Module: General Practice
Q72: Consider the following statements regarding the "Franchisee" model in the foreign exchange business:
I. An AD Category-I Bank or AD Category-II entity can appoint franchisees to undertake money changing activities.
II. A Full Fledged Money Changer (FFMC) can also appoint franchisees to expand its network.
III. Franchisees are required to maintain a minimum Net Owned Funds (NOF) of ₹10 Lakh.
Which of the statements above are correct?
II. A Full Fledged Money Changer (FFMC) can also appoint franchisees to expand its network.
III. Franchisees are required to maintain a minimum Net Owned Funds (NOF) of ₹10 Lakh.
Which of the statements above are correct?
✅ Correct Answer: C
1. Statement I (Correct): AD Category-I Banks and AD Category-II entities are the Authorised Persons.
To expand reach, they are permitted to appoint franchisees (often to restrict costs of setting up full branches) to purchase forex.
2. Statement II (Incorrect): Under the current Master Direction, FFMCs cannot appoint franchisees.
Only AD Category-I and AD Category-II entities generally have the policy bandwidth to manage agency/franchisee risks.
Correction/Refinement: While older norms might have been looser, the Master Direction explicitly states that only AD-I and AD-II can appoint franchisees.
3. Statement III (Incorrect): Franchisees are entities that restrict their activity (mostly purchase). They do not have a statutory NOF requirement in the same way the Licensor (AD) does.
The strict ₹10L/25L/50L NOF applies to the Licensor (the AD/FFMC), not the franchisee directly.
To expand reach, they are permitted to appoint franchisees (often to restrict costs of setting up full branches) to purchase forex.
2. Statement II (Incorrect): Under the current Master Direction, FFMCs cannot appoint franchisees.
Only AD Category-I and AD Category-II entities generally have the policy bandwidth to manage agency/franchisee risks.
Correction/Refinement: While older norms might have been looser, the Master Direction explicitly states that only AD-I and AD-II can appoint franchisees.
3. Statement III (Incorrect): Franchisees are entities that restrict their activity (mostly purchase). They do not have a statutory NOF requirement in the same way the Licensor (AD) does.
The strict ₹10L/25L/50L NOF applies to the Licensor (the AD/FFMC), not the franchisee directly.