With liberalization in foreign exchange space and risk-based supervision approach of the RBI, the transaction-based verification is getting delegated to auditors. The auditors are required to know the accounting rules applicable to foreign exchange transactions, nitty-gritty of the foreign exchange and also the internal procedures of the bank. In the present computerized environment, they are also required to be conversant with the software used by the banks for the forex transactions.

Authorized Dealers are the commercial banks that are permitted by the Reserve Bank of India (RBI) to handle foreign exchange business. Branches of such banks are classified into three categories from the foreign exchange angle. At the top level are the branches or offices of banks which maintain and operate foreign currency accounts with banks abroad (called nostro accounts) and these are classified as `A' category (Cat `A') branches. They are limited in number. A fully networked bank or a small bank generally has one such Cat A branch. Such branch will have a `foreign exchange dealing room' or the `forex treasury' and will manage the funds in these accounts, maintains the `position' in foreign currencies and will attend to other related works.

Other branches which handle foreign exchange but do not have independent nostro accounts in their names are required to operate such accounts maintained by Cat `A' branches e.g., when the export bill of a customer of such other branch is realized, its proceeds are to be credited to this centrally maintained account in the name of Cat `A' branch. Such branches are called `B' Category (Cat `B') branches. For usual customer related foreign exchange transactions like imports, exports and remittances, a complete service is rendered by such branches and the customer service is generally not effected by not having an independent nostro account. However, as advised by the RBI, such branches should have minimum infrastructure such as instant communication facility with the Cat A branch of that bank, so that customer credits and debits can be attended without loss of time. During the 1980s, the RBI's emphasis was on deepening foreign exchange market at different centers in the country, so it prodded banks to have a good number of Cat B branches to render online service at outstation centers.

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