report specifying the balance paid off during the financial year should be sent by all AMC to the Foreign Exchange Department's respective Regional Offices, RBI within one month from the end of the financial year.

What are the regulatory requirements for creating an external branch?

A prior approval of RBI is required to establish an additional branch to carry out the money-changing function. A written request shall be sent to the RBI regional office where the company's registered office is located for this function. The main purpose of creating an external branch is to provide appropriate interchange facilities in remote tourist attraction areas.

Following documents are required to set up additional branches:

  • Version of the current audited reports followed by a legal auditor's certification specifically stating the Net Owned Funds(NOF) status as at the time.;
  • Statement of bankers;
  • A resolution specifying that any lawsuits against the claimant organization or its representatives with the Directorate of Enforcement (DOE)/Directorate of Revenue Intelligence (DRI) or any other enforcement authority are not adhered to.;
  • Report stating the validity of the correct KYC / AML / CMT policy framework;
  • Notice for internal control mechanisms and internal / external audit;
  • A record of the Shop and Store application, rent receipt or any other documentary evidence of the additional branch's place of business.