FFMC License in India

Are you planning to set up a foreign exchange business in India? If yes, then it’s crucial to obtain an FFMC license. A Full Fledged Money Changer (FFMC) license is a legal document issued by the Reserve Bank of India (RBI) that permits an entity to deal with foreign currency transactions. This license is essential for individuals or companies planning to offer currency exchange services to customers. In this blog post, we will explore everything you need to know about FFMC licenses in India, from the application process to the requirements and benefits of obtaining it. So, read on to learn more!

1. What is FFMC License and its Importance?

FFMC License is a necessary license issued by the Reserve Bank of India (RBI) to entities that deal with forex trading and money changing activities. With the help of this license, these entities can procure funds from Indian residents and non-residents and undertake forex trading activities. It is important to note that no entity is allowed to undertake money exchange business unless it holds a license from the RBI. Unauthorized money exchanges can attract hefty penalties as per the law. The FFMC License is reserved for authorized entities only and regulated by the RBI. It offers various benefits to foreign visitors and travelers seeking financial aid to support their activities.

Entities seeking to avail FFMC License in India need to fulfill specific eligibility criteria. For instance, they must be registered entities under the Companies Act 1956/ Companies Act 2013 and must possess a minimum net owned fund of Rs. 25 Lakh for a single branch. In case of multiple branches, the minimum net owned fund required is Rs. 50 lakh. Moreover, the entity must not have a criminal record, and the money exchange activity must be mentioned in its object clause of Memorandum. 

2. Introduction to FFMC license

FFMC license stands for Full Fledged Money Changer license, which is granted by the Reserve Bank of India to individuals or business entities to deal in foreign currencies. With this license, a holder can purchase foreign exchange from NRIs and sell it for business and travel purposes to the Indians visiting abroad. The main aim of FFMCs is to widen access to foreign exchange facilities to residents and tourists while providing efficient customer service through competition. In addition, FFMCs play a pivotal role in foreign exchange transactions. Only an Authorized Money Changer (AMC) is eligible to deal in the activities related to Money Changing and Foreign Exchange, as per the stipulations of Section 10 of the FEMA 1999. Therefore, obtaining an FFMC license is crucial for individuals and businesses who want to conduct foreign exchange operations in India. 

3. Legal requirements for obtaining FFMC license

A Full Fledged Money Changer (FFMC) is an authorized entity that can purchase foreign exchange from non-residents and residents of India and sell it for private and business purposes only to people visiting abroad. As stipulated by the Reserve Bank of India (RBI), authorized money changers are the only entities in the country that can engage in foreign exchange activities and offer the necessary exchange services. To obtain FFMC License, the applicant should register a company under the Companies Act 2013. The NOF (Net-owned Fund) requirement is Rs. 25 lakhs for one FFMC branch and Rs. 50 lakhs for multi-branch FFMCs. The memorandum must demonstrate the business of money exchange to be carried out by the company. Additionally, there should be no criminal or civil cases pending against the company or individual with the Directorate of Tax Intelligence and the Directorate of Enforcement. 

4. Benefits of having an FFMC license

An FFMC license is a legal document that grants permission to individuals or entities to carry out foreign exchange transactions. There are numerous benefits of possessing an FFMC license. Firstly, it provides individuals with the ability to offer foreign exchange services without any legal ramifications. Secondly, it enables them to engage in both buying and selling of foreign currency, ensuring that they are not restricted in any way. Additionally, it empowers entrepreneurs to start and operate their own foreign exchange business. The license allows for flexibility in the business, as it can be operated either as a standalone entity or in conjunction with other services. Having an FFMC license is also a clear indicator of credibility, as it is only granted to individuals who meet specific requirements set by regulatory bodies. Overall, having an FFMC license provides entrepreneurs with numerous opportunities to expand their business while also ensuring compliance with legal and regulatory requirements.

5. Regulations and compliance

A Full Fledged Money Changer (FFMC) is an authorised entity that deals with the purchase and sale of foreign currencies for business and travel purposes. FFMCs can offer foreign exchange facilities to tourists and residents, ensuring efficient customer service through competition. However, only an Authorised Money Changer (AMC) is eligible to deal with activities concerning money changing and foreign exchange. Full Fledged Money Changer License from the Reserve Bank of India (RBI) grants approved entities the authority to purchase and sell foreign exchange for business and travel purposes, ensuring the provision of encashment certificates for travellers’ cheques and foreign currency notes from non-residents and residents.

To apply for an FFMC License, a business entity must have been incorporated under the provisions of the Companies Act 2013. The applicant’s net-owned funds (NOF) must be at least INR 2.5 million for a single-branch company and INR 5 million for multiple branches. The memorandum of association (MOA) of the company must reflect the activities of money changing, and there should be no legal cases against the company or individual by the Directorate of Tax Intelligence and the Directorate of Enforcement.

To regulate the Authorised Money Changer License, the RBI issues guidelines for associated matters such as appointing franchisees or agents and Combating of Financing Terrorism (CFT) norms. The key benefits of the Full Fledged Money Changer License include the capability to provide sale facilities and services and carry out foreign exchange activities for foreign tourists visiting India. AMCs and FFMCs settle trades in coins, travellers’ cheques, and foreign currencies at the prevailing exchange rate. The RBI permits business entities to handle foreign exchange for specific purposes only, and operating any exchange office without a valid license may result in legal consequences. It is compulsory for a company to start its business operations within six months of obtaining an AMC License from RBI. 

6. Challenges faced by FFMC license holders

FFMC license holders play a pivotal role in the facilitation of foreign exchange transactions in India. They provide foreign exchange sale facilities to residents and tourists visiting India while maintaining efficient customer service through competition. However, being a Full Fledged Money Changer (FFMC) in India comes with a set of challenges. These challenges range from constantly evolving regulatory and compliance requirements to market volatility and operational risks. FFMCs are heavily regulated by the Reserve Bank of India (RBI), and non-compliance can lead to severe legal and financial consequences. Moreover, FFMCs also face operational challenges such as managing liquidity, currency risk, and maintaining a robust AML/KYC framework. The lack of adequate infrastructure, skilled staff, and access to technology are additional challenges faced by FFMCs, hindering their business growth and sustainability. Despite these challenges, FFMCs continue to play a crucial role in India’s foreign exchange market and strive to provide efficient and transparent currency exchange services to their customers. 

7. Process for obtaining an FFMC License in India

To obtain an FFMC License in India, one must meet certain conditions. Firstly, the business entity must be incorporated under the provisions of the Companies Act 2013. Secondly, the entity needs to have a minimum of Rs 2500000 as Net Owned Funds (NOF) for a single branch, and Rs 5000000 as NOF for multiple branches. The object clause of the Memorandum of Association must also reflect the activities of money changing. Additionally, there should be no pending cases with the Department of Revenue Intelligence or Department of Enforcement, and business operations must commence within six months of obtaining the AMC License from RBI. The Reserve Bank of India is the regulatory body responsible for granting Authorised Money Changer Licenses and prescribing directions and guidelines.

Next, to acquire the license, an application must be submitted to the Reserve Bank of India in the prescribed format. The application must be accompanied by the necessary documents like MOA, certificate of incorporation, and PAN card. Post submission, the RBI may request for additional documents or information for scrutiny. Upon satisfaction, the central bank may grant the license upon payment of the necessary fees. It is essential to note that FFMCs must comply with the regulations specified in the Foreign Exchange Management Act (FEMA) and the guidelines issued by the Reserve Bank of India.

It is crucial to obtain an FFMC License in India if one desires to deal in foreign exchange activity. The license permits individuals or business entities to widen access to foreign exchange facilities to residents and tourists. It also grants them the authority to purchase foreign exchange from Non-Resident Indians and sell it for business and travel purposes to Indians visiting abroad. Moreover, an FFMC License Holder has the capability to provide sale facilities and services for foreign exchange, as well as undertake foreign exchange activities for foreign tourists visiting India.

Obtaining an FFMC license in India is a significant step for companies wanting to deal with foreign currency. It is an approval granted by the Reserve Bank of India to deal with the activities of foreign exchanges. The license is only granted to banks or financial institutions that are well equipped to carry out foreign exchange transactions in India. The FFMC license enables the authority to purchase foreign exchange from NRIs and sell it for business and travel purposes to the Indians visiting abroad. It also grants the capability of providing sales facilities and services for foreign exchange.

In summary, obtaining an FFMC License in India is a crucial step for a business entity to deal in foreign exchange activities. The license is granted by the Reserve Bank of India under the provisions of Section 10 of the FEMA 1999. Before applying, the business entity must ensure it meets all the necessary conditions and complies with the guidelines issued by the RBI, which could involve getting assistance from professionals. The license permits the holder to widen access to foreign exchange facilities to residents and tourists while ensuring efficient customer service through competition. Furthermore, it grants the holder the authority to purchase foreign exchange from NRIs and sell it for business and travel purposes to the Indians visiting abroad. 

8. Conditions and compliance requirements for FFMC License holders

Full Fledged Money Changer License is essential for individuals or business entities who wish to deal in foreign currencies. The Reserve Bank of India (RBI) authorizes AMCs (Authorized Money Changers) to undertake foreign exchange activities to purchase foreign exchange from NRIs and sell it for business and travel purposes only to Indians visiting abroad. The operations of FFMC License holders include encashment certificates in the case of Traveller’s Cheques and foreign currency notes from non-residents and residents, addressing dealings in coins, Travellers’ Cheques, and foreign currency at the prevailing exchange rate, and providing foreign exchange sale facilities and services.

The process of obtaining an FFMC License requires the business entity to be duly incorporated under the Companies Act 2013 with a minimum Net Owned Funds (NOF) of Rs 25 lakhs for a single branch and Rs 50 lakhs for multiple branches. Moreover, the Memorandum of Association must reflect the activities of money changing, and the company must not have any pending case with the Department of Revenue Intelligence and Department of Enforcement. The company must start its operations within six months of obtaining the AMC License from RBI.

FFMC License holders are subject to certain compliance requirements, including CFT (Combating of Financing Terrorism) norms, and RBI regulations regarding the appointment of franchisees or agents. The RBI guidelines empower only authorized money changers in the country to carry out foreign exchange activities and impose stringent penalties on individuals carrying on exchange office businesses without a license. Therefore, FFMC license holders must adhere to the regulatory framework and fulfill the conditions for obtaining an FFMC license to engage in foreign exchange activities. 

9. Why FFMC License is important in India

Foreign exchange transactions are an integral part of international travel and business. In India, the Reserve Bank of India (RBI) regulates and controls all money-changing activities through Section 10 of the Foreign Exchange Management Act, 1999. To carry out the business of money changing, an entity must obtain an FFMC License from the RBI. This license allows the holder to purchase foreign exchange from non-residents visiting India and residents, and sell it for purposes such as private and business travel abroad. FFMCs are authorised to undertake forex trading, purchase travellers’ cheques, coins and foreign currency notes from residents and non-residents and sell foreign exchange for Forex prepaid cards, business visits and private visits. The main objective of enabling FFMCs to do business is to widen access to foreign exchange facilities for residents and tourists while ensuring efficient customer services through competition. Therefore, obtaining an FFMC license is vital in India as no person shall carry on the business of money changing unless in possession of a valid license, as per the Act. 

10. Eligibility to Apply for FFMC License in India

To apply for a Full Fledged Money Changer (FFMC) License in India, an entity must fulfill certain eligibility criteria. Firstly, the entity must be registered under the Companies Act 2013/1956. Secondly, the entity must have a minimum net-owned finance of Rs. 25 lakhs for a single-branch license and Rs. 50 lakhs for a multiple-branch license. The object clause of Memorandum must reflect the action of money changing to be pursued through the corporation. Furthermore, no civil or criminal case should be pending against the corporation with the Department of enforcement of the Department of Revenue Intelligence. Lastly, the corporation must continue its business activity within 6 months from the date of issuance of Forex License and must intimate the RBI. 

11. Documents Required for FFMC License Registration

Getting a Full-Fledged Money Changer (FFMC) License in India requires meeting eligibility and documentation criteria. To be seen as someone worthy of filing the application for the license, the FFMC business must be incorporated as a company and meet minimum Net Owned Funds (NOF) requirements. The applicant company must not have any pending cases and should have a Memorandum of Association that reflects their money changing activities. The applicant must implement a business plan that enables them to open their FFMC business within six months of obtaining the license.

To obtain an FFMC License in India, companies must submit a document checklist alongside their filled application. The documents required include a certified copy of the Certificate of Incorporation, Memorandum and Articles of Association, latest audited accounts, and confidential agreement from the applicant’s bank. Other requirements also entail furnishing information concerning associated concerns operating in the financial sector and a copy of the Board Resolution to undertake money-changing businesses. These documents, alongside the application, should be submitted to the Foreign Exchange Department of the Reserve Bank of India, and if everything is in order, the FFMC License would be issued within two to three months. 

12. Pre-Conditions to Fulfil Before Filing for FFMC License

Before filing for a Full Fledged Money Changer (FFMC) license in India, there are certain pre-conditions that an entity must fulfill. Firstly, the entity must be registered as a company under the Companies Act 2013. Secondly, the minimum net owned funds (NOF) should be INR 25 lakhs for a single branch FFMC and INR 50 lakhs for multiple branch FFMC. Thirdly, there should not be any civil or criminal case pending against the company with the Directorate of Enforcement or the Directorate of Revenue Intelligence. Fourthly, the object clause of Memorandum of Association (MoA) should mention the activity of money changing to be pursued by the company. The application form for FFMC license must be submitted to the respective Regional Office of the Foreign Exchange Department (FED) of the Reserve Bank of India along with the required documents. Moreover, the applicant should have a proper policy framework on AML/KYC/CFT in place before commencing operations. If these pre-conditions are not met, the application for FFMC license will not be considered. 

13. Role of RBI in Authorizing FFMC Companies

The Reserve Bank of India (RBI) has a crucial role in authorizing entities that wish to deal in foreign exchange through Full Fledged Money Changer (FFMC) License. This license is necessary for purchasing foreign exchange from non-residents visiting India and residents and selling it for specified purposes, such as private and business travels abroad. Under the Foreign Exchange Management Act 1999, only an Authorised Money Changer (AMC) can engage in foreign exchange and money changing activities. The FFMC License contains various instructions on money-changing activities, including the authorization and functioning of FFMCs, non-bank Authorised Dealers Category-II, and franchisees of Authorised Persons, as well as the conduct of foreign exchange transactions with their customers/constituents.

To promote efficient customer services through competition, the main objective of allowing FFMCs to do business is to broaden access to foreign exchange facilities to both residents and tourists. The following entities can carry out money changing businesses: entities authorized by the RBI under Section 10 for Foreign Exchange Management Act 1999. A person cannot undertake money changing activity unless RBI issued a valid license, and conducting such business without a license will draw penalties under the Act. The eligibility criteria to apply for an FFMC License stipulate that the applicant should register under Companies Act 1956/Registration of Companies (Sikkim) Act 1961. The applicant entity must have a minimum net-owned fund of Rs. 25 Lakhs to apply for a single branch FFMC License and Rs. 50 Lakhs for a multiple branch FFMC License. Also, the object of the Memorandum of Association (MOA) of the applicant entity must contain a provision for undertaking money-changing activities. Finally, before granting such a license, the RBI ensures no proceedings are initiated or pending against the applicant company or its directors by the Department of Enforcement (DOE)/Department of Revenue Intelligence (DRI). 

14. Time Frame for FFMC License Issuance

Obtaining an FFMC License in India can be a lengthy and complicated process. However, knowing the documentation and eligibility criteria can make the process smoother. To apply for the license, the business of FFMC should be incorporated as a company, and there should not be any pending case against it in the Department of Enforcement or Department of Revenue Intelligence. The minimum net owned funds (NOF) are different for a single branch or multiple branches FFMC License. The Memorandum of Association of the applicant entity must mention undertakings to money-changing activities. The Reserve Bank of India issues the license only to those who meet the eligibility criteria and documentation checklist. In case of any discrepancies or incompleteness in the documents, an FFMC License consultant can be contacted.

Once all the documents and eligibility requirements are met, the application goes under scrutiny. If RBI approves the application, FFMC License Issuance takes approximately six months. The applicant would need to implement their FFMC business plan enough to commence FFMC operations within six months of obtaining the license. While the process can take time, all the requirements are in place to ensure efficient customer service and maintain compliance with laws and regulations for FFMC operations. The aim of the license is to enable full-fledged money changer businesses to provide foreign exchange facilities to both residents and tourists. 

15. Frequently Asked Questions about FFMC License in India

What is FFMC License in India?

FFMC stands for Full-Fledged Money Changer, and an FFMC license in India is a permit issued by the Reserve Bank of India (RBI) to individuals or companies who want to carry out the business of money changing or foreign exchange services.

Who is eligible to apply for an FFMC License in India?

Any individual or company registered under the Indian Companies Act, 2013 can apply for an FFMC license in India. Additionally, if you want to open a single branch of FFMC business, you need to have Net Owned Funds (NOF) of at least INR 25 Lakh, and for multiple branches of FFMC business, you need to have NOF of at least INR 50 Lakh.

What are the activities permitted to Fully Fledged Money Changers in India?

Fully Fledged Money Changers in India are primarily allowed to do the following activities – they can take up a franchise for money-changing activities; conversion of foreign currency notes to Indian Rupees; and receive money through normal banking channels. They are also allowed to buy coins and foreign currency from NRIs as well as residents.

What is the regulatory framework for FFMC license in India?

The regulatory framework for FFMC license in India has been adequately defined under section 10(1) of the Foreign Exchange Management Act (FEMA) 1999. The guidelines specify the eligibility criteria for FFMC and the procedure to obtain the license. Additionally, authorized dealers are appointed under the Act, and they are empowered to deal with foreign exchange or money-changing activities.

How to apply for an FFMC license in India?

The applicant needs to submit the application in the requisite form given in FEMA under section 10(1) of the Act. The form shall be submitted to the regional office of RBI under the jurisdiction where the registered office of the applicant falls. The applicant must fulfill the fit and proper criterion, which means there should be no litigation or proceedings pending with the Department of Revenue or Department of Enforcement. If the application is approved, RBI shall issue the Certificate of Incorporation and the FFMC License.

What are the documents required to apply for an FFMC License in India?

The applicant needs to submit the certified copy of the Certificate of Incorporation, Memorandum of Association, Articles of Association, the latest balance sheets, net worth certificate of the company, and the profit and loss account certified by a CA. Additionally, a board resolution passed to carry on money-changing activities through your company and a confidential agreement from the bank in which your company has an account is also required.

Can an FFMC License applicant use the same company to do anything else?

No, running an FFMC business is an exclusive one, which means once you start, you won’t be allowed to use the same company to do anything else. Thus, your Memorandum of Association should reflect that you do money-changing activities through your business entity.

What is the minimum net owned funds required to obtain an FFMC License in India?

For a single branch FFMC, the minimum net owned funds required are INR 25 Lakh, and for multiple branches of FFMC, the minimum net owned funds required are INR 50 Lakh.

What is the process to increase the authorized capital of the company after obtaining an FFMC License in India?

After obtaining an FFMC License, if the company wants to increase its authorized capital, it needs to file a resolution with RBI, along with the documents certifying the increase in the authorized capital.

What is the importance of NOF in an FFMC License application in India?

Net Owned Funds (NOF) is a critical aspect of an FFMC License application as it represents the total value of the company’s assets minus its liabilities. For a single branch FFMC, the minimum net owned funds required are INR 25 Lakh, and for multiple branches of FFMC, the minimum net owned funds required are INR 50 Lakh.

What is the duration of the FFMC License validity in India?

The FFMC License in India is valid for five years from the date of issuance. After five years, the FFMC License needs to be renewed by the applicant.

Where can I find FFMC License consultants in India?

There are various FFMC License consultants available in India who can assist you in obtaining the license. You can search for them online or contact a reputed consultancy firm like Monetic Corp Consultants Pvt Ltd.

What are the benefits of obtaining an FFMC License in India?

Obtaining an FFMC License in India enables companies or individuals to legally operate money-changing businesses in the country, which provides lucrative earning opportunities. Additionally, it gives businesses an edge over other entities that do not have an FFMC License.

What is the significance of the NOF requirement for multiple branches FFMC License application in India?

The NOF requirement for a multiple branches FFMC License application in India ensures that the company has sufficient funds to manage additional branches and mitigate any potential risks. This requirement provides a secure foundation for businesses that intend to expand their operations and increase profits.

What are the consequences of not meeting the eligibility criteria for FFMC License in India?

If an applicant does not meet the eligibility criteria for FFMC License in India, the RBI will put the application into the shredded. Thus, it is crucial to ensure that all the eligibility criteria are fulfilled before submitting the application.