In addition to Banks who are Authorized Dealers to deal in foreign exchange, The Reserve Bank of India under Section 10 of the Foreign Exchange Management Act, 1999 may provide license to work as Authorised Money Changers (AMCs). An AMC may either be a Full Fledged Money Changer (FFMC) or a Restricted Money Changer (RMC). FFMCs are authorised to purchase foreign exchange from residents and non-residents visiting India, and to sell foreign exchange for certain approved purposes while RMCs are authorised only to purchase foreign exchange from residents and non-residents.

Under the New Scheme, in addition to the existing facilities, RBI freely permit Authorised Dealers i.e. Banks and FFMCs to enter into agency/franchising agreements at their option with entities for the purpose of carrying on Restricted Money Changing business i.e. conversion of foreign currency notes, coins or travellers cheques into rupees.

The objective of the Scheme is to provide easier conversion facilities for travellers and tourists, including NRIs, by enlarging the network of money changing facilities in the country. It is expected that the new facility will enable banks and full fledged money changers to provide such facilities at all tourist centers and major cities for extended hours and on holidays.

Existing RMCs who are licensed by the Reserve Bank are free to undertake money changing under this new scheme as a franchisee of the AD/FFMC on surrendering the existing RBI licence. Those who do not opt for operation under this Scheme may continue to undertake existing money changing business until further notice.

FFMCs/RMCs/Franchisees may freely purchase foreign currency notes, coins and travellers cheques from residents as well as non-residents and foreigners. Production of passport need not be insisted upon if encashment of foreign currency notes and/or travelers cheques does not exceed USD 500. However a photo identity document such as passport, driving licence, PAN card etc. should be obtained if encashment is in excess of USD 500.

All payment for encashment of foreign currency notes and travelers cheques in excess of USD 1000 should be made by account payee cheque or demand draft only. 

FFMCs may also purchase from other FFMCs, Franchisees RMCs and Banks any foreign currency notes and can encash travellers cheques tendered in the normal course of business. However rupee equivalent of the amount of foreign exchange purchases from other FFMCs, Franchisees and Banks should be paid only by way of crossed account payee cheque or demand draft. 

FFMCs may sell exchange upto US $ 10000 or its equivalent in the form of foreign currency notes and travellers cheques to eligible resident Indian citizens for undertaking one or more private visits to any country abroad (except Nepal and Bhutan) in one calendar year. Exchange for such visits may be released on the basis of declaration given by the traveller regarding the amount of foreign exchange availed of during a calendar year. 

FFMCs may sell exchange in the form of foreign currency notes and traveller cheques to eligible travellers for business travel or for attending conference or specialised training upto US $ 25000 or its equivalent per trip.

Payment in excess of Rs.50,000/- towards foreign exchange sold should be received only by account payee cheque/demand draft.

FFMCs may convert into foreign currency, unspent Indian currency held by non-residents at the time of their departure from India, provided a valid Encashment Certificate is produced. 

FFMCs may put through transactions i.e. sale and purchase, relating to foreign currency notes and travellers cheques at rates of exchange determined by market conditions. 

FFMCs should display at a prominent place in or near the public counter, a chart indicating the rates for purchase/sale of foreign currency notes and travellers cheques.

FFMCs should keep balances in foreign currencies at reasonable level and avoid build up of idle balances with a view to speculating on currency movements.

FFMCs shall maintain such registers and books of account as prescribed by the Reserve Bank from time to time. All registers namely called FLM 1 to FLM 7 and books should be kept up-to-date, cross-checked and balances verified daily.

FFMCs should submit to the office of Reserve Bank which has issued the licence/unified licence, a monthly consolidated statement for all its offices in form FLM 8 so as to reach Reserve Bank not later than the 10th of the succeeding month.

FFMCs should also submit to the Reserve Bank a monthly statement indicating details of receipt/purchase of US $ 10,000 or its equivalent and above per transactions within 10 days of the close of the month. FFMCs should include transactions of their franchisees in their statement.

Section 12(1) of Foreign Exchange Management Act 1999, empowers any officer of Reserve Bank specially authorised in this behalf to inspect the books and accounts and other documents of FFMCs.

All single branch FFMCs having a turnover of more than USD 100,000 or equivalent per month and all multiple branch FFMCs should institute a system of monthly audit. However single branch FFMCs and having turnover of less than USD 100,000 or its equivalent may institute a system of quarterly audit. 

Appointment/selection of auditors is left to the discretion of the FFMCs. The auditors should check all the transactions of the FFMCs. The Statutory Auditors would be required to certify that the Concurrent Audit and the internal control systems are working satisfactorily. 

FFMCs should apply for renewal of license at least 3 months in advance of the expiry of the current license to the Regional Office of Reserve Bank in whose jurisdiction their Head Office is situated.

Since the License to carry on the business of FFMC is given only to a body corporate and further to make compliance of guidelines issued from time to time under FEMA and RBI Act only a qualified professional preferably in finance sector can handle this business better and a chartered accountant may be considered the right person to do this business. 

Secondly, by gaining knowledge in related areas, there is a scope to provide consultancy for promoting a company for carrying on the business of FFMC. 

Thirdly, as only bodies corporate are given the license to work as FFMC, professional services are required by every company in the field of statutory audit, company law and taxation matters.

Fourthly concurrent audit which is compulsory for all multiple branch FFMCs or a single branch FFMC having a turnover of more than USD 100,000 or its equivalent per month and quarterly audit is to be instituted by a single branch FFMC having turnover of less than USD 100,000 or its equivalent per month.

The author is a member of the Institute. The views expressed herein are his personal views and do no necessarily represent the views of the Regional Council