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As the name suggests, a Currency Exchange Business is a type of business that essentially provides currency exchange services. It is also known as a foreign exchange business and forex business. To start this kind of business, it is mandatory for you to secure approval from the Reserve Bank of India (RBI).
Upon securing the approval, your business can buy and sell foreign currencies legally. In this blog post, we shall discuss the licenses required to start a business for providing currency exchange services in India.
A currency exchange business is an important business that enables currency conversion. It allows tourists to easily exchange their home currency for the local currency of their destination. Also, it enables businesses to enter into financial transactions and engage in global trade.
By starting a business that engages in exchange of currencies, you can generate income through the spread between buying and selling exchange rates. It is more of an ‘essential’ business than a ‘luxury’ one. Therefore, individuals in need of currency conversion, for travel and international transactions, will reach out to you when the need arises.
To start a foreign exchange business in India, you require certain approvals from relevant government authorities. These approvals are as follows:
To start a business for exchanging currencies, you need to register a business entity under the Companies Act 2013. For this, you must file an online application via MCA portal. For the online application, you must use the prescribed form SPICe+ and fill in all the required details. Along with the form, you will need to attach certain documents like Digital Signature Certificate, Director Identification Number (DIN), Memorandum of Association (MOA) and Articles of Association (AOA).
Once you submit the form along with all the required documents, your application will be reviewed by the Registrar of Companies (ROC). If the ROC is satisfied with the application, your company will be registered with the Ministry of Corporate Affairs. Additionally, you will receive a certificate of incorporation, a.k.a company registration certificate, that will imply that your company is a legal entity.
A Commencement of Business Certificate is an essential certificate for starting business operations. Without this certificate, a company cannot legally commence its business activities. To secure this certificate, you must file an INC 20A form with ROC within 180 days of incorporation.
After filing this form, the ROC will review and verify it. If the form complies with all requirements, the ROC will issue your company a business commencement certificate.
FFMC License’s full form is Full Fledged Money Changer License. This license is issued by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA) 1999. It allows a business to conduct foreign exchange operations, specifically purchasing and selling foreign currency for travel purposes.
To secure FFMC licence, you must file an online application using a prescribed form known as RMC-F form via COSMOS portal. If the RBI approves the application, it’ll issue the license for your business.
After securing the license, you must commence business operations within 6 months of receiving the license and notify RBI’s Regional Office. If you fail to commence your operations within the prescribed period, your license may be revoked (unless RBI grants a valid extension.)
Another key requirement to start a forex business is to secure shop and establishment registration. It isn’t just a legal requirement for forex businesses but for most businesses operating in India.
To secure a shop and establishment certificate, you must register your business with the Labour Department of your state/union territory. You must fulfill this requirement within 30 days of commencing operations.
To provide currency exchange services in India, you need to fulfill certain legal and regulatory requirements. This involves registering your business with ROC under Companies Act 2013 and obtaining certificate of incorporation and certificate of business commencement. Apart from these certificates, you must also secure a full-fledged money changer license from the RBI. This license allows you to legally conduct foreign exchange transactions in India, including buying and selling currencies. Finally, you must register your currency shop/business under the Shop and Establishment Act.
If you want to set up a currency exchange business and get all the necessary approvals from concerned authorities, you can reach out to Registrationwala for assistance.
Q1. Which licence authorizes a business to sell and purchase currencies?
A. FFMC licence, issued by RBI, authorizes a business to sell and purchase currencies.
Q2. Which form needs to be filed with RBI for securing FFMC certificate?
A. RMC-F form needs to be filed with RBI for securing FFMC certificate.
Q3. Which portal do I need to visit to file an application for a forex license?
A. You need to visit the official COSMOS portal of the RBI to file an application for a forex license.
Q4. Can a sole proprietorship secure a full fledged money changer license?
A. No, a sole proprietorship cannot secure a full fledged money changer license. The business needs to be a registered entity under Companies Act 2013.
Q5. Can a partnership firm secure a currency-exchange certificate to offer currency exchange services?
A. No, only companies registered under the Companies Act 2013 are eligible to apply for and secure a currency-exchange certificate from RBI.
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