Money changing business
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Money changing business
A money changer is a person or organisation whose business is the exchange of coins or currency of one country, for that of another. This trade was a predecessor of modern banking.
The advent of paper money in the mid-17th century and the development of modern banking and floating exchange rates in the 20th century allowed a foreign exchange market to develop. This provided a way for banks and other specialist financial companies such as bureaux de change and forex brokers to easily change one country’s money for another, and with the added confidence of transparency. When outsiders, especially traveling merchants, visited towns for a market fair, it became necessary to exchange foreign coins to local ones at local money changers. Money changers would assess a foreign coin for its type, wear and tear, and validity, then accept it as deposit, recording its value in local currency. The merchant could then withdraw the money in local currency to conduct trade or, more likely, keep it deposited: the money changer would act as a clearing facility.
A company or person which intends to carry out the functions of Forex currency or money changer activity after obtaining license from the Reserve Bank of India shall be regarded as fully fledged money changer. FFMCs are authorized to purchase foreign exchange from residents and non-residents visiting India and to sell foreign exchange for certain approved purposes.
What are the entry norms for Money changer?
The applicant should be accompanying registered under the Companies Act, 2013, having registered/head office within the area of jurisdiction of the office.
The minimum Net owned funds (NOF) required for consideration as FFMC are:
Single branch FFMC Rs. 25 Lakh
Multiple branch FFMC Rs. 50 lakh
What are the others registration required for Money Changer business? On obtaining approval from the Reserve Bank, a copy of the registration under Shops & Establishment Act or any other documentary evidence such as rent receipt, copy of lease agreement, etc. should be submitted to the Regional Office concerned of the Reserve Bank before commencement of the business.
Does the license need to be renewed annually? Money Exchanger license needs to be renewed year by providing applicable documents to the Reserve Bank of India.
Conditions for carrying out concurrent transactions: FFMCs should put in place a system of Concurrent Audit of the transactions undertaken by them.
All single branches having a turnover of more than US $ 100,000 or equivalent per month and all multiple branch FFCs should institute a system of monthly audit.
Single branch AMCs having turnover of less than US $ 100,000 or its equivalent may institute a system of quarterly audit.
Documents required for Money Changer license?
Certificate of Incorporation and Certificate of Commencement of Business of the Company.
Memorandum and Articles of Association containing a provision for undertaking money changing business or an appropriate amendment to this effect filed with the Company Law Board.
Copy of latest audited accounts with a certificate from the Statutory Auditors certifying the Net Owned Funds as on the date of application.
Copies of the audited Balance Sheet and Profit & Loss account of the company for last three years. (if applicable)
Confidential Report from the applicant’s banker in a sealed cover.
A declaration to the effect that no proceedings have been initiated by / are pending with the DoE / DRI or any other law enforcing authorities, against the applicant company or its directors and that no criminal cases are initiated / pending against the applicant company or its directors.
A declaration to the effect that proper policy framework on KYC / AML / CFT, in accordance with the guidelines issued vide A.P. (DIR Series) Circular No. 17 [A.P. (FL/RL Series) Circular No. 04] dated November 27, 2009, as amended from time to time, will be put in place on obtaining the approval of the Reserve Bank and before commencement of operations.
- Details of sister / associated concerns operating in the financial sector, like NBFCs, etc.
- A certified copy of the board resolution for undertaking money changing business.
Revocation of License by RBI: The Reserve Bank reserves the right to revoke the license granted to an AMC at any time if the Reserve Bank is satisfied that
- It is in public interest to do so or
- The AMC has failed to comply with any condition subject to which the authorization is granted or has contravened any of the provisions of the Foreign Exchange Management Act, 1999 or any rule, regulation, notification, direction, or order made there-under. The Reserve Bank also reserves the right to revoke the authorization of any of the offices for infringement of any statutory or regulatory provision.
- The Reserve Bank may at any time vary or revoke any of the existing conditions of a money changer’s license or impose new conditions.
RBI Money changer Approval Process: The request for issuance of FFMC license would be considered by the Regional Office concerned of the Reserve Bank on the basis of the clearance by an Empowered Committee, set up for the purpose. Reserve Bank’s decision in the matter of granting approval or otherwise will be final and binding.
