The Reserve Bank of India's Authorised Dealer framework defines the permitted entities for foreign exchange intermediation in India. Under FEMA Section 10, only entities specifically authorised by RBI may deal in foreign exchange. The framework operates across multiple categories — primarily AD Category I, II, and III — with each category having specific permitted activity scope. For Indian retail customers seeking to access permitted forex activities (LRS remittance, education funding, travel currency, business remittance, specific investment activities), the AD bank is the operational interface. Understanding the category distinctions, the specific capability differences across categories, and the practical implications for customer service shapes informed bank selection and operational planning.
By 2026, the AD framework has continued maturation with specific technology integration, compliance framework operation, and customer service development. Major Indian banks operate as AD Category I with comprehensive forex capability; specific other entities operate at Category II or III with more focused capability scope.
This piece walks through the specific AD framework, the category capability distinctions, and what customers should know about AD bank selection and operation.
The AD Category Framework
Specific category distinctions.
AD Category I. Comprehensive forex capability. All major Indian commercial banks operate as AD Category I. Capability scope includes LRS remittance, current account transactions, capital account transactions within permitted scope, trade finance, and specific other forex activities.
AD Category II. Limited forex capability for specific authorised activities. Specific entities including specific cooperative banks and specific other entities operate at this level.
AD Category III. Specific limited capability for specific activity types. Specific entities operating in specific service categories.
Specific Money Changers. Separately licensed entities for specific currency exchange activities, distinct from AD framework but operating within RBI authorised entity ecosystem.
Specific Indian banks abroad. Specific operational provisions for Indian banks operating internationally.
The combined framework supports specific activity intermediation appropriate to entity capability and regulatory framework.
What AD Category I Banks Provide
For typical Indian retail forex customers, AD Category I capability is the relevant frame.
LRS remittance processing. Comprehensive LRS framework support including category-specific processing, Form A2 documentation, and TCS calculation.
Current account transactions. Specific current account transactions including travel-related, education-related, medical-related, and specific other categories.
Capital account transactions. Permitted capital account transactions within specific scope.
Trade finance and business remittance. Business-related forex activities for AD's business customers.
Specific investment-related transactions. Specific investment-related forex transactions including overseas equity, debt, and specific other instruments.
FCY-denominated accounts. FCNR(B), RFC, and specific other FCY-denominated account services for resident and non-resident customers.
Specific NRI account services. NRE, NRO, and FCNR(B) account services for non-resident Indian customers.
Specific currency conversion services. Specific currency conversion services for permitted activities.
Specific TCS calculation and reporting. TCS framework operation alongside remittance processing.
The combined capability scope supports comprehensive Indian retail forex activity within permitted framework.
Specific Bank Selection Considerations
For customers selecting AD bank for specific forex activities, several considerations apply.
Category capability alignment. Verify the bank's AD category supports planned activity. AD Category I covers comprehensive scope.
Specific service quality. Service quality varies across banks. Specific factors including processing speed, customer support, technology platform quality, and specific staff expertise matter.
Specific technology platform. Bank technology platforms vary in capability. Modern platforms support more efficient processing and customer self-service.
Specific fee structure. Banks have specific fee structures for forex services. Fee comparison supports informed selection.
Specific FX rate practice. Banks have specific FX rate practice including specific spreads applied to retail customers. Rate comparison supports informed selection.
Specific specialty capability. Some banks specialise in specific activity categories (NRI services, business remittance, specific other categories). Specialty alignment supports better service quality.
Specific branch presence. Branch presence may matter for specific activities requiring in-person interaction.
Specific digital capability. Digital capability affects self-service and operational efficiency.
The combined considerations support informed bank selection.
Comparison Across Major AD Category I Banks
| Bank category | Specific characteristics | Specific strengths |
|---|---|---|
| Major public sector banks (SBI, others) | Substantial scale, branch presence | Comprehensive capability, scale |
| Major private sector banks (HDFC, ICICI, Axis, Kotak) | Modern technology, specific service quality | Technology, service quality |
| Foreign banks operating in India (Citi, HSBC, Standard Chartered, others) | Specific international integration | International integration, NRI services |
| Specific cooperative and regional banks | Specific category scope | Local presence |
| Specific specialised institutions | Specific activity focus | Specific specialty |
The pattern shows comprehensive capability across major AD Category I banks with specific differentiation by bank type and specialisation.
Specific Operational Practice
Several specific operational items.
Form A2 processing. Standard Form A2 processing across LRS-related transactions. Specific bank technology supports digital Form A2 in many cases.
Specific KYC framework. Specific KYC framework operation supporting AD bank compliance. Specific Aadhaar and PAN integration supports identity verification.
Specific source of funds documentation. AD bank may require specific source of funds documentation for substantial transactions.
Specific aggregate utilisation tracking. AD banks track aggregate LRS utilisation per individual at the specific bank.
Specific TCS calculation. TCS calculation operates as part of remittance processing.
Specific Form 27D issuance. Banks issue Form 27D for TCS-affected remittance.
Specific reporting framework. AD banks operate within specific reporting framework supporting RBI-level monitoring.
Specific record retention. Banks maintain specific records supporting regulatory framework.
The combined operational framework supports framework integrity.
Specific Customer Service Considerations
Several specific customer service items.
Specific staff expertise. AD bank staff handling forex transactions have specific training and expertise. Quality varies.
Specific processing speed. Processing speed varies across banks and across specific transaction types.
Specific digital capability. Self-service digital capability for specific transactions varies.
Specific support availability. Customer support availability and quality varies.
Specific specialty knowledge. Specific category specialty knowledge varies (NRI, business, specific other).
Specific multi-channel availability. Branch, phone, digital, and specific multi-channel availability varies.
The combined customer service factors affect operational experience.
Specific 2026 AD Framework Developments
Several specific developments.
Continued technology development. Banks continue developing AD-specific technology platforms.
Specific digital framework integration. Specific digital framework integration including UPI, account aggregation, and specific other digital ecosystem elements.
Specific compliance framework evolution. Continued compliance framework evolution including specific TCS framework operation, specific reporting integration, and specific regulatory framework alignment.
Specific FATF framework alignment. Continued FATF framework alignment affecting AD bank specific compliance practice.
Specific cross-border payment infrastructure. Continued cross-border payment infrastructure development affecting AD bank operational framework.
Specific NRI services development. Continued development of NRI-specific services across AD banks.
The combined developments support continued framework evolution.
What This Means for Specific Activity Categories
For specific Indian retail customer activities, AD bank framework implications.
LRS remittance. AD Category I bank required. Comprehensive support across major banks. Selection based on specific service preferences.
Travel currency. AD Category I bank or licensed money changer. Specific convenience considerations.
Education funding. AD Category I bank with specific education category support. Some banks have specific education-focused processes.
NRI account services. Specific NRI capability at AD Category I banks. Some banks have specific NRI specialisation.
Business remittance. AD Category I bank with specific business banking capability. Specific business banking quality matters.
Specific investment-related. AD Category I bank with specific capital market integration. Specific investment platform integration may matter.
Specific specialty activities. Specific specialty activities may have specific AD bank preference based on specialty alignment.
The combined activity-bank alignment supports informed customer practice.
Specific Compliance Considerations
Several specific compliance considerations.
Activity within permitted scope. All AD bank activity must operate within permitted framework scope. Out-of-scope activity is prohibited.
Specific documentation discipline. Maintaining specific documentation supports both AD bank requirements and personal records.
Specific category alignment. Aligning activities with specific permissible categories supports clean compliance.
Specific reporting compliance. Specific reporting obligations apply for specific activity types.
Specific tax framework alignment. Activities operate within Indian tax framework alongside AD framework.
Specific cross-jurisdictional considerations. Specific cross-jurisdictional considerations apply for specific activity types.
The combined compliance framework requires sustained operational discipline.
The Decision Reading
For Indian retail customers in 2026, the AD framework provides substantive infrastructure for permitted forex activities. AD Category I banks provide comprehensive capability across LRS, current account, capital account, and specific other activity categories.
For specific bank selection, alignment with planned activity scope, specific service quality preferences, and specific specialty needs shapes appropriate selection. Major AD Category I banks provide comprehensive capability with specific differentiation by bank type.
For broader operational strategy, AD framework integrates Indian retail forex activity with the legitimate Indian financial system supporting specific household objectives within permitted scope.
Honest Limits
The framework descriptions in this piece reflect publicly available RBI provisions and operational practice through May 2026. Specific bank capabilities and service quality vary. Specific case-by-case treatment requires specific bank consultation. None of this constitutes specific bank recommendation or financial advice.