Module: General Practice
Q54: Scenario: "Global Travels Ltd." is an entity licensed as an FFMC (Full Fledged Money Changer). A customer approaches them with an invoice for importing machinery from Germany and requests a foreign currency demand draft (DD) to pay the supplier. Based on FEMA regulations, what is the correct course of action?
✅ Correct Answer: B
1. The Rule: FFMCs are authorized only for private and business travel-related forex sales (and purchase of forex). They are strictly prohibited from handling trade transactions (Imports/Exports) or remittances for goods.
2. The Scenario: The customer wants to pay for "importing machinery." This is a Current Account (Trade) transaction.
3. The Violation: If the FFMC processes this, they violate their licensing conditions.
Even issuing a DD for this purpose is ultra vires.
4. Correct Action: The customer must be directed to an AD Category-I Bank.
Even AD Category-II entities are restricted from trade transactions.
2. The Scenario: The customer wants to pay for "importing machinery." This is a Current Account (Trade) transaction.
3. The Violation: If the FFMC processes this, they violate their licensing conditions.
Even issuing a DD for this purpose is ultra vires.
4. Correct Action: The customer must be directed to an AD Category-I Bank.
Even AD Category-II entities are restricted from trade transactions.