LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Full fledged money changer

namrata (company secretary ) (422 Points)

26 March 2010

Please tel me what is exactly full fledged money changer , is Rbi approval necessary before insertion of this clause or after insertion ..

Reply
Follow
Share

4 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 26 March 2010

Find below useful info.

Scheme for Authorized Dealers Category I (AD) banks, Authorized Dealers Category-II and Full Fledged Money Changers Appointing Agents/Franchisees for Undertaking Restricted Money Changing

Objective

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 facility, given below, will enable Authorized Dealers Category-I (AD Cat-I) banks, Authorized Dealers Category-II (AD Cat-II) and full fledged money changers (FFMC) to provide such facilities at all tourist centers and major cities for extended hours and on holidays.

Present Money Changing facilities

At present, the conversion of currency notes, coins or travellers' cheques designated in foreign currency into Indian rupees is possible through AD Cat-I banks, AD Cat-II as also through (a) Full Fledged Money Changers (FFMCs) and (b) Restricted Money Changers (RMCs). Reserve Bank has stopped issue/renewal of RMC licenses except in certain specific cases. While FFMCs are allowed to, both, buy and sell foreign exchange against Indian rupees, the RMCs can only buy foreign exchange against Indian rupees.

The Scheme

Under the Scheme, RBI permits AD Cat-I banks, AD Cat-II and FFMCs to enter into agency/franchisee 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.

Franchisee

A franchisee can be any entity who has a place of business and whose bonafides are acceptable to the AD Cat-I/ AD Cat-II/ FFMC. These franchisees would undertake only restricted money changing business.

Agency/Franchise Agreement

Franchisers are free to decide on the tenor of the arrangement as also the commission or fee through mutual agreement with the franchisee.

The Agency/Franchise agreement to be entered into by an AD Cat-I/ AD Cat-II/ FFMC should, however, include the following salient features :

(A) The display of exchange rates by the franchisee. Exchange Rate for conversion of foreign currency into rupees should be the same or close to the daily exchange rate charged by the AD Cat-I/ AD Cat-II / FFMC at its branches.

(B) The surrender of collections by the franchisee to the franchiser or other authorised persons, as may be agreed upon, within 7 days.

(D) The on-site inspection of premises and records of the franchisee by the franchiser at least once a year.

Procedure for application

The Franchiser i.e. an AD Cat-I, AD Cat-II or an FFMC would need to apply to the respective Regional Office of Reserve Bank under whose jurisdiction their H.O. is situated, in the enclosed format for putting in place arrangements under this Scheme. The application should be accompanied by a declaration that while selecting the franchisees adequate due diligence has been carried out and that such entities have undertaken to comply with all the provisions of the franchising agreement/prevailing RBI regulations regarding money changing. Approval would be issued by the Reserve Bank for the first franchisee arrangement. Thereafter, as and when new agency/franchisee agreements are entered into, these would have to be reported to the Reserve Bank on a post-facto basis along with similar declaration as indicated above.

Selection of Centers

Franchisers are free to select centers for operationalising the Scheme.

Training

Franchisers would be expected to impart training to the agents/franchisees as regards operations and maintenance of records. Reserve Bank would also be willing to provide the required support for organizing such training, subject to mutual convenience.

Reporting and Inspection

The franchisers i.e. ADs Cat-I / ADs Cat-II / FFMCs would be expected to put in place adequate arrangements for reporting of transactions by the franchisees to the franchisers (on a regular basis) in a simple format to be prescribed by them, say at monthly intervals.

As mentioned above, a system of inspection of the books of franchisees should be put in place. The purpose of such inspection, which should be done at least once a year, would be to ensure that the money changing business is being carried out by the franchisees in conformity with the terms of agreement/prevailing RBI guidelines and that, necessary records are being maintained by the franchisees.

AML/KYC Guidelines

Franchisees are required to strictly adhere to the AML/KYC guidelines issued by Reserve Bank to Authorized Money Changers vide A.P.(Dir Series) Circular No. 18 dated December 2, 2005 and A.P.(DIR Series) Circular No. 39 dated June 26, 2006.