Full Fledged Money Changer (FFMC) License

Brief Overview

In this era of increased promotion of tour and tourism in India, foreign currency inflow has increased. The process of exchange remained a problem until there was an addition of provision of FFMC license in FEMA, 1999.

The major issue before the introduction of this license was pertaining to the conversion of foreign exchange brought in by the foreign tourists. The tourists used to have lot of trouble in getting Indian currency against their foreign currencies and Indian Hotels were not allowed to accept these currencies.

The government taking note of these issues amended the provisions of FEMA,1999 which allowed for hotels and other entities taking license which shall enable them to accept these foreign currencies from foreign tourists.

What is a FFMC?

FFMC is an authorized entity that may purchase foreign exchange from the NRIs providing them with the Indian currency and may sell the foreign addition exchange for travel purposes, whether private or business but only to the people visiting from abroad.  For this purpose, they need a license approved or provided by the Reserve Bank of India.

In a lot of good hotels across India you will find foreign exchange counters either through recognized dealers (Franchise Agreement) or the hotels can themselves apply for the FFMC license. In case if the hotels apply through a registered dealer (a private vendor or a Bank) then the private vendor shall open their counter in the hotel premise.

Licenses for carrying out the act of foreign exchange in India are of the following types, namely,

• Authorized Dealer Category I- Banks
• Authorized Dealer Category II
• Authorized Dealer Category III
• FFMC

The conditions to apply for a FFMC License:

• A company incorporated under The Companies law/ Registration of Companies (Sikkim) Act, 1961.
• Net Owned Funds

In case the company has a single branch, it must be a minimum of Rs 2,500,000

In case the company has multiple branches, it must be a minimum of Rs 5,000,000

This requirement of Net Owned Funds has to be maintained on an ongoing basis.

• The object clause of Memorandum of Association (MoA) shall mention the activities of money changing.
• The company must not have any pending case with The Department of Revenue Intelligence (DRI) and Department of Enforcement (ED).
• A newly licensed FFMC should commence operations within a period of 6 months from the date of issuance of license.

How to calculate Net Owned Funds?

Owned Funds: (Paid up Equity Capital + Free Reserves + Credit Balance in Profit & Loss A/c) – (Accumulated Balance of Loss, Deferred Revenue Expenditure and other intangible assets)

Net Owned Funds: Owned Funds – amount of investment in shares of and book value of debentures, bonds, outstanding loans and advances, deposits with the subsidiaries and companies in the same group in excess of 10% of the Owned Funds.

Documents required for applying for FFMC License:

• copy of Certificate of Incorporation
• copy of MoA
• copy of AoA
• A copy of latest Audited Accounts along with the certificates from the Chartered Accountant confirming the Net Owned Funds as on the date of application and calculation thereof
• A copy of last three years audited accounts
• A sealed confidential report from the applicant’s bank
• A duly certified copy of the Board Resolution passed for carrying out the operations of money changing business.
• A Declaration to the effect that the company and any of its directors are not under investigation/ adjudication of any law enforcing agencies, such as ED/DRI & also that no criminal proceedings filed by Crime Investigation Agencies are pending against the company or any of its directors.

Procedure for obtaining license:

• The applicant needs to submit an application with the required documents to the Regional Office of RBI.
• The applicant must fulfill the conditions to be a valid applicant.
• RBI will see to the fit and proper condition for the directors of the company.
• After satisfaction RBI will issue the license within a period of two to three months.
• The company also requires approval from the Empowered Committee.

How do FFMC operate

A Full-Fledged Money Changer (FFMC) must maintain the following registers and records with respect to their money changing activities.

• Daily Summary and Balance book of the Foreign currency notes/ coins in form FLM-1.
• Daily Summary and Balance book of Travelers’ cheques in form FLM-2.
• Register of purchases of the foreign currencies from the public in Form FLM-3.
• Register of purchases of the foreign currency notes/ coins from authorized dealers and authorized money changers in the Form FLM-4.
• Register of sales of foreign currency notes/ coins and foreign currency travellers’ cheques to the public in the Form FLM-5.
• Register of sales of the foreign currency notes/ coins to authorized dealers/ Full Fledged Money Changers/ overseas banks in the Form FLM-6.
• Register of travellers’ cheques surrendered to the authorized dealers/ authorized money changers/ exported in the Form FLM-7.

Conclusion

FFMC license was the need of the hour and has certainly helped the Indian government meet two targets -First of increasing its foreign reserves and secondly its promotion of tourism under the Incredible India plan.