Foreign Exchange Operations
About Certificate Examination in Foreign Exchange Operations
SUBJECT OF EXAMINATION: Foreign Exchange Operations
EXAMINATION FEES: One thousand rupees.
PROCEDURE FOR APPLYING FOR EXAMINATION
STUDY MATERIAL / COURSEWARE
The table given below further Cut-off Date of Guidelines
Two. Regulatory Requirements under FEMA for Resident or Non-resident Individuals
Three. Regulatory Requirements under FEMA for Resident or Non-resident Entities
BREAKING DOWN 'Foreign Exchange Dealers Association of India (FEDAI)'
Recent Updates from the Foreign Exchange Dealers Association of India
Gist of Important FEDAI Rules
Rule three: Import Transactions
crystallized as per the stated policy of the bank in this respect. Rule four Clean Instruments:
Rule five Foreign Exchange Contracts:
Foreign Exchange Management Act
The Main Features of the Foreign Exchange Management Act:
Four Main Participants of Foreign Exchange Market
Participant number one. Commercial Banks or Market Makers:
Participant number two. Foreign Exchange Brokers:
Provisions of Foreign Exchange Management Act
Regulation for Current Account Transaction:
Regulations Relating to Capital Account Transactions:
Regulations relating to export of goods and services:
Six. Reserve bank has also granted general permission to a person resident in India to make payment in rupees;
OVERVIEW OF FOREIGN EXCHANGE MANAGEMENT ACT
Transformation from control-to-management: Foreign Exchange Regulation Act to Foreign Exchange Management Act
CAPITAL ACCOUNT TRANSACTION AND CURRENT ACCOUNT TRANSACTION:
A. Capital Account Transaction:
Prohibited Capital Account Transactions: General Prohibition:
B. Current Account Transaction:
OTHER IMPORTANT SECTIONS - SECTION SIX SUBSECTION FOUR AND SECTION SIX SUBSECTION FIVE:
Section Six Subsection Five:
THE FOREIGN EXCHANGE MANAGEMENT ACT, NINETY-NINE ACT NO. Forty-Two OF Ninety-Nine [Twenty-Ninth December, Ninety-Nine].
REGULATION AND MANAGEMENT OF FOREIGN EXCHANGE CHAPTER TWO-REGULATION AND MANAGEMENT OF FOREIGN EXCHANGE
Holding of foreign exchange, etc.
Current account transactions.
Capital account transactions.
Export of goods and services.
Realisation and repatriation of foreign exchange.
Exemption from realization and repatriation in certain cases.
Reserve Bank's powers to issue directions to authorized person.
Power of Reserve Bank to inspect authorized person.
CONTRAVENTION AND PENALTIES
Enforcement of the orders of Adjudicating Authority.
Power to compound contravention.
Appointment of Adjudicating Authority.
Appeal to Appellate Tribunal.
Composition of Appellate Tribunal.
Qualifications for appointment of Chairperson, Member and Special Director (Appeals).
equivalent to a Joint Secretary to the Government of India. Term of Office.
Term and Conditions of service.
Member to act as Chairperson in certain circumstances.
Staff of Appellate Tribunal and Special Director (Appeals).
Procedure and powers of Appellate Tribunal and Special Director (Appeals).
Power of Chairperson to transfer cases.
Decision to be by majority.
Members, etc., to be public servants.
Civil court not to have jurisdiction.
Explanation. In this section "High Court" means-
DIRECTORATE OF ENFORCEMENT
Directorate of Enforcement.
Empowering other officers.
MISCELLANEOUS CHAPTER SEVEN-MISCELLANEOUS
Suspension of operation of this Act.
Bar of legal proceedings.
Power to make regulations.
Rules and regulations to be laid before Parliament.
currency while buying and give less foreign currency while selling. Forward Rates
EXCHANGE CONTROL REGULATIONS
The objectives of ECR are
LIBERALISED REMITTANCE SCHEME (LRS) FOR RESIDENT INDIVIDUALS
Facilities for Individuals
Remittances not available under the scheme:
Rules related to release or remittance of foreign exchange to residents
Non-Residents and their Accounts
Who is Resident Indian? Who is Non-Resident
PIO - Persons of Indian Origin
Non-Resident Ordinary account:
Non-Resident (External) and Foreign Currency Non-Resident (Bank) account
Rupee Loans against NRE or FCNR B FDRs
Resident Accounts Operation Either or Survivor with non-resident
Investments by NRIs in India
Loans to NRIs NRI can avail the following loans:
Four. Housing Loans to NRIs: HL can be sanctioned to NRIs subject to following conditions:
Portfolio Investment Scheme for NRIs
Ceiling PER Investor Company
RBI controls Foreign Exchange
FERA was replaced by FEMA in the year nineteen ninety-nine.
Purpose of Visit Up to United States dollars or equivalent
LRS (Liberalized Remittance Scheme)
Import and Export of Indian Rupees
RETURNS TO BE SUBMITTED TO RBI
Exchange Earners Foreign Currency
FEDAI - Foreign Exchange Dealers Association of India
Normal Transit Period is:
Compensation on Delayed payment:
External Commercial Borrowings
American Depository Receipts
Unsponsored American Depository Receipts
Sponsored American Depository Receipts
Form A One and Form A Two
Interest Subvention on Export Credit
Trade Credit - Revised Reserve Bank of India
Foreign Currency Deposits
Two. Introduction to Foreign Exchange
EXCHANGE RATES IN THE LONG RUN: What determines Exchange Rates?
LAW OF ONE PRICE: starting point for understanding exchange rates in the long run. Also called the
Formula for INTEREST RATE PARITY.
Other Long Run Factors: One. MACRO ECONOMIC FUNDAMENTALS: One. GDP Growth.
Three. Technical Market Factors:
Two. Foreign Exchange Rates and Arithmetic.
American versus European Quote.
Direct versus Indirect Quote.
CHAPTER TWO FOREX DERIVATIVES
Short Currency future hedge
One. Currency Futures in India:-
One. Mark to market Case study:
Purchased Call option: Corporate buys a USD call option for covering its import transactions
CHAPTER THREE LC and UPCDC six hundred
Process involved in Letter of Credits.
Types of Letter of Credit:
Two. Irrevocable Letter of Credit
Three. Confirmed Letter of Credit
Four. Sight Credit and Usance Credit Letter of Credit
Five. Back to Back Letter of Credit Letter of Credit
Six. Transferable Letter of Credit Letter of Credit
"Red Clause" Letter of Credit:-
Amendments to a Letter of Credit:
Import Operations Under Letter of Credit
Risk associated with Opening Imports Letters of Credit
Export operations under Letter of Credit
Advising of Amendments to Letters of Credit
Three. Confirmation of Export Letters of Credit
"Transfer Guarantee" scheme and include both the commercial and political risk involved.
Five. Reimbursement of Export Letters of Credit
Opening of imports letters of credit in India involve compliance of the following main regulation:
Two. Exchange Control Requirements
Uniform Customs and Practice for Documentary Credit Guidelines
Four. ABC Bank opens an L/C calls for shipment of:
CHAPTER Four FACILITIES AVAILABLE TO EXPORTERS AND IMPORTERS
One) Types of Facilities for Exports
b) Pre-shipment Credit in Foreign Currency (PCFC):
c) Negotiation of Bills under L/C
d) Export Bill Rediscounting:
Two) Types of Facilities for Importers:-
d) Deferred Payment Guarantee/Standby LC :- The bank's Deferred Payment
Important RBI Guidelines on Rupee/Foreign Export Credit: Pre-shipment Rupee Export
One. Rupee Pre-shipment Credit/Packing Credit
One point one. Running Account Facility
One point two Rupee Pre-shipment Credit to Specific Sectors/Segments
One point three Rupee Export Packing Credit to Sub-Suppliers
One point four Rupee Pre-shipment Credit to Construction Contractors
One point five Export of Services
One point six Export Credit to Processors/Exporters-Agri-Export Zones
One point seven Export Credit Insurance Whole Turnover Packing Credit
Two. Post shipment Rupee Export Credit
Two point one Rupee Post shipment Export Credit:
Two point four. Export on Consignment Basis
Two point five. Export of goods for Exhibition and Sale
Three. INTEREST ON RUPEE EXPORT CREDIT
CHAPTER Five Risk in international trade
C. What is the Need for export credit insurance?
To protect such exporters, ECGC has the following types of covers.
Export Credit Insurance Covers to Banks from ECGC
CHAPTER Six Role of RBI and Exchange Control
Before going ahead with FEDAI Rules, let us see about Nostro, Vostro and Loro accounts maintained by Authorized dealers:
Example for Nostro transactions:
FEDAI Rules-One-Hours-Of-Business
. FEDAI Rules-Three-Import-Transactions
. FEDAI Rules-Five-Clean-Instruments
. FEDAI Rules-Seven-Exchange-Contracts
. FEDAI Rules-Nine-Schedule-Of-Charges
. FEDAI Rules-Eleven-Inter-Bank-TT-Settlement-And-Dispatch
. FEDAI Rules-Thirteen-Abolition-Of-Sterling-Rates-Schedule
FEDAI Rules-General Guidelines/Instructions
SOME PROBLEMS ON FORWARD CONTRACT :-
Cancellation at the request of customers
One. Cancellation at the request of customers
Extension of Forward contract:
ROLL OVER FORWARD CONTRACT:
CHAPTER SEVEN FOREIGN EXCHANGE MANAGEMENT ACT, nineteen ninety-nine
IMPORTANT TERMS UNDER FOREIGN EXCHANGE MANAGEMENT ACT - Section two
Bank account outside India of employees of foreign companies on deputation in India
Four. CONTRAVENTION, PENALTIES AND APPEALS - Sections Thirteen To Thirty-five
Five. DIRECTORATE OF ENFORCEMENT - SECTIONS Thirty-six TO Thirty-eight
Six. COMPOUNDING OF CONTRAVENTIONS
Seven. PERMISSIBLE TRANSACTIONS BY RESIDENTS
The details of restrictions on Current Account Transactions are as follows: A.
Seven. Two. Investments Abroad by Indian Residents
Other Investments Options:
Seven. Four. One. Borrowings through Loans or Deposits
Eight. PERMISSIBLE TRANSACTIONS BY NON-RESIDENTS:
Prohibition for investments by Foreign Institutional Investors and Non-Resident Indians
Investment by non-residents other than Non-Resident Indians or Person of Indian Origin
Eight point three. Acquisition and transfer of Immovable Property in India
Citizens Resident of Foreign Concern
MEANING OF FOREIGN EXCHANGE
FEATURES OF FOREIGN EXCHANGE MARKETS
FACTORS DETERMINING EXCHANGE RATES These factors can be (i) Fundamental reasons (ii) Technical reasons (iii)
DIFFERENT TYPES OF EXCHANGE RATES
SPOT TRANSACTIONS and FORWARD TRANSACTIONS
Summary of Exchange Rate Application
DEALING ROOMS OPERATIONS IN FOREIGN EXCHANGE
Management and control of dealing room and Risk Management in Foreign Exchange
Different kinds of risks leading to Foreign Exchange Risk
One. BASICS OF FOREX DERIVATIVES
RISKS IN INTERNATIONAL TRADE
DIFFERENT KINDS OF RISKS RELATED TO FOREX TRANSACTIONS
Foreign exchange exposure: The exposure can be classified into three categories:
CORRESPONDENT BANKING AND NRI ACCOUNTS
Functions handled by correspondent banks:
Types of accounts opened under correspondent banking: These accounts include NOSTRO, VOSTRO, LORO accounts.
ELECTRONIC MODES OF TRANSMISSION / PAYMENT
FEATURES OF NON-RESIDENT INDIAN DEPOSITS Foreign Currency Non-Resident (Bank) Account (FCNR(B) Account) - (with effect from fifteenth May nineteen ninety-three)
Non-Resident External (Rupee Account)
Non-Resident Ordinary Account (N R O)
Accounts of Foreign Students in India
N R O Accounts Of Foreign Nationals of Non-Indian Origin on a visit to India
Accounts of residents Resident Foreign Currency Account (R F C)
Resident Foreign Currency (Domestic) Account - R F C (D)
Exchange Earner's Foreign Currency Account (E E F C Account)
LIBERALISED REMITTANCE SCHEME (LRS) FOR RESIDENT INDIVIDUALS
Rules related to release or remittance of foreign exchange to residents
DOCUMENTARY LETTERS OF CREDIT
DEFINITION OF LETTER OF CREDIT
TYPES OF LETTERS OF CREDITS
DIFFERENT TYPES KINDS OF BILL OF LADING
Advising Bank's Liability
Liability of the Confirming Bank
Bank-to-Bank Reimbursement Arrangements as per UCPDC
UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS UCPDC-six hundred