Authorised Dealer

The authorised channel: why authorised dealers exist

FEMA regulates every payment between a person resident in India and a person resident outside India, and every receipt or holding of foreign exchange. Section 10 creates the gatekeepers of that system: authorised persons. The Reserve Bank authorises them, prescribes what each category may and may not do, and can revoke the authorisation. Banks, money changers and other authorised persons are the only lawful route through which foreign exchange can be bought, sold, remitted or held in India.

Within that family, the authorised dealer categories (AD Category-I, II and III) carry the substantive transaction business — trade payments, remittances, investments and borrowings. The framework was recast on 6 May 2026, when the Foreign Exchange Management (Authorised Persons) Regulations, 2026 (Notification No. FEMA 401/2026-RB dated 30 April 2026) took effect and the category definitions in the earlier Master Direction No. 3 were omitted. Any description of AD categories that does not reflect the 2026 Regulations is describing a repealed framework.

The categories under the 2026 Regulations

Fresh authorisations are considered only under AD Category-I, II and III (Regulation 3(4)). Eligibility and permitted activities are set by Regulations 4 and 7:

Eligibility is not only financial. Regulation 4(5)'s fit-and-proper criteria include that at least 50% of the directors and KMPs have qualification and experience in the financial services industry, and applications are filed through the RBI's PRAVAAH portal. Existing authorised persons also carry ongoing floors: renewal net worth (single-branch FFMC ₹25 lakh; multiple-branch FFMC ₹50 lakh; AD-II ₹10 crore; AD-III ₹2 crore) and minimum annual forex turnover for non-bank APs (AD-II ₹50 crore; FFMC ₹10 crore).

What changed on 6 May 2026

What an AD Category-I bank actually does

For most readers, "authorised dealer" means their bank's forex desk. Its day-to-day FEMA work includes:

Trade transactions. Export bills are monitored in the RBI's EDPMS and import payments in IDPMS; the AD bank reconciles entries against shipping bills and bills of entry and closes them (entries up to ₹10 lakh can be closed on the exporter/importer's declaration). Importers and exporters declare the AD Code allotted by the RBI to the bank branch handling their transactions, which links the customs and banking records.

Remittances and LRS. ADs process outward and inward remittances, including remittances by resident individuals under the Liberalised Remittance Scheme — up to USD 2,50,000 per financial year for any permitted current or capital account transaction or a combination of both. The scheme is available to resident individuals only (including minors, with the Form A2 countersigned by the natural guardian); corporates, partnership firms, HUFs and trusts cannot use it, and PAN is mandatory.

Certificates and returns. The designated AD bank issues the Foreign Inward Remittance Certificate (FIRC) for inward remittances where applicable, certifies and files the monthly ECB-2 Return for external commercial borrowings with the RBI (within seven calendar days of receipt from the borrower), and receives and onward-submits Form FC for overseas direct investment by residents.

Accounts and cards. ADs maintain the foreign currency and non-resident accounts FEMA permits (NRE, NRO, FCNR and others under the deposit regulations). Non-bank AD Category-II entities operate under tighter limits: foreign currency accounts in India need RBI Regional Office approval, Nostro accounts need a one-time approval, and forex pre-paid cards issued by an AD-II are settled only through an AD Category-I.

The authorised person's own duties — Section 10(5) and 10(6)

Authorisation is not a passive licence. Before undertaking any foreign exchange transaction for a person, an authorised person must require that person to make declarations and give information that reasonably satisfy it that the transaction will not involve, and is not designed for, any contravention or evasion of FEMA (Section 10(5)); the 2026 Regulations repeat the duty as a condition of authorisation (Regulation 8(8)). If the customer refuses to comply, or complies unsatisfactorily, the authorised person must refuse the transaction in writing and report it to the RBI.

How long does an authorisation last?

Under Regulation 8(1) of the 2026 Regulations, an authorisation is valid until revoked or surrendered — it is a continuing status, not a fixed-term licence (for banks and NBFCs it runs with their banking licence or certificate of registration). Section 10(3) of FEMA and Regulation 8(9) empower the RBI to revoke an authorisation, including in the public interest or where the authorised person has not complied with the conditions of authorisation or has contravened FEMA. An appeal against revocation lies to the Executive Director, Foreign Exchange Department, within 45 days (Regulation 9). Renewal mechanics under Regulation 5 — including applying at least two months before any expiry and the authorisation continuing until the renewal is decided or rejected — apply where the terms of authorisation carry an expiry.

This page explains the authorised-person framework under FEMA for study and compliance reference. Category eligibility, net-worth floors and permitted activities are as notified in the FEMA (Authorised Persons) Regulations, 2026 and the RBI Master Directions current on the date shown on this page; it is not legal advice for a specific authorisation or transaction.