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TaxTMI 
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TaxTMI 
Master Direction - Money Changing Activities (Updated as on April 2, 2026)
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....€¢ select banks (as Authorised Dealers Category-I) to carry out all permissible 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 Manage....
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....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 foreign securities. 2.2 'Authorised Dealer' (AD) means a person authorised as an authorised dealer under sub-section (1) of section 10 of FEMA. 2.3 'Authorised Dealer (AD) Category I' means entities which are authorised by the Reserve Bank to carry out all permissible current and capital account transactions as per directions issued from time-to-time 2.4 'Authorised Dealer (AD) Category II' means entities which are authorised ....
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....res 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 ^1through 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 documents: (a) Copy of the Certificate of Incorporation. (b) 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. (c) Copy of the 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 the last three years, wherever applicable. (d) Confidential Report from the applicant....
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....e 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 Guidelines for Grant of Authorisation for Additional Branches:- 1. No FFMC/non-bank AD Category II shall carry on money changing business at any additional place of business other than its permanent place of business except with the prior approval of the Reserve Bank. An FFMC/non-bank AD Category II which intends to commence money changing business at any additional place of business shall apply ^3through the APConnect application to the respective Regional Office of the Foreign Exchange Department under whose jurisdiction the registered office of the applicant falls and the Reserve Bank may approve the additional place of business subject to such conditions as deem fit. It is expected that branches of Authorised Persons should be diversified and should be meeting the demand of tourists, etc. Preference will b....
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....dhere 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 condition that these counters shall only purchase foreign currency and sell Indian Rupees (INR) and "Encashment Certificates" shall invariable be issued by the money changers to the customers. (b) Foreign Exchange Counters/branches in the departure halls in international airports in India shall be established before the Customs Desk or the immigration desk, whichever comes first. ^4However, the Foreign Exchange Counters established in the Duty-Free Area or Security Hold Area beyond the Immigration or Customs desk shall allow residents (along with non-residents) to exchange Indian Rupee notes. The limits of carrying Indian Rupees by residents and non-residents shall be as per the para given below at (c) and (d). (c) Resident Indians as well as those Non-residents who are - (i) not citizens of Pakistan or Bangladesh....
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....st once a year. 4. Procedure for application An AD Category - I Bank / AD Category - II/ FFMC should apply ^5(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 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 and prevailing Reserve Bank regulations regarding money changing. Approval would be granted by the Reserve Bank for the first franchisee arrangement. Thereafter, as and when new franchisee agreements are entered into, these would have to be reported (through the APConnect application by non-bank AD Category -II and FFMCs) to the Reserve Bank in Form RMC-F on a post-facto basis along with similar declaration as indicated above. 5. Due Diligence of Franchisees A franchiser, i.e. AD Category-I Bank/ AD Category-II / FFMC should undertake the following minimum checks while conducting due diligence of its franchisees: i. existing b....
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....ards 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, should be conducted by the franchiser. Such audits should involve a dedicated team and incognito visits should also be used to test the compliance level of the franchisees. A system of annual inspection of the books of the franchisees should also be put in place. The purpose of such inspection is to ensure that the money changing business is being carried out by the franchisees in conformity with the terms of the agreement and prevailing Reserve Bank guidelines and that necessary records are being maintained by the franchisees. 9. Anti-Money Laundering (AML) / Know Your Customer (KYC) / Combating of Financing of Terrorism (CFT) Guidelines Franchisees are required to strictly adhere to the AML / KYC/ CFT guidelines, as applicable to ADs Category-I Banks / ADs Category - II / FFMCs. Note:....
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....e 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 Authorities. When foreign exchange brought in the form of currency notes or travellers' cheques does not exceed USD 10,000 or its equivalent and / or the value of foreign currency notes does not exceed USD 5,000 or its equivalent, declaration thereof on CDF is not insisted upon. (ii) Taking out foreign exchange in any form, other than foreign exchange obtained from an authorised dealer or a money changer is prohibited unless it is covered by a general or special permission of the Reserve Bank. Non-residents, however, have general permission to take out an amount not exceeding the amount originally brought in by them, subject to compliance with the provisions of sub-para (i) above. 2. Purchases of Foreign Currency from Public (i) Authorised Persons and their franchisees may freely purchase foreign currency notes, coins and travellers cheques from residents as well as non-residents. Where the foreign....
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.... 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-declaration basis to the traveller regarding the amount of foreign exchange availed during a financial year. Foreign nationals permanently resident in India are also eligible to avail of this quota for private visits provided the applicant is not availing of facilities for remittance of his salary, savings, etc., abroad in terms of extant regulations. (II) Business visits Authorised Persons may sell foreign exchange to persons resident in India for undertaking business travel or for attending a conference or specialised training or for maintenance expenses of a patient going abroad for medical treatment or check -up abroad or for accompanying as attendant to a patient going abroad for medical treatment / check-up up to the limits specified in Schedule III to FEMA (Current Account Transactions) Rules, 2000. (III) Forex Pre-paid Cards Authorised Dealers Category-II may issue forex pre-paid car....
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....s 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 holder is one and the same person. v. The sale of foreign currency notes and coins within the overall entitlement of foreign exchange should be restricted to the limits prescribed by the Reserve Bank from time to time for the country of visit of the traveller. Note: Instructions in the Master Direction - Liberalised Remittance Scheme (LRS) dated January 1, 2016 (updated from time to time), as applicable, shall apply. 6. Sales against Reconversion of Indian Currency Authorised Persons 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. Note (1): Authorised Persons may convert at their discretion, unspent Indian currency up to Rs.10,000 in the possession of non-residents if, for bonafide reasons, the person is unable to produce an Encashment Certificate after ensuring tha....
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....against payment in rupees made by way of account payee crossed cheque / demand draft/electronic funds transfer through banking channel. ^7From July 1, 2024, value of foreign currency notes sold by FFMCs / non-bank ADs Category-II to the public for permitted purposes should not be less than 75% of the value of foreign currency notes purchased from other FFMCs/ ADs, on a quarterly basis. Data of such sale and purchase should be maintained and made available for audit / inspection. FFMCs/ADs selling foreign currency may also ascertain the 'sale to public' requirement of the buying FFMCs/non-bank ADs Category II, by seeking relevant data from such entities. (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 of the Reserve Bank through an AD Category-I for permission to import foreign currency into India. The import should take place through the designated AD Category-I through whom the application is made. 13. Export / Disposal of surplus Foreign Currency Notes / Travellers' Cheques FFMCs/non-bank ADs Category II may export surplus foreign currency notes / enca....
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....ther 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 ^9through 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) ^10[***] (iii) FFMCs/ non-bank ADs Category II FFMCs should submit a quarterly statement regarding Foreign Currency Account/s maintained in India in their names with AD Category-I Banks to the Regional Office concerned of the Foreign Exchange Department, Reserve Bank as per the prescribed format. (iv) An Annual Statement should be submitted by all the FFMCs/ non-bank ADs Category II to the respect....
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....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 transact money changing business only at the location or locations specifically indicated in the licence. If it is intended to provide money changing facilities on a temporary basis on certain special occasions, a separate application shou....
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....ong with a certificate from their statutory auditors regarding the NOF as on the date of the balance sheet, latest by October 31 of the year concerned^14. 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 clients only for the purpose of hedging their underlying foreign exchange exposures. FFMCs and ADs Category-II which are RRBs, LABs, UCBs and NBFCs), may be guided by the instructions issued by the respective regulatory Departments of the Reserve ....
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....n 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 shall apply with regard to the age of the candidate. Further, the candidate should not be a Member of Parliament / Member of Legislative Assembly / Member of Legislative Council. (g) Any change of directors during the yea....
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....sed 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 2. A.P. (DIR Series) Circular No.57 March 9, 2009 3. A.P. (DIR Series) Circular No.06 August 3, 2009 4 A.P. (DIR Series) Circular No.40 January 25, 2011 5 A.P. (DIR Series) Circular No.61 May 16, 2011 6 A.P.(DIR Series) Circular No.31 Octob....