India’s foreign exchange ecosystem is regulated by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), 1999. To ensure smooth and lawful forex transactions, RBI authorizes different entities to deal in foreign exchange. These entities are broadly classified as AD-I, AD-II, and Full Fledged Money Changers (FFMCs).
Understanding the difference between these categories is essential for businesses, NBFCs, travel companies, and entrepreneurs planning to enter the forex industry or apply for an FFMC License in India.
What is an Authorized Dealer (AD)?
An Authorized Dealer (AD) is an entity licensed by RBI to deal in foreign exchange transactions. ADs are divided into AD-I and AD-II, depending on the nature and extent of permissions granted.
1. AD-I (Authorized Dealer – Category I)
Who comes under AD-I?
AD-I licenses are granted mainly to:
- Scheduled Commercial Banks
- Public & Private Sector Banks
- Certain Cooperative Banks
Permitted Activities
AD-I entities can conduct both current and capital account transactions, including:
- Foreign trade (imports & exports)
- Foreign remittances
- External Commercial Borrowings (ECB)
- Foreign Direct Investment (FDI)
- Outward & inward remittances
- Forex cards and traveler’s cheques
Key Feature
AD-I has the widest authority under FEMA and acts as the primary interface between RBI and forex users.
2. AD-II (Authorized Dealer – Category II)
Who comes under AD-II?
AD-II licenses are granted to:
- NBFCs
- Travel companies
- Financial institutions
- Forex service providers
Permitted Activities
AD-II entities are allowed to handle restricted current account transactions, such as:
- Overseas travel-related forex
- Education & medical remittances
- Small outward remittances
- Forex cards (limited)
- Non-trade related forex transactions
Key Limitation
AD-II entities cannot handle capital account transactions or large trade-related forex activities.
3. Full Fledged Money Changers (FFMCs)
What are Full Fledged Money Changers?
Full fledged Money Changers are RBI-authorized entities permitted to buy and sell foreign currency for specific purposes, primarily catering to individuals and tourists.
To operate as an FFMC, businesses must obtain a full fledged Money Changer license from RBI.
Activities Allowed Under FFMC License in India
Entities holding an FFMC License in India can:
- Buy foreign currency notes, coins & traveler’s cheques
- Sell foreign currency for:
- Overseas travel
- Business travel
- Medical & education purposes
- Exchange forex for NRIs and tourists
Types of FFMC Licenses
- Single Branch FFMC
- Multiple Branch FFMC
- Franchise Model (through approved franchisees)
Many businesses now prefer applying for FFMCs license in India due to growing international travel and remittance demand.
Key Differences: AD-I vs AD-II vs FFMC
| Basis | AD-I | AD-II | FFMC |
|---|---|---|---|
| Issued To | Banks | NBFCs & Financial Institutions | Companies / NBFCs |
| Governing Law | FEMA, RBI | FEMA, RBI | FEMA, RBI |
| Capital Account Transactions | ✅ Allowed | ❌ Not Allowed | ❌ Not Allowed |
| Trade Forex | ✅ Yes | ❌ No | ❌ No |
| Retail Forex Exchange | Limited | Limited | ✅ Primary Activity |
| License Complexity | High | Medium | Moderate |
| Target Customers | Corporates & Individuals | Individuals | Tourists & Individuals |
FFMC License: A Growing Opportunity
With rising outbound tourism, medical travel, and global mobility, the demand for full fledged Money Changers is increasing rapidly. RBI has also streamlined the process, making it possible to apply for FFMCs license online with proper documentation and compliance.
Businesses frequently search for:
- FFMC, full fledge money changer license in India
- FFMCs license in India
- FFMCs license online
This highlights the growing interest among entrepreneurs and NBFCs to enter the forex exchange segment.
Conclusion
- AD-I entities enjoy the broadest forex powers and mainly include banks.
- AD-II entities cater to limited current account transactions.
- Full fledged Money Changers focus on retail forex exchange and are ideal for businesses targeting travelers and individuals.
If your goal is to enter the forex market with comparatively lower compliance requirements, obtaining a full fledged Money Changer license is often the most practical and scalable option.