The FFMC license stands for Full Fledged Money Changer license. It is a license that is regulated by the Reserve Bank of India (RBI), in accordance with Section 10 (1) of the Foreign Exchange Management Act, 1999. This license is required by any company from the RBI as permission to conduct forex exchange activities in India.
Without permission, no company can engage in such activities, as doing so will be deemed an offence. The purpose of the FFMC license is to expand access to foreign exchange facilities for residents and tourists while ensuring efficient customer service through healthy competition.
Under the Foreign Exchange Management Act (FEMA), the Reserve Bank of India (RBI) authorises different categories of entities to deal in foreign exchange transactions in India. These authorised persons include the following:
Selected banks authorised to conduct all permissible current account and capital account transactions as directed by RBI from time to time.
Selected entities authorised to conduct specified non-trade related current account transactions, certain foreign trade transactions as permitted by RBI, and other foreign exchange activities allowed under RBI regulations.
Financial and other institutions authorised to conduct specific foreign exchange transactions incidental to their business activities.
Registered companies authorised to undertake the purchase and sale of foreign exchange for specific purposes such as private and business travel abroad.
The FFMC business owners must comply with the regulatory framework prescribed for the FFMC License. These entities must follow important regulatory requirements for carrying out money-changing activities in India. Below are the key compliances with which FFMCs must follow:
The applicant has to be a company registered under the Companies Act, 1956/ Companies Act 2013 or Registration of Companies (Sikkim) Act, 1961. So, the minimum Net Owned Funds (NOF) required for consideration as FFMC are as follows:
Single branch FFMC requires Rs. 25 lakh NOF.
Multiple branches of FFMC require Rs. 50 lakh NOF.
A franchiser, i.e. AD Category–I Bank/ AD Category–II / FFMC, should undertake the following minimum checks while conducting due diligence on its franchisees:
Existing business activities of the franchisee/ its position in the area.
Minimum Net Owned Funds of the franchisee.
Shops & Establishments / other applicable municipal certification in favour of the franchisee.
Verification of the physical existence of the location of the franchisee, where restricted money-changing activities will be conducted.
Declaration regarding past criminal cases, if any, cases initiated/pending against the franchisee or its directors/partners by any law-enforcing agency, if any.
PAN Card of the franchisee and its directors/partners.
Photographs of the directors/partners and the key persons of the franchisee.
Conduct certificate of the franchisee from the local police authorities (certified copy of Memorandum and Articles of Association and Certificate of Incorporation in respect of incorporated entities).
Note: Obtaining of Conduct Certificate of the franchisee from the local police authorities is optional for the franchisers. However, the franchisers may take due care to avoid appointing individuals/ entities as franchisees who have cases/proceedings initiated/pending against them by any law enforcement agencies.
All the points must be followed regularly, or at least once a year. The franchiser must obtain from the franchisees proper FFMC Documents to check the location of the franchisees or visit the site personally. However, the franchiser should also obtain a Chartered Accountant's certificate confirming the maintenance of minimum Net Owned Funds of the franchisee, i.e., Rs.10 lakh on an ongoing basis.
The franchisers, i.e. ADs Category–I Banks / ADs Category–II / FFMCs are expected to put in place adequate arrangements for reporting transactions by the franchisees to the franchisers regularly (at least monthly). Regular spot audits of all locations of franchisees, at least once in six months, should be conducted by the franchiser.
Such audits should involve a dedicated team and incognito visits should also be used to test the compliance level of the franchisees. A system of annual inspection of the books of the franchisees should also be put in place. So, the purpose of such inspection is to ensure that the money-changing business is being carried out by the franchisees in conformity with the terms of the agreement and prevailing Reserve Bank guidelines and that necessary records are being maintained by the franchisees.
The applicant should be a company registered under the Companies Act, 1956/ Companies Act, 2013/ Registration of Companies (Sikkim) Act, 1961 having a registered office within the area of jurisdiction of the respective Regional Office of the Foreign Exchange Department. However, the Net Owned Funds required are as follows:
|
Category |
Minimum NOF |
|
Single Branch FFMC |
Rs. 25 lakh |
|
Multiple Branch FFMC |
Rs. 50 lakh |
However, renewal applications should be submitted along with the documents mentioned below.
Copy of the latest audited accounts with a certificate from the Statutory Auditors regarding the position of Net Owned Funds as of date.
Confidential Report from the applicant's banker in a sealed cover.
A declaration to the effect that no proceedings have been initiated by/ are pending with the Directorate of Enforcement / Directorate of Revenue Intelligence or any other law enforcing authorities against the applicant company. Or, its directors and that no criminal cases are initiated/ pending against the applicant company or its directors.
A copy of the KYC / AML / CFT policy framework existing in the company.
If the RBI has granted an authorisation under Section 10(1) of FEMA, 1999, it may revoke such authorisation in the following cases:
If it is in the public interest; or
If the authorised person has failed to comply with the imposed conditions or has violated any provisions of the Act or any rules, regulations, notifications, directions or orders issued for the license.
The FFMC License allows businesses to conduct foreign exchange activities and related services in India. However, these activities cannot be carried out without obtaining a license from the Reserve Bank of India. If you want to obtain an FFMC License from RBI, you can reach out to our FFMC License Consultants for assistance. We can help you throughout the application process until the license is successfully obtained.
Q1. What is an FFMC License?
A. An FFMC License is an RBI authorization that allows companies to legally deal in foreign exchange in India.
Q2. Who needs to obtain an FFMC License?
A. Any company or entity involved in buying or selling foreign currency must obtain this license.
Q3. What is the minimum Net Owned Fund (NOF) required for FFMC?
A. Rs. 25 lakh is required for a single branch and Rs. 50 lakh for multiple branches.
Q4. Can RBI revoke an FFMC License?
A. Yes, RBI can revoke it in public interest or if the license holder violates rules or conditions.
Q5. What are the reporting and audit requirements for FFMCs?
A. FFMCs must report transactions monthly, conduct audits every 6 months and inspect records annually.
Q6. What checks are required before appointing a franchisee?
A. Franchisers must verify business background, financial status, documents, location and legal history.
Q7. What documents are needed for FFMC License renewal?
A. Audited accounts, banker’s report, no-pending-case declaration and KYC/AML/CFT policy are required.
Q8. What happens if a company operates without a valid FFMC licence?
A. If it is discovered that a company is operating without a valid FFMC licence, it may face regulatory action, penalties or legal consequences. It could even face permanent suspension of foreign exchange activities.
Which License is Required to Provide Currency Exchange Services
Who are authorized money changers amcs
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
Want to know More ?
Transform your Business.
