Authorised dealers are the institutions that have the license from the RBI to sell and buy foreign currencies. Most of the authorised dealers are banks.
As per the Foreign Exchange Management Act, 1999, the Reserve Bank, on an application, may authorise any person to be known as an authorised person, to deal in foreign exchange as an Authorised Dealer.
Different categories of Authorised Dealers
There are three types of authorised dealers, depending upon the type of institutions. These three types are classified under there categories.
Who is a Category I Authorised Dealer?
Category I Authorised Dealers are select banks who can carry out all permissible current and capital account transactions as per directions issued from time to time. There are 106 authorised dealers of Category -I as per the RBI regulations.
Who is a Category II AD?
Category II are select entities to carry out specified non-trade related current account transactions, all the activities permitted to Full Fledged Money Changers and any other activity as decided by the Reserve Bank
Who is a Category III AD?
Category III ADs are select financial and other institutions (as Authorised Dealers Category-III) to carry out specific foreign exchange transactions incidental to their business / activities.
Who is Full-Fledged Money Changer?
Another category, outside the Authorised Dealers, who can deal in a lesser way in foreign exchange dealing are the Full Fledged Money Changers. They have less functionalities vis a vis ADs.
FFMCs are select registered companies as Full-Fledged Money Changers (FFMC) to undertake purchase of foreign exchange and sale of foreign exchange for specified purposes viz. private and business travel abroad.