International Banking

INTERNATIONAL BANKING
INTRODUCTION
International banking has one of the major growth stories of the last
century. The momentum of growth was provided by the European and
US banks under a new global financial system after the Bretton wood
system and establishment of the International Monetary Fund (IMF) and
World Bank thereby augmenting global trade. However, advancement of
technology also provided support to cross-border financial markets and
their gradual integration. In the twentieth century, growth in international
banking was closely linked to the phenomenal economic growth Asian
markets transforming into closer relationship between these economies.
MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE
EVOLUTION OF INTERNATIONAL BANKING

The term banking is derived from the Banco means Bench. The
Banking has undergone tremendous change this year. The traditional &
commercial banking activities of accepting deposits & lending has been
replaced by the concept of Universal Banking & now International
Banking.
The evolution of International Banking can be traced back to 1944
where the word institutions viz. IMF, World Bank was born.
MEANING:
International Banking includes all activities & services that facilitates the
moment of goods/services & funds from one country to another country.
International Banking came into existence to facilitate the Foreign Trade
Transactions & development export in India.
The following are the International Banking Activities:
i.
Non Residents Account
ii.
Financing Export
iii.
Financing Imports
iv.
Issue Of Guarantees
v.
Foreign Currency Loan
vi.
Syndication of loan to correspondent Bank
Factors Influencing the Evolution of International Banking:

i.
World War II- Effects
ii.
Collapse of Bretton Woods System
iii.
Oil Crisis & Effect on U. S. Economy
iv.
Integration of World Economy
v.
Liberation & Globalization of Economies
vi.
1.
Emergence of Euro Markets
Effects of World War-II: the Second World War effectively stopped

all international economic activities. Global economic growth was
severely affected. During the Post World War period the
economies had the sole objective of restructing & reconstructing
their respective nations & ensure stability in the economic
development. On one hand the warring nations suffered huge
damages on account of the war & on the other hand most of the
countries were suffering from hyper Inflation.
2.
Fall of Bretton Woods: To develop the International trade their

should be a need of system which would ensure that the countries
do not get the any incentives by following inflationary policies. Also
some arrangements which could help countries to tied over their
short term balance of payments problems & help them remain
within the system without causing term oil in their economies
therefore, in 1944 representatives of 44 countries met in Bretton
Woods, New Hampshire, USA & signed an agreement to establish
a new monitory system.
Reasons for Failure of Bretton Woods Agreement:

Through the member countries had the option of paging their
currencies to either gold or to the dollars, the only reserves
assets mentioned in the agreement establishing the system
was gold. Thus, increase in trade requires increase in official
reserves. This proved as an impediment to the system.
The system was too rigid despite the aim of the members
being otherwise.
The system provided for realignment of exchange rates in
respect of fundamental of disequilibrium.
In 1967, Bretton devalued its currency Pound.
In 1968, their was outflow of capital from France due to
political disturbances.
In 1969, France was devalued.
All this above led to brake down of Bretton Woods System by
1970.
3. Oil Crisis & impact in U.S. Economy: The price of oil went up by
17% from U.S.D. 3.65 per barrel to U.S.D. 80per barrel by 1980.
The decision affected western countries & USA in particular the
most. U.S.A. with 6% of world population was consuming more
33% of worlds oil. The oil consumption in U.S. more than doubled
between 1950 & 1975 economic policies had important effect on
the crisis. The president released the form that fluctuate gold
standards that had controlled in worth since the signing of Bretton
Wood Pact allowing its value to fall in world market. The

convertibility of dollars were suspended in 1971 the dollar was
devalued in 1971 & 1973. This action of U.S.A. led to more
uncertainty in both economic & political term.
4. Integration of World Market: Interdependence of countries is
reflected in the international, economic & commercial transaction.
The integration of market involves the freedom & opportunity to
raise funds & invest them anywhere in World through any types of
instrument. The reasons for integration have been the growth of
technology for remittance fund at reduces cost. This has resulted
in co-ordination between financial centers even across the national
boundaries.
Reasons for Integration of World Market:
The growth of financial system is fast.
Non resident investment bank were allowed to asses the
national bond & stock market.
Emergence for Global unified financial market
Development of new financial instruments like Euro Dollar
Market, Interest Rates, Swaps Futures, Options etc.
5. Globalization of Economies/Liberalizations: Globalization involves
the various markets getting integrated across geographical
borders. Globalization effects are seen in volatility of interest rates,
exchange rates, prices of financial assets etc. Globalization &
liberalization lead to tough competition in the trading which
required advance banking system for smooth functioning of

countries foreign trade.
6. Emergence of Euro Market: Euro Currency Market emerging as
one of the leading international money market wherein Euro
Dollars & Petro Dollars started developing as source of financing
to international trade. The growth of Euro market show the
development of a financial centers in various centers example
France, Switzerland, Singapore, Germany, etc.
Gold Standards:
From the ancient time the gold was used as medium of exchange.
Gold was used throughout the Mercantilist period to 19 th Century.
There was phenomenal growth in trade. Therefore need for a more
formalized payment system was felt to settle payments. They did not
emerge the system of formal agreements among nations but most of
countries used to declare par value of their currency in terms of gold.
In this way gold standards get acceptance throughout the trading
partners & among various nations. First such an acceptance came
from Europe & later America joined it. Under gold standards ach
economy has to establish the rates at which its currencies could be
converted to a weight of gold. In the first instance U.S. declares that
its currency is convertible to gold at rate of $ 20.671 ounce of gold &
U.K declared pounds 4.247 per ounce of gold as per their fixation.
Fixed Exchange Rate System
It is a system in which exchange rates are permitted to fluctuate

with a narrow bond, both limits of which are fixed but not immutable.
In 1944, Bretton Woods Agreement, US Dollar gained importance as
a reserve currency. US balance of payment depicts provided the
major source of international liquidity, while the ratio of gold to
reserves declined sharply. In order to maintain confidence in dollar
into gold. Under FIRs, major currencies maintained official par values
in terms of gold. The US dollar was pegged to gold at the fixed price
of $35 ounce. The market exchange rate was officially maintained
within 1% bond around party.
Most of the countries adopted pegged exchange rate system and
announced their par value with the dollar. But some countries pegged
their currencies with currencies with were related to dollar.
In order accomplish the objective; central banks were obliged to
intervene whenever market forces tended to push market rates
outside their bond.
Pegged exchange rates are managed on day to day basis through
official intervention in foreign exchange market and by internal
regulations by limiting exchange rate transactions. Exchange rate
parties are set in terms of either a foreign currency (single currency)
or a basket of currency and the fluctuations around parties are
contracted through official intervention or monetary and fiscal policies.
Features of Fixed Exchange Rate System:-
i.
It returns the variability of exchange rate.
ii.
Pegging has a cost because the parties in the system do not

reflect their true value.
iii.
There may occur foreign exchange deficits and surpluses

because peg does not represent equilibrium price.
iv.
Foreign investors mat consider investment less risky and safe.
Advantages of Pegged Exchange Rate System:i.
The system provides a measure of exchange rate stability and

therefore eliminates a further source of uncertainty and price
instability.
ii.
It helps to install the economy disturbances and contributes to

economic stability.
iii.
Exchange rate stability encourages the foreign investors to

invest without much consideration of exchange risk.
iv.
Poorer nations could get foreign exchange for development

purpose at low costs.
Disadvantages of Pegged Exchange Rate System:-
i.
Since, the realignment was to be done only when all other

avenues to correct the balance of payment were exhausted,
therefore the burden gets accumulated.
ii.
The system is not self-equilibrating therefore over-valuation and

under-valuation started existing.
iii.
Since the inflexibility inherent in the fixed exchange rate system,

system does not respond to the changes in the economy.
iv.
The system required regular rigorous contract and monitoring

by the monetary authorities.
Floating Exchange Rate System:The collapse of Breton Woods Agreement coupled with oil crisis
of 1970, the system of floating exchange rate started appearing in 1971
and was adopted by leading industrialized countries. However, the
official approval of the system was done in April 1978. Under freely
floating exchange rate system, the exchange rate would be determined
by market forces without intervention of government.
No country in the world has adopted freely floating exchange
rate system. He system which now-a-days exist in the name of floating
exchange rate is mix of pegged and floating exchange rate. This system
is called Crawling Peg or Dirty Peg.
Advantages:-
i.
If the system works efficiently, the floating exchange rate

system is expected to adjust automatically to ensure BOP
equilibrium.
ii.
The Exchange process are market determined, therefore there

is always an efficient allocation of resources.
iii.
It encourages stabilization of speculation which limits the size of

fluctuations.
iv.
It facilitates domestic autonomy by removing external

constraints on BOP equilibrium.
Disadvantages:i.
The cyclical or temporary exchange rate stability will transmit price

instability which may discourage trade and hence reduce
economic welfare.
ii.
Destabilizing speculations might exacerbate exchange rate

volatility by pushing exchange rate progressively further.
iii.
The absence of BOP constraints might foster the pursuit of

domestic economic policies.
International Monetary Fund (IMF)
The International Monetary Fund (IMF) was established for

promoting international economic stability by promoting the balanced
growth of free international trade and the multi-convertibility of national
currencies. The fund is the pool of central bank reserves and national
which are made available to the fund members under certain conditions.
In a way, the pool may be regarded as an extension of member
countries central bank reserve. There was a common plan evolved at the
United Nations Monetary and Financial Conference of 44 nations held at
Bretton Woods, New Hampshire in the USA in July 1944. The
conference gave birth to the International Bank for Reconstruction and
Development (IBRD). According to the conference three main
economies problem dominated the postwar period. Firstly, in order to
ensure world economic order and peace. Secondly, it was necessary to
find effective means to reconstruct the war ravaged economies and
European countries. Thirdly, it was realized that stable international
peace would never prevail in the world in which the development nations
were unconcerned about the untold miseries of vast sea of humanity
living in the undeveloped and underdeveloped poor countries of Asia,
Africa and Latin America. The world was to be made a better place to
live for the masses of the poor Afro-Asian nations.
Objectives & Roles of IMF:-
According to article I of the funds Articles of Agreements the objectives

and the roles of the funds are:
i.
To promote international monetary cooperation through a

permanent institution this provides the machinery for consultation
and collaboration on monetary problems.
ii.
To provide exchange stability, to maintain orderly exchange

arrangements among the members and to avoid competitive
exchange depreciation.
iii.
To assist in the establishment of a multilateral system of payments

in respect of current transactions between members and in the
elimination f foreign exchange restrictions that hampers the growth
of the world trade.
WORLD BANK
The World Bank was established for reconstructing and developing

the infrastructure of the underdeveloped economies, which were
totally destroyed by the global war. The International Bank for
Reconstruction and Development, popularly known as World Bank,
owes its birth to the deliberation of the United Nations Monetary and
financial conference, which met at Bretton Woods, New Hampshire,
to prepare final text of Article of Agreement of International monetary
Fund and the International Bank for Reconstruction and Development
from July 1st to 22nd, 1944. The World Bank was established on 25th
December, 1944 when the Article of Agreement was ratified by the
requisites number of member Government.
Objective & Roles of World Bank:The World Bank is an international co-operate institution whose
capital stock is owned by its members. The principal purposes or
functions of the World Bank are:i.
To assist in reconstruction and development of the territories of

its member Governments by facilitating investment of capital for
productive purposes.
ii.
To promote foreign private investments by guarantees of or

through participation in loans and other investment of capital for
productive purposes.
iii.
Where private capital is not available on reasonable terms, to

make loan for productive purposes out of its on resources or
out of the funds borrowed by it.
iv.
To promote the long range growth of international trade and the

maintenance of international trade and the balance of
payments of member by encouraging international investments

for the development the productive resources of members.
The World Banks loans are directed to hold the members to
build foundation of sound economic growth. Loan made or
guaranteed by World Bank are accepted in special circumstances,
for the purpose of specific of reconstruction or development.
The World Bank has also promoted international peace by
successfully resolving difficult international disputes. Its settled the
dispute between the United Kingdom and the United Arab Republic and
the nationalization of Suez Canal. The bank added another important
feather to its Cap when its successfully liquidated in Sep 1960 one of
the toughest and frustrating dispute between India and Pakistan over the
sharing of the water of the Indus System of rivers. But for the sincere
endeavors of the bank which culminated in the creation of Indus Basin
Development Fund.
FUNCTIONS OF INTERNATIONAL BANKING

Facilities to Non Residents Indians:
Particulars
Foreign Currency
Non-Resident
Non-Resident
(Non-Resident)
(External)Rupee
Ordinary
Account(Banks)
Account Scheme
Rupees
Scheme(FCNR(B)
(NRE Account)
Account
Account)
Scheme (NRO
Account)
(1)
(2)
(3)
(4)
Who can open
NRIs
NRIs
Any person
an account
(individual/entities of
(individual/entities of
resident
Bangladesh/Pakistan Bangladesh/Pakistan
outside India
nationality/
nationality/
(other than a
ownership require
ownership require
person
prior approval of
prior approval of
resident of
RBI)
RBI)
Nepal and
Bhutan)
(individuals/
entities of
Bangladesh/
Pakistan
nationality/
ownership as
well as
erstwhile
OCBs require
prior approval
of RBI)
Joint Account
In the names of two
In the names of two
or more non-resident or more non-resident
May be held
jointly with
individuals
individuals
residents
Nomination
Permitted
Permitted
Permitted
Currency in
Pound Sterling, US
Indian Rupees
Indian Rupees
which account
Dollar, Jap. Yen,
is denominated
Euro, Canadian
Repatriable
Not
Dollar.
Repatriable
Repatriable
Repatriable
except for the
following in the
account-1)
Current
income 2) Up
to USD 1
million per
financial year
(April-March),
for any
bonafide
purpose out of
the balances in
NRO
account/sale
proceeds of
assets in India
acquired by
way of
inheritance/
legacy
inclusive of
assets
acquired out of
settlement
subject to
certain
condition.
Type of
Term Deposit only
Account
Savings, current,
Savings,
recurring, fixed
current,
deposit
recurring, fixed
deposit
Period for fixed
For terms not less
At the discretion of
As applicable
deposits
than 1 year and not
the bank
to resident
more than 5 years
accounts
Rate of interest
Subject to cap:
LIBOR/SWAP rates
for the respective
currency/
corresponding
maturities minus 25
basis points
Subject to cap: Fixed Banks are free

Deposits :
to determine
LIBOR/SWAP rates
interest rates
as, on the last
for term
working day of the
deposits.
previous month, for

US dollar of
corresponding
maturities plus 50
basis points with
effect close of
business on January
31, 2007.
Savings Bank
Account : interest
rate shall be at the
applicable to
domestic savings
account with effect
from close of
business India on
17-11-2005.
Operations by
Operations on the
Operations on the
Power of
account in terms of
account in terms of
Attorney in
power of attorney is
power of attorney is
favour of a
restricted to
restricted to
resident by the
withdrawals for
withdrawals for
non-resident
permissible local
permissible local
account holder
payments a
payments a
remittance
remittance
accountholder him
accountholder him
selfs through normal selfs through normal

banking channels.
banking channels.
--
Financing of export and import trade

Export of the country plays very significant role because they represent
the biggest source of earning foreign exchange. Increasing exports
enables the economy to earn foreign exchange, enhance foreign
exchange reserves; improve balance of trade, balance of payments
correct deficit in BOP, improve exchange value of its currency.
The international banking plays main role providing finance, guarantees
to the exporters to encourage the export trade in world.
Following are the facilities provided by the international banking to the
exporters
1. Pre-shipment finance
2. Post-shipment finance
3. Export financing
4. Export forfeiting
5. ECGC schemes
6. EXIM bank schemes
Pre-shipment finance
Pre-shipment finance refers to a lending by a banker to exporter for

procuring the raw materials processing manufacturing packing and
exporting the goods. This is working capital finance. Also known as
the export packing credit. The advance is extended either on the
basis of confirmed orders or under letter of credit. This type of
advance is extended up to the point of shipment or loading the goods
on ship hence it is known as pre-shipment finance. The rate of
interest on such loans are at concessional rates say 8.25% upto 180
days compared to the loans given to domestic borrower which is at 115% while extending the packing credit loan the banker has to assess
the credit requirement, part history of the borrower, credit worthiness,
goods exported etc.
Packing credit in rupees;-
Packing credit can be extended in rupees where the interest rate is

in rupee terms or in foreign currency. In the letter case, it is known as
PCFC. In case of PCFC, the funds are released in foreign currency.
Packing credit in foreign currency;-
The export credit has taken new dimension with bank extending
running account facility to the borrowers and also GOLD card scheme
has been announced for exporters with satisfactory financial and
performance cum transactions track record.
Runni9ng account facility;-
Normally, whenever and export finance is required by the borrower

banks insist on submission of confirmed orders on lodgment of letter of
credits. However banks are permitted to grant pre-shipment advances
without insisting on immediate lodgment of LCs or firm export orders
under the running account facility.
FCNR (B) scheme;-
The deposits under the scheme mean term deposits received by

the bank for a fixed period and withdraw able only after the expiry of the
said fixed period.
Post shipment finance
The post shipment finance commences from the stage where preshipment finance ends. Post shipment essentially is extended after the
goods have been loaded on the board the vessel. These advances are
extended mainly on the basis of export shipping documents. In case the
exporter fails to export and the loan becomes bad a report is sent to the
RBI.
Export bills discounting or purchase:-
Under this , the bank extends finance by discounting the bill of exchange
drawn by the exporter on the importer. However the rates of interest are
at a concessional rate. The bank takes the commission upfront. In case
of bill of lading, it should be a clean bill of lading and does not contain
any adverse remark of the goods received for the shipment. The banker
would verify that the bill of exchange is properly drawn and makes
endorsement on the bill lading after which the possession of the goods is
given in the hands of the lender.
Export bill negotiation;This is also export bill discounting with the only difference that this
finance extended under LOC. The exporter when exporting under a LOC
is assured of payment irrespective of the borrowers financial standing or
credit worthiness. However, he receives the payment only if has
complied with terms of letter of credit.
Advances against cash incentives;In order to encourage exports the government of India extends certain
cash incentives to the exporters to make exporter more competitive than
selling in domestic market.
Advance against collection;Under this scheme, the bank finances the customer against export bill
loaded by him for collection. The bank acts as the agent for the
customer.
Export Factoring
1. Many companies sell goods on credit basis. Some credit period is

allowed buyer (Debtor). After the credit period is over the
company will approach the Debtor and collect. Big organization
have department called Credit Department.
2. Factoring is a financing arrangement, whereby, person which
institute is appointed to collect money from debtor such a person
is called as Factor of Factoring Institution.
3. A contract will be made between a seller and the factors. This
contract consists of various terms and conditions.
4. For rendering services, the sellers pays to the factor commission
called Factoring Commission.
5. Factoring commission is given to the factor as the % of turn over
(sales).
6. When a factor is appointed the company assigns his favour
account receivable bills, book debts, etc.
7. When factor is appointed, then there is no need of credit
department within the organization.
8. The factor reliefs the organization from the work of credit collection
and so the organization can concentrate on important business
activities.
9. The factor collects the amount from the debtor, from this amount
he deducts his commission and remits the balance to the seller.
10. Factoring helps in credit control and credit management.
Factoring arrangement eliminates the risk of bad debts (when
money is not paid by debtor it is called bad debts).
11. There exists should be fiduciary relationships between seller and

factors, therefore factors helps in recovery of book debts.
12. Factoring is on recourse basis or non-recourse basis. The debtor
has not paid money to the factor and factor cannot recourse to the
seller then it is called non-recourse factoring.If the debtor does not
pay money to the factor and factor can have recourse to the seller
then it is called recourse factoring.
13. Factoring is of two types:
Disclosed Factoring
Undisclosed Factoring
If name of the factor is mentioned on he invoice then it is called
Disclosed Factoring, but when the name of the factor is not
mentioned on the invoice it is called Undisclosed Factoring.
Export Forfeiting
1. Under this mechanism, the forfeiter purchases a bundle of credit
instruments viz. BOE supported by LOC, promissory notes and
other freely negotiable instruments on a non recourse basis.
2. The forfeiter discounts the bills, deducts upfront interest and plays
the net amount to the seller.
3. Forfeiting means the purchase by bank of medium and long term
BOE which have been accepted by the drawee.
4. The banks take all further risks of negotiating the documents and
non-payment by the importer.
5. The bank bears the risk of fluctuations in exchange rates.
Flow chart for forfeiting:
Commercial contract between the foreign buyer and the Indian
exporter
Commitment to forfeit BOE, promissory notes, debt instrument
Delivery of goods by the Indian exporter to the foreign buyer
Delivery of debt instrument
Endorsement of debt instruments without recourse in favor of the
forfeiter
Cash payment of discounted debt instruments
Presentation of debt instruments on maturity
Payments of debt instruments on maturity.
ECGC
In order to provide export credit insurance support to Indian
exporters, the Government of India set up the Export Risk Insurance
Corporation (ERIC) in July 1957. It was transformed into Export Credit
And Guarantee Corporation Ltd. (ECGC) in January 1964. To bring the
Indian identity into sharper focus, the corporations name was once
again changed to the present Export Credit And Guarantee Corporation
of India Ltd. In 1983.
Functions of ECGC
a. To help exporters to obtain financial assistance from commercial
banks and other financial institutions.
b. To provide exporters information regarding creditworthiness of the
overseas buyer.
c. To help exporters to develop & diversify their exports.
d. To provide risk cover to the exporters against the risk associated in
the world market.
e. To provide other essential services which are not provided by other
commercial insurance companies?
f. The covers issued by ECGC can be divided broadly into 4 groups:
Standard Policy
Small Exporters Policy
Specific Policy
Financial Guarantees
Special Schemes
Policies Issued By ECGC:
a. Standard Policy: It is ideally suited to cover risk in respect of
goods exported on short term credit i.e. credit not exceeding 180
days. The policy covers both commercial and political risk from
date of shipment. It covers 90% of loss.
b. Small Exporters Policy: Small exporters policy basically standard

policy, incorporating certain instruments in terms of cover. This
policy issued to exporters whose anticipated export turnover for
the next 12 months does not exceeding Rs. 50,00,000/-. The
corporation normally pays 90% of the loss.
c. Specific Policy: The following are the specific policies of the
ECGC:
Specific Shipment(comprehensive risk) Policy
Specific Shipment(Political Risk) Policy
Specific Contract(Comprehensive Risk) Policy
Specific Contract(Political Risk) Policy
Financial Guarantees Provided By ECGC
In order to provide financial assistance to the exporter through
commercial banks and financial institutions, ECGC guarantees various
loans provided by this financial intermediaries to the exporters.
i.
Packing Credit Guarantee: Any loan given by banks to an

exporter at the pre shipment stage against confirmed export order
or L. C. qualifies for packing credit guarantee. The bank will be
entitled to claim 66 2/3% of its loss from the corporation.
ii.
Post Shipment Export Guarantee: Post Shipment Finance given

to exporters by banks through purchase, negotiations or discount
of export bills or advances against such bills qualifies for this
guarantee. This covers 75% of the loss.
iii.
Export Production Finance Guarantee: This guarantee enable

banks to sanction advances at pre shipment stage to the full extent
of the domestic cost of production. The bank will be entitled to
claim 66 2/3% of its loss from the corporation.
iv.
Export Finance Guarantee: This guarantee covers post shipment

advances granted by banks to exporters against export incentives
receivable in the form of duty draw back. The percentage of loss
covered under this guarantee is 75%.
v.
Export Performance Guarantee: exporters are often called to

furnish a bank guarantee to foreign party to ensure duty
performance. This covers 75% of the loss
vi.
Export Finance Guarantee: If a bank financing an overseas

project provides a foreign currency loan to a contractor, it can
protect it self from risk of non-payment by obtaining export finance
guarantee. The percentage of loss covered under this guarantee is
75%.
EXIM BANK
Origin:
As early as in 1967 there was proposal b the commerce ministry
for setting up of an Exim bank n India and it did not accepted by banking
commission. The idea was later received and spelt out in a report by the
committee headed by shri B.D.Kumar in 1974.
With urgency given to promotion of exports for fostering economic
development under 6th plan and for stepping up the rate of growth of
exports, exporters have demanding all assistance at one window and
simplification of procedures. The government financially accepted the

idea of setting up an Exim Bank in 1979. The necessary legislation was
passed in august 1981.
Objectives:
1. Exim bank is a service institution set up to serve the foreign trade
sectors in the form of finance, advice, consultancy, market
intelligence, credit info. Service.
2. Grating loans and advances in India solely or jointly with
commercial banks and other financial bodies to person importing
and exporting.
3. To encourage the export of capital goods, turnkey projects,
construction services, consultancy and deferred payment exports.
4. To provide finance and re-finance in connection with foreign trade
of the country.
5. To provide information system on foreign markets and foreign
buyers etc.
Functions of Exim bank:
1. Granting loans and advances in India solely or jointly with
commercial banks to person exporting, person outside India for
import from India of goods, government, financial institutions.
2. Handling transaction where a mix of government to government
credit and commercial credit for export is involved.
3. Issuing bid bonds and guarantees and other similar facilities in
India or abroad.
4. Purchasing, discounting and negotiating export bills etc..
Incidental functions:
1. Maintaining of foreign currency accounts with banks and

correspondent abroad for purpose connection with business of
Exim bank.
2. Buying and selling currencies or foreign exchange and undertaking
other functions of authorized dealers.
3. Undertaking and financing of research surveys etc. in connection
with promotion and development of international markets.
4. Planning, promoting, developing and financing export-oriented
industries.
5. Forming or conducting subsidies for carrying out its functions.
6. Acting as an agent of the center and state governments,RBI, IDBI<
etc.
7. Providing technical, administrative and financial assistance to any
exporter in India.
OFF SHORE BANKING

Types of Off Shore-Financing
Euro Money
Euro Deposits
Euro Loans
Euro Bonds
Euro Money: - The Euro Money Market constitute the short term to
medium term debt part of the international capital market structure. The
market consist of banks and other financial institutions that accepts
deposits and make loans in currency or currencies other than that of he
country in which they are located. The later characteristics of financial
institutions define structure of Euro currency market. These institutions
are non- domestic financial intermediaries. Such institutions have grown
world wide, such as in London, New York, Hong Kong, Singapore etc..
These markets are also called Off Shore Money Market.
Usual function of a bank is to mobilize resources and lend this to
the borrowers and charge for these services through the spread of
deposits and lending rates. Since international banking is unregulated
market involving greater risk, therefore to attract deposits, this market
offers higher rate of deposits and provide loans at lower rate, the market
works on lower spreads as compared to domestic banking.
Euro Deposits: - the deposits denominated in currencies made outside

the domestic banking systems operation are called Euro Deposits.
These deposits are more risky because these are made beyond the
control of the domestic banking authority. In other words, when a
currency deposits is made in a bank outside the jurisdiction of the
Central Bank which issued the currency is termed as Euro Deposits.
Euro currency deposits are primarily conventional short term
deposits such as 30 days or 90 days. Interest rates on these deposits
are fixed for term of the deposits. The characteristics of fixing deposits
keeps the term of the deposits short because interest rates in Euro
markets fluctuate in response to demand and supply pressure. These
deposits are non-negotiable. The deposits can also be made in
composite currencies like ECU or SDR.
Euro Loans: - Usually Euro Dollar Loans are direct bank to customer
credit on the basis of formal lines of credit. Since loan in this market are
large in amount, therefore the market has developed the technique of
loan syndication and forming of consortium banks. The loans in this
market are sought by big borrowers such as Government and Multi
National firms. Loan syndication is a procedure that allows a bank to
diversify some of sovereign risk that arise in international banking.
Euro Bonds: - The Euro bonds market is an off shore market. Being a
bond market in permits lender to lend directly to borrowers without the
intermediation of financial institutions that take place the funds from
lenders and itself lends to borrowers. Euro Bonds are simply bonds
issued directly by the final borrowers. They have some unusual features.
Some may be floating rate bonds, while others may involve currency
conversion options and payments in basket of currencies. The word off
shore refers to the multi national issue of bonds. These bonds are not
being issued in only one national capital market, they are unwritten by a
international syndicate and distributed world wide in a bearer form.
Kinds of Euro Bonds: Straight Euro Bonds

Convertible Euro Bonds
Bond with Warrants
Currency option Bonds
Currency Cocktail Bonds
Yankee Bonds
Floating Rate Bonds
Stripped Bonds
Samural Bonds.
Advantages of Euro Bonds: To the Borrowers:
i.
The size and depth of the market are large enough that it has
the capacity to observe large and frequent issues.
ii.
The euro bond markets has a freedom and flexibility not found
in domestic market. The bonds are beyond the regulations of
respective Central Banking authorities.
iii.
The costs of issue of Euro bonds are relatively low around 2.5%
of the face value of the issue.
iv.
Interest costs on dollar Euro bonds are competitive in most

financial markets. The multi nationals have been able to raise
funds at a slightly lower cost at Euro bonds market.
v.
Maturities are suited for long term requirements say 10 to 30

years. Longer maturities provide assurance of funds.
vi.
A key feature of Euro bond market is development of sound

institutional frame work.
i.
To the Investors:
Euro bonds are issued in such a form that interest can be paid
free of income tax.
ii.
The issuer enjoys an excellent reputation for credit worthiness

and hence the bonds as good as securities.
iii.
A special in advantage is available to the investors with the

option to convert the maturity proceeds in any one or more
currency of its option.
Risks of Euro Banks

Euro Banks faces 3 types of risks:
Exchange Rate Risk
Interest Rate Risk
Default Risk
Exchange Rate Risk:- the euro banks have assets & liabilities
denominated in foreign currency. The composition of such asset &
liability differs from bank to bank. The view of the fact that bank cannot
always match the assets & liability in currency compositions. Some of
the assets & liabilities remain exposing. The performance of this bank
depends on the value of exposed assets/liability.
Interest Rate Risk: - On account of mis-match of maturities between
assets & liabilities the interest rate risk between assets & liabilities the
interest rate risk is faced. deposits of Euro bank are short term assets
are of long term. To hedge this risk (mismaturity) the banks have to
continuously undertake interest rates swaps to avail any contingent

liability on account of mismaturity in assets and liabilities.
Default Risk: - Euro Banks like any other credit institutions, faced the
risk of non-payment on due dates. Euro banks may not be able to
maintain foreign companies to which they extend loans. Recent debt
prices have shown that the lending like Euro Banks to Government &
MNC's are not safe. The necessary occurs to evaluate credit worthiness
of the borrowers even if it is Government.
Organizational Structure of International Banking

It is the changing and diverse organizational structure which is
responsible for banking to become multi national. The various
forms of organizational structure to which the banks operates are:
i.
Correspondent Banking: it is an informal linkage between banks in

different countries. The bank maintains correspondent account
with each other. Large banks have correspondent relationship with
banks in almost all countries in which they do not have office of a
branch. The purpose of maintaining correspondent account is to
facilitate international payment & collection of customers. The
correspondent comes from communication that the banks used for
setting customer accounts. Now days messages are sent through
3 techniques. Such as SWIFT, CHIPS, CHAPS.
ii.
Resident Representative: to provide customer help on the spot in

foreign countries the banks open over seas business offices. The
primary purpose is to provide information about local business
practices and conditions including credit worthiness of potential
customers. The resident representatives will keep in contact with
local correspondent bank and provide help needed by them.
iii.
Bank agency: agencies are that a full fledged bank except that is
does not handle ordinary deposits. The agencies deal in money
market and also in foreign exchange market. They arrange loans,
bank overdrafts and cheques, channels foreign funds into financial
markets and involve in syndication.
iv.
Foreign branches: foreign branches operate internationally local
banks accepts that its directors ad owners may be foreigners.

Foreign banks are subject to local banking as well as domestic
rule. They can benefit from loop goals of regulations. The banks of
foreign branches are incorporated with parent banks. Although the
foreign branch will also maintain separate bank for prevailing
performance and payment of taxes.
v.
Foreign subsidiaries: a foreign branch is a art of organization that

is incorporated elsewhere. A foreign subsidiaries are locally
incorporated banks owned either completely or partially by a
foreign parent.
vi.
Consortium Banks: consortium banks are joint ventures of larger

commercial banks. They can involve half of dozen or more
partners from numerous countries. They are primary concerned
with investments, and they arrange large loans and underwrites
stocks and bonds. Consortium banks are not concerned with
mobilizing deposits, these banks only lend to large corporations
and governments.
Meaning of off shore banking centers (OFCs)

In todays highly integrated global network, international off shore
centers have come to play a vital role in facilitating investment world
wide. It is a wide range of business, chiefly banking but also insurance
securities transactions, trusts and some non-financial activities such as
shipping registries. They engage mainly in Eurocurrency loans (including
syndicated loans and deposits, under writing of euro bonds and over the
counter). Euro currency transactions are the bulk of off shore banking
operations. These include transactions between banks and original
depositors, between banks and ultimate borrowers and between banks
themselves on inter bank market.
An off-Sore Banking Unit(OBU) of a bank is deemed foreign banks
of a parent bank situated within India and shall undertake International
Banking involving foreign currency denominated assets & liabilities. The
RBI has given permission to certain banks in India fulfilling certain
criteria, to set up OBUs in Special Economic Zone (SEZ).
Types of Off- Shore Financing Centers (OFCs):-
1.
Primary OFCs:- They are large international full service centers

with advanced settlement and payment system, operating in liquid
regional markets where both the sources and uses of funds are
available. London, U.S. & Japan have such centers.
2.
Secondary OFCs:- They differ from primary OFCs in that they

intermediate funds in out of their region, according to whether the
region has a deficit or surplus of funds. Such OFCs include Hong
Kong, Bahrain, Luxemburg, etc.
3.
Booking OFCs:- Booking OFCs do not have engaged in the

regional intermediation of funds, but rather serves a registries for
transactions arranged.
OFF- Shore Banking in Indian Context:

Off Shore Banking has taken shape in India since 2002. the seeds
for OFCs were sown in EXIM Policy 2002-07, where the Government
has targeted to achieve the growth in export target from the present
0.67% to 1.00% of the world trade. The Government of India has
introduced Special Economic Zone Scheme with a view to provide
Internationally Competitive Environment for export production. Off Shore
Banks are the foreign branches of Indian Banks located in India.
Features Of Off-shore Banking Centers:
i.
These units will be permitted to be set up in Special Economic

Zones.
ii.
These over seas banking units would be exempted from CRR,

SLR & would give access to SEZ units & SEZ developers finance
at international rates.
iii.
The OBUs would operate and maintain balanced sheet only in

foreign currencies and would not be allowed to deal in Indian
Rupees.
iv.
Operations of OBUs in Rupees would be minimal in nature, and

any such operations in domestic area would be through the
authorized dealers(distinct from OBUs) which would be subject to
the current exchange control regulations in force.
v.
The OBUs would be required to maintain separate nostro account

with correspondent banks which would be distinct from nostro
account maintain by the other branches of the same banks.
vi.
These accounts can be opened by Non-resident Individuals

coperates, trusts or Off Shore Companies eligible to open foreign
current account under FEMA.
Eligibility Criteria and Capital Requirement:-
i.
Banks operating in India viz. public sector, private sector and

foreign banks authorized to deal in foreign exchange rate are
eligible to set up OBUs would be given preference.
ii.
Each of the eligible banks would be permitted to establish only one

OBUs which would essentially carry on whole sale banking
operations.
iii.
Since OBUs would be branches of Indian Banks, no separate

assigned capital for such branches would be required.
Functions of Offshore Banking:i.
Multi currency deposits accepted.
ii.
Maturities ranging from 15 days to 5 years. Deposits for 15 days

upto 1 month are accepted subject to minimum deposit amount of
USD 100 000/-, GBP 60000/- and Euro 100 000/-.
iii.
Attractive rate on interest of Deposits.
iv.
Multi currency borrowing option.
v.
Rates of interest linked to LIBOR of corresponding period.
vi.
Full repatriability of maturity value of deposits.
vii.
Loan against deposits both in foreign currency.
viii.
Higher rate of interest vis--vis FCNR deposits subject to minimum

deposits USD 5000 or its equivalent.
FOREIGN EXCHANGE MARKET

Meaning
Foreign Exchange Market is a market for the purpose of sale and
purchase of foreign currency. The need for foreign exchange market
arises because of the presence of multiple currency such as US Dollars,
UK pounds, Sterling. Euro, France, Yen, etc. The purpose of foreign
exchange market is to facilitate international trade and investment. The
foreign exchange is converted at a price called the exchange rate. Free
operation in the exchange market is not possible. The exchange rate is
determined by the supply and demand for foreign exchange. Foreign
exchange market differs from country to country. The day to day
business of buying and selling foreign exchange is handled by the
foreign exchange department of RBI and authorized branches of
commercial banks in India.
Features of Foreign Exchange Market:
i.
Geographical dispersal: The foreign exchange market in India is

widely dispersed through out the leading financial centers. It is not
be found at one place.
ii.
Electronic Market: Foreign Exchange market in India is connected

electronically. Trading in foreign currencies takes place through the
electronically linked network of banks, foreign exchange brokers
and dealers. They bring together various buyers and sellers in the
foreign exchange.
iii.
Transfer of Purchasing power: Foreign exchange market aims at

permitting the transfer of purchasing power denominated in one
currency to another. Firms of respective countries would like to

have the payments settled in their currencies.
iv.
Intermediary: Foreign Exchange market act as an intermediary

between buyer and seller of foreign exchange. It provides
convenient way of converting the currencies earned into currency
wanted to their respective countries.
v.
Provision of Credit: The foreign exchange market provides credit

through specialized instruments like bankers acceptance and letter
of credit. This credit is much helpful to traders in the international
market.
vi.
Minimizing Risk: Foreign exchange market helps the importer and

exporter in foreign trade and minimizes their risk in international
trade. This is done through the provisions of hedging facilities.
LOAN SYNDICATION
Concept:
A loan syndication is a group of banks which agree to lend a
specific amount of loan. There 3 categories of banks loan syndicateo.
They are Lead Banks, Managing Banks, and Participating Banks. There
is separate group calledCo-Managers .
Most of the loans are lend by one or two major banks to negotiate
to obtain mandates from borrowers to raise funds after the primary
stage of negotiation with the borrowers, the Lead Banks begins to
assemble the management group to committee to provide entire
amount of the loan it necessary. Once the management group is formed
the placement memorandum is prepared by the Lead Bank. Portion of
the loan are marketed to Participating Banks. Lead Bank is normally
expected to provide a share as a large as any other bank. As soon as
the Lead Bank establishes the group of managing banks, it commits to
the group to raise the fund for the borrowers and specify the terms &
conditions. The chief responsibility of any banks is marketing at loan
and members on managing group assist in this respect. There are three
main methods which are used to find out participant.
i.
The borrower may specify a certain bank should be given special

authority to participate because of relation ship the borrower
enjoys with the bank.
ii.
The Lead Bank it self invites participant to join the syndication.
iii.
Each major bank maintains the file of syndicate banking activity of

other bank. It can select the bank of own choice out of list.
Usually a Syndicate Loan is a term; a loan where funds can be

drawn by borrower within specified period of a time after signing loan this
is called Drawn down Period. The repayment of loan is subsequently
made in accordance with amortization schedule. Sometime amortization
of a loan comments immediately following drawn down. Sometime loan
amortization and the entire payment due on maturity which is called
Bullet Loan. Loan which require repayment according to amortization
schedule and into a large final payment of a principle of maturity are
known as Ballon Payment System. The period prior to commencement
of repayment is called as Grace Period or Moratorium. Usually a
Syndicator Loan are revolving credit time. The borrower is given a line of
credit within which he will draw fund and repay with great flexibility then
Term Loans. The borrower is expected to pay commitment charges for
undrawn line of credit.
Charges on Syndicate Loan
There are front end fees and occasionally an agent annually fees.
Front end management fees are negotiating in advance and imports
when loan agreement you signed. The fees are usually are % to 1%
of the value of loan. The fees may be high if the borrower may insist for
obtaining the fund at a lower spread than market condition. The banks
may after lowest spread compensated with higher fees. The fronted
fees consist of the participating fees are divided into under writing banks
and Lead Bank. The Lead Bank gets the premium on the entire loan.
With other thing being equal longer maturity loan carries a widen spread
leave lender, locked funds for a long period of a time.
SPREADS:MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE
Spreads maturities are heavily influence by market condition abilities.

The factor that means consideration of quoting spreads are:
i.
The present level of interest rates.
ii.
The banks capital/ratio asset.
iii.
The volatility of interest rates.
iv.
Liquidity consideration & availability of Non-Bank deposits in Euro

Market.
v.
vi.
Relative Demand for loan in domestic economy.

Charges in competitive structure in credit markets & borrowers
risk.
The Syndicate Loans or Floating Rates linked to Rate LIBOR

(London Inter Bank Offer Rate).
Loan Syndication Procedure in India
The procedure of syndication starts with the following steps in the
sequence:i.
To begin with the borrowing company start with the working out of
the investment proposal along with the detail of financing plan and
obtain Government approval with board sector of a parameter so
that there is flexibility for the borrowers.
ii.
The borrowers than call for quotation from leading foreign banks
and major domestic plans for over sea component of financing
plan. Based on he quotation the borrower gives mandate to the
banks which as quoted the best over all terms. Supposing this is
HSBC.
iii.
The HSBC prepares a document for an examination by asset of

banks as a managing bank. This document is called Placement
Memorandum which preserves in detail the project, the Cash Flow
& other relevant information. The idea of this memorandum is to
get he relatively large number of Euro Banks interested in
proposal. The loan is then market rate to participate bank.
iv.
As soon as Syndicate group is formed & necessity commitment

are obtained from the group members, the Lead Bank requires the
necessary legal document & get it signed by company official.
v.
After the 4th Step the reimbursement of funds starts to the client in
accordance with maturity agreed condition, e.g. of Syndicate
Loans
Borrowers : NACLO
The loan amount : US$ 680 million
Banks forming
o Lead Bank : BNP Paribus
o Company Manager : SBI
vi.
Contribution
BNP
$30 million
SBI
$ 30 million
Societic Gentle $ 30 million

Advantages of Loan Syndication:-
International lending by Bank have some advantages:

i.
International loans are highly profitable for large banks and had
significant impact on the earnings of this bank, such as Syndi
Group, Bank of America and Manhacannet Group.
ii.
Many banks have improved risk return performance, because they

can diversify international loans by country to by types of
customers.
iii.
The developing countries have traditionally attempt reserve credit

standing with international bank.
iv.
Several safe funds have reduced risk of international lending. This

includes insurance credit program, Guarantee by parent company
& guarantee by host Government.
Disadvantages of Loan Syndication:ii.
Country risk analysis is extremely complex because it depends

upon many variables, the behavior of which may not be focused.
iii.
International banks did not anticipate dramatic increase and

country risk.
iv.
Some bankers have relaxed credits standards to composite for

meet domestic demands.
v.
Critics question the ability of better country to service the external

debts.
INTERNATIONAL BANKING SERVICES OF

STATE BANK OF INDIA
International banking services of State Bank of India are delivered
for the benefit of its Indian customers, non-resident Indians, foreign
entities and banks through a network of 84 offices/branches in 32
countries as on 31 March 2008, spread over all time zones. The network
is augmented by a cluster of Overseas and NRI branches within India
and correspondent links with over 522 banks, the world over. Bank's
Joint Ventures and Subsidiaries abroad further underline the Bank's
international presence.
The services include corporate lending, loan syndications,
merchant banking, handling Letters of Credit and Guarantees, short-term
financing, collection of clean and documentary credits and remittances.
The Bank has carved a niche for itself in the Euroland with
branches located in Antwerp, Paris and Frankfurt. Indian banks and
corporate are able to avail single-window Euro services from the Bank's
Frankfurt branch.
TRADE FINANCE
SBI Understand there is much stake involved in Export Import
business Global economic, political situations, anything and every thing

that affects you and your business. SBI offers the trusted financial
solution to all your complex Trade finance related fund needs (both in
Indian rupee and foreign currencies).
The gamut of services includes credit for both pre shipment and post
shipment activities.
Export Avenue
Rupee Export Credit (Pre-Shipment and Post-Shipment)
Pre-Shipment Export Credit
Post-Shipment Export Credit
Pre-Shipment Credit in Foreign Currency (PCFC)
Getting Started - Opening a PCFC
Operating PCFC
Export Bill Rediscounting
Letter of Credit
Import Avenue
Foreign Currency import credit
Supplier's credit
Frequently Asked Questions (FAQs)

Q. Is there any withholding tax on SBI PCFC?
A. No withholding tax is payable on the PCFC, if the interest on the

foreign currency line is to be remitted to SBI foreign offices.
Q. Can PCFC drawls be booked on a forward basis?
A. Yes, forward contracts can be booked in respect of future PCFC
drawals.
Q. What about cross currency drawals?
A. At SBI, PCFC drawals in cross currencies are allowed, subject to the
exporter bearing the risk in currency fluctuations. However, cross
currency drawals are restricted to the US Dollar. For instance, for an
export order in a non-designated currency like the Swiss Franc, PCFC
will be given only in USD. However, for orders in Pound Sterling, Euro
and the Japanese Yen, pre-shipment credit may be availed in the
respective currencies or USD. Multiple currency drawals against the
same order are not permitted, for the sake of operational convenience.
CORRESPONDENT BANKING
The Correspondent Banking Division develops and maintains
relationship with Banks and Financial Institutions across the Globe.
This network Correspondent Banks forms the foundation for all

international operations of SBI.
SBI has correspondent banking relations with around 522 leading
banks worldwide. The bank has deployed a dedicated Correspondent
Relations section to attend exclusively to create, nurture, cultivate and
continue relationship in correspondent banking.
The Correspondent Relations section helps SBIs correspondents
market and distributes their products for various applications of the
bank and its Customers.
Meanwhile, the banks Foreign Department, based in Kolkata
(Calcutta), handles all operational aspects of correspondent banking,
including all matters pertaining to the exchange of test keys and swift
authenticator keys (SAK), appointment of correspondents, maintenance
and reconciliation of Nostro accounts, and treasury management.
All trade and retail transactions are handled by the vast net work
of SBI's branches. However, only designated branches handle
International Banking activities. Designated branches (click here)
enjoy delegated authority to receive/pay through the
NOSTRO accounts maintained by the Foreign Department. The Rupee
Vostro accounts of International Banks and Institutions are maintained
and serviced at SBIs International Services branch (ISBM) at
Mumbai and at Overseas Branches at Kolkata (Calcutta), Chennai,
Cochin, Bangalore and New Delhi. ACU accounts are also serviced at
the overseas branches.
Products and Services
Creating, nurturing, cultivating and maintaining SBIs

network of over 522 correspondent relationships.
Providing support to the correspondents in marketing and
distribution of their products for various applications of the
SBI and its clients.
Complaint Resolution of correspondents.
Setting up Standard Settlement Instructions.
MERCHANT BANKING
SBIs Merchant Banking Group is strongly positioned to offer
perfect financial solutions to your business. We specialize in the
arrangement of various forms of Foreign Currency Credits for Corporate.
We provide the resources, convenience and services to meet your

needs by arranging Foreign Currency credits through:
Commercial loans
Syndicated loans
Lines of Credit from Foreign Banks and Financial Institutions
FCNR loans
Loans from Export Credit Agencies
Financing of Imports.
PRODUCTS AND SERVICES
1] Arranging External Commercial Borrowings (ECB)
2] Arranging and participating in international loan syndication
3] Loans backed by Export Credit Agencies
4] Foreign currency loans under the FCNR (B) scheme
5] Import Finance for Indian corporate
PROJECT EXPORT FINANCE

State Bank of India is an active participant in the area of finance
of Project export activities. These activities will mainly involve financing
the fund based and non fund based requirements of the project
exporters.
Export of engineering goods on deferred payment terms

Execution of turnkey projects abroad
Execution of overseas civil construction contracts abroad
Exports of services are the contracts for export of consultancy,
technical and other services.
Credit facilities
Various types of credit facilities, both non fund and fund based,
that the project exporters may need at the time of bidding and/ or for
execution of the project are extended by the Bank.
EXPORTER GOLD CARD
State Bank of India has launched "SBI EXPORTERS GOLD
CARD SCHEME" to meet the working capital needs of exporters with
good track record and credit worthiness, subject to their fulfilling the
specified eligibility norms.
Interest will be charged at concessional rate from the Gold Card
holders. The present rate for Packing Credit up to 180 days and Postshipment credit up to 365 days would be 3.75% below the Bank's
benchmark Prime Lending Rate. Also, SBI Gold Card holders will be
given preference for grant of packing credit in foreign currency.
Portfolio Management & Custodial Services
The Portfolio Management Services Section (PMS) of State bank of
India has been set up to handle investment and regulatory related
concerns of Institutional investors
OFFSHORE BANKING
STATE BANK OF INDIA OPENS INDIA'S FIRST OFFSHORE

BANKING UNIT
State Bank of India has opened the first Offshore Banking Unit (OBU) in
India at the SEEPZ Special Economic Zone, New Bank Building, Andheri
(East) Mumbai 400,096 on 17th July 2003.
INTERNATIONAL BANKING SERVICES OF UCO BANK

UCOBANK has international presence for over 50 years now. UCO
presently has four overseas branches in two important international
financial centers in Singapore and Hong Kong and representative office
at Kuala Lumpur, Malaysia and Guangzhou, China.
The international linkage from India is supported by a large Indian
network through Integrated Treasury Branch and Authorized Forex
Branches. Our other branches in India also provide international banking
facilities through the Authorized Branches of our bank. This international
network is further augmented by correspondent arrangements with
leading Banks at all important world centers in various countries. Thus
UCO has a true global presence and can offer a variety of international
banking products, services and financial solutions to all cross-sections of
clients, tailor-made to their banking requirements through one of the best
international banking relationship networks both in terms of strength and
spread.
PRODUCTS & SERVICES
The international banking services in India are provided for the
benefit of Indian customers, corporate, NRIs, Overseas Corporate
Bodies, Foreign Companies/ Individuals as well as Foreign Banks etc. by
our International Banking Branches, Authorized Forex Branches and
Integrated Treasury Branch. Our other branches in India also provide
international banking facilities through the aforesaid network of our
branches.
All the facilities are subject to the prevalent rules & guidelines
of the Bank and RBI. Brief details of services provided are as
under:1. NRI Banking
2. Foreign Currency Loans
3. Finance/Services to Exporters
4. Finance/Services to Importers
5. Remittances
6. Forex & Treasury Services
7. Resident Foreign Currency (Domestic) Deposits
8. Correspondent Banking Services
9. All General Banking Services.
CONCLUSION
Now days international banking services become necessary for all
international operations and international transactions. New are coming
into existence with their innovative facilities to the exporters and
importers which leads to development of export trade of the country and
hence there is economic development of the country.
There is competition between various banks and financial
institutions which leads to betterment of services and enhancing
reputation of institutions.
BIBLIOGRAPH
Book reffered
INTERNATIONAL BANKING OPERATION A.K. TRIVEDI
(DIPLOMA IN BANKING & FINANCE)
INTERNATIONAL BANKING & FINANCE T.Y.BBI
WEBILOGRAPHY
www.google.co.in
www.yahoo.com
www.economictimes.com
www.uco.com
www.sbi.com

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INTERNATIONAL BANKING

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

EVOLUTION OF INTERNATIONAL BANKING

Non Residents Account

Foreign Currency Loan

Syndication of loan to correspondent Bank

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

Factors Influencing the Evolution of International Banking:

World War II- Effects

Collapse of Bretton Woods System

Oil Crisis & Effect on U. S. Economy

Integration of World Economy

Liberation & Globalization of Economies

Emergence of Euro Markets

Effects of World War-II: the Second World War effectively stopped

Fall of Bretton Woods: To develop the International trade their

Reasons for Failure of Bretton Woods Agreement:

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

Wood Pact allowing its value to fall in world market. The

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

required advance banking system for smooth functioning of

Fixed Exchange Rate System

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

It is a system in which exchange rates are permitted to fluctuate

Features of Fixed Exchange Rate System:-

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

It returns the variability of exchange rate.

Pegging has a cost because the parties in the system do not

There may occur foreign exchange deficits and surpluses

Foreign investors mat consider investment less risky and safe.

Advantages of Pegged Exchange Rate System:i.

The system provides a measure of exchange rate stability and

It helps to install the economy disturbances and contributes to

Exchange rate stability encourages the foreign investors to

Poorer nations could get foreign exchange for development

Disadvantages of Pegged Exchange Rate System:-

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

Since, the realignment was to be done only when all other

The system is not self-equilibrating therefore over-valuation and

Since the inflexibility inherent in the fixed exchange rate system,

The system required regular rigorous contract and monitoring

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

If the system works efficiently, the floating exchange rate

The Exchange process are market determined, therefore there

It encourages stabilization of speculation which limits the size of

It facilitates domestic autonomy by removing external

The cyclical or temporary exchange rate stability will transmit price

Destabilizing speculations might exacerbate exchange rate

The absence of BOP constraints might foster the pursuit of

International Monetary Fund (IMF)

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

The International Monetary Fund (IMF) was established for

Objectives & Roles of IMF:-

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

According to article I of the funds Articles of Agreements the objectives

To promote international monetary cooperation through a

To provide exchange stability, to maintain orderly exchange

To assist in the establishment of a multilateral system of payments

MAHARSHI DAYANAND COLLEGE OF ART, COMMERCE & SCIENCE

The World Bank was established for reconstructing and developing

To assist in reconstruction and development of the territories of

To promote foreign private investments by guarantees of or

Where private capital is not available on reasonable terms, to

To promote the long range growth of international trade and the