The banks which are officially authorized by RBI to deal in foreign exchange transactions are called ‘Authorised Dealers’ (ADs).Foreign Exchange Dealers Association of India (FEDAI) is an association of ‘Authorised Dealers’ set up in 1958 under sec 25 of companies’ act 1956. As per RBI guidelines, it is obligatory on the part of all the Authorised Dealers to give an undertaking to Reserve Bank of India that they will abide by the exchange control and other terms and conditions introduced by the FEDAI for transactions in foreign exchange business.
FEDAI which is a self-regulatory body which evolved various rules and guidelines for transactions related to foreign exchange like rules regarding trading hours, Transit period, Crystallization, Forward covers etc. Besides, it has prescribed code of conduct in settling issues /matters related to forex dealing of member banks and provided a standardized settlement process for all market participants. FEDAI represents member banks while liaising with RBI and other organizations like Fixed Income Money Market and Derivatives Association (FIMMDA), the Forex Association of India, International Chamber of Commerce and other world bodies related to foreign trade and business. Further, it is liaising with other market participants, in its endeavor for reforms and development of forex market.
The other functions of FEDAI include circulating various policies matters and decisions related to foreign exchange business amongst the members, approving Foreign Exchange brokers, circulating ‘spot date’ to its members at the start of each trading day to ensure uniformity in settlement between different market participants. It also provides at the end of a calendar month a schedule of forward rates to be used by AD’s for revaluating foreign currency denominated assets and liabilities.