Forex Trading License Requirements

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Forex Trading License Requirements

What are some of the Forex Trading License requirements?

Every Full Fledged Money Changer is authorized to purchase foreign exchange from non-residents visiting India as well as residents. The Forex Trading License holder can sell foreign exchange for both private and business travel.

This article details the guidelines for the issue of a new FFMC license RBI and the forex trading license renewal. We will also discuss the guidelines for authorization for additional branches.

Entry Norms of a Forex Trading License holder

The RBI Money Changer applicant has to be a company registered under the Companies Act of 2013 or the Registration of Companies (Sikkim) Act of 1961.

Net Owned Fund: Requirement and Calculations

We have detailed the minimum Net Owned Funds requirement for FFMC registration consideration in the following points:

• For Single branch FFMC, the minimum net owned fund requirement is Rs. 25 lakh
• For Multiple branch FFMC, the minimum net owned fund requirement is Rs. 50 lakh

The Net Owned Funds of FFMC applicants, other than traditional banks, must be calculated as per the following:

Gross Owned Funds 

The Gross Owned Funds in an FFMC setup comprise the following:

• Paid-up Equity Capital
• Free reserves
• Credit balance in Profit & Loss A/c

But for yielding out the NOF, the following must be subtracted from the Gross funds:

• Accumulated Loss Balance
• Deferred Revenue Expenditure
• Other Intangible Assets

Net Owned Funds 

The applicant must calculate the NOF by subtracting the Gross Owned Funds from the following:

• Amount of investments in shares of its subsidiaries
• Amount of investments in companies in the same group,
• Other Non-Banking Financial Companies
• Book value of debentures, bonds, outstanding loans, and advances made to its subsidiaries more than 10 percent of the Gross Owned Funds

Required Documentation for the Forex Trading License 

The applicant must submit the application in the prescribed form. The applicant must address the application to the respective Regional Office of the Foreign Exchange Department of the Reserve Bank. It is under this jurisdiction the registered office of the applicant falls. Attach the following documents with the application:

Incorporation Certificate

Submit a copy of the Certificate of Incorporation of the Applicant Company

Memorandum and Articles of Association

They must contain the provision for undertaking money exchanging business. They must also detail an appropriate amendment to the effect filed with the Company’s Board.

Audit Statements

Applicant must also submit a copy of the latest audited accounts. A certificate must accompany this from the Statutory Auditors certifying the Net Owned Funds. Submit copies of the Audited Balance Sheet as well as the Profit & Loss Account of the applicant company for the last three years. The applicant must also submit a confidential report from the applicant's banker in a sealed bank cover.

Declaration of Compliance from Authorities

The FFMC applicant must also submit a declaration that no proceedings have been initiated by the following against the applicant company or its directors:

• Directorate of Enforcement
• Directorate of Revenue Intelligence
• Other law enforcing authorities

The Declaration must also mention that no criminal cases are initiated against the applicant company or its directors.

To know more about the FFMC License RBI guidelines, connect with the experts at Registrationwala.

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