What is Full Fledged Money Changers License in India?

In order to work as an authorized money changer in India, one needs to apply for a valid full fledge money changer license which is issued by the Reserve Bank of India and if any person or organization found to be operating money changing activities without the appropriate license will be liable to be penalized as per the laws.

For obtaining an FFMC license in India, it is mandatory that the company is registered under the Companies Act, 2013.
The RBI annually publishes the applicable guidelines for Full Fledged Money Changers in the form of a master circular called the Memorandum of Instruction on Money Changing Activities. Every entity intending to enter or already involved in the money changing activities in India need to follow these guidelines as well as the provisions mentioned in the Foreign Exchange Management Act, 1999.

What is the eligibility criterion for FFMC License in India?

The eligibility criteria for companies to obtain the FFMC license are:-

• The company has to be registered with the Registrar of Companies under the Companies Act, 2013.
• The minimum net owned fund (NOF) of the company need to be Rs. 25 lakh for a single branch license. For a multiple branch license, the minimum net owned fund of the company needs to be Rs. 50 lakh. It is essential that the FFMC maintains this minimum NOF on a continuous basis.

Single Branch Rs. 25 lakhs

Multiple Branch Rs. 50 lakhs

Note: The Net Owned Fund (NOF) is calculated by subtracting the investments of the company from the owned funds. Investments can include a share of its subsidiaries, the book value of debentures, bonds, outstanding loans and even advances made to and deposits with its subsidiaries and companies in the same group in excess of 10% of the owned funds. Owned funds, on the other hand, is derived by subtracting accumulated balance of loss, deferred revenue expenditure and other tangible assets from the sum of paid-up equity share capital, free reserves and credit balance in P&L Account.

• It is also essential that the main activity which is mentioned in the object clause of the company needs to be money changing activity.
• Finally, there should be no ongoing case against the company with the Department of Enforcement or Department of Revenue Intelligence.

What are the basic requirements for FFMC License in India?

• The FFMC license needs to be renewed on annual basis.
• The company is required to start operations within six months from the date of issue of the FFMC license.
• Using a Franchise Agreement, all the three categories of AMC:– AD Category – I Bank, AD Category – II and FFMC appoint their franchises to widen the network for providing money changing facilities such as conversion of foreign currency, notes, coins and traveler’s cheque into Indian currency to travelers, tourists, NRIs etc.
• To be appointed as a franchise, the proposed company needs to have a minimum net owned fund of Rs. 10 lakh and its main object must be money changing activity.
• The franchisee’s books need to be annually inspected to ensure that its activities comply with laid terms and conditions of RBI.

Which authority regulates the framework for FFMC License in India?

In India, the framework for FFMC License is regulated by the Reserve Bank of India as per Section 10 of the Foreign exchange Management Act, 1999. It is mandatory for a license holder to comply with the directions & guidelines issued by the RBI. FFMC License holder shall not engage in any transaction which is not in conformity with the authorization terms. RBI may at any time revoke the FFMC license if it is in the public interest.

• Inspection of Documents

Reserve Bank of India is empowered to inspect the books of accounts and other documents of FFMC as per FEMA, 1999. For carrying out the inspection, full assistance and co-operation shall be provided to the investigating authority. However, if the FFMC fails to produce books of accounts, or any other document or fails to answer any question asked by the authority then it shall be considered a contravention of the provisions.

What is the procedure of obtaining FFMC License from the RBI?

The application form for the FFMC license needs to be downloaded from the website of RBI. Along with the required supporting documents, the application form needs to be submitted to the Foreign Exchange Department of the Reserve Bank of India at the regional center under the purview of which the registered office of the applicant falls.

Step by Step procedure for obtaining the FFMC License

• Company Formation as per Companies Act, 2013
• Documentation & Arrangement of the entire necessary documents for filing of FFMC license application as per RBI guidelines;
• Submission of FFMC license application along with the necessary documents with the concerned department of RBI;
• Reply in case of resubmission;
• Liaison with the RBI until the FFMC license is obtained;
• After the vigilant inspection by the RBI, FFMC license is granted.

What are the documents required for filing FFMC License application?

The supporting documents that need to be submitted for obtaining the FFMC license include:-

• Copy of the certificate of registration of the company (Certificate of Incorporation and Certificate of Commencement of Business)
• Copy of Memorandum of Association with a letter mentioning the clause related to money changing activity.
• A confidential report from the bank
• Copy of the latest audited balance sheet of the company along with a certificate from the Statutory Auditors of net owned funds. Also, audited accounts for the last 3 years need to be submitted.
• Declaration to the effect that the company or its Directors are not being investigated by DOE or DRI.
• 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.