Categories of Authorised Dealers Under FEMA
Who may deal in foreign exchange in India, and what each category of authorised person can do.
Under Section 10 of FEMA, only a person authorised by RBI can deal in foreign exchange. These authorised persons come in categories, and each category can do a defined set of things. A bank branch that sells forex for a student's fees, a money changer at an airport and a financial institution handling forex for its own business are all authorised persons, but they sit in different categories with very different powers.
The framework was reset by the Foreign Exchange Management (Authorised Persons) Regulations, 2026, in force from May 6, 2026. Most IIBF courseware predates it, so this page gives the current position and flags what changed.
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The Categories at a Glance
AD Category-I
Who can be one
A bank licensed by RBI
What it may do
Any current account and capital account transaction permissible under FEMA
Minimum net worth
Not prescribed in these regulations (banks are regulated under other Acts)
AD Category-II
Who can be one
A bank or RBI-registered NBFC, or an FFMC or Forex Correspondent with two years' operation and average annual forex turnover of ₹50 crore
What it may do
Any non-trade current account transaction other than gift and donation; foreign trade transactions up to ₹25 lakh each
Minimum net worth
₹10 crore
AD Category-III
Who can be one
An entity that deals in forex incidental to its business, or offers innovative products involving forex
What it may do
Only what its RBI authorisation specifies
Minimum net worth
₹2 crore
Full Fledged Money Changer (FFMC)
Who can be one
Existing licensees only: no new FFMC applications are considered
What it may do
Buy foreign currency notes and travellers' cheques; sell them for foreign travel; act as an MTSS agent
Minimum net worth
₹25 lakh (single branch), ₹50 lakh (multiple branches) for renewal
| Category | Who can be one | What it may do | Minimum net worth |
|---|---|---|---|
| AD Category-I | A bank licensed by RBI | Any current account and capital account transaction permissible under FEMA | Not prescribed in these regulations (banks are regulated under other Acts) |
| AD Category-II | A bank or RBI-registered NBFC, or an FFMC or Forex Correspondent with two years' operation and average annual forex turnover of ₹50 crore | Any non-trade current account transaction other than gift and donation; foreign trade transactions up to ₹25 lakh each | ₹10 crore |
| AD Category-III | An entity that deals in forex incidental to its business, or offers innovative products involving forex | Only what its RBI authorisation specifies | ₹2 crore |
| Full Fledged Money Changer (FFMC) | Existing licensees only: no new FFMC applications are considered | Buy foreign currency notes and travellers' cheques; sell them for foreign travel; act as an MTSS agent | ₹25 lakh (single branch), ₹50 lakh (multiple branches) for renewal |
What Changed in 2026
RBI no longer grants fresh FFMC licences. Authorised persons cannot enter new franchisee arrangements, and existing franchisees must be wound down within two years of May 6, 2026; they may then be appointed as Forex Correspondents. Non-bank authorised persons other than NBFCs must reach a minimum annual forex turnover (₹50 crore for AD Category-II, ₹10 crore for FFMCs) within two years. Older notes that describe franchisees and net owned fund rules for money changers describe the pre-2026 framework.
Forex Correspondents and Other Terms
- Forex Correspondent (FxC)
- An agent appointed by an AD Category-I or Category-II under a principal-agent model to buy foreign currency notes, coins and travellers' cheques, sell them for foreign travel, and act as an MTSS sub-agent. All its transactions sit in the principal's books, and it may act for more than one AD.
- MTSS
- Money Transfer Service Scheme: the route for personal inward remittances from abroad through overseas principals and Indian agents. FFMCs may act as agents; FxCs as sub-agents.
- Standalone Primary Dealers as AD Category-III
- Under RBI's hedging directions, standalone primary dealers authorised as AD Category-III may offer certain foreign exchange derivatives, alongside AD Category-I banks.
- Annual forex turnover
- Foreign exchange bought from and sold to the public directly or through agents, franchisees or FxCs in a financial year, excluding inward remittances processed.
Who can do which transaction. No signup.
How CCFE Tests This
Questions ask which category can do a given transaction: can an FFMC send an outward remittance for education (no, it deals in notes and travellers' cheques and acts as an MTSS agent), which category handles all capital account work (AD Category-I), who authorises (RBI under Section 10). The trap is giving AD Category-II full remittance powers; it covers non-trade current account transactions, with gift and donation excluded and trade capped per transaction.
FAQs
What is the difference between AD Category-I and AD Category-II?expand_more
AD Category-I is a bank that can handle any permissible current or capital account transaction. AD Category-II can handle non-trade current account transactions other than gifts and donations, and foreign trade transactions up to ₹25 lakh each.
What can a Full Fledged Money Changer do?expand_more
Buy foreign currency notes and travellers' cheques, sell them for foreign travel, and act as an agent under the Money Transfer Service Scheme. RBI no longer issues new FFMC licences.
What is a Forex Correspondent?expand_more
An agent of an AD Category-I or Category-II under the 2026 regulations, allowed to buy and sell foreign currency notes and travellers' cheques for travel and act as an MTSS sub-agent, with all transactions recorded in its principal's books.
Who authorises dealers in foreign exchange in India?expand_more
The Reserve Bank of India, under Section 10 of FEMA. No person may act as an authorised person without RBI's authorisation.
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