FFMC License in India: Eligibility, Procedure, Documents & RBI Guidelines 

In India, dealing with foreign exchange or currency requires pre-approval from the Reserve Bank of India (RBI). One such approval is required for the purpose of obtaining the FFMC License, which stands for Full-Fledged Money Changer License. Businesses involved in currency exchange, such as travel agencies, hotels, and financial service providers, must obtain this license to operate legally.

This blog explains what an FFMC license is, its benefits, eligibility, documents required, the procedure to apply, the renewal process, and key compliance obligations. All information provided is based on the latest RBI guidelines.

What is an FFMC License?

An FFMC License is issued by the Reserve Bank of India under the provision of Section 10 of the Foreign Exchange Management Act, viz. (FEMA), 1999. It allows entities to buy and sell foreign exchange for specific permitted purposes.

There are two categories of money changers:

1. Authorized Dealer Category-I Banks

2. Authorized Money Changers (AMCs), which include:

• FFMCs (Full-Fledged Money Changers)
• Restricted Money Changers (RMCs) – allowed to undertake limited foreign exchange transactions

FFMCs can provide the following services:

• Sale and purchase of foreign currency coins and notes
• Issuance of prepaid Forex cards and traveller’s cheques (through tie-ups)
• Forex services for traveller’s and NRIs

Who Needs an FFMC License?

Businesses or individuals engaged in the following activities require an FFMC license:

• Currency exchange services
• Travel and tour operations offering forex to clients
• Hotels or establishments dealing with foreign tourists
• Forex agents or sub-agents acting under principal money changers

Only entities registered under the Companies Act, 2013 are eligible to apply for this license.

Eligibility Criteria

As per RBI’s Master Direction on Money Changing Activities (updated 2022 AND CIRCULAR DATED MAY 2024):

1. Company Registration: The applicant must be a company registered in India.

2. Minimum Net Owned Funds (NOF):

• ₹25 lakh for single-branch operations
• ₹50 lakh for multiple-branch operations

3. Clean Track Record:

• No ongoing legal proceedings or convictions
• Promoters and directors should have a clean financial background

4. Furnishing of a Board Resolution: Stating intent to engage in forex business

Documents Required

Below are the documents required for obtaining an FFMC license:

• Certificate of the Incorporation and Memorandum of Association (MoA)
• Audited balance sheet showing NOF as required
• Board resolution approving application for FFMC license
• Declaration regarding past criminal or civil proceedings
• PAN card and KYC documents of directors/promoters
• Business plan, including proposed activities and locations
• Details of internal control systems, along with Anti-Money Laundering, viz. (AML), Know Your Customer (KYC), and Counter Financing of Terrorism (CFT) measures as required by RBI guidelines.

Procedure to Apply for FFMC License

1. Prepare Documents: Gather all required financial, KYC, and company documents.
2. Online Application: Submit an application to the RBI via the COSMOS portal.
3. Review and Clarifications: RBI may ask for additional clarifications or documents.
4. Onsite Visit: RBI may inspect premises before granting approval.
5. Issuance of License: If satisfied, the RBI issues the FFMC license with a validity of one year.

Note: After receiving the license, the entity must commence their operations of within the time period of six months...!

Post-License Compliance

Once an FFMC license is obtained, the holder needs to adhere to several regulatory obligations, including:

• Maintenance of Records: Maintain records as per RBI’s prescribed FLM registers (FLM-1 to FLM-7).
• Daily Transaction Reporting: Through the RBI’s Foreign Exchange Transactions Electronic Reporting System (FETERS)
• Quarterly Reporting: On branch operations and turnover
• Annual Audit: Submission of audited financials and Net Owned Funds (NOF) certificate to RBI.
• Fixed timeline: All annual documents (audited financials and NOF certificate) must be submitted by October 31 of each year.
• 75% utilization mandate: FFMCs must ensure at least 75% of foreign currency notes purchased are sold to the public each quarter. Shortfall must be justified with documentation.
• Display of License: Prominently at business premises

Non-compliance may result in suspension or cancellation of the license.

Renewal of FFMC License

FFMC licenses are valid for one year and must be renewed annually. The renewal application should be submitted at least one month before expiry along with:

• Updated audited financials
• Compliance status report
• KYC and AML/CFT review summaries
• Application fee and renewal form

RBI evaluates the performance, compliance record, and financial health before granting renewal.

Benefits of Obtaining an FFMC License

1. Legally Authorized: Only FFMC license holders can deal in foreign exchange legally.
2. Revenue Generation: Enables businesses to diversify income by offering forex services.
3. Credibility: Improves brand trust and client confidence.
4. Partnership Opportunities: FFMCs can partner with banks, travel companies, and international payment service providers.

Penalties for Non-Compliance

According to the FEMA provisions, engaging in the foreign exchange transactions without proper authorization can result into:

• Monetary penalties
• Seizure of currency and documents
• Cancellation of business license
• Imprisonment in extreme cases

Hence, timely compliance with RBI directions is crucial.

Why Choose a Consultant for FFMC License?

To obtain an FFMC license is a critical and a process that involves extensive paperwork. A professional consultant can help with:

• To assess eligibility and financial readiness
• To prepare RBI-compliant documentation
• Submitting the applications and handling clarifications
• Guiding on post-license compliance and renewals

Choosing expert support ensures smooth approval and minimizes delays...!

Conclusion

The FFMC license is essential for companies who intend to operate in the foreign exchange area in India. It not only to ensure legal compliance with FEMA and RBI guidelines but it also opens up opportunities to offer the various related valuable services to traveller’s, NRIs and corporates.

If your business is looking to expand into the forex operations, then understanding the FFMC licensing process is the first step. Ensure that your financials are in place, documentation is accurate and all compliance measures are followed strictly to gain and retain RBI’s approval. If you are seeking professional help, feel free to contact our business experts at CRSPL Business Consultants, they will guide you at every stage when you are going through FFMC license process.

With the help expert guidance, proper planning, and adherence to RBI regulations, you can successfully operate as a licensed money changer and build a credible and compliant forex business in India.

Frequently Asked Questions (FAQs)

Q1. Who grants the FFMC license in India?

The Reserve Bank of India (RBI) grants FFMC licenses under FEMA.

Q2. How long is the FFMC license valid?

It is valid for a period of one year and needs to be renewed annually.

Q3. Can a partnership firm apply for an FFMC license?

No, only companies registered under the Companies Act are eligible.

Q4. What is the minimum NOF required for an FFMC?

₹25 lakh for a single branch, ₹50 lakh for multiple branches.

Q5. Can an FFMC appoint franchisees or sub-agents?

No, FFMCs cannot appoint sub-agents unless permitted by RBI.