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Full-Fledged money changers are also known by the name of Authorized Money Changers, which are the entities authorized by the Reserve Bank of India under Section 10 of FEMA, 1999. In this article we will discuss about RBI Regulations for Money Changing Business.
Following are the entities authorized by the Reserve Bank to deal in Foreign Exchange for specified purposes, involving widening of the foreign exchange facilities to the tourists and resident:
The aim is to ensure efficient customer services through healthy competition. The activities include the purchase of foreign exchange from the residents and foreigners visiting India and selling thereafter for certain approved purposes. The Franchisees may also be appointed by the above entities for the purchase of foreign exchange. Unless the entities possess a valid license for money exchange issued by Reserve Bank, it shall not carry on or advertise that it carries on the activities of a money changer. If any person is found guilty of such activities, she shall be liable to be penalized under the Act.
Application in the prescribed form shall be submitted to the respective department of Reserve Bank for Foreign Exchange, under whose jurisdiction the registered office of the applicant is situated. The application shall be accompanied by the following documents:
Due to operations of several FFMCs, RBI is granting fresh applications to only those applicants who are complying with all the licensing requirements.
If DoE/DRI or any other enforcement authorities had initiated/given verdict over any case against the applicant company or its directors/promoters, then its applications shall not be considered for FFMC license;
In order to carry out the money changing business at a place except for the permanent place of business, the prior approval from the RBI shall be sought;
The application shall be submitted along with the following documents:
In the case of Foreign Exchange Counters in the arrival halls of the International Airports, they shall be established after the Customer desks or may also be established between the Immigration desk and the customer disk;
The operations at the additional branch shall be commenced within a period of six (6) months from the grant of approval by RBI, and the information about such commencement of business shall also be provided.
Guidelines for appointment of Agents/Franchisees by Authorized Dealer Category I banks/Category II banks/FFMCs
The above entities can enter into the Franchisees Agreement as per their will, in order to carry out the money changing business such as conversion of foreign currency notes, coins or traveler’s cheques;
Following are the salient features of the Franchise Agreement:
Authorized Dealer Category I banks/Category II banks/FFMCsshall apply to the respective regional office of the RBI for the appointment of Franchisees under this agreement;
Following minimum checks shall be done while conducting the due-diligence of the Franchisees:
The above points shall be in check on a regular basis or at least once in a year including the personal visit to the site of the Franchisee after the receipt of the documentary evidence of such place of business.
The Franchisees shall be appointed within a distance of 100 km from the controlling branches of Authorized Dealer Category I banks/Category II banks/FFMCs
Adequate arrangements shall be put in place for reporting of transactions to the Franchisers by the Franchisees;
Anti Money Laundering (AML) / Know Your Customer (KYC) / Combating the Financing of Terrorism (CFT) Guidelines
The above-mentioned guidelines shall strictly adhere to b the Franchisees.
Bringing in and taking out of the Foreign Exchange
Purchases of foreign currency from public
Encashment Certificate
Purchases from the other FFMCs and Authorised Dealers (ADs)
Foreign currency notes, coins and encashedtravellers’cheques may be freely purchased from other AMCs and Ads in the normal course of the business. The rupee equivalent of the same shall be paid only by way of crossed account payee cheque/Demand DraftBankers’ cheque / Pay order.
Sale of Foreign Exchange
The Foreign Exchange shall be sold to a person resident in India for undertaking one or more private visits to the foreign country in accordance with the prescribed ceiling, currently 10,000/- USD;
Foreign Exchange may be sold to the person resident in India for the following purposes:
The specified limit for such purpose is 25,000/- USD per visit.
These cards may be issued to the residents traveling abroad for the private or business purpose provided they fulfill all the KYC/AML/CFT requirements. It shall be noted that the settlement of transactions made through these cards shall be done only by AD Category I banks.
Other Conditions
Cash Memo
Cash memo shall be issued on the official letterhead of the money changer to the travelers to whom the foreign currency is sold by them. Such cash memo shall be presented to the emigration authorities while leaving the country.
Rates of Exchange
The exchange rates shall be determined by the ongoing market conditions and all the transactions shall be put through the same.
Display of Exchange Rate Charts
A chart indicating the rates for purchase/sale of foreign currency notes/ traveler’s cheques shall be displayed at a prominent place or a public counter indicating the rates for all major currencies and rate cards every day by 10:00 AM latest.
Foreign Currency Balances
Replenishment of Foreign Currency Balances
Export / Disposal of surplus Foreign Currency Notes / Traveler’s Cheques
Write-off of fake foreign currency notes
FFMC License Holder RBI Compliance requirement?
Following registers shall be maintained by the FFMCs in respect of the transactions of money changing:
(a) Daily Summary and Balance Book (Foreign currency notes/coins) in form FLM 1
(b) Daily Summary and Balance Book (Travellers’cheques) in form FLM 2
(c) Register of purchases of foreign currencies from the public in form FLM 3
(d) Register of purchases of foreign currency notes/coins from authorized dealers and authorized money changers in form FLM 4
(e) Register of sales of foreign currency notes/coins and foreign currency traveller’s cheques to the public in form FLM 5
(f) Register of sales of foreign currency notes/coins to authorized dealers / Full Fledged Money Changers / overseas banks in form FLM 6
(g) Register of traveller’s cheques surrendered to authorized dealers / authorized money changers / exported in form FLM 7
Submission of Statements to Reserve Bank
Inspection of transactions of FFMCs
Concurrent Audit
The opening of Foreign Currency Accounts by AMC
AMCs or FFMCs may be allowed to open Foreign Currency accounts in India, subject to the following conditions:
Read our article:RBI Guidelines For FFMC License
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