An Overview of Full Fledged Money Changer License A valid Full Fledged Money Changer License, also known as a Foreign Exchange License, is a license granted by the Reserve Bank of India (RBI). The FFMC license authorizes the holders to deal in money-changing and foreign exchange business. The object of acquiring the Full Fledged Money Changer License is to serve the foreign exchange conversion network and expand the money-changing facilities in India. What is an FFMC? FFMC is an abbreviation used for Fully Fledged Money Changer. A company that intends to carry out the activities of forex currency exchange after obtaining the prior approval of the RBI shall be regarded as a Full Fledged Money Changer. The RBI, through Section 10(1) of the Foreign Exchange Management Act of 1999, authorizes entities to deal in foreign exchange for specific purposes. These entities are called Authorized Money Changers (AMCs). The RBI annually publishes the applicable guidelines for FFMC in the form of a master circular called the Memorandum of Instruction on Money Changing Activities. Benefits of Acquiring Full Fledged Money Changer License Acquiring a Full Fledged money changer license offers various benefits for the businesses registered as an FFMC business. The following are the key benefits of acquiring a Full Fledged Money Changer License in India: 1. Facilities Foreign Exchange Facilities The grant of a Full Fledged Money Changer License authorizes the companies to facilitate foreign currency exchange facilities and services comprehensively. 2. Authorizes Money Changing The FFMC license granted to the companies authorizes them to carry forward the money-changing facility for both the residents and non-residents of India. 3. Issuance of Certificate of Encashment The certificate of encashment for traveler's cheques and foreign currency notes is issued by the companies holding the Foreign Exchange license in India. 4. Facilitates Cross-Border Transactions The issuance of an FFMC license enables the companies to facilitate cross-border transactions to support international trade and commerce 5. Enables FEMA Services for Tourists The benefit of holding a Full Fledged Money Changer License is that it enables the FEMA Services for tourists to conduct foreign currency exchange activities as specified in the FEMA Act of 1999. 6. Handles Currency Transactions Full Fledged Money Changer License holders are entitled to handle various currency transactions, including coins, traveler’s cheques, and foreign currency. 7. Store Value/Charge/Smart Card Services The FFMC license simplifies the issuance of store value, charge, and smart cards for Indian residents travelling abroad. What are the Types of Authorized Money Changers? The different types of authorized money changers or dealers are the businesses granted Full Fledged Money Changer License under section 10 of the FEMA Act of 1999. The following are the types of authorized money changers authorized to carry out the money-changing business in India: 1. Authorized Dealer Category I The category I authorized dealers are permitted to carry out all current and capital account transactions. The RBI issues directions from time to time for regulating the transactions carried out by AD Category I, including all nationalized, lending-non-nationalized, and foreign banks. 2. Authorized Dealer Category II Category II authorized dealers are permitted to carry out specific trade-related current account transactions and any other activities of the FFMC or decided by the RBI. The upgraded FFMC, cooperative banks, and rural banks are some of the entities required to acquire a Forex License in India. 3. Authorized Dealer Category III The Category III authorized dealers are permitted to carry out specific foreign exchange transactions, especially remittance services, travel-related foreign exchange services, and retail foreign exchange services incidental to the business. 4. FFMCs The FFMC, including the Department of Post and urban cooperative banks, are authorized for the purchase and sale of foreign exchange for specified purposes. Regulatory Authority Authorized to Grant FFMC License Section 10 of the Foreign Exchange Management Act of 1999 authorizes the RBI to grant the FFMC license in India. A license holder must mandatorily comply with the directions & guidelines issued by the RBI. Hence, the full-fledged money changer license holder shall not engage in any transaction that is not in conformity with the authorization terms of the RBI. Foreign Currency Exchange Service Market Size The current foreign currency exchange service market size is USD 9.09 billion, which is expected to grow at a CAGR of 8.3% to USD 15.79 billion by 2030. The continuous rise in the foreign currency exchange market motivates FFMC business entities to track down the Money Changer Compliance activities in India. How do Full-Fledged Money Changers Make Money? Generally, the Full-Fledged money changers in India make money by charging fees and commissions for every transaction and spread between the prices of buying and selling foreign currencies. Eligibility Criteria for Acquiring a Full Fledged Money Changer License The eligibility criteria direct certain companies to acquire a Foreign Exchange license in India. The following are the eligibility criteria to be fulfilled by the companies acquiring a Full Fledged Money Changer License in India: 1. Mandatory Company Registration The applicants intending to apply for an FFMC license must be mandatorily registered as a company under the Companies Act of 1956 or 2013. 2. Net-Owned Fund The FFMC must continuously maintain a minimum net owned fund (NOF) calculated by subtracting the investments of the company from the owned funds. The minimum NOF required for acquiring a Full Fledged license is provided below: Rs. 25 lakhs for single branch license; Rs. 50 lakhs for multiple branch licenses. 3. No Pending Cases The applicant companies must not be indulged in any pending cases legal disputes, or issues with the Department of Revenue Intelligence or Enforcement. 4. Money Changing Business Activities The applicant company must incorporate the Memorandum of Association with the object clause providing for the intention of engaging in money-changing business activities. Documents Required for Foreign Currency Exchange License A list of documents is required to be filed at the regional office of the Foreign Exchange Department of the RBI, under whose jurisdiction the registered office of the applicant falls. The following documents are required for acquiring a Full Fledged money changer license in India: Certificate of Incorporation & Business Commencement; MOA with a clause to carry out money-changing activity; Bank’s Confidential Report; Audited company’s Balance Sheet; Details of associated financial companies, like NBFC; Certificate from Statutory Auditors (for net-owned funds); Last 3 years Audited P&L Accounts; Details of the nature of the company; A previous application for FFMC (if any); Board Resolution for acquiring FFMC; Declaration to the effect that no proceeding is initiated by the Directorate of Enforcement or Directorate of Revenue. Process for Acquiring Full Fledged Money Changer License The applicant must follow the process for acquiring a Full Fledged Money Changer License in India. The following are the steps involved in acquiring a Foreign Exchange license in India: Step 1: Checking the Eligibility Criteria In the next step, the applicant company and its board of directors must fulfil the eligibility criteria (fit and proper) as specified by the RBI. The eligibility criteria require a company to be registered under the Companies Act of 2013, whereas, the Board of Directors must hold the expertise, integrity, and relevant qualification. Also, the BOD must not be indulged in any fraudulent practices. Step 2: Preparation of Mandatory Documentation The next step requires the applicant companies to arrange and compile the mandatory documents for acquiring the Full Fledged Money Changer license as per RBI guidelines. Step 3: Drafting of Application and Other Documents Next, the applicant is required to draft and prepare the necessary documents required for acquiring an FFMC license in India. Step 4: Application Submission to RBI Further, the application form and the required supporting documents must be submitted at the RBI's regional office of the Foreign Exchange Department. Step 5: Review by RBI The RBI is authorized to review the application and documents submitted by the applicant company. The applicant companies are free to file a resubmission application in case the RBI is not satisfied with the review of the previous application or any other documents. Step 6: Background Check In the first step, the RBI conducts background verification and relevant checks on the fresh application filed by the applicant companies. The background check verifies the company's financial stability for acquiring a Foreign Exchange License in India. Step 7: Grant of Certificate After the vigilant inspection, the RBI grants a Full Fledged Money Changer License to the applicant companies. The grant of the Full Fledged Money Changer license allows the applicant companies to carry out their FFMC business activities and commence their business within 6 months from the license's issuance date. Any failure to commencement of the license within 6 months may lead to revocation or cancellation of the issued license. Post-Licensing Compliance Requirements After acquiring the FFMC license in India, certain requirements must be complied with. The following is the list of mandatory compliances to be followed by the FFMC business setup. 1. Business Commencement Within 6 months of the successful acquisition of the FFMC license, the business must be commenced and informed to the concerned Regional Office of the RBI. 2. Documentary Evidence A copy of registration under shop and establishment, rent receipt, or any other documentary evidence shall be submitted to the RBI after obtaining the Full Fledged Money Changer license. 3. Maintaining Books of Accounts The entities granted the Full Fledged Money Changer license must maintain the following registers for carrying out their money-changing activities in India: Form FLM 1 (Daily Summary and Balance Book of foreign currency notes & coins); Form FLM 2 (Daily Summary and Balance Book of Travellers' cheques); Form FLM 3 (Register of purchases of foreign currencies from the public); Form FLM 4 (Register of purchases from authorized dealers & authorized money changers); Form FLM 5 (Register of sales of foreign currency and foreign currency travellers' cheques to the public); Form FLM 6 (Register of sales of foreign currency from authorized dealers/Full Fledged Money Changers /overseas banks); Form FLM 7 (Register of travellers' cheques surrendered to authorized dealers /authorized money changers /exported). 4. Concurrent Audit However, a system of concurrent audits must be complied with to regulate all the transactions undertaken by the FFMC businesses. Also, a concurrent auditor must be appointed to check that all the FFMC transactions are compliant with the instructions issued by the RBI. 5. Submission of Balance Sheet & Maintenance of NOF Also, the registered FFMC license holder is obliged to furnish at least three years of audited balance sheet and P&L account at the RBI’s regional office. FFMC business entities must maintain net-owned funds as prescribed by the RBI. 6. Reporting Requirements The Full Fledged Money Changer License holder must ensure compliance with the reporting requirements. The following is the list of consolidated statements that must be duly reported to the concerned Regional Office of the Forex Exchange Department of the RBI within 10 days from the end of the month. A. Monthly Compliance Monthly compliance ensures the filing of the following reports as provided below: Form FLM 8 (monthly statement of all the offices for sale and purchase of foreign currency notes); A monthly statement indicating details of receipt/purchase of US $ 10,000 (or its equivalent) and above. B. Quarterly Compliance The quarterly FFMC compliance ensures the filing of a quarterly statement regarding Foreign Currency Account/s maintained in India. C. Annual Compliance The annual FFMC compliance ensures the filing of an annual statement giving the details of the amount written off during the financial year. 7. Additional Branch The Full Fledged Money Changer license holders are authorized to apply for additional branches to carry out money-changing activities in the remote areas of tourist attractions. For this purpose, a written application shall be submitted to the regional office of the RBI where the registered office of the company is situated. 8. Appointment of Franchise All the categories of authorized money changers using the Licensing and Franchise Agreements are authorized to appoint their franchises with a minimum net owned fund of Rs. 10 lakhs. The franchises are appointed to widen the network for providing money-changing facilities to travelers, tourists, NRIs, etc. Penalty for Non-Compliance For any non-compliance with the following registration requirements, the RBI reserves the right to impose a penalty, revoke or cancel the license granted to the authorized money changers. The following are the circumstances when the RBI holds the right to revoke or penalize the Full Fledged Money Changer license holders. It is against public interest; For any contravention of statutory or regulatory provision; Fails to comply with any condition authorizing the grant of FFMC license; Contravenes any provision of the FEMA Act of 1999. Validity and Renewal of FFMC License The FFMC License is only valid for 3 years, which is required to be renewed at least 1 month before its expiry. The license holder must file a renewal application every year along with the applicable documents with the RBI. Once an application is made for a Full Fledged Money Changer license renewal, it shall be valid until the expiration date or rejection date, as the case may be. Recent Updates On December 26, 2023, the RBI published a draft licensing framework for authorized persons under the FEMA Act of 1999. The proposed norms aim to simplify transactions for every applicant entity by introducing Forex Correspondent Schemes (FCS). Further, the scheme provided for the following: Introduced a new category of money changers carrying out business by becoming Forex Correspondents (principal agency model) with AD Category-I and II; Perpetual renewal of existing AD category-II authorization for reducing the regulatory burden; Authorized an existing FFMC license holder to approach for authorization up-gradation to AD Category-II. FFMC License Fees The professional fee structure for acquiring an FFMC license is Rs. 1.5 Lakhs, depending upon the region of filing the license application. Timeline for Acquiring Full Fledged Money Changer License The timeline for the issuance of the Full Fledged Money Changer License is approx. 2 to 3 months, which depends upon the fulfilment and review of the requirements prescribed by the RBI. Why Choose Enterslice for an FFMC License? We at Enterslice specialize in acquiring an FFMC license and provisioning a franchise agreement. Choose our legal advisory services to secure your Full Fledged Money Changer License in India: 1. Professional Tech-Based Services We offer professional technology-based legal services to simplify the process of acquiring a Foreign Exchange license in India. 2. Ensures Additional Legal Compliances We also offer services to ensure the fulfilment of additional regulatory and legal compliances for the Full Fledged Money Changer License holder. 3. Transparent Charges We promote transparency by providing a clear picture of the expenses and charges required to issue an FFMC license in India. 4. PAN India Services We provide PAN India services for acquiring an FFMC license by companies registered in different regions of India. 5. Services for Renewal of FFMC License Upon the expiry of the FFMC license, we also provide professional consultancy services for its timely renewal.
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