Module: General Practice
Q49: Consider the following statements regarding the permitted activities of an Authorized Dealer (AD) Category-II:
I. They can undertake all current account transactions, including trade and remittance.
II. They are permitted to release/remit foreign exchange for medical treatment abroad.
III. They can issue foreign currency pre-paid cards to residents.
IV. They can open Letters of Credit (LC) for import of goods.
Which combination of statements is correct?
II. They are permitted to release/remit foreign exchange for medical treatment abroad.
III. They can issue foreign currency pre-paid cards to residents.
IV. They can open Letters of Credit (LC) for import of goods.
Which combination of statements is correct?
✅ Correct Answer: B
AD Category-II entities have a restricted scope compared to AD Category-I. 1. Statement I is False: AD-II entities cannot undertake "all" current account transactions.
They are explicitly prohibited from handling trade-related transactions (Exports/Imports) involving shipping documents.
2. Statement II is True: AD-IIs are permitted to release forex for private purposes, including medical treatment, education, emigration, and gifts, subject to LRS limits.
3. Statement III is True: AD-IIs are permitted to issue forex pre-paid cards to residents travelling abroad.
4. Statement IV is False: Opening Letters of Credit (LC) or handling documentary collections is a trade finance function reserved for AD Category-I Banks.
Rationale: The AD-II license is designed for "Specified Non-Trade Current Account Transactions" to serve retail needs without entering complex trade finance risks.
They are explicitly prohibited from handling trade-related transactions (Exports/Imports) involving shipping documents.
2. Statement II is True: AD-IIs are permitted to release forex for private purposes, including medical treatment, education, emigration, and gifts, subject to LRS limits.
3. Statement III is True: AD-IIs are permitted to issue forex pre-paid cards to residents travelling abroad.
4. Statement IV is False: Opening Letters of Credit (LC) or handling documentary collections is a trade finance function reserved for AD Category-I Banks.
Rationale: The AD-II license is designed for "Specified Non-Trade Current Account Transactions" to serve retail needs without entering complex trade finance risks.