Overview of FFMC License

FFMC License holders are the authorized entities who purchase foreign exchange from non-residents and residents of India and sell that foreign exchange for private and business travel purposes only to the people visiting abroad.
As per the provisions of Section 10 of Foreign Exchange Management Act, 1999, authorized money changers are the only entities in India dealing in money changing activities and provide the necessary foreign exchange services.
Some firms and hotels have also been provided the Registration to deal in the foreign currency notes, coins and traveler's cheques subject to the directions issued by RBI from time to time to remove the difficulties faced by the foreign visitors and tourists.

Different types of FFMC License

Authorised Dealer Category -I Banks (AD Category–I Banks),
Authorised Dealers Category - II (ADs Category–II) and,
Full Fledged Money Changers (FFMCs).

What are the Conditions to be satisfied to apply for FFMC License in India?

The entity who applies for Full-Fledged Money Changer License should be registered under Companies Act 2013.
The Company should have a minimum net owned fund of Rs.25 lakhs to apply for a single branch License and Rs.50 lakhs for a multiple branch License.
The object clause of Memorandum should reflect the activity of money changing to be pursued by the Company. There should not be any civil/criminal case pending against the Company with the Department of Enforcement or Department of Revenue Intelligence.
After obtaining FFMC License, the Company should carry out its business activity within six months from the date of issuance of Forex License and should intimate RBI.

What is the Regulatory Framework for FFMC License?

RBI is the governing authority and it has issued the guidelines mentioned below for the purpose of regulating the operation and Licensing process of FFMC’s:

RBI Guidelines for new FFMC License
Renewal of FFMC License;
Branch Licensing;
Approval for the appointment of agents/Franchisees;
Know Your Customer (KYC) / Anti Money Laundering (AML);
Combating of Financing of Terrorism (CFT)
Guidelines for Authorized Persons (AP)

Documents required for making the Application for FFMC License

Copy of the Certificate of Incorporation.
Memorandum and Articles of Association containing a provision for undertaking money changing business or an appropriate amendment to this effect.
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.
Details of sister / associated concerns operating in the financial sector like NBFC’s etc. A certified copy of the board resolution for undertaking money changing business.

What all are the Activities FFMC can undertake?

FFMC’s can enter into Franchise Agreements at their option for the purpose of carrying on Restricted Money Changing business i.e. conversion of foreign currency notes, coins or travelers' cheques into Indian Rupees. FFMC’s/Franchisees may freely purchase foreign currency notes, coins and traveler's cheques from residents as well as non-residents.
FFMC’s may sell Indian Rupees to foreign tourists/visitors against International Credit Cards/International Debit Cards and take prompt steps to obtain reimbursement through normal banking channels.
FFMCs may sell foreign exchange for the following purposes:
Private visits.
Business visits.
Forex Pre-Paid cards.

What is the Procedure for FFMC License from RBI?

A detailed Application is submitted to the concerned Regional Office of RBI.
'Fit and proper' criteria for the applicant/Director of applicant FFMC’s is checked and if everything as per the satisfaction of RBI, Full Fledged Money Changer License shall be issued within a period of 2-3 months.
Note: If any case by any law enforcing authorities is initiated/pending against any Company / its Directors, the Company will not be considered as 'fit and proper' and its Application will not be considered as eligible for FFMC License. Clearance by Empowered Committee.
Reserve Bank’s decision in the matter of granting approval or otherwise will be final and binding.

What is the Post Approval requirement of FFMC License?

A copy of Registration under Shops & Establishment Act or any other documentary evidence such as Rent Receipt, a copy of Lease Agreement etc. should be submitted to concerned Regional Office of Reserve Bank before the commencement of the business.
New FFMC’s should carry out their activities as per the instructions specified by Reserve Bank from time to time. FFMC’s should at each of its business place display a copy of Money Changing License issued by Reserve Bank of India. FFMC’s should put in place a system of Concurrent Audit of the transactions undertaken by them.
All FFMC’s are required to submit their annual audited Balance Sheet to the respective Regional Office of Reserve Bank.

Renewal of FFMC License in India

An Application for the renewal of a Full-Fledged Money-Changers License shall be made before one month from the expiry date of the License. No Application for renewal of a Money Changer's License shall be made after the expiry of the License.

What are the Records and Registers to be maintained by FFMC’s?

AMC shall maintain the following Registers in respect of their money-changing transactions:
Daily Summary and Balance Book of
Foreign currency notes/coins in Form FLM 1.
Travelers' cheques in Form FLM 2.
Register of
Purchase of foreign currencies from the public in Form FLM 3.
Purchase of foreign currency notes/coins from the authorized dealers and the authorized money changers in Form FLM 4.
Sale of foreign currency notes/coins and foreign currency travelers' cheques to the public in Form FLM 5.
Sale of foreign currency notes/coins to the authorized dealers / Full Fledged Money Changers / overseas banks in Form FLM 6.
Travelers’ cheques surrendered to the authorized dealers / authorized money changers / exported in Form FLM 7.

What are the Situations and Circumstances in which FFMC License can be revoked by RBI?

Reserve Bank of India reserves the right to revoke the License granted to any FFMC at any time if Reserve Bank of India is satisfied that
It is in public interest to do so or
The FFMC has failed to comply with any condition or any of the provisions of Foreign Exchange Management Act, 1999.

Who are Franchisees?

There is one more intermediary authorized by RBI to deal in foreign exchange, i.e., Agents and Franchisees.
Authorized Dealer Category- I Banks, Authorized Dealers Category - II and FFMC’s can appoint their Agents and Franchisees to deal in money changing activities. Following are the important points in this regard:

The AD Category – I Banks,
AD Category - II banks and
FFMC’s have been permitted by Reserve Bank to enter into Franchise Agreements at their option for the purpose of carrying on Restricted Money Changing business. Any person proposing to opt for Franchisee of any AMC may do so after entering into the Franchise Agreement.

Following are the important points in this regard:

A Franchise can be any entity which has a place of business in India.
An entity should have a minimum Net Owned Funds of Rs.10 lakh.
Franchisees can undertake only restricted money changing business.
A Franchisee Agreement shall be executed between the parties.
The Franchisees should display the names of their Franchisers, exchange rates and that they are authorized only to purchase foreign currency, prominently in their offices.
The foreign currency purchased by the Franchise should be surrendered only to its Franchiser within 7 working days from the date of purchase. You can also start your currency exchange business in India.
The maintenance of a proper record of transactions by the Franchise.

Role of Authorized Dealers in Foreign Exchange

Authorized dealers play an important role in Forex transactions. RBI grants authorization in the form of Licenses to deal in foreign exchanges to the banks which are well equipped to undertake foreign exchange transactions in India. RBI has granted authorization to certain financial institutions to undertake specific types of foreign exchange transactions incidental to their main business.

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