Mysteries are subjective in their importance. For some, it’s mysterious if they don’t get their newspapers for time. For others like, the cancellation of FFMC license in 2016 remains the most mysterious topic.
In 2016, suddenly the Reserve Bank of India decided to cancel FFMC license of 201 business entities in Chennai. Losing their FFMC license online even made these entities remove themselves from any prospect of FFMC license renewal. So, what might have happened to make Reserve Bank of India to take such a drastic decision.
What is FFMC License?
Before we delve into what happened, let’s give you FFMC license meaning. FFMC License is the permit to establish a business providing Full Fledged Money Changer Services. These services include currency exchange services. For instance, a tourists wants to exchange the currencies to Indian rupee, they can do so at the FFMC centre. Similarly, if a parent wants to send their kid to foreign country to study, they can do the same.
To put it simply, FFMC license widened the foreign exchange facilities by empowering small scale business owners to provide such services.
With such power comes responsibility to comply to FFMC rules
Although even the small shops got empowered to provide FFMC services courtesy of FFMC license consultants, that doesn’t imply that they can rest anymore. Reserve Bank of India, the issuer of the said license, asks for several compliance that these small licensees have to fulfil. Most common among them are as follows:
- Annual returns: You need to provide annual report to the Reserve Bank of India regarding how much business you did during that financial year.
- Income Tax returns: ITR compliance is necessary for the survival of any business. Unless you’re someone with deep pockets, the Income Tax Department is not a forgiving authority.
- GST returns: The Reserve Bank of India has to rest assured that it made the right choice granting you the FFMC license. Filing the GST registration is one way you can give surely to the RBI.
- Information of the change in FFMC infrastructure: If your infrastructure have gone through any change, the Reserve bank of India have the right to know about it.
Why all those FFMC licenses were cancelled in Chennai
While to this day the Reserve Bank of India remains tight-lipped about the reason behind the cancellation, the FFMC controller was kind enough to spill some beans about the issue.
- Some of the FFMCs weren’t operational: Many FFMCs whose licenses were cancelled weren’t operating for years before the RBI chose to cancel their authorization.
- Non Compliance: Most of FFMCs in the FFMC cancelled list were the ones that didn’t bother with fulfilling the compliance requirements.
- Maintaining the records of their transaction: Because Chennai is the region of tourist importance, each record of each transaction done by FFMC is a critical one. Not maintaining the records is one more reason given by the FFMC controller that those licenses were cancelled.
What might be the real reason behind the cancellation of the license?
Even though the reasons that FFMC controller gave us were genuine ones, many are still doubtful as to why the licenses were really cancelled. And these doubts are warranted? Chennai is a place that doubles as a tourists haven for people around the globe. So, removing the licenses of not one but 201 doesn’t make a lot of sense. After a lot of deliberation, we have come up with the following reasons:
- None of them were serious players in the FFMC business.
- They were given licenses long time ago.
- Some of them might have not even renewed their old licenses.
Reserve Bank of India takes the matter of FFMC license quite seriously. Thus, only opt to become a Full Fledged Money Changer if you can live up to the required compliances. If you can’t, you should probably look the other way towards businesses that don’t have so many nuances.