TMI BlogMaster Direction - Money Changing Activities (Updated as on February 29, 2024)X X X X Extracts X X X X X X X X Extracts X X X X ..... issible current and capital account transactions as per directions issued from time-to-time select entities (as Authorised Dealers Category-II) to carry out specified non-trade related current account transactions, all the activities permitted to Full Fledged Money Changers and any other activity as decided by the Reserve Bank select financial and other institutions (as Authorised Dealers Category-III) to carry out specific foreign exchange transactions incidental to their business / activities select registered companies as Full Fledged Money Changers (FFMC) to undertake purchase and sale of foreign exchange for specified purposes only 3. The directions relating to the subject of money changing activities including authorisation and functioning of FFMCs, non-bank ADs Category II, and franchisees of Authorised Persons as well as the conduct of foreign exchange transactions with their customers/constituents are being issued in a consolidated form through the Master Direction enclosed herewith, under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk money changers during elections 10 Appendix List of circulars consolidated Master Direction - Money Changing Activities SECTION-I 1. Introduction Money changing business can be undertaken by entities authorised by the Reserve Bank under Section 10 of the Foreign Exchange Management Act, 1999. No person shall carry on money changing business without the possession of a valid money changer s licence issued by the Reserve Bank. Any person found undertaking money changing business without a valid licence is liable to be penalised under the Act ibid. This document contains the various instructions relating to the subject of money changing activities including authorisation and functioning of Full Fledged Money Changers (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. 2. Definitions 2.1 Authorised Person means an authorised dealer, money changer, off-shore banking unit or any other person authorised under sub-section (1) of section 10 to deal in foreign exchange or foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mum NOF Single branch FFMC Rs.25 lakh Multiple branch FFMC Rs.50 lakh Note: The Net Owned Funds of applicants, other than banks, should be calculated as per the following. (a) Owned Funds :- (Paid-up Equity Capital + Free reserves + Credit balance in Profit Loss A/c) minus (Accumulated balance of loss, Deferred revenue expenditure and Other intangible assets) (b) Net Owned Funds :- Owned funds minus the amount of investments in shares of its subsidiaries, companies in the same group, all (other) non-banking financial companies as also the book value of debentures, bonds, outstanding loans and advances made to and deposits with its subsidiaries and companies in the same group in excess of 10 per cent of the Owned funds. (ii) Documentation Application in the prescribed form should be submitted 1 through the APConnect application (https://apconnect.rbi.org.in/entity) to the respective Regional Office of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the applicant falls, along with the following docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance by the Empowered Committee: The request for issuance of FFMC licence 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. (e) Reserve Bank s decision in the matter of granting approval or otherwise will be final and binding. (f) 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. (g) The FFMC should commence its operations within a period of six months from the date of issuance of licence and inform the Regional Office concerned of the Reserve Bank. (h) The new FFMCs should carry out their activities as per the instructions specified in SECTIONS V and VI below and other instructions issued by the Reserve Bank from time to time. Note: Urban Cooperative Banks (UCBs), fulfilling the eligibility norms, would be considered for authorisation as Authorised Dealer Category-I / Authorised Dealer Category-II only. SECTION II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding internal and external audit since submission of the last write-up to RBI. However, in case there is a change, the revised/latest write-up would be required to be submitted. 3. 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 business at an additional branch. 4. The FFMC/ non-bank AD Category II should commence operations of its additional branch within a period of six months from the date of issuance of licence and inform the Regional Office concerned of the Reserve Bank. 5. For opening Foreign Exchange Counters/branches/) at the international airports in India, AD Category-I banks/ ADs Category II/ FFMCs should adhere to following conditions. (a) Foreign Exchange Counters/branches in the arrival halls in international airports in India shall ideally be established after the Customs Desk (Green Channel/Red Channel). However, Foreign Exchange Counters may also be established between the Immigration Desk and the Customs Desk in international airports in India subject to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hisee. The Agency / Franchisee agreement to be entered into should include the following salient features: (a) The franchisees should display the names of their franchisers, exchange rates and that they are authoried only to purchase foreign currency, prominently in their offices. Exchange Rate for conversion of foreign currency into Rupees should be the same or close to the daily exchange rate charged by the AD Category I Banks / ADs Category - II / FFMC at its branches. (b) The foreign currency purchased by the franchisee should be surrendered only to its franchiser within 7 working days from the date of purchase. (c) The maintenance of proper record of transactions by the franchisee. (d) The on-site inspection of the franchisee by the franchiser should be conducted at least once a year. 4. Procedure for application An AD Category I Bank / AD Category - II/ FFMC should apply 3 (non-bank AD Category -II and FFMCs should apply through the APConnect application) to the respective Regional Office of the Reserve Bank, in Form RMC-F for appointment of franchisees under this Scheme. The application should be accompanied by a declaration that while selecting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., Rs.10 lakh on an ongoing basis. 6. Selection of Centres (i) The franchiser, i.e. AD Category I Bank / AD Category II / FFMC may appoint franchisees within a distance of 100 kms. from their controlling branches concerned. (ii) However, this distance criterion is relaxed in case of a recognised group/ chain of hotels appointed as franchisees, provided the headquarters of the group/ chain of hotels falls within a distance of 100 kms. of the controlling branch of the franchiser concerned. (iii) Further, in case of areas declared as hilly areas (as defined by the respective State Governments/ Union Territories) and the North-Eastern States, the distance restriction given in point (i) above is not applicable. 7. Training Franchisers are to impart training to the franchisees as regards operations and maintenance of records. 8. Reporting, Audit and Inspection The franchisers, i.e. ADs Category I Banks / ADs Category II / FFMCs are expected to put in place adequate arrangements for reporting of transactions by the franchisees to the franchisers on a regular basis (at least monthly). Regular spot audits of all locations of franchisees, at least once in six months, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) A declaration to the effect that no proceedings have been initiated by/ are pending with the Directorate of Enforcement / Directorate of Revenue Intelligence 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. (d) A copy of the KYC / AML / CFT policy framework existing in the company. Note: An application from an FFMC/non-bank AD Category-II for renewal of licence shall be made two months before expiry of the licence or such other period as the Reserve Bank may prescribe. Where an application for licence renewal is submitted, the licence shall continue in force until the date on which the licence is renewed or the application is rejected, as the case may be. No application from an FFMC/non-bank AD Category-II for renewal of licence shall be made after expiry of the licence. SECTION V Operational Instructions 1. Bringing in and taking out of Foreign Exchange (i) Foreign exchange in any form can be brought into India freely without limit provided it is declared on the Currency Declaration Form (CDF) on arrival to the Custom Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (ii) In cases where encashment certificate is not issued, attention of the customers should be drawn to the fact that unspent local currency held by non-residents will be allowed to be converted into foreign currency only against production of a valid encashment certificate. 4. Purchases from other FFMCs and Authorised Dealers (ADs) An FFMC/ non-bank AD Category II may purchase from other FFMCs and Authorised Dealers (ADs) any foreign currency notes, coins and encashed traveller s cheques tendered in the normal course of business. Rupee equivalent of the amount of foreign exchange purchased should be paid only by way of crossed account payee cheque/demand draft/banker s cheque / pay order/electronic funds transfer through banking channel. 5. Sale of foreign exchange (I) Private Visits Authorised Persons may sell foreign exchange up to the prescribed ceiling specified in Schedule III to the Foreign Exchange Management (Current Account Transaction) Rules, 2000 during a financial year to persons resident in India for undertaking one or more private visits to any country abroad (except Nepal and Bhutan). Exchange for such private visits will be available on a self- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... road (for private visit or for any other purpose). Wherever the sale of foreign exchange is for the amount equivalent to Rs.50,000/- and above whether it involves a single drawal or multiple drawals for a single journey, the payment must be received only by a crossed cheque drawn on the applicant s bank account or crossed cheque drawn on the bank account of the firm sponsoring the visit of the applicant or electronic funds transfer through banking channel by applicant or sponsoring company or banker s cheque / pay order / demand draft. In addition to the payment by Rupees/ through crossed cheque/ banker s cheque/ pay order/ demand draft/electronic funds transfer through banking channel, Authorised Persons may also accept the payments made by the traveller through debit cards/ credit cards/ prepaid cards for travel abroad (for private visit or for any other purpose) provided- (i) KYC/ AML / CFT guidelines are complied with, (ii) sale of foreign currency/ issue of foreign currency traveller s cheques is within the limits (credit/ prepaid cards) prescribed by the bank, (iii) the purchaser of foreign currency/ foreign currency travellers cheque and the credit/ debit/ prepaid card hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng licence issued by Reserve Bank of India. 11. Foreign Currency Balances (i) An FFMC/non-bank AD Category-II should keep balances in foreign currencies at reasonable levels and avoid buildup of idle balances with a view to speculating on currency movements. (ii) Franchisees should surrender foreign currency notes, coins and travellers' cheques purchased only to their franchisers within seven working days. (iii) The transactions between authorised dealers and FFMCs should be settled by way of account payee crossed cheques / demand drafts/electronic funds transfer through banking channel. Under no circumstances should settlement be made in cash. 12. Replenishment of Foreign currency Balances (i) FFMCs/non-bank ADs Category II may obtain their normal business requirements of foreign currency notes from other FFMCs and Authorised Dealers (ADs) in foreign exchange in India, against payment in rupees made by way of account payee crossed cheque / demand draft/electronic funds transfer through banking channel. (ii) Where FFMCs/ non-bank ADs Category II are unable to replenish their stock in this manner, they may make an application to the Regional Office concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cs / exported in form FLM 7. (ii) All registers and books should be kept up-to-date, cross-checked and balances verified daily. (iii) Transactions not pertaining to money changing business of the FFMC/ non-bank AD Category II should not be mixed up with money changing transactions. In other words, the registers and books of account should show clearly the trail of transactions pertaining to money changing business. (iv) Separate registers should be maintained for each establishment, if the FFMC/ non-bank AD Category II maintains more than one place of business. Note: Inter-branch transfer of foreign currencies should be accounted as stock transfer and not as sales. 16. Submission of Statements to the Reserve Bank (i) FFMCs/non-bank ADs Category II should submit 6 through the APConnect application to the office of the Reserve Bank which has issued the licence, a monthly consolidated statement for all its offices in respect of sale and purchase of foreign currency notes in form FLM 8 so as to reach not later than the 10th of the succeeding month. (ii) 7 [***] (iii) FFMCs/ non-bank ADs Category II FFMCs should submit a quarterly statement regarding Fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrent auditors is left to the discretion of the FFMCs/non-bank ADs Category II. The concurrent auditors should check all the transactions of the FFMCs/non-bank ADs Category II and ensure that the same are undertaken as per the instructions issued by the Reserve Bank from time to time and all necessary requirements are complied with. The scope of concurrent audit should, inter alia, include: KYC/AML/CFT related areas, timely submission of statements, verification that prescribed registers are being maintained, verification that all money changing transactions have been recorded in the respective books and registers, verification that cash is accepted within the limit of INR 50000, including cases of structuring of transactions into a series of cash transactions below INR 50000, verification that payments received in non-cash mode from customers are reflected in the bank account statements of the FFMC/non-bank AD Category II (iv) The Statutory Auditors are required to certify that the Concurrent Audit and the internal control systems are working satisfactorily. 19. Temporary Money Changing Facilities FFMCs/non-bank ADs Category II are authorised to tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the APConnect application. 22. Submission of Balance Sheet and maintenance of NOF All FFMCs/non-bank ADs Category-II are required to submit their annual audited balance sheet to the respective Regional office of the Reserve Bank for the purpose of verification of their Net Owned Funds along-with a certificate from the statutory auditors regarding the NOF as on the date of the balance sheet. As FFMCs/ non-bank ADs Category-II are expected to maintain the minimum NOF on an ongoing basis, if there is any erosion in their NOF below the minimum level, they are required to bring it to the notice of the Reserve Bank immediately along with a detailed time bound plan for restoring the Net Owned Funds to the minimum required level. 23. Participation in the Currency Futures and Exchange traded Currency Options Markets FFMCs and ADs Category-II [which are not Regional Rural Banks (RRBs), Local Area Banks (LABs), Urban Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs)], having a minimum net worth of Rs.5 crore, may participate in the designated currency futures and currency options on exchanges recognised by the Securities and Exchange Board of India (SEBI) as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors should assess fit and proper status by calling for information by way of self-declaration, verification reports from market, etc. FFMCs / non-bank ADs Category - II should obtain necessary information and declaration from the proposed / existing directors for the purpose as given in the Master direction on Reporting. (b) The process of due diligence should be undertaken by the FFMCs / non-bank ADs Category - II at the time of appointment / renewal of appointment. (c) The Boards of the FFMCs / non-bank ADs Category - II should constitute Nomination Committees to scrutinise the declarations. (d) Based on the information provided in the signed declaration, Nomination Committees should decide on the acceptance or otherwise and may make references, where considered necessary to the appropriate authority / persons, to ensure their compliance with the requirements indicated. (e) FFMCs / non-bank ADs Category - II should obtain annually as on 31st March a simple declaration that the information already provided has not undergone change and where there is any change, requisite details are furnished by the directors forthwith. (f) The provisions of Companies Act 2013 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made through banking channels (viz. cheque, demand draft, NEFT, RTGS, IMPS etc.) only. The transactions between authorised dealers and FFMCs should be settled by way of account payee crossed cheques / demand drafts/electronic funds transfer through banking channel and in no circumstances the settlement of Indian Currency should be made in cash. The cash (INR) collected by the AP or its franchisee should be deposited to a bank branch on the same day or next day. D. The cancellation of any move for transportation of cash should be properly documented. E. The movement of cash should be in sync with the documents. F. The upper limit for movement of cash in INR would be Rs.10,00,000/- and in Foreign Currency equivalent of USD1,00,000 except the transactions where the imported foreign currency is being transported to the offices/ branch of the AP. Appendix List of A.P.(DIR Series) Circulars which have been consolidated in the Master Direction on money changing activities Sl. No. A.P.(DIR Series) Circular Date 1 A.P. (DIR Series) Circular No.25 March 06, 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted vide A.P. (DIR Series) Circular No.01 dated April 06, 2023 3 Inserted vide A.P. (DIR Series) Circular No.01 dated April 06, 2023 4 Inserted vide A.P. (DIR Series) Circular No.01 dated April 06, 2023 5 Inserted vide A.P. (DIR Series) Circular No.01 dated April 06, 2023 6 Inserted vide A.P. (DIR Series) Circular No.01 dated April 06, 2023 7 Deleted vide AP (DIR Series) Circular No.05 dated November 13, 2020. Prior to deletion, it read FFMCs/non-bank ADs Category II should submit to the Regional Office concerned of the Foreign Exchange Department, Reserve Bank, a monthly statement indicating details of receipt / purchase of USD 10,000 (or its equivalent) and above per transaction in the prescribed format, within 10 days of the close of the month. They should include transactions of their franchisees in their statement. 8 Inserted vide A.P. (DIR Series) Circular No.01 dated April 06, 2023 9 Inserted vide A.P. (DIR Series) Circular No.01 dated April 06, 2023 10 Inserted vide A.P. (DIR Series) Circular No.01 dated April 06, 2023 11 Inserted in terms of the Policy Decision, effective date February 22, 2017 - Circular - Trade Notic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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