Who are Authorized Money Changers (AMCs)?

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Who are Authorized Money Changers (AMCs)?

When it comes to the foreign exchange industry in India, the Authorized Money Changers (AMCs) play an important role. AMCs are authorized to partake foreign exchange currency or money changer activities under Foreign Exchange Management Act (FEMA) by the Reserve Bank of India (RBI).

In this article, we will discuss who the Authorized Money Changers (AMCs) are in detail.  

Overview of Authorized Money Changers (AMCs)

Authorized Money Changers (AMCs) are entities that are authorized by the Reserve Bank of India (RBI), under Section 10 of Foreign Exchange Management Act (FEMA), 1999. 

According to Section 2 of FEMA, an ‘Authorized Person’ refers to an authorized dealer, money changer, off-shore banking unit or any other person who is, for the time being, authorized to deal in foreign exchange or foreign securities under sub-section (1) of Section 10 of the Act.

What are the Types of Authorized Money Changers (AMCs)?

An Authorized Money Changer (AMC) can either be a Full Fledged Money Changer (FFMC) or a Restricted Money Changer (RMC). Restricted Money Changers (RMCs) are only authorized to buy foreign currency notes, coins and traveler’s checks after which they are required to turn over each collection to a licensed foreign exchange dealer or a full-fledged money changer in turn.

Full Fledged Money Changers (FFMCs) are authorized to conduct both buy and sell transactions with the general masses. They are authorized to perform forex currency or money changer activities upon the grant of FFMC license by RBI. FFMCs are authorized to buy foreign exchange from residents and non-residents who visit India and to sell foreign exchange for certain approved purposes, including the conversion of currency notes, coins or travelers’ cheques designated in foreign currency into Indian Rupees and vice versa.

Unless in possession of a valid RBI-issued money changer’s license, no person shall carry or advertise that he carries the business of money changing. If a person is found to be undertaking money changing business without the possession of a valid FFMC license, he is liable to be penalized under the FEMA Act.

Note: The RBI has discontinued the scheme of RMCs. However, certain RMCs that function within 10 km from Pakistan and Bangladesh’s borders are permitted by RBI to operate for the time being.

Who is granted the FFMC License by RBI?

At present, RBI issues authorization under Section (10) of FEMA, 1999 to the following entities:

• Select banks (as Authorized Dealers Category - I) to carry out all permissible current and capital transactions.
• Select entities (as Authorized Dealers Category - II) to carry out specified non-trade related current account transactions, all the activities permitted to FFMCs and any other activities which are decided by RBI.
• Select financial and other institutions (as Authorized Dealers Category - III) to carry out specific transactions related to foreign exchange that are incidental to their business activities.
• Select registered companies (as FFMCs) to undertake purchase of foreign exchange and sale of foreign exchange for specified purposes, like private and business travel abroad.

List of Authorized Money Changers in India

Mentioned below are the lists of Authorized Money Changers (AMCs) in India.

Public Sector Banks

Foreign Banks

Private Sector Banks

Co-Operative Banks / Financial Institutions / Others

Source: Foreign Exchange Dealers Association’ of India

What are the Functions of FFMCs?

RBI-registered FFMCs have the following functions:

• FFMCs can purchase any foreign currency coins, notes or traveler’s cheques from non-residents that travel to India or residents that come to India after traveling abroad.
• These Authorized Money Changers (AMCs) are also allowed to sell Indian rupees to the foreign tourists against their international debit/credit cards through necessary actions for full reimbursement through any normal banking channels.
• In addition to the above, by entering into franchise agreement, FFMCs can also carry restricted money changing activities such as the conversion of foreign currency notes, coins, and traveler’s cheques into Indian currency.
• Apart from these functions, FFMCs can also be involved in sales of foreign currency for the sole purpose of forex prepaid cards, business travel and private travel.

Inspection of Authorized Money Changers (AMCs) by RBI

According to Section 12(1) of FEMA, 1999, an officer of Reserve Bank of India who is specially authorized to inspect AMCs can inspect their books of accounts and other documents.

The AMCs must assist and cooperate with the Inspecting Officers while the inspection is being carried out. If an AMC fails to produce any books of accounts or other documents or to furnish any statement or information or to answer any question pertaining to the money changing transactions to the Inspecting Officer, it shall be considered as a contravention of FEMA’s provisions.

Inspecting Officers generally point out the following irregularities during their inspection of AMCs:

• One irregularity is that the system of concurrent audit hasn’t been put in place or that the concurrent audit is not taking place as per the periodicity.
• Another irregularity generally pointed out is that the foreign exchange rate chart is not displayed at a prominent place or not updated on a regular basis.
• If the amount of forex tendered for encashment by a non-resident or a resident returning from abroad exceeds the prescribed limits for Currency Declaration Form and the CDF is not kept on record, the Inspecting Officer shall point out this irregularity.
• If the payment exceeding 1000 USD is made in cash instead of account payee cheque, it shall be pointed out by the Inspecting Officer.

Conclusion

In India, only the Authorized Money Changers (AMCs) can deal in or transfer any foreign exchange or foreign security to any person. AMCs are authorized by RBI, under FEMA. It is necessary to receive authorization from RBI to carry out forex currency and money changer business activities. Want to obtain FFMC License to start a foreign currency exchange business? Connect with Registrationwala’s FEMA Consultants!

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