How to Start a Foreign Exchange Business in India
A foreign exchange or money changing business in India is a regulated financial activity. A business that wants to operate as a Full Fledged Money Changer (FFMC) must obtain authorisation from the Reserve Bank of India (RBI) under the Foreign Exchange Management Act, 1999 (FEMA) and comply with the RBI directions governing money changing activities.
Foreign exchange businesses can serve residents travelling abroad and non-residents visiting India, subject to the scope of the RBI authorisation. Revenue may arise from exchange margins and permitted fees or commissions, but profitability depends on transaction volume, operating costs, compliance controls, currency inventory management and customer service. Marketing may focus on lawful customer segments such as travellers and businesses requiring permitted travel-related foreign exchange services.
Legal Framework and Important Definitions
Section 10(1) of FEMA: This provision empowers the RBI, on application, to authorise a person to deal in foreign exchange or foreign securities as an authorised dealer, money changer, off-shore banking unit or in another manner permitted by the RBI. The authorisation is in writing and is subject to its conditions. See the Foreign Exchange Management Act, 1999 on India Code.
Authorised Person: Under the RBI money changing framework, an authorised person includes an authorised dealer, money changer, off-shore banking unit or another person authorised under Section 10(1) of FEMA to deal in foreign exchange or foreign securities.
Full Fledged Money Changer (FFMC): An FFMC is a money changer authorised by the RBI to purchase foreign exchange from non-residents visiting India and from residents, and to sell foreign exchange for private and business travel purposes within the permitted regulatory framework.
Authorised Dealer Category-II: These are entities authorised by the RBI to undertake specified non-trade current-account transactions, all activities permitted to FFMCs and other activities permitted by the RBI.
Who Can Apply for an FFMC Licence?
Under the RBI Master Direction on Money Changing Activities, an applicant for an FFMC licence must be a company registered under the Companies Act, 1956, the Companies Act, 2013, or the Registration of Companies (Sikkim) Act, 1961, as applicable. The company's constitutional documents should permit money changing business, and the applicant must satisfy the RBI's licensing, fit-and-proper and other regulatory requirements.
Minimum Capital Requirement: Net Owned Funds
| FFMC structure | Minimum Net Owned Funds |
|---|---|
| Single branch FFMC | Rs. 25 lakh |
| Multiple branch FFMC | Rs. 50 lakh |
The RBI uses the regulatory concept of Net Owned Funds (NOF), not merely the amount deposited into a business bank account. Applicants should calculate and document NOF in the manner prescribed by the RBI and maintain the required level after licensing.
How to Apply for a New FFMC Licence
Eligible entities seeking a fresh FFMC licence are required to use the RBI's APConnect application process. The application must contain the information and supporting documents prescribed by the RBI. Applicants should refer to the current RBI directions and APConnect instructions before filing because forms, submission procedures and regulatory requirements may be amended.
Typical licensing documentation under the RBI framework includes corporate incorporation and constitutional documents, audited financial information, banker-related information, details concerning directors and management, and information required to establish regulatory eligibility. The RBI may also examine the applicant's financial position, the suitability of its directors and the public interest before granting authorisation.
Fit and Proper Requirements for Directors
RBI directions require FFMC boards to carry out due diligence on directors and assess suitability based on matters such as qualifications, expertise, track record, integrity and financial position. The prescribed fit-and-proper process includes declarations and ongoing review. A prospective FFMC should therefore establish governance and director due-diligence procedures before commencing regulated operations.
Office and Branch Requirements
An FFMC may conduct money changing business only from locations covered by its RBI authorisation. Additional branches require the applicable RBI approval or authorisation process. A business should therefore avoid representing an unapproved office, kiosk or temporary counter as an operating money changing location.
Basic Office Facilities
- Suitable owned or rented office premises at the authorised location.
- Secure cash and foreign-currency handling arrangements appropriate to the business.
- Computers, printers, reliable internet connectivity and business communication facilities.
- Licensed accounting and record-keeping systems capable of maintaining the registers and transaction records prescribed by the RBI.
- Appropriate physical and information-security controls for customer records, transaction data and currency.
Employees and Operational Expertise
The business should employ personnel with adequate knowledge of foreign exchange transactions, RBI operating instructions and customer due diligence. Depending on scale, staffing may include experienced foreign exchange dealing or operations personnel, compliance and accounts staff, customer-service personnel and administrative support. Employees handling transactions should be trained in KYC, AML and CFT controls, record keeping, suspicious transaction escalation and the limits of the entity's authorisation.
KYC, AML and CFT Compliance
FFMCs and other authorised persons are subject to KYC, Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) requirements. The RBI Master Direction on Money Changing Activities applies the relevant RBI KYC framework to authorised persons, their agents and franchisees. A licensed operator must therefore maintain appropriate customer identification, due diligence, transaction monitoring, record-keeping and compliance systems in accordance with the rules and directions in force.
The RBI's KYC framework is connected with obligations under the Prevention of Money-laundering Act, 2002 and the Prevention of Money-laundering (Maintenance of Records) Rules, 2005. Businesses should use the current versions of these requirements rather than relying on a fixed historical list of identity documents.
Franchise Model for Restricted Money Changing
RBI permits eligible Authorised Dealer Category-I banks, Authorised Dealer Category-II entities and FFMCs to appoint franchisees for restricted money changing, subject to the RBI scheme. A franchisee generally undertakes conversion of permitted foreign currency notes, coins or travellers' cheques into Indian Rupees and cannot assume the full powers of an FFMC. Under the RBI framework, a franchisee must have a place of business and minimum Net Owned Funds of Rs. 10 lakh, and the franchiser must follow the prescribed approval, due-diligence, agreement, monitoring and inspection requirements.
Ongoing Compliance After Licensing
Obtaining the licence is only the first stage. An FFMC must continue to comply with the conditions of authorisation and RBI directions. This includes prescribed books and registers, transaction records, KYC and AML controls, audit and inspection requirements, regulatory reporting, maintenance of required Net Owned Funds and compliance with rules governing purchase and sale of foreign currency.
RBI instructions effective from July 1, 2024 also require the value of foreign currency notes sold by FFMCs and non-bank AD Category-II entities to the public for permitted purposes to be at least 75 percent of the value of foreign currency notes purchased from other FFMCs or Authorised Dealers, measured quarterly. Relevant data must be maintained for audit or inspection. The RBI also requires the annual audited balance sheet and a statutory auditor's NOF certificate to be submitted to the concerned Regional Office by October 31 of the relevant year.
Bank Account and Accounting Arrangements
After incorporation and as part of establishing the licensed business, the company will require appropriate banking arrangements in its corporate name. Bank account opening is subject to the bank's current KYC and account-opening requirements. Because an FFMC applicant must be an eligible company, the earlier concept of opening the foreign exchange business as a proprietorship is not applicable to an application for a new FFMC licence.
Advertising and Customer Acquisition
After obtaining the necessary authorisation, a foreign exchange business may use lawful marketing channels such as its website, local advertising, digital marketing and business relationships to reach travellers and other permitted customers. Advertising should accurately describe the entity's RBI-authorised status and services and should not imply permissions beyond the scope of the licence.
Official Regulatory References
Regulatory information reviewed and updated: October 7, 2026. RBI directions and statutory requirements may change; applicants should verify the latest official requirements before filing or commencing regulated activity.