What is an FFMC License?
A Full-Fledged Money Changer (FFMC) is an authorized entity that can purchase foreign exchange from both residents and non-residents of India and sell it to individuals travelling abroad for private or business purposes. Under Section 10 of the Foreign Exchange Management Act (FEMA) 1999, only an Authorized Money Changer is permitted to conduct activities related to money changing and foreign exchange.
Additionally, some firms and hotels have been granted FFMC Licenses by the RBI. These licenses enable them to handle foreign currency, traveller’s cheques, and coins, thereby assisting foreign tourists and visitors with their currency-related transactions in India. This initiative addresses the challenges faced by foreign tourists during their stay in the country, making their visit more convenient.
Why apply for an FFMC License in India?
A Full-Fledged Money Changer License provides numerous advantages, making it a valuable asset for financial service providers. The primary benefits of holding an FFMC License include:
Foreign Exchange Sale Facilities and Services: An FFMC License holder can offer comprehensive foreign exchange sale facilities and services. This includes exchanging foreign currency for Indian rupees and vice versa, catering to the needs of both residents and non-residents.
Encashment Certificates for Travellers' Cheques and Foreign Currency: License holders are authorized to issue encashment certificates for Travellers' Cheques and Foreign Currency Notes, assisting both resident and non-resident individuals in converting these instruments into Indian rupees as needed.
Foreign Exchange Services for Tourists: A significant advantage of holding an FFMC License is the ability to provide foreign exchange services to foreign tourists visiting India. This enables license holders to offer convenient and competitive exchange rates, enhancing the tourists’ travel experience.
Handling Various Currency Transactions: FFMC License holders can manage a wide range of currency transactions, including coins, travellers’ cheques, and foreign currency. They carry out these transactions at prevailing exchange rates, ensuring transparency and efficiency in transactions.
Required Documents for FFMC License in India
Applying for a Full-Fledged Money Changer License in India requires a comprehensive submission of documents to demonstrate eligibility and compliance with regulatory requirements. The necessary documents for applying include:
Certificate of Incorporation: A copy showing the legal registration of the business entity under the Companies Act.
Memorandum of Association: A copy detailing the provisions related to the money-changing business activities.
Articles of Association: A copy outlining provisions related to the money-changing business activities, further clarifying the entity’s intentions and compliance with regulatory standards.
Latest Audited Accounts: The most recent audited financial accounts, along with certificates from Statutory Auditors confirming the Net Owned Funds (NOF) as of the application date, are crucial for financial stability.
Audited Balance Sheet: A copy of the latest audited balance sheet reflecting the entity’s financial condition.
Profit and Loss Account: Copies of the Profit and Loss Account statements for the past three years to demonstrate the entity’s financial performance.
Confidential Bank Report: A sealed confidential report from the applicant’s bank, possibly including information on financial standing, banking history, and creditworthiness.
Details of Associated/Sister Concerns: Information regarding any associated or sister concerns in the financial market, such as Non-Banking Financial Companies, to assess the entity’s overall financial standing and industry relationships.
Board Resolution: A certified copy of the Board Resolution passed by the company’s board of directors, authorizing and confirming the intent to engage in money-changing business operations.
Steps to apply for FFMC License in India
The following procedures are required to complete the RBI application process for the Full-Fledged Money Changer License:
Submit the Application to the Reserve Bank of India: The applicant company must submit an application in the required format to the regional office of the RBI, along with the necessary supporting documents as the initial step of the process.
Fulfil the “Fit and Proper” Requirements: To obtain an Authorised Money Changer License from the RBI, a business must meet the Fit and Proper Criteria. Consequently, the Board of Directors must undergo a due diligence process to ensure these criteria are properly met.
The Fit and Proper Criteria are crucial for assessing the knowledge, moral character, credentials, and prior record of the candidate for the position of Director.
Eligibility for FFMC License in India
Obtaining a Full-Fledged Money Changer License in India involves meeting specific conditions and requirements to ensure the business entity’s eligibility and credibility. The conditions that must be fulfilled:
1. Incorporation under the Companies Act 2013:
The business entity must be duly incorporated by the Companies Act 2013. This legal requirement establishes the entity’s legitimacy for applying for the license.
2. Minimum Net Owned Funds (NOF):
For a single branch operation, the company must have a minimum of Rs 25,00,000 in Net Owned Funds (NOF). This financial requirement demonstrates the entity’s financial stability and capacity.
For multiple branches, the company must maintain a minimum of Rs 50,00,000 in Net Owned Funds (NOF). A higher NOF is required for entities with a broader operational scope.
3. Reflecting Money Changing Activities in MOA:
The Memorandum of Association must include an object clause explicitly stating the company’s intention to engage in money-changing activities. This ensures that the company’s primary objective is aligned with the services it wants to provide.
4. No Pending Cases with Government Departments:
The company must not have any pending cases, legal disputes, or issues with the Department of Revenue Intelligence and the Department of Enforcement. This requirement signifies compliance with the legal and regulatory obligations.
5. Commencement of Business Operations:
Upon obtaining the Money Changer License from the Reserve Bank of India (RBI), the company must initiate its money-changing business operations within six months. This condition ensures that the license is promptly put to productive use.
Conclusion
In conclusion, obtaining a Full-Fledged Money Changer License in India involves a meticulous application process that includes submitting various documents and fulfilling specific eligibility criteria. Businesses must be duly incorporated under the Companies Act 2013 and demonstrate financial stability through minimum Net Owned Funds. The company’s Memorandum of Association must reflect its intention to engage in money-changing activities, and there must be no pending legal issues with relevant government departments. Additionally, upon receiving the license, businesses are required to commence operations within six months to ensure prompt and productive use of the license. By meeting these conditions, entities can provide essential foreign exchange services, enhancing the convenience and financial needs of residents, non-residents, and tourists in India.
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