By Manu Rao | Updated March 2026
What Is an Authorized Dealer Bank?
An Authorized Dealer (AD) bank is a bank in India that the Reserve Bank of India (RBI) has licensed to buy, sell, and deal in foreign exchange. Not every bank branch can process foreign currency transactions. Only those with AD Category I, II, or III licenses can do so.
For foreigners setting up companies in India, the AD bank is your most important banking relationship. It processes your inward remittance, issues the Foreign Inward Remittance Certificate (FIRC), verifies your FC-GPR filing, and handles repatriation of dividends and profits.
Legal Basis
The authority for AD licensing comes from Section 10 of FEMA, 1999. The RBI issues licenses under three categories:
- AD Category I — Full-service banks authorized to conduct all foreign exchange transactions. All major Indian banks (SBI, HDFC, ICICI, Axis, Kotak, etc.) and several foreign banks operating in India (Citibank, HSBC, Deutsche Bank, Standard Chartered) hold AD-I licenses.
- AD Category II — Certain upgraded Full Fledged Money Changers (FFMCs) authorized for specified non-trade current account transactions like private remittances, travel-related forex, and advance remittances for imports up to $200,000.
- AD Category III — Select Financial Institutions authorized for specific foreign exchange transactions, typically related to their core business.
The governing circular is RBI Master Direction — Risk Management and Interbank Dealings (FED Master Direction No. 25/2020-21, dated January 22, 2021).
Why AD Banks Matter for FDI
When a foreign investor sends money to an Indian company, the funds land at an AD Category I bank. The AD bank is not a passive intermediary. It performs several gatekeeping functions mandated by RBI:
1. Processing Inward Remittance
The AD bank converts the foreign currency to Indian rupees at the prevailing exchange rate and credits the Indian company's account. It then issues a FIRC — the document that proves foreign money entered India legitimately. Without a FIRC, you cannot file FC-GPR.
2. KYC and Due Diligence
The AD bank must verify the identity of the foreign investor and the source of funds. This includes collecting passport copies, proof of address, bank statements, and beneficial ownership declarations. For corporate investors, the AD bank checks incorporation documents and board resolutions.
3. FEMA Compliance Verification
Before approving an FC-GPR filing on the FIRMS portal, the AD bank checks whether:
- The sector allows FDI at the proposed level
- The investment comes through the correct route (automatic or government)
- Shares are priced at or above Fair Market Value
- The investor is not from a restricted country under Press Note 3 without approval
- All timelines (60-day share allotment, 30-day FC-GPR) have been met
4. Annual Return on Foreign Liabilities and Assets (FLA)
AD banks assist companies in filing the Annual Return on Foreign Liabilities and Assets with RBI, due by July 15 each year for every company that has received FDI.
Choosing the Right AD Bank
Not all AD banks handle FDI transactions equally well. Factors to consider:
- FIRMS portal access. Your AD bank must be active on RBI's FIRMS portal. Some smaller bank branches have AD-I licenses but limited experience with FIRMS filings.
- Foreign exchange desk. Banks with dedicated forex desks (HDFC, ICICI, SBI, Axis) process FDI transactions faster than those where foreign exchange is handled by the general operations team.
- Correspondent banking network. For smooth inward remittance, choose a bank with strong correspondent relationships in the investor's country. HSBC and Standard Chartered are good choices for investors from the UK, Singapore, and Hong Kong.
- NRI banking services. If the investor is an NRI, select a bank that offers NRE, NRO, and FCNR accounts alongside the company's current account.
- Processing speed. FC-GPR verification at the AD bank level can take 3-15 business days depending on the bank's internal processes. Ask about expected turnaround times before opening the account.
AD Bank's Role in Repatriation
When a foreign investor wants to take money out of India — dividends, sale proceeds, or winding-up proceeds — the AD bank processes the outward remittance. It verifies:
- Tax clearance (Form 15CB from a CA and Form 15CA filed with Income Tax)
- That the remittance complies with FEMA regulations
- Board resolution authorizing the dividend or payment
- Applicable DTAA benefits, if a Tax Residency Certificate is provided
The AD bank cannot block a legitimate repatriation request, but incomplete documentation causes delays. Get your 15CA/15CB ready before approaching the bank.
Common Mistakes
- Opening a regular savings account instead of a company current account with AD-I facility. FDI proceeds must be received into a bank account specifically designated for foreign exchange transactions.
- Using a different bank for FC-GPR than the one that received the remittance. The AD bank that issues the FIRC must be the same one that verifies the FC-GPR on FIRMS.
- Not informing the AD bank about the nature of remittance. Banks classify incoming funds by purpose code. If the remittance is coded as a general payment instead of FDI equity (Purpose Code S0001), it creates reporting mismatches.
- Switching AD banks mid-transaction. If you change your company's bank after receiving FDI but before filing FC-GPR, the process becomes complicated. Complete the FC-GPR filing with the original bank first.
- Assuming all branches are AD branches. A bank may have AD-I license at its main branch but not at every branch. Confirm before opening the account.
Practical Example
A Singaporean investor wants to put SGD 500,000 into an Indian Private Limited Company for a 40% stake. The Indian company opens a current account with ICICI Bank's Bandra-Kurla Complex branch in Mumbai, which has a dedicated foreign exchange desk.
The Singaporean investor wires SGD 500,000 through DBS Bank Singapore to ICICI Bank's nostro account. ICICI credits the INR equivalent (approximately Rs 3.1 crore at the prevailing rate) to the company's account and issues a FIRC.
After share allotment, the company's CS files FC-GPR on FIRMS. ICICI Bank's forex team verifies the filing within 7 business days and approves it. RBI acknowledges the FC-GPR. The entire banking side of the FDI transaction is complete.
Key Takeaways
- AD Category I banks are the only ones that can handle FDI transactions end-to-end
- The AD bank issues the FIRC, verifies FC-GPR, and processes repatriation
- Choose a bank with an active FIRMS portal presence and a dedicated forex desk
- The same AD bank must handle both the inward remittance and the FC-GPR filing
- Purpose code S0001 must be used for FDI equity remittances
Need help selecting an AD bank and managing FDI compliance? Beacon Filing works with all major AD banks across India.