fully fledged money changer (FFMC)
Why register an FFMC
All the businesses and individuals that want to deal in foreign currencies are required to obtain an FFMC license from the apex bank, that is, the Reserve Bank of India (RBI). By obtaining this license the holder has the authority to purchase foreign exchange from non-resident individuals.
No person is allowed to carry money changing business unless they own a lawful money changer license issued through the RBI. If a person is found doing money changing business without obtaining the license they shall be punished under the act.
The FFMC license is actually for those entities that deal with activities of foreign exchange. The FFMC entity should ensure compliance with provisions of the RBI after obtaining the license.
The registered FFMC entity would be required to maintain the balance books, logbooks that record activities and records of transactions and travellers’ cheques.
The companies seeking an FFMC license in India must be incorporated under the companies act, 2013. The entities having any criminal record are not allowed to obtain the FFMC license. The company has to ensure that many exchange activity is mentioned in the object clause of the memorandum. After obtaining the license the entity is required to commence its activities related to business within a period of 6 months or else the license will lapse.
A minimum requirement of ₹25 lacs (Twenty-five lakh rupees) as the net owned fund is compulsory for the individuals obtaining the license for a single branch. In the case of multiple branches, the net owned fund requirements escalate up to ₹50 lacs (Fifty lakh rupees).
Benefits of obtaining the FFMC license
Following are the benefits and perks that one can enjoy after obtaining an FFMC license:
- Potential to furnish sale facilities: The FFMC license allows to participate in international trade. Foreign exchange adds to more Indian currency. This leads to more profitability. The FFMC license gives the opportunity to earn more profits at an extraordinary value.
- Gives permission to foreign currency notes: The dollar note is very valuable in India. Those who have obtained the FFMC license can provide these currency notes encashment services.
FFMC entities can perform the foreign exchange activities: FFMC has the authority to perform foreign exchange activities. The authority is granted by the RBI. Such entities perform activities such as:
- Inputting and outputting the foreign exchange.
- Has the ability to buy foreign currency from the general public.
- Staying updated to provide the best services to their clients.
- Deals with foreign shares are subject to authorization by the RBI.
- Ability to furnish sale facilities: FFMC has the capability to furnish sale facilities for foreign exchange.
- Addressing various transactions: Through an FFMC license, RBI provides FFMC entities with the power to address many types of transactions such as the exchange of coins, foreign currency notes, and travellers’ cheques.
About the FFMC license service
FFMC is the company that carries the activities related to foreign exchange. Such an entity is allowed to carry this activity only after obtaining approval from the RBI.
As per section 10 of the foreign exchange management act, 1999, only entities that are authorized money changers can provide the money changing activities and can offer the forex services.
To remove certain barriers, faced by the foreign visitors and tourists, particular firms and hotels also have been offered the FFMC registration so that they can also deal in foreign currency notes, travellers’ cheques, and coins in accordance with the directions issued by the Reserve Bank of India (RBI).
Activities that an FFMC entity undertakes are as follows:
- FFMC may diverse to sell foreign exchange for business visits, private visits, or for forex prepaid cards.
- An FFMC entity may freely purchase foreign currency notes from residents and from non-residents.
- FFMCs may enter into franchise agreements at their own comfort in order to carry on the restricted money.
Registration requirement for an FFMC license
The companies that desire to work as an FFMC are required to obtain an FFMC license mandatorily which is issued by the RBI. If any company engages itself in forex operations without obtaining the license then such company shall be penalized.
The company obtaining the FFMC license should be clean, that is, there should be no legal cases against the company.
The activities to be carried by such a company should be specified in the MOA.
The company should satisfy the requirements of net owned funds of ₹25 lacs (Twenty-five lakhs rupees) in case of a single branch and ₹50 lacs (Fifty lakhs rupees) in case of multiple branches.
Such a company should be registered as a company under the companies act, 2013.
Procedure to register/obtain a license for FFMC
Following are the steps to obtain the FFMC license, they are as follows:
- A detailed application for the FFMC license is submitted to the concerned regional office of the RBI
- The director of the applicant entity would be reviewed under, fit and proper criteria by the RBI. If the RBI is satisfied, then the FFMC license would be issued within 2-3 months.
- Clearance by the empowered committee is a necessity and the RBIs decision on the subject of granting approval or not would be final and binding.
Documents required to obtain a license for FFMC
Following are the documents required:
- Certificate of registration (Copy)
- Memorandum of Association (MOA)
- A letter having a clause that gives details about money changer business.
- Report from the applicant bank (CIR format)
- Latest audited balance sheet
- Certificate from the statutory auditor enclosing their net owned fund
- A declaration that no proceedings against the company
- A declaration that no proceedings against the director of the company.
- Undertaking to post competent staff who can handle the money changer’s activities.