Money Changer License

Authorized Money Changers (AMCs) are entities sanctioned by the Reserve Bank of India as per Section 10 of the Foreign Exchange Management Act of 1999. AMCs can either be Restricted Money Changers (RMC) or Full-Fledged Money Changers (FFMC). An Authorised Person is defined as an authorised dealer, money changer, off-shore banking unit, or any other individual authorised under sub-section (1) of Section 10 to engage in foreign securities or foreign exchange transactions. FFMCs specifically require a license to buy foreign exchange from residents and non-residents visiting India and to sell it for approved purposes.

Full-Fledged Money Changer (FFMC)

An FFMC is an entity authorized to purchase foreign exchange from non-residents and residents in India and sell it for private and business travel purposes to those going abroad. As per the prescriptions of Section 10 of the Foreign Exchange Management Act, 1999, AMCs are the only entities entitled to conduct money changing activities and offer requisite foreign exchange services. To ease issues faced by foreign tourists and visitors, specific firms and hotels are permitted to deal in foreign currency notes, coins, and traveler's cheques as directed by the RBI.

Individuals are prohibited from undertaking or advertising money changing businesses without a valid license issued by the RBI. Violations result in penalties under the Act.

Activities of FFMCs

FFMCs are involved in various activities related to money changing:

Entering franchise agreements for restricted money changing businesses involving conversion of foreign currency notes, coins, or travellers' cheques into INR.
Purchasing foreign currency notes, coins, or traveler's cheques from residents and non-residents of India freely.
Selling INR to foreign tourists against International Debit/Credit Cards and ensuring prompt reimbursements via normal banking channels.
Selling foreign exchange for business visits, private visits, and through Forex Pre-Paid Cards.

Types of FFMC License

The licenses required by an entity to function as an FFMC are:

Authorized Dealer Category-I Banks (AD Category-I Banks)
Authorized Dealers Category-II (ADs Category–II)
Full-Fledged Money Changers (FFMCs)

Eligibility to Obtain FFMC License

The eligibility criteria to operate as an FFMC are as follows:

Registration under the Companies Act of 2013.
Minimum net-owned funds of INR 25 Lakhs for a single-branch license and INR 50 Lakhs for a multiple-branch license.
The Memorandum must include money changing activities.
No pending civil or criminal cases from the Department of Revenue Intelligence against the entity.
Post FFMC License acquisition, business activities must commence within 6 months and notified to the RBI.

Documents Required for FFMC License

The essential documents for obtaining an FFMC License include:

Certificate of Incorporation copy.
Memorandum and Articles of Association with money changing provisions.
Latest audited accounts and Statutory Auditor's Net-Owned Funds certificate.
Audited Balance Sheet and Profit and Loss Accounts for the three years prior to the application date, if applicable.
Confidential banker report in a sealed manner.
Information on the financial sector operations of sister or associated concerns such as NBFCs.
Board Resolution certified copy authorizing money changing business.

Process of Obtaining FFMC License

The process of obtaining an FFMC License involves:

Submitting a detailed application to the RBI's concerned regional office.
The Director's review under the "fit and proper" criteria by the RBI, with the issuance of the license within 2 to 3 months if compliant.
Mandatory Empowered Committee clearance with the RBI's final decision on approval or denial being binding.

Note: An entity with pending cases against it or its directors is ineligible for an FFMC License.

Post Approval Requirements by FFMCs

FFMCs must maintain the following standards post-license:

Submissions of Shops and Establishment Act registration or rent/lease receipts to the RBI before starting business activities.
Adherence to frequently updated instructions by the RBI.
Displaying the RBI-issued money changing license at each business location.
Implementation of Concurrent Audit systems for transaction reviews.
Submission of annual audited balance sheets to the respective RBI Regional Office.

Records and Registers by FFMC

FFMCs must maintain registers and records as follows:

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

Renewal of FFMC License

An application for renewal of an FFMC License should be submitted at least 1 month before the license expiry date. Post-expiry restoration requests are not accepted.

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Frequently Asked Questions

Common questions about Money Changer License.

An RMC can only convert foreign currency notes, coins, or traveler's cheques into Indian Rupees. On the other hand, an FFMC can both purchase foreign currency from residents and non-residents and sell it for approved purposes like private or business travel.

No, individuals are not permitted to carry on or advertise money changing business unless they possess a valid money changer's license issued by the Reserve Bank of India (RBI). Any individual found undertaking money changing activities without a license is liable to be penalized under the Foreign Exchange Management Act, 1999.

The entity applying for an FFMC License must be registered under the Companies Act, 2013, have a minimum net-owned fund of INR 25 Lakhs (for single branch) or INR 50 Lakhs (for multiple branches), and have an object clause in the Memorandum for money changing activity. Additionally, there should be no pending civil or criminal cases against the entity.

The key activities of an FFMC include purchasing foreign currency notes, coins, or traveler's cheques from residents and non-residents, selling Indian Rupees to foreign tourists/visitors against international debit/credit cards, and selling foreign exchange for business visits, private visits, and forex pre-paid cards.

The three types of licenses for money changing activities are Authorised Dealer Category-I Banks (AD Category–I Banks), Authorised Dealers Category-II (ADs Category–II), and Full Fledged Money Changers (FFMCs).

The documents required include a copy of the Certificate of Incorporation, Memorandum and Articles of Association, audited accounts and balance sheets, a confidential report from the applicant's banker, information on associated financial concerns, and a certified board resolution.

The entity must submit a complete application to the concerned RBI regional office. The RBI will review the directors under the "fit and proper" criteria. If satisfied, the FFMC License will be issued within 2-3 months after clearance from the Empowered Committee.

After obtaining the license, FFMCs must submit documentary evidence like rent receipts, display the RBI license at business places, have a concurrent audit system, and submit annual audited balance sheets to the RBI regional office.

FFMCs must maintain registers for daily foreign currency and traveler's cheque summaries, purchases from public and authorized dealers, sales to public and authorized entities, and surrendered or exported traveler's cheques in prescribed forms.

An application for renewal of the FFMC License must be made at least one month before the expiry date of the existing license. Requests for restoration after expiry will not be accepted by the RBI.