Section 10 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Most foreign exchange business in India runs through authorised persons: banks and other entities that the Reserve Bank has authorised to deal in foreign exchange or foreign securities. Section 10 is the section that creates and controls them. It deals with how the authorisation is given, on what terms, how it can be revoked, what directions the authorised person must follow, the declaration it must obtain from a customer, and what happens when a customer misuses the foreign exchange bought.
The Reserve Bank, on an application, may authorise a person to deal in foreign exchange or foreign securities as an authorised dealer, money changer, off-shore banking unit or in any other manner it deems fit. The authorisation is in writing and carries conditions. It can be revoked at any time for public interest, or for breach after the holder is given a reasonable opportunity of making a representation. Before any foreign exchange transaction, the authorised person must require a declaration and information from the customer and may have to refuse in writing and report to the Reserve Bank.
About this article
This article is based on the consolidated text of the Act consulted (amendments shown up to Act 50 of 2019). Later amendments should be checked. Section 10 carries no amending footnote in the copy consulted. If you run a business that uses authorised dealers for foreign exchange, our FEMA advisory team can help you prepare the declarations and information they ask for.
Who is an authorised person
Section 2(c) says "authorised person" means an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under sub-section (1) of section 10 to deal in foreign exchange or foreign securities. The categories are therefore named in the definition and in section 10(1), but the Act does not describe what each category may do; the terms of the authorisation say so. For the practical side, see our guides on authorised persons and AD banks and on money changers and authorised dealer categories.
Sub-section by sub-section
| Sub-section | Subject | Core rule |
|---|---|---|
| (1) | Authorisation | The Reserve Bank may, on an application, authorise any person to deal in foreign exchange or foreign securities |
| (2) | Form and conditions | In writing and subject to the conditions laid down in it |
| (3) | Revocation | At any time if satisfied of public interest, or breach of condition or of the Act, rule, regulation, notification, direction or order |
| Proviso to (3) | Hearing | No revocation on the breach ground without a reasonable opportunity of making a representation |
| (4) | Directions and conformity | Comply with the Reserve Bank's general or special directions; no transaction outside the terms of authorisation without previous permission |
| (5) | Declaration before a transaction | Require a declaration and information; refuse in writing if not given; report if contravention or evasion is contemplated |
| (6) | Misuse of exchange bought | A person who misuses foreign exchange is deemed to have committed a contravention for the section |
Sub-section (1): authorisation on application
The Reserve Bank "may, on an application made to it in this behalf, authorise any person to be known as authorised person to deal in foreign exchange or in foreign securities, as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit." The word "may" gives discretion. The application is the trigger, and the Act does not set a form, a fee or a time. The words "in any other manner as it deems fit" let the Reserve Bank create other kinds of authorisation.
Sub-section (2): in writing, with conditions
An authorisation "shall be in writing and shall be subject to the conditions laid down therein". Two consequences: there is no oral or implied authorisation, and the conditions in the document are part of the authorisation, so a breach of a condition can lead to revocation under sub-section (3)(b) or a penalty under section 13(1), which covers any condition subject to which an authorisation is issued by the Reserve Bank.
Sub-section (3): revocation
The Reserve Bank may revoke an authorisation at any time if satisfied that:
- (a) it is in public interest to do so; or
- (b) the authorised person has failed to comply with the condition subject to which the authorisation was granted, or has contravened any provision of the Act or any rule, regulation, notification, direction or order made under it.
The proviso: no authorisation shall be revoked on the ground in clause (b) unless the authorised person has been given a reasonable opportunity of making a representation in the matter. Note that the proviso protects only the clause (b) ground. For the public-interest ground in clause (a), the Act does not provide a similar hearing in the proviso.
Sub-section (4): directions and conformity
An authorised person "shall, in all his dealings in foreign exchange or foreign security, comply with such general or special directions or orders as the Reserve Bank may, from time to time, think fit to give". Also, "except with the previous permission of the Reserve Bank", an authorised person shall not engage in any transaction involving foreign exchange or foreign security that is not in conformity with the terms of the authorisation. Directions are the Reserve Bank's own tool, and section 11 deals with them further; see our article on sections 11 and 12.
Sub-section (5): the declaration the customer must give
Before undertaking any transaction in foreign exchange on behalf of any person, an authorised person shall require that person to make such declaration and give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of, any contravention or evasion of the Act or of any rule, regulation, notification, direction or order made under it.
If the person refuses or makes only unsatisfactory compliance, the authorised person:
- shall refuse in writing to undertake the transaction; and
- shall report the matter to the Reserve Bank, if he has reason to believe that a contravention or evasion is contemplated.
The two steps are separate. A refusal in writing follows from refusal or unsatisfactory compliance; the report depends on the authorised person's reason to believe.
Example. Kestrel Trading Private Limited asks its bank to remit foreign exchange to an overseas supplier. The bank asks for a declaration of the purpose and supporting information. If Kestrel gives only vague answers, the bank must refuse in writing. If the bank also has reason to believe the remittance is designed to evade the Act, it must report the matter to the Reserve Bank. The Act does not list the documents; they are for the bank's procedures and the Reserve Bank's directions.
Sub-section (6): misuse of foreign exchange bought
Any person, other than an authorised person, who has acquired or purchased foreign exchange for any purpose mentioned in the declaration made to an authorised person under sub-section (5) and does not use it for that purpose, or does not surrender it to an authorised person within the specified period, or uses it for any other purpose for which purchase or acquisition is not permissible under the Act or the rules, regulations, direction or order made under it, is deemed to have committed a contravention of the Act "for the purpose of this section".
Drafting point: the sub-section is one long sentence, and the words "shall be deemed to have committed contravention" have no clearly stated subject. The sense is that a customer who departs from the declared purpose, or who fails to surrender the unused exchange within the specified period, is treated as having contravened the Act. "Specified" means specified by regulations; the Act prints no period. The wording is as printed in the copy consulted.
What section 10 leaves to others
- The conditions of each authorisation are in the written authorisation, not the Act.
- The Reserve Bank's directions and orders are its own power and need no rule.
- Section 11(3) provides a penalty on the authorised person for contravening a direction or not filing a return, as the article on sections 11 and 12 explains.
- The consequence for a customer is in section 13; see our guide on contravention and penalties under section 13.
Need help with declarations to your bank?
A well-prepared declaration speeds up a cross-border transaction and reduces the chance of a refusal under sub-section (5). Our FEMA advisory team can help you prepare the purpose, documents and records so that foreign exchange bought from an authorised person is used, or surrendered, as declared.
Key takeaways
- The Reserve Bank authorises authorised persons on application, in writing, subject to conditions (section 10(1) and (2)).
- Authorisation can be revoked at any time for public interest, or for breach after a reasonable opportunity of making a representation (section 10(3) and proviso).
- An authorised person must follow the Reserve Bank's directions and stay within the terms of its authorisation (section 10(4)).
- Before a transaction, the authorised person must require a declaration and information, refuse in writing if not given, and report suspected contravention or evasion (section 10(5)).
- A customer who misuses foreign exchange bought, or fails to surrender it within the specified period, is deemed to have contravened the Act for the purposes of the section (section 10(6)).
Read next
- Sections 11 and 12: Reserve Bank directions to, and inspection of, authorised persons
- Section 3: dealing in foreign exchange and payments to non-residents
- Authorized Persons Under FEMA: AD Banks
- Money Changers and Authorized Dealers: Categories
Disclaimer: Based on a consolidated text of the Foreign Exchange Management Act, 1999 showing amendments up to Act 50 of 2019, as consulted on 2 October 2026. Limits, forms, timelines and procedures are set by rules, regulations and Reserve Bank directions made under the Act; they change from time to time and are not covered here. Later amendments should be checked. This article is general information, not legal advice; check the official text before acting.