Dealing in foreign exchange is a regulated activity in India, and businesses that want to operate as Full Fledged Money Changers (FFMCs) must obtain the FFMC licence from the Reserve Bank of India (RBI). This license allows an eligible business entity to undertake permitted money changing activities. However, obtaining this licence from the central bank requires applicants to meet certain eligibility criteria and comply with prescribed guidelines.
In this blog post, we shall explain to our readers the latest RBI guidelines for issuance of FFMC licence, including the major requirements that applicants should understand before applying. If you are planning to start a money changing business in India, we recommend reading this post to understand basic regulatory requirements for obtaining FFMC licence.
Full Fledged Money Changer meaning can be explained as a company authorised by the Reserve Bank of India to purchase and sell foreign exchange for specified purposes u/s 10 of Foreign Exchange Management Act, 1999. An FFMC can purchase foreign currency coins, notes and travellers’ cheques from residents and non-residents visiting India. It can also sell foreign exchange for permitted private and business travel purposes while adhering to RBI regulations.
For a company to operate as a Full Fledged Money Changer in a lawful manner, obtaining the required RBI authorisation commonly known as FFMC licence is mandatory. The company must also comply with eligibility criteria, operational requirements and licence renewal conditions laid down by the central bank.
The latest RBI guidelines for issuance of FFMC license are given below:
The applicant must be a company registered under any of the following Acts:-
Companies Act, 1956;
Companies Act, 2013; or
Registration of Companies (Sikkim) Act, 1961.
The applicant must meet minimum NOF requirement based on type of FFMC licence it is applying for (i.e., a single-branch or multiple-branch FFMC licence).
|
Category |
Minimum NOF required |
|
Single-branch FFMC |
Rs. 25 lakh |
|
Multiple-branch FFMC |
Rs. 50 lakh |
For applicants (other than banks), the Net Owned Funds should be calculated as follows:
A. Owned Funds
First, calculate the owned funds using the formula below:
“Owned Funds = Paid-up Equity Capital + Free Reserves + Credit Balance in the Profit and Loss Account − Accumulated Losses − Deferred Revenue Expenditure − Other Intangible Assets.”
B. Net Owned Funds
Once you have calculated the owned funds, you can calculate the net owned funds using the formula below:
“Net Owned Funds = Owned Funds minus the following:
Amount of investments in shares of its subsidiaries, companies in the same group and other non-banking financial companies.
The book value of debentures and bonds, outstanding loans and advances made to and deposits made with subsidiaries and companies in the same group to the extent that total of these items exceeds 10% of Owned Funds.”
The application for the FFMC license must be submitted using the prescribed form through the APConnect portal to the Regional Office of the RBI's Foreign Exchange Department, where the applicant company's registered office is located.
The FFMC application must be accompanied by the following documents:
|
S. No. |
Type of Document |
Details |
|
1. |
Certificate of Incorporation |
A copy of the company's Certificate of Incorporation issued by the Registrar of Companies. This document serves as proof of company registration. |
|
2. |
Memorandum and Articles of Association (MOA and AOA) |
MOA serves as the company’s external charter and defines its scope, object limits, capital structure, etc. AOA serves as an internal rulebook for managing and governing the internal affairs, administration & day-to-day operations of company. For the purpose of obtaining an FFMC license, these documents must include a provision allowing the company to undertake money-changing business. If this provision is missing, an appropriate amendment must be filed with the Company Law Board, as stated in the original guidelines. |
|
3. |
Audited Financial Statements and NOF Certificate |
A copy of latest audited accounts along with a certificate from Statutory Auditors confirming the company's NOF as of application date. Audited Balance Sheets and Profit and Loss Accounts for last three years also need to be submitted along with the application, wherever applicable. |
|
4. |
Banker's Confidential Report |
A confidential report from applicant's banker. This report must be submitted in a sealed cover. |
|
5. |
Declaration Regarding Legal Proceedings |
A declaration confirming that no proceedings have been initiated or are pending against the applicant company or its directors before the Directorate of Enforcement, Directorate of Revenue Intelligence or any other law enforcement authority and that no criminal cases have been initiated or are pending against them. |
|
6. |
Declaration Regarding KYC/AML/CFT Policy |
A declaration stating that the company will put the required policy framework for Know Your Customer (KYC), Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) in place upon receipt of RBI approval and prior to commencement of operations. |
|
7. |
Associated Businesses’ Details |
Details of sister or associated concerns operating in the financial sector like Non-Banking Financial Companies (NBFCs). |
|
8. |
Board Resolution |
A certified copy of Board Resolution approving the company's decision to undertake money changing business. |
If any case has been initiated or is pending against the applicant company or its directors before the Directorate of Enforcement, Directorate of Revenue Intelligence or another law enforcement authority, the company will not be considered to meet the prescribed fit and proper criteria. Its application for an FFMC licence will therefore not be considered.
The concerned RBI Regional Office will consider the application for an FFMC licence based on clearance from an Empowered Committee established for this purpose.
The RBI’s decision on whether to grant FFMC licence approval or otherwise shall be final and binding. Therefore, applicants must ensure that they satisfy all prescribed eligibility criteria, possess requisite supporting documents and submit a duly completed application form containing accurate and complete information in prescribed format.
After receiving RBI approval, the applicant must submit a copy of its registration under the Shops and Establishments Act or other acceptable evidence of its business premises, such as a rent receipt or lease agreement, to the concerned RBI Regional Office before starting operations.
The newly licensed full fledged money changers are required to commence their operations within a period of six months from the date the licence is issued and inform the concerned RBI Regional Office.
FFMCs newly licensed by the RBI must, at all times, ensure that their operations comply with the operational instructions as well as the Know Your Customer (KYC), Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidelines set forth by the RBI. They must also adhere to any other instructions issued by the central bank periodically to ensure their business runs smoothly and legally.
FFMCs are regulated entities that conduct foreign exchange activities in accordance with the regulations prescribed by Reserve Bank of India under Foreign Exchange Management Act, 1999. To operate as an FFMC, an eligible entity must obtain the requisite authorisation known as FFMC licence. The application for obtaining the licence must be prepared in accordance with RBI guidelines and submitted via APConnect portal. Applicants must ensure that they fulfil all eligibility criteria, meet prescribed financial requirements and submit all the necessary documents for regulatory scrutiny.
Given the strict eligibility conditions and documentation requirements involved in obtaining FFMC licence, professional assistance can be quite helpful. It can simplify the entire application process and help ensure that all required documents are properly prepared and then submitted.
If you are planning to obtain FFMC licence, you can reach out to our expert consultants at Registrationwala for full professional guidance and assistance throughout FFMC licensing process.
Q1. Within what period must a newly licensed FFMC commence its operations?
A. A newly licensed FFMC is required to commence its operations within a period of six months from the date of issuance of the licence.
Q2. What is FFMC license fee?
A. The RBI does not charge a licence fee for issuing an FFMC licence. However, if an applicant engages a professional FFMC consultant to assist with license application process and documentation, then the consultant would charge a professional fee for their services.
Q3. Which portal is the official portal for filing FFMC license application?
A. The official portal for filing an application for FFMC licence is APConnect portal (https://apconnect.rbi.org.in/entity).
Q4. What is the minimum net owned funds requirement for FFMC licence?
A. The minimum net owned funds requirement depends on the type of licence sought. A single branch FFMC license requires a minimum NOF of Rs. 25 lakh whereas a multiple branch FFMC license requires a minimum NOF of Rs. 50 lakh.
Q5. What activities can an FFMC undertake under its licence?
A. An FFMC authorised by the RBI can purchase foreign currency notes, coins and travellers’ cheques from residents and non-residents visiting India. It can also sell foreign exchange for permitted private and business travel purposes while strictly adhering to RBI regulations.
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Disclaimer:- The information provided is for general guidance only. Therefore, it should not be considered legal advice. Licensing requirements are subject to RBI guidelines and applicable laws, which may change from time to time. |
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, finance 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.
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