FOREIGN EXCHANGE

Foreign Exchange 

     

1. Who is authorized to handle foreign exchange business in India?

All foreign exchange transactions are to be conducted by entities having license issued by Reserve Bank of India. The following are the entities who operate in the country and handle foreign exchange business and they are termed as Authorized persons.

a) Commercial Banks (Authorized Dealer-Category I)

b) Authorized Dealer – Category II

c) Full Fledged money changers

d) Franchisees.

2. What types of forex business can be handled by the various authorized persons?

Commercial Banks can handle all kinds of transactions, viz,

a) Purchase of foreign currency

b) Sale of foreign currency

c) Outward / Inward Remittances

d) All trade related transactions like exports, imports and related business.

1. Authorized Dealer Cat-II can handle three kinds of transactions, viz,

a) Purchase of foreign currency

b) Sale of foreign currency to Resident Indians.

c) Outward Remittances for purposes like education, medical expenses, visa/emigration charges etc. as per RBI rules.

2. Full fledged money changers can handle two types of transactions.

1) Purchase of foreign currency

2) Sale of foreign currency to Resident Indians

3. Franchisee of AD-Cat II/FFMCs can handle encashments of foreign currency only.

AD-Cat II and FFMCs can handle Money Transfer Services (MTS) with permission to be obtained from Reserve Bank of India. All exchange companies need to get approval of Reserve Bank of India for opening and shifting of branches.

3. Muthoot Exchange Co. Pvt.Ltd. is the Foreign Exchange Division of The Muthoot Group having a turnover of over 40,000 Crores and over 3850 branches spread over 21 states. Muthoot Exchange Co. Pvt. Ltd. was incorporated on 4th September 2000 for handling money exchange business. The company obtained FFMC licence in 2001 and AD Category II vide Lic.No. CHN/2/2007.in 2007. The Directors of the company are:

i) Mr. George Jacob Muthoot – Managing Director

ii) George Alexander Muthoot-Director

iii) Mrs. Anna Alexander- Director

iv) Mr.K.P.Padmakumar- Executive Director

Muthoot Exchange Co.Pvt.Ltd.is having full fledged exchange operations at 44centres in Kerala, Karnataka, Tamilnadu, Andhra Pradesh and also Mumbai, Pune, Delhi, Chandigarh, Jaipur, Agra, Kolkatta etc. In addition, there are

over 1000 franchisee offices like finance companies, travel agencies, hotels, resorts etc for purchase of foreign currency. They handle encashment of foreign currency notes and travelers cheques as per RBI guidelines. The operations of the company are being managed by the following executives.

i) Chief Executive Officer

ii) Asst.Vice President

iii) Chief Manager (Audit & Compliance)

iv) Manager (Accounts & Operations-south zone)

v) Manager (North Indian Operations based at New Delhi)

The company also handles MTSS operations under arrangement with the following principals.

a) Wall Street Finance Ltd.-Instant Cash

b) Baharin Finance Co.- Easy Remit

4. Branch Network

Our company had 44 branches as on 31.05.2012 Kerala

1. Kochi		19. Trichy	Rajasthan
2. Kochi – Airport Road		20. Tirupur	34. Jaipur
3. Oberon Mall-Edapally		21. Nagercoil	35.Chandigarh (Sec.17)
4. Fort Kochi		22. Thoothukudy	Punjab
5. Kottayam		23. Pondichery	36. Ludhiana
6. Thiruvalla		Andhara Pradesh	37.Jalandhar
7. Pathanamthitta		24. Secunderabad	38. Amritsar
8. Kollam		Goa	Gujarat
9. Trivandrum		25. Panaji	39. Ahmedabad
10. Trichur		Delhi (North Zone)	40. Surat
11. Calicut		26. Connaught Place	Maharashtra
12. Kannur		27. Nehru Place	41. Andheri (Mumbai)
Karnataka		28. Green Park	42. Fort (Mumbai)
13. Bangalore		29. Janakpuri	43. Pune
14. Mysore		Delhi (West Zone)	West Bengal
15. Mangalore		30. Agra	44. Kolkatta
Tamil Nadu	31. Varanasi
16. Chennai	Haryana
17. Coimbatore	32. Gurgaon
18. Madurai	33. Panipat

Three more branches are proposed to be opened at the following centers.

                                1. Kattapana 2. Erode 3. Thanjavur

5. Franchisee arrangements

More than1000 branches of Muthoot Finance located within a distance of 100 kms from Exchange Co. branches and having potential for encashment of foreign currency have been appointed as franchisees. In addition a few hotels and travel houses also have been enlisted as franchisees. These franchisees can handle purchase of foreign currency/Travellers cheques at rate given by the Exchange Co. as per RBI rules. Currency exchanged by franchisees have to be picked up or surrendered to the Exchange Co. branches concerned within 7 days time. Franchisees can not handle issue of foreign currency for travel abroad or any other purpose.

6. KYC/AML Guidelines

All authorized persons (Banks, Exchange Cos and franchisees) are required to comply with the provisions of Foreign Exchange Management Act and Anti Money Laundering Rule. These have been explained in detail in RBI Circular No.17 dtd27.11.2009. The salient features of the rules are,

                i) Customer Identification Procedure

                ii) Customer Acceptance Policy

The customer who visits the Exchange Co. branch or a branch of MFIN franchisees for any forex transactions should be identified beyond doubt by obtaining one or more of the documents mentioned in Paragraph II (i). No transactions should be undertaken if the customers identity and genuiness are not established to the full satisfaction of the branch officials. For this purpose, the KYC form prescribed by the company should be filled and obtained from the customer and verified with the ID document. It should be ensured that the photo of the customer appearing on the ID proof is that of the customer who has come to the branch for transaction.

                a) ID proof only

                                i) Pan Card

                                ii)Driving Licence

                b) ID and address proof

                                i)Passport

                                ii)Voters ID

Purchase of foreign currency/TC can be made from Resident Indians and foreigners, at the rate fixed for that currency. As per Govt. of India rules and RBI guidelines, it is essential that the customers ID and address are correctly established by verifying any one or more of the documents listed above.

The originals of the documents should be verified and details entered in the system. Photocopies of the ID and address proof should be obtained and filed for all purchases of USD 500 and above or equivalent in other currencies. Production of passport is compulsory for exchanging Travelers Cheque.

6. Currency Declaration Form (CDF) is issued by the customs Dept. at Airports/Sea ports showing amount of currency brought by travelers on the basis of a declaration by the travelers and verification where necessary. Production of CDF is compulsory in the following cases, irrespective of whether customer is a Resident India/NRI/Foreign National.

                a) If the value of currency notes purchased is in excess of USD 5000 or equivalent in

                                 other currencies

                                                OR

                b) When the value of Travellers Cheque brought is in excess of USD 10000 or equivalent

                                in other currencies.

                                                OR

                c) When the value of currency notes and Travellers cheque put together is in excess of

                                USD 10000. (Eg: currency notes 4000 + Travellers cheque 7000).

Original of the   CDF should be verified for Customs Dept. seal, signature and date and a photo copy retained. The original of CDF should be taken and a copy given to the customer if all the currencies mentioned in the CDF are purchased.

7. Procedure for purchase of Foreign Currency Notes by MFIN branches

Welcome the customer with a smile. Request him/her for identification (passport, driving licence, Voter ID etc). Original should be seen. Identity and address of customer is to be established without any doubt.

Tell the customer the rate at which currency can be changed. If he/she bargains about the rate, you may get the best rate by contacting the Exchange Co. Count the currency notes and confirm the amount with customer. Do not accept notes which are faded, torn, oil stained or with poor quality printing/paper.

For genuineness of the currency, you may check the embossed printing, paper quality and other ultra violet features. If the currency is USD, you have to run your finger (to feel the roughness- embossing) through “UNITED STATES OF AMERICA” printed on the top portion, look for security thread and certain other features that may be clarified with the nearest MECPL branch or checked with ‘muthootlive’ site on internet.

CAUTION : KUWAIT DINARS AND OMAN RIYALS

(a) Take special care about Kuwait Dinars. Genuine notes should have the words ‘WE SEEK GODSASSISTANCE’ in English. Notes without these words should not be exchanged.

(b) 1000 Baisas make one Oman Riyal. There are currency notes for 100, 200 and 500 Baisas. These should not be mistaken as Oman Riyals, leading to overpayment. ( c) Rates of Japanese Yen & Thai Baht are, for 100 units.

If the amount is less than USD200 or equivalent, you can note the ID proof details and customer’s address on the encashment register. Copy of the ID proof need not be kept.

If the amount is USD 200 or above, copy of the ID proof with photo and customer’s address is to be retained. No exception should be made.

Payment in INR cash can be made to the customer only up to USD 1000 or its equivalent in a month (30 days period), if he/she is a Resident Indian. For any amount above USD 1000 or equivalent, payment can be made by way of account payee cheque/demand draft only. For Non-Resident Indians and foreign visitors payment in INR can be made up to USD 3000 or its equivalent in a month.

After confirmation with customer, Encashment Certificate shall be issued. You can obtain the signature of the customer on the Encashment Certificate. You can also note the denomination-wise break up of the currency tendered on the office copy for cross checking. The denomination - wise break up of the INR paid shall also be noted. (Second copy of EC is to be sent to Exge Co. branch with currency). Bulk purchase bill of the Exchange Co. branches should be obtained and filed, for currencies surrendered.

Colour photocopies of notes are sometimes brought for encashment. Close scrutiny can detect such notes.

Take special care in the case of unknown persons. Ask for local address and /or purpose of visit. Original of ID and Address proof should be seen and copy retained.

High Value Notes : Some customers bring high value notes like 1 million Euro , 10 million Dollar etc saying that they are special notes. Please remember that there are no such currency notes.

Issue of bulk purchase bills for currencies taken from franchisees is a requirement of Reserve Bank of India. You are directed to ensure this. The staff members visiting MFIN branches can carry a separate book with him for issuing Bulk Purchase bills for currency taken.

8. Service Tax:- The rate of Service Tax applicable from 01/04/2012 is 0.12% +Cess of 3% of the Tax. Therefore you have to collect Service Tax as under for all retail forex transactions, viz Sale or Purchase of foreign currency/TC or issue of Travel Cards as under,

Value of Money Changed Service Tax

(i) UptoRs. 1.00 Lac	0.12% of the value of currency exchanged, Minimum Rs.30/-+Cess 3%= Rs.31
(ii) Over Rs.1.00 lac and Upto Rs.10.00 Lacs	Rs.120/- +0.06%of the value of currency exchanged over Rs.1.00 lac +Cess@3%of tax
(iii) Over Rs.10.00 Lacs	Rs.660/-+0.012%of the value of currency exchanged over Rs.10.00Lac+cess @3% of tax

Franchisees have to deduct Service Tax at the above rates (minimum Rs.31/-)for all forex purchases from public and show the amount in the Encashment certificate.

9. Cash Transaction Report (2 pages) is to be sent to the Exchange Co. as per annexure to H.O. Circular Cir.No. 56/2010 dt: 16/04/2010 if cash payment to any customer exceeds Rs.50,000/- in a month. This is important. Any suspicious transaction should be reported to Exchange Co. Branch on STR form.

10. Procedure for purchase of Foreign Currency Travelers Cheques

Travelerscheques should be encashed only with the production of the passport in original. Copy of the passport should be retained for records. Ensure that customer’s identity is correct. Before accepting the travelerscheques, authentication can be taken from the following  toll free Nos:

Travelers Cheques                          Toll Free Numbers

American Express                            1800-180-1245

Thomas Cook/Travellex                1800-222-324    or from site www.quickcheque.net

All travelerscheques will have a signature of the holder. Customer should sign the travelerscheques again in the space provided “counter sign here” in front of the staff at the counter, after the rate is agreed upon. Style and flow of signing should be observed and signatures compared. Signature of the customer should be verified/cross checked with the signature on the passport. Currency Declaration Form should be obtained if the amount exceeds USD 10000 or equivalent in TCs and currency notes put together. (Currency should not exceed USD 5000) Travellers Cheques after encashing should be affixed with the branch seal at the back of the TCs. This is to prevent any fraudulent encashment.

11. Procedure for MFIN Branches after encashing currency notes / Travelers Cheques

All the foreign exchange purchased should immediately be surrendered to Exge Co branch. It is necessary to inform Exge Co about any high volume purchase to enable them to plan sale with profit.

All purchases should be entered in the encashment register provided at all branches. A statement showing amount of foreign exchange purchased and surrendered should be sent to the Exge Co branch every month.

MFIN branches may pay the customer as per the Encashment Certificate and debit the link branch through Central Office account, with the amount paid to the customer.

A statement giving the names of employees to whom incentive is to be paid should be sent to Exge Co not later than the 10th of the next month, with amount payable to each employee, Emp. No, and PAN Card No. (if amount paid exceeds Rs.5000 in that year).

12. Foreign Exchange Sale

Under “private visit” USD 10000 or its equivalent can be sold to a Resident Indian in a calendar year, out of which USD 3000 or equivalent only can be sold in currency notes and the balance in TCs or Travel Cards.

For “business visits” USD 25,000 or its equivalent can be sold for each visit to a Resident Indian out of which USD 3000 or equivalent can be sold in currency notes and the balance in TCs or Travel Cards.

Note : MFIN branches are franchisees of Exchange Co and are not authorised to sell foreign exchange, as per the RBI rules. In case of any enquiry for sale of forex, the information shall be intimated to the Exchange Co branch for processing and sale. Incentive is payable for sale canvassed.

Outward Remittances. Money can be sent abroad for various purposes like maintenance of close relatives, studies abroad, visa fees, immigration, membership fees, medical treatment etc. Please contact the Exchange Co. branch for details and also give them the phone number of the customer for follow up.

13. BUSINESS DEVELOPMENT

60% of the forexpurchases is expected from MFIN franchisees. Targets have been advised to Regions having franchisee branches, for allocation,to branches depending up on the potential.

a). Marketing : MFIN branch staff, particularly CRE/CSE should tell customers and friends about the forex services viz

1. Encashment of forexat MFIN branch and Exchange Co.

2. Issue of forex for travel(by Exchange Co branch)

3. Outward remittances (through Exchange Co branch or Money Transfer Division).Customers can be offered the best rate.

4. Business Strategy :Aggressive marketing for capturing a larger share of the market at key Centres like Kochi, Alappuzha, Trivandrum, Bangalore, Mysore, Pondichery, Mumbai, and Delhi. Young and active marketing personal will be selected for appointment.

5. (i) Advertisements in the form of hoardings and display boards will be put at tourist centres like Fort Kochi, Alappuzha, Munnar, Kumily and Kovalam. Display boards at key locations in major towns and highways will also be put in large numbers.

b) Currency Despatch to other cities will help the company to get better sale value for currency purchased locally. This will in turn, help giving better rates for the purchases, thereby contributing to increase in volume. A few points to be kept in mind while dispatching currency by air, in the interest of safety are listed below.

(i) Adequate insurance cover should be taken.

(ii) Packing should be proper –locked steel box and cloth cover with seal

(iii) Dispatch to be done before 3.00 pm to ensure that the branch at the destination can take delivery of the parcel and deposit in the strong room not later than 6.00 pm. This is very important.

(iv) Transport of currency packets by train/car should be accompanied by 2 staff members. No transport to be done after 6.00 pm.

(v) Currency should be delivered to the buyer only after getting credit to the bank account of our branch.

Please take care to check the safety aspects of different modes of conveyance involved for each shipment. Branch transfer Memo, ID card and RBI Licence copy should be taken by the employees carrying currency box.

c) Outward Remittances: There is good scope for sending money abroad for various purposes. As competition from banks is keen at urban centres, our focus will be on semi-urban and rural areas. Franchisee branches of MFIN will be encouraged to market this service. Some other sources are given below.

i) As all the major tour operators charge the hotel payments from their clients at the time of booking, they need to make the payment to the hotels situated abroad through TT only. As per the RBI guidelines, we (AD-II) are allowed to make the payment of tour operators on behalf of travellers, out of the currency which the travellers have bought under the BTQ limit from the authorized money changers.

As far as the payment part is concerned, we have to take the payment from the Tour Operators (Max 50,000 in cash and above through Transfer only).

Documents:

1) One time KYC documents as required in case of Corporates.

2) Invoice of Hotel payment with Account details of hotel situated abroad.

3) Request letter from the Tour Operator (on the letter head of tour operator) in our favor to do the payment.

4) Details of travellers i.e, Name, Passport Number, Date of Issue on the letter head of tour operator.

5) Passport & Visa copies of all the travellers.

6) Signatures of Tour Operator on Form A2 & FEMA declaration

Earlier all suchremittances were done through Banks only but the rates of bank are very high. Therefore a few other exchange companies are now marketing very aggressively. We have good scope to do the same. As per our competitive tie-up with HDFC/ING Vysya Bank, we can do this business profitably.

ii) Education

iii) Medical Treatment

iv) Visa/Emigration charges

v) Membership in professional bodies

vi) Subscription to magazines

14. Management of funds Special attention is now paid, every day, for better management of funds. RTGS will be used widely for moving idle funds at a branch to another where funds are required and also to reduce overdraft.Large value purchases at MFIN franchisee branches should be monitored and covered for sale. Special arrangements should be made to lift such currency to facilitate sale without loss.Branches should not keep large value currency without cover for sale on profit. Similarly large value currency at MFIN branches should also covered and picked up for sale within the cover taken. All bulk sales should be reported to C.O and prior approval taken for sales over Rs.5.00 lakhs (except for sale to Commercial Banks, Thomas Cook and UAE Exchange).

16. Franchisee Business Meetings of MFIN Managers being held by the Regional Offices is a good opportunity for meeting Managers of franchisees and to talk to them on forex encashment. Arrangements can also be made to bring the currency available at their branches.One area of special importance is fast pick-up of currency from MFIN branches to MECPL branches for sale.

17.Special Business strategy for increasing volume of purchases is to get currency from banks at semi urban and rural locations. Most of the bank branches at these centres do not encash foreign currency due to lack of expertise and logistical problems. We can offer our services to lift currency from bank’s branches. Exchange Company can also buy currency from branches which do the encashment. MECPL has already been empanelled by a few banks for this purpose.But some banks give currency without empanelment, if we keep good contacts with them. Some of the points to be remembered while approaching banks are listed below.

(i) Banks generally do encashment upto 3.00 pm and no encashment is done on Saturdays. Our branch or MFIN branches can encashupto 5.30pm, Monday to Saturday.

(ii) Small branches on the outskirts of large cities have to send the currency encashed by them to the main branch. This involves manpower and expense. We can offer our pick up at good rates.

(iii) Some banks do not encashforex to avoid the work involved. We can request them to send their customers who want encashment to our branch or nearby MFIN branch.

(iv) We can deliver currency to the banks or to their customers, in the evening also.

(v) We can also send remittances (many banks do not take this work)

RBI licence copy and KYC documents can be given to banks.Cheques can be given normally, but RTGS can also be sent if the banks want it. You may visit banks in your area of operation and offer to handle forex pick up, delivery and outward remittances. Letter of offer can be sent from CO, if needed.

18. Registers :

(i) Encashment Certificates to be issued to all customers.

(ii) Forex Encashment Register to be kept and transactions recorded.

(iii) Monthly report to be sent to Exchange Co branch for getting incentive (Rs.2.00 /thousand for encashment /sales and share of profit for remittances)

18. RBI Guidelines:

The following registers/records as per RBI rules are to be maintained in the branch.

1. Copy of RBI Licence is to be displayed at a prominent place in the branch premises.

2. Valid copies of RBI licences of all the FFMCs, with which the branch is doing transactions, are to be kept on on record.

3. Foreign Currency Rate Board, giving the current date and rates, is to be displayed.

4. Bulk purchases and bulk sales bills are to be verified for stamp and signature of both, purchaser and seller and all the transactions are to be settled by cheque only.

5. (a)Encashment Certificates with ID proof details and address are to be kept on record for purchases below Rs.50000/-, for all currencies.

(b)Photo copy of ID/Address proof is to be obtained and kept on record for purchases of Rs.50000/- and above for all currencies.

6. Payment is to be made by cheques for encashment of above USD 1000 or its equivalent for Resident Indians and above USD 3000 or its equivalent for foreign citizens/NRIs.

7. Copy of the Currency Declaration Form (CDF) is to be collected from the customer for encashments that exceed USD 5000/- for foreign currency notes and USD 10000/- for currency notes and TCs put together ( or its equivalent), after verifying with the original.

8. All sales of foreign currencies for various purposes, for both private and business visits, are to be within the limits prescribed by RBI from time to time? (USD 10000/- for private visit per financial year and USD 25000/- per business visit and in either case the foreign currency notes portion should not to exceed USD 3000/-, – or its equivalent)

9. Payment for forexsales in excess of Rs.50000/- is to be taken by cheque/DD.

10. Copies of valid passport and BTQ/private visit application are to be obtained and kept with the relative bills, when making sales.

11. For Business Visits, payments are to be received by cheque from the company and the business visit application on company’s letter head with copy of valid passport are to be obtained and kept with the relative bills.

12. Cash Transaction Report (CTR) is to be submitted to the HO on a monthly basis for all purchases where cash payment has been made by branches/franchisees forRs.50000/- and above.

13. Suspicious Transaction Report (STR) is to be submitted to HO within 07 days of finding out that a particular purchase transaction (attempted or put through), for any amount, is of suspicious nature.

14. Required KYC documents are to be obtained and kept on record and a customer profile sheet prepared for establishing business relationships with customers like corporates/other FFMCs/firms/trusts & foundations/etc.

15. Due care is to be taken to put in place an effective KYC programme for the purpose of risk management as detailed in RBI circular dated 27.11.2009.

16. All the forex transactions undertaken are to be in conformity with the KYC/AML/CFT guidelines of the RBI and Govt.of India.

17. The guidelines issued by RBI with regard to Anti Money Laundering are to be strictly adhered to by the branch.

18. FLM 1 to 7 printouts are to be taken out daily and properly filed.

19. FLM 8 is to be sent to HO every month for submission to RBI before 10th of the succeeding month.

20. Stock of currency notes/TCs should tally with balances appearing in the respective FLM registers.

21. Franchisee inspections are to be carried out once in a year and the reports filed properly.

22. Unauthorized representatives should not be permitted for making money changing transactions on behalf of the branch.

23. Monthly Statement of forexencashments done by the franchisees are to be sent to the concerned MECPL branch.

All instructions of the RBI, given from time to time, have to be complied with by the branch.

Physical Verification:

1. The balance of cash on physical verification is to be in agreement with the balance as per Cash Book/System.

2. The stock of Foreign Currencies/TCs on physical verification is to b e in agreement with the FLM reports.

3. The Manager /Br.In-charge has to verify and sign in the Cash Denomination Book on all working days.

4. The audit official will conduct verification of the debit and credit vouchers for 02 days prior to cash verification date.

5. Late purchases and petty expenses are to be accounted for on the next day itself, before the commencement of transactions.

6.Blank IDBI/UTI Debit Card stock is to be verified with the ledger and system report.

 VOUCHING

1. Payments for expenses are to be authorized and supported by original bills/sanction letters/other evidences.

2. Payments for all expenses in excess of Rs.20000/- are to be made by ‘crossed account payee’ cheque/DD/PO.

3. Entries in the Cash Book for withdrawals/deposits of cash from/to the bank are to be reflected on the same day in the Bank ledger in the system.

4. The payment towards travel expenses is to be made only after proper sanction is obtained from the competent authority. (Local travel expenses upto Rs.100/- can be paid at branch)

5. There should not be any significant variations in the telephone bill amounts for the period under audit as compared to the bills for the previous months.

6. There should not be any wide variations in the electricity bills for the period under audit when compared with the previous months.

7. Central Office originated entries are to be responded to on the same day.

BANK

1. Bank Reconciliation Statements (BRS) have to be prepared for the month and send to CO not later than 7th of the succeeding month.

2. All the outstanding/uncleared items in the BRS have to be cleared/accounted for.

3. The cheques received for the sale of currencies are to be deposited in the bank without delay and cleared.

4. In case of overdraft accounts, the interest charged and debited by the banks are to be properly calculated.

5. Entries in the Bank Account are to be individually checked with the entries in the passbook along with the cheque book and withdrawal slips, even though the balance as per Bank Account and Passbook are tallying.

6. Cancelled cheque leaves are to be attached along with the counterfoils/cheque issue slips.

7. The Bank/Cash balance is to be within the limits prescribed.

8. The cheque counterfoils/cheque issue slips are to be properly filled up and Cheque Issued Register is to be maintained at the branch.

9. The cheque books are to be kept under proper custody of the authorized official.

10. There should not be any signed blank cheque leaves found in the branch.

11. List of officials authorized to operate the bank account are to be held by the branch and verified by the auditors.

PURCHASE OF FOREIGN CURRENCIES

1. The franchisee purchases from MFIN branches are to be accounted for as bulk purchases and settled through the Link Branch.

2. The bills of the other Cos are to be obtained (bulk purchases) and attached with the bulk purchase bills.

 3. The cheque/PO/DD numbers are to be noted in the purchase bills of the foreign currencies.

4. All the void bills are to be cancelled and kept in the branch.

 5. Corrections/overwritings are not to be made in the bills.

6. The purchases as per the bills should tally with the INR statements and with the purchases in the Cash Book/System.

SALE OF FOREIGN CURRENCIES

1.The signature of the customer is to be obtained on the sale bill (both public and bulk sales).

2.The bills of the other companies are to be obtained (bulk sales) and attached with the bulk sales bills.

3.Thecheque/PO/DD numbers are to be noted in the sales bills of the foreign currencies.

 4.All the void bills are to be cancelled and kept in the branch. 5.Corrections/overwritings are not to be made in the bills.

6.The sales as per the bills should tally with the INR reports and accounted for in the Cash Book/System.

7.Thecheques received from the customers are to be cleared in the bank without delay.

8.Confirmation is to be obtained from the issuing bank in respect of PO/DD issued by them before the release of foreign currency.

 9.The sales (bulk) are to be made only to those FFMCs which are listed by the CO. sales to banks can be made on getting their cheques.

GENERAL

1. The attendance register is to be maintained properly and leave to be taken with the proper sanction of the competent authority.

2.Salary advances are to b e availed within the limits and are to be taken with proper sanction.

3.Fixed Assets Register is to be maintained and updated.

4.Key Movement Register is to be properly kept and maintained.

5.Cash/Currency in Transit Register is to be properly maintained.

6.All payments are to be made against proper approvals/sanctions.

7. Salary/incentives are to be paid only after getting the sanction from CO.

8. Necessary care is to be taken to ensure that there are no suspicious transactions in the branch.

9. The auditors will scrutinize the following accounts (ledger extracts of the accounts should be attached to the audit report). a) Sundry Creditors, b) Sundry Debtors c) Suspense Account

10. Sundry Debtors Account should tally with franchisee/branch wise.

11.Correctness of profit and loss entries is to be checked. Collection of service tax at the appropriate rates per transaction, by branch and the franchisees, should be verified.

12.TDS deduction for incentive payments exceeding Rs.5000/- pa are to be checked and kept on record. TDS certificates are to be obtained from banks/others who have deducted TDS while paying interest/commission to us.

13.All the discrepancies/irregularities pointed out in the previous audit reports have to be rectified.

14.All precautions/instructions contained in the Manual Of Instructions are to be complied with by the branch.

20. Anti Money Laundering Guidelines for Franchisees

All Franchisees have to follow Anti Money Laundering Guidelines issued by Reserve Bank of India and the same needs to be followed by their Franchisees also. As a result all the Franchisees need to follow the guidelines given below while doing forex transactions at their respective locations.

Money Laundering

The offence of Money Laundering has been defined in Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA) as “whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering“. In common man’s language, Money Laundering can be called a process by which money or other assets obtained as proceeds of crime are exchanged for “clean money” or other assets with no obvious link to their criminal origins.

1. Know Your Customer (KYC) – Identification of Customers

All transactions should be undertaken only after proper identification of the customer by verifying the original of ID proof/address. Full details of name and address as well as the details of the identity document provided should be kept on record. If a transaction is being undertaken on behalf of another person, identification evidence of all the persons concerned should be obtained and kept on record. A new KYC form for getting the details regarding the customers with whom you carry out forex transactions has been supplied. The KYC forms should be got filled with all particulars mentioned on the form and filed in serial order, along with copies of ID and address proof documents taken as per RBI rules. KYC audit will be conducted for ensuring the compliance.

2. Purchase of Foreign Exchange

a) For encashment of foreign currency notes valued below Rs.50000/-, production of passport need not be insisted upon and any other document of identification like voter ID card, driving license etc. which gives ID and address proof can be accepted.

b) In the case of foreign nationals passport copy should be retained for all transactions. A copy of the photo ID should be retained along with the encashment certificate/bill, if the amount encashed is Rs.50,000/- and above. (Verification of passport and retention of copy is compulsory for encashment of Transfer cheques) Correct address should be recorded in all cases.

c) For encashment, INR (cash) can be paid only to the extent of USD 1000 or its equivalent per transaction. All encashments within one month (30 days period) is to be treated as single transaction for this purpose. In all other cases Franchisees should make payment by way of "Account Payee" cheque / demand draft only. e) Where the amount of forex tendered for encashment by any person exceeds the limits prescribed for Currency Declaration Form (CDF), the Franchisee should invariably insist for production of CDF. Limits for CDF are

a) USD 5000 or equivalent in currency notes

b) USD 10000 or equivalent for T.Cs

c) USD 10000 or equivalent for currency notes & T Cs put together. (Currency should not exceed USD 5000)

3. Cash Transaction Report on form CTR should be submitted to Exchange Co. in respect of all cash

4. Suspicious Transactions The Franchisee must ensure that its staff is vigilant against money laundering transactions at all times. An important part of the AML measures is determining whether a transaction is suspicious or not. A transaction may be of suspicious nature irrespective of the amount involved. Any suspicious transaction ( attempted or put through) should be reported to Exchange Co. at Cochin immediately. Some possible suspicious activity indicators are given below:

Customer is reluctant to provide details/documents on frivolous grounds.

The transaction is undertaken by one or more intermediaries to protect the identity of the beneficiary or hide their involvement.

Large cash transactions.

Size and frequency of transactions is high considering the normal business of the customer.

Change in the pattern of business transacted.

The above list is only indicative and not exhaustive.

21. ACCOUNTING

MFIN franchisee branches should debit the link branch of MFIN located near the Exchange Co through Central Office Account with the value of currency encashed(less service Tax deducted) and effect payment to customer. Exchange Co branch will settle transactions with MFIN and also pay Service Tax. i) Registers and Books of Accounts of FFMCs/AD II categories AMCs shall maintain the following Registers in respect of their money changing transactions:

a. FLM 1 – Daily Summary & Balance book (Foreign currency notes/coins)

b. FLM 2 – Daily summary & Balance Book (Travellers cheque)

c. FLM 3 – Register of purchase of foreign currencies from the public

d. FLM3 (TC) – Register of purchase of Travellers cheque from public.

e. FLM 4 – Register of purchase of foreign currency notes/coins from authorized dealers and authorized money changers.

f. FLM 5 – Register of Sales of foreign currencies to the public.

g. FLM 6 – Register of sales of foreign currencies/notes/coins to authorized money changers/overseas banks.

h. FLM 7 – Register of travelerscheques surrendered to authorized dealers/authorized money chnagers/exported.

i. FLM 8 – Summary statement of purchase & sales of foreign currency notes during the month.

All registers and books should be kept up-to date, cross checked and balance verified daily. Transactions not pertaining to money changing business of the AMC should not be mixed up with money changing transactions. In other words, the registers and books of accounts should show clearly the trail of transactions pertaining to money changing business. Separate registers should be maintained for each establishment, if the AMC maintains more than one place of business. Note: - Interbranch transfer of foreign currencies should be accounted as stock transfer and not as sales

ii) Tallying of Office Accounts

The unreconciled entries in sundry creditor/debtors accounts should be verified and reconciled

(a) Total of individual items should agree with Trial Balance

(b) There should be no entry older than two weeks , generally

(c) Position of all old entries should be tracked and reconciliation done soon.

Many branches have small amounts in debit as well as credit sides outstanding for a long time. Credit balances equal to Service Tax amount should be reversed and credited to ‘Service Tax Received Forex’ account and debit/credit balance amounts around Rs. 3 can be credit / debit to Round off account. Both the accounts should have normal credits /debits only, which will be reversed in the normal course.

iii) System entries for transaction

Branches not entering the transactions in the system promptly, will results in wrong information being obtained in the reports taken. Some examples are,

a) Bank/cash balance will not show the correct position.

b) Sundry Debtors position is wrong.

c) Stock position will not reflect the true level of currency holding.

d) Outstandings from Corporates will not be correct.

If any transaction is done, the related entries should be made in the system immediately. When cheques are issued to link branch of Muthoot Finance Ltd. the entries to be put are as under.

                                 Debit : Franchisee a/c

                                Credit : Bank a/c

iv) Acceptance of cheques for forex sales

As a rule, our branches should not accept cheques from individuals towards value of currency sold. Acceptance of cheques should be in very rare cases only, involving known persons of high integrity and net worth. In other cases currency should be released only after the cheques are realized and the amount is credited to our bank account.

22. Outward Remittance (Rules & Restrictions of RBI)

The Reserve Bank of India had announced a Liberalised Remittance Scheme (the Scheme) in February 2004 as a step towards further simplification and liberalization of the foreign exchange facilities available to resident individuals. As per the Scheme, resident individuals may remit up to USD 200,000 per financial year for any permitted capital and current account transactions or a combination of both. The Scheme was operationalised vide A.P. (DIR Series) Circular No. 64 dated February 4, 2004.

Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 200,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.

Under the Scheme, resident individuals can acquire and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the Scheme.

The remittance facility under the Scheme is not available for the following:

i) Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000;

ii) Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty;

iii) Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market;

iv) Remittance for trading in foreign exchange abroad;

v) Remittance by a resident individual for setting up a company abroad;

vi) Remittances directly or indirectly to Bhutan, Nepal, Mauritius and Pakistan;

vii) Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories”, from time to time; and

viii) Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

The facility under the Scheme is in addition to those already available for private travel, business travel, studies, medical treatment, etc., as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. The Scheme can also be used for these purposes.

However, remittances for gift and donation can not be made separately and have to be made under the Scheme only. Accordingly, resident individuals can remit towards gifts and donations up to USD 200,000 per financial year under the Scheme.

Further, a resident individual can give rupee gifts to his visiting NRI/PIO close relatives [means relative as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque/electronic transfer within the overall limit of USD 200,000 per financial year for the resident individual and the gifted amount should be credited to the beneficiary’s NRO account. An individual resident can lend money by way of crossed cheque /electronic transfer to a Non resident Indian (NRI)/ Person of Indian Origin (PIO) close relative [means relative as defined in Section 6 of the Companies Act, 1956] within the overall limit of USD 200,000 per financial year under the Liberalised Remittance Scheme, to meet the borrower’s personal or business requirements in India, subject to conditions. The loan should be interest free and have a maturity of minimum one year and cannot be remitted outside India.

The resident individual investors can retain and re-invest the income earned on investments made under the Scheme. The residents are not required to repatriate the funds or income generated out of investments made under the Scheme. Remittance under this scheme is on a gross basis.

Remittances under the facility can be consolidated in respect of family members subject to the individual family members complying with the terms and conditions of the Scheme.

Remittances under the Scheme can be used for purchasing objects of art subject to compliance with the extant Foreign Trade Policy of the Government of India and other applicable laws.

AD will be guided by the nature of transaction as declared by the remitter and will certify that the remittance is in conformity with the instructions issued by the Reserve Bank, in this regard from time to time.

The Scheme can also be used for remittance of funds for acquisition of ESOPs.

The remittance under the Scheme is in addition to acquisition of ESOPs linked to ADR/GDR.

The remittance under the Scheme is in addition to acquisition of qualification shares.

A resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes, etc. under this Scheme. Further, the resident can invest in such securities through the bank account opened abroad for the purpose under the Scheme.

An individual, who has availed of a loan abroad while as a non-resident Indian can repay the same on return to India, under this Scheme as a resident.

It is mandatory to have PAN number to make remittances under the Scheme.

In case a resident individual requests for an outward remittance by way of issuance of a demand draft (either in his own name or in the name of the beneficiary with whom he intends to putting through the permissible transactions) at the time of his private visit abroad, the remitter can effect such an outward remittance against self-declarationin the form of a DD can be effected against the declaration by the resident individual in the format prescribed under the Scheme.

There is no restriction on the frequency of remittance. However, the total amount of foreign exchange purchased from or remitted through, all sources in India during a financial year should be within the cumulative limit of USD 200,000.

The requirements to be complied with by the remitter are, the individual will have to designate a branch of an AD through which all the remittances under the Scheme will be made. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance. If the applicant seeking to make the remittance is a new customer of the bank, Authorised Dealers should carry out due diligence on the opening, operation and maintenance of the account. Further, the AD should obtain bank statement for the previous year from the applicant to satisfy themselves regarding the source of funds. If such a bank statement is not available, copies of the latest Income Tax Assessment Order or Return filed by the applicant may be obtained. He has to furnish an application-cum-declaration in the specified format (Annex) regarding the purpose of the remittance and declare that the funds belong to him and will not be used for the purposes prohibited or regulated under the Scheme.

Once a remittance is made for an amount up to USD 200,000 during the financialyear, he would not be eligible to make any further remittances under this scheme, even if the proceeds of the investments have been brought back into the country.

The remittances can be made in any freely convertible foreign currency equivalent to USD 200,000 in a financial year .

Investment by resident individual in overseas companies is subsumed under the Scheme of USD 200,000. The requirement of 10 per cent reciprocal shareholding in the listed Indian companies by such overseas companies has since been dispensed with.