An Authorised Dealer (AD) Bank is a bank licensed by the Reserve Bank of India under Section 10(1) of the Foreign Exchange Management Act, 1999, to deal in foreign exchange and foreign securities. Operating mainly as an AD Category-I entity, it is the regulated gateway through which residents and businesses route foreign investment, trade payments and remittances, and report them to the RBI under the Foreign Exchange Management (Authorised Persons) Regulations, 2026.
Definition
In law, the anchor is Section 2(c) of FEMA, 1999, which defines an “authorised person” as an authorised dealer, money changer, offshore banking unit or any other person authorised under Section 10(1) to deal in foreign exchange or foreign securities. An AD Bank is the banking form of that authorisation, a bank that the RBI permits to handle forex. In everyday use, the term means an AD Category-I bank, which may undertake the full range of current and capital account transactions.
Governing Provision
The parent statute is the Foreign Exchange Management Act, 1999, administered by the Reserve Bank of India. Section 10(1) lets the RBI authorise a person as an authorised dealer, while Sections 10(4) and 10(5) bind that dealer to RBI directions and require a customer declaration before any transaction. The detailed operating framework is now the Foreign Exchange Management (Authorised Persons) Regulations, 2026 (Notification No. FEMA 401/2026-RB, in force 6 May 2026), which replaced an older patchwork of master directions and circulars.
Key Features
The 2026 Regulations classify authorised persons into four classes, with an AD Bank occupying the top class. The markers below distinguish an AD Bank from a money changer or a Category-II entity, and explain why almost every cross-border payment made by an Indian business is routed through one. Each carries a statutory or regulatory anchor that a reviewer can trace back to the Act or the notification.
The defining features are:
| No | Key Features | Description |
|---|---|---|
| 1 | Reserved for banks | AD Category-I authorisation is granted only to RBI-licensed banks and covers all permissible current and capital account transactions under FEMA, 1999. |
| 2 | Reporting gateway | FDI, ODI and ECB filings reach the RBI through the company’s AD bank on the FIRMS portal, via the Single Master Form. |
| 3 | Compliance check-post | Before remitting, an AD bank must take a customer declaration under Section 10(5) and clear KYC and AML checks. |
| 4 | Category ladder | Below it sit AD Category-II (non-trade items plus trade items up to ₹25 lakh each), AD Category-III, and Full-Fledged Money Changers. |
Related Terms
- Foreign Exchange Management Act (FEMA), 1999
- Authorised Person under FEMA
- Foreign Direct Investment (FDI)
- Overseas Direct Investment (ODI)
- External Commercial Borrowing (ECB)
- Liberalised Remittance Scheme (LRS)
- Full Fledged Money Changer (FFMC)
- Zero-Rated Supplies under GST
Frequently Asked Questions
Is an AD Bank the same as an authorised dealer?
Which law governs Authorised Dealer Banks today?
Does every foreign payment go through an AD Bank?
References
- Foreign Exchange Management Act, 1999
- Foreign Exchange Management (Authorised Persons) Regulations, 2026: Notification No. FEMA 401/2026-RB, dated 30 April 2026 (in force 6 May 2026).
- RBI Master Direction – Money Changing Activities (as amended) and
- Master Direction – Reporting under FEMA, 1999 (FED Master Direction No. 18/2015-16).
In This Article
Author Bio
Meet Sanjeev Kumar, a distinguished advocate before the Supreme Court of India, High Courts, and National Tribunals. Founding Partner of Juriskps Law Offices, a premier law firm, he specializes in commercial, corporate, tax, arbitration, and IPR matters. His incisive legal insights enrich Setindiabiz’s blog with expert commentary.
