The Head Offices/Principal Offices of all
Exchange Companies and Authorised Dealers
in Foreign Exchange
Franchise
Arrangements of the Exchange Companies
Attention of the Exchange Companies
is invited to rule No. 13 of Annexure II of FE Circular
No.09 dated July 30, 2002 in terms of which Exchange Companies
were allowed to have Franchise Arrangements with the other
entities. In order to facilitate the Exchange Companies,
following Franchise Arrangement has been decided to be allowed
with immediate effect:
i)
Franchiser and Franchisee would enter into a formal agreement
which should be duly registered as per existing laws of
the land.
ii)
Franchisee may be an existing company or partnership/firm
or sole proprietorship carrying out only Money Changing
business or a new company or partnership/firm or sole proprietorship
specifically formed to carryout Money Changing business.
It is re-iterated that Money Changers presently allowed
to function would cease to exist after 30th June, 2004.
iii)
Franchisee by virtue of the Agreement, in consideration
of the same, would pay the Franchiser an agreed amount as
Franchise Deposit. This Franchise Deposit would be maintained
by the Franchiser in his books during the currency of the
Agreement.
iv)
Franchise Deposit would be treated as “Second Tier
Capital” in the books of the Franchiser. For the purpose
of calculation of 25% SLR requirement and 50% of the Exposure
Limit, this “Second Tier Capital” would be added
to the paid up capital of the Franchiser. It may, however,
be noted that at any point of time, combined Exposure of
Franchiser and Franchisee should not exceed 50% of the sum
of paid up capital and Second Tier Capital (Franchise Deposit)
of the Exchange Company.
v)
Franchiser and Franchisee will have to make arrangement
for a completely integrated/compatible computerized system
so that Exchange Company may provide a consolidated reporting
of exchange business transactions carried out by Franchiser
& Franchisee as per requirement of the SBP.
vi)
In addition to the clauses of the Franchise Agreement, all
the Rules & Regulations specified by the State Bank
for the Franchiser shall be equally applicable to the franchisee.
vii)
Franchiser will be required to immediately notify to SBP
all franchise agreements forwarding a copy to the SBP. In
the absence of any objection from SBP, franchiser may deposit
requisite enhanced SLR amount with SBP after 15 days from
the date of notifying of the Agreement. Only thereafter
franchisee would be allowed to commence its operations.
viii)
Franchiser would be fully responsible for the activities
of the Franchisee and shall also have the right to inspect/visit
franchisee’s operations as per their agreement.
ix)
State Bank reserves the right to inspect Franchisee’s
books of accounts and premises as and when it may deem fit
and necessary.
x)
In case of any violations of related rules, SBP shall hold
the Franchiser directly responsible for the same, reserving
however the right to take such direct action against Franchisee
as it may deem fit.
Please bring the above to the notice of all your constituents.