FFMC License for Foreign Currency Exchange Business

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FFMC License for Foreign Currency Exchange Business

People from different cities of the world visit India for a vacation or a business trip. During their stays, they require Indian currency for their daily expenses such as hotel charges, purchasing food and shopping. 

Many people visit India with dollars or some other currency, and then get it exchanged for Indian currency with the help of an Authorized Money Changer (AMC). The Reserve Bank of India (RBI), under Section 10 of Foreign Exchange Management Act (FEMA), 1999, grants the AMCs the right to convert foreign currencies under specific circumstances.

In order to be an AMC, it is necessary to obtain FFMC License. Many hotels and companies have been granted this license by RBI to enable them to trade in foreign currency, traveler’s cheque and coins so that the foreigners can enjoy their stay. The business of a foreign currency exchange can be a profitable business. In this article, we will discuss how to open a foreign currency exchange business.

What is FFMC License?

FFMC License is issued by the RBI for currency changing business. FFMC is short for a ‘Full Fledged Money Changer’, which is an authorized organization/authorized money changer (AMC) for buying foreign currency from the residents and non-residents of India and selling it to the individuals who are planning to travel overseas for personal or professional reasons. According to Section 10 of Foreign Exchange Management Act, 1999, AMCs are the only entities in the country who are permitted to do money exchanging activities and offer the necessary foreign exchange services. 

In case the FFMC license is not issued by the RBI to an entity, the business of money changing cannot take place. Any entity who is caught undertaking any kind of money changing business without the required license will be penalized according to the Foreign Exchange Management Act (FEMA), 1999.

Authorized Money Changers (AMCs) under FEMA & their Categories

Authorized Money Changers (AMCs) refers to authorized dealers, money changers, offshore banking units or any other person who is authorized to deal in foreign exchange or foreign securities under the sub-section (1) of section 10 of the Foreign Exchange Management Act (FEMA), 1999. At present, the RBI issues the authorization for money changing business to the following AMCs in India:

• Authorized Dealer (AD) Category-I: It refers to an entity that is authorized to execute all the permissible transactions of a current account and a capital account as per the directions issued by RBI. 
• Authorized Dealer (AD) Category-II: It refers to an entity that is given the authority to execute specified non-trade related current transactions, all the activities permitted to full-fledged money changers and any other activity which has been decided by the RBI.
• Full Fledged Money Changers (FFMC): It refers to a money changer that is permitted to undertake purchase of foreign exchange and sale of foreign exchange for specified purposes, such as private and business travel abroad.

For assistance regarding the provisions of FEMA, you may get in touch with Registrationwala’s FEMA consultants!

Benefits of FFMC License

The following benefits are associated with FFMC license: 

• It enables the licensee to provide sales facilities and services for foreign exchange.
• It enables the licensee to offer collection certificates in case of traveler’s cheques, currency notes from the residents and non-residents.
• The FFMC license holder is permitted to carry out foreign exchange activities for foreign tourists visiting India.
• The holder of FFMC license can settle trades at the prevailing exchange rate, in coins, traveler's cheques and foreign currency.

Activities of FFMCs

An FFMC can choose to sell foreign exchange for the purposes related to business visits, private visits or forex prepaid cards. It may enter into a franchise agreement for the purpose of carrying on the business of unrestricted business which involves the foreign currency or coins or traveler’s cheques’ conversion into Indian rupees. FFMC or its franchisees can purchase any foreign currency notes, coins or traveler’s cheques freely from the residents and non-residents. Indian rupees can be sold by an FFMC to the foreign tourists or visitors against international debit cards or international credit cards and take prompt actions for obtaining reimbursements through normal banking channels. 

Eligibility criteria for obtaining FFMC license

For obtaining the FFMC license, the following is the eligibility criteria: 

• The organization that wants to apply for FFMC license must be registered under the Companies Act, 2013.
• In order to apply for a single branch license, the organization must have net owned funds (NOF) of at least Rs. 25 lakhs. Whereas, for a multiple branch license, the minimum NOF required is Rs. 50 lakhs.
• The company should not have any active criminal or civil cases.
• The prior money-changing activities must be reflected in the company’s MoA’s object clause.
• The organization must carry out its foreign currency exchange business operations upon the grant of FFMC license within six months which is calculated from the license’s issue date.

Cancellation of FFMC license by RBI 

The Reserve Bank of India can cancel an entity’s FFMC license in the following cases:

• If the AMC has violated or not complied with the provisions or rules of the Foreign Exchange Management Act, 1999 or the rules, regulations and notifications stated by RBI.
• If the AMC undertakes illegal and unethical methods to alter the conversion rates.
• If the revocation is in the public interest
• Failure to Submit any required Document or furnish returns.

Conclusion

Foreign currency exchange business is a great business idea. However, to start this business, FFMC license requirements need to be fulfilled. For assistance in obtaining FFMC license in a hassle free manner, get in touch with Registration’s FFMC license consultants!

Frequently Asked Questions (FAQs) 

Q1. Does the FFMC License need renewal?

A. Yes, this license needs to be renewed every year in order to continue with the operations. The renewal application, along with the required documents, needs to be sent to the RBI.

Q2. Is there any possibility of carrying out money changing business without obtaining the FFMC license?

A. No, it is a legal requirement to obtain FFMC license for carrying out the money changing business.

Q3. Are proprietorship firms, partnership firms and LLPs eligible for FFMC License?

A. No, since these businesses are not covered under the Companies Act, 2013, they cannot apply for the FFMC License.

Q4. How much capital is required for obtaining the FFMC license? 

A. For FFMC license, the entity needs to have at least minimum Net Owned Funds (NOF) of Rs. 25 lakhs for a single branch license. For a multiple branch license, a minimum NOF of Rs. 50 lakhs is required.

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