Here’s how AD codes are typically used in export-import business:
Export Transactions: When an Indian exporter enters into a transaction with a foreign buyer and expects to receive payment in foreign currency, they need to provide their AD code to the foreign buyer. This code ensures that the foreign currency received is correctly attributed to the exporter’s bank account in India.
Import Transactions: Importers also require an AD code when they need to make payments for goods or services procured from foreign suppliers. The AD code helps in tracking and verifying the payment and ensures that the funds are used for legitimate import transactions.
Foreign Exchange Regulations: AD codes are essential for compliance with foreign exchange regulations in India. They are used to monitor and control the flow of foreign currency in and out of the country, helping the government and the Reserve Bank of India (RBI) keep track of foreign exchange transactions.
To obtain an AD code, businesses typically need to approach an Authorized Dealer Bank (usually a commercial bank authorized by the RBI to deal in foreign exchange) and provide the necessary documentation. The bank will then issue a unique AD code, which should be used in all foreign exchange transactions related to the export-import business.
It’s important to note that the requirements and procedures related to AD codes may change over time, so it’s advisable for businesses involved in export-import activities to consult with their bank or financial institution and stay updated with the latest regulations.
