A PROJECT REPORT ON “A Study of Foreign Exchange Remittances And Interbank Dealings” FOR NKGSB CO-OP.BANK LTD.

MASTER OF MANAGEMENT STUDIES (MMS) UNIVERSITY OF MUMBAI SUBMITTED TO MARATHA MANDIR’S BABASAHEB GAWDE INSTITUTE OF MANAGEMENT STUDIES MUMBAI CENTRAL SUBMITTED BY: SACHIN KAJAVE BATCH: ROLL NO: 19

DECLARATION I, Sachin P. Kajave student of Masters of Management Studies (Semester III) of Babasaheb Gawde Institute of Management Studies (BGIMS), hereby declare that I have successfully completed this project on “STUDY OF FOREIGN EXCHANGE REMITTANCES AND INTERBANK DEALINGS” as a part of my ‘Summer Internship’. The information incorporated in this project is true and original to the best of my knowledge. ____________________________________ Signature

CERTIFICATE

I gratefully thank our Director and all the faculty members and my friends for adding value to my knowledge base by providing with valuable insights into the completion of this project and sharpening me for the corporate world. Without their vision and support this project would not have been so beneficial to me in which I had worked. I am highly indebted to my Industry guide and Mentor Mr. Forex Department. I would also like to express my gratitude to Ms.. encouragement and approachability from day one through the end and for making the one and half month period a memory to cherish. Sanchita and Ms. I take this opportunity to acknowledge the efforts of all those individuals who have helped me in making the project. Girgaum Branch for their timely guidance and valuable experience that they shared with me during my project and sincerely appreciate their suggestions. First and foremost. NKGSB Co-op Bank Ltd.ACKNOWLEDGEMENT My sincere gratitude to NKGSB Co-op Bank Ltd for providing me with an opportunity to work in the Banking Sector. . Assistant Manager and Mrs. Nirmal Parekh. Shambhavi Forex Dept. Poonam Madam. NKGSB for their guidance and constant supervision as well as for providing necessary information regarding the project & completion of the project.

13. 14.INDEX Chapter No 1. 7.4 Benefits of remittances Types of remittances Operating model in remittance business Remittance transaction process Page No.1 Purposes of Remittances 25 10.3 Procedure & Documentation required Purchase and Sale of Foreign Currency Travelers cheques (FTC) Purchase and Sale of Foreign Currency notes (FC) 69 71 11.3 8. 4.1 8. Travel Currency card Advantages Of Travel Currency Cards 12. Inter Bank dealings 10. 6. 3.2 8. NKGSB’s AD II activities 9. 2. 1 2 10 11 13 14 21 23 9.1 10. 8. Recommendation and suggestions Conclusion Bibliography 78 79 80 Executive Summary . 5.2 10. CONTENTS Executive Summary Introduction to project Objectives of Study Research methodology NKGSB profile Foreign exchange market Forex Department & their functions Remittance overview 8.

Dominant migration corridors have been formed between various countries/regions. There are too many banks who are dealing with Forex so there is intense competition among all of them for providing better services to the customers. Documentary Credits mainly Letter of Credit is involved in the process of the importing and exporting of goods through Banks. However the margin or Credit given by all the banks differs from each other. Though the process can be done without banks but for the security of the payment and assurance of the Credit worthiness of the parties’ banks plays a major role to it. Traders in India. migration of people from one country to another for employment opportunities h a s b ecome a c o m m o n phenomenon. In this globalizing world. As studying there are their views regarding the LC process and charges relating to it. This work gives brief information about Benefits of remittances and various purposes of remittances. Trade Finance activities and also Foreign Exchange currency convertibility transaction. During this study. as some of the foreign exchange transactions and applications are studies.During one and half month period. It is universal processes accepted by all the countries dealing in forex and adheres to terms and agreement from WTO and strict guidelines given by Reserve Bank of India for trading in India. . I have found out Foreign Remittance business may follow the conventional banking model or any of the non-banking models. RBI is playing a very important role in maintaining strict guidelines for Banks in India. Traders outside India and Foreign Banks. NKGSB bank has given greater opportunity to work with Forex Department and learn how Banks play an important role in Foreign Exchange Remittances.

For small exchange rate change. as a result of which.e. Licenses required.1 Introduction to project Globalization and financial liberalization in India have brought about enormous changes in the financial functioning of the economy. it is not worthwhile to change the invoice price of imports in its own currency due to the menu cost (a fixed cost involved in altering invoice price). export taxes was also levied and also quantitative restrictions. to protect its economy as they fear of the colonization and to achieve self-reliance. a higher pass-through. the import price in local currency (domestic prices) would change by the extent of the exchange rate change. Invoicing pattern of trade. while foreign direct investment(FDI) was restricted by high-limit equity participation.. the resultant gain of the global integration of domestic and foreign financial markets has thrown open new opportunities but at the same time exposed the financial system to significant risks. Foreign trade was highly difficult as import tariffs were extremely high around 300%.Since my project states Trade Finance activities and foreign exchange currency dealing especially inward remittance and Outward remittance which has given a new scenario to all the New Traders on how to function in import/export activities and Various Tariffs regarding import/export of goods into India and what all Process has to be followed with what sort of documents. Thus. Until 1991 before liberalization. there were restrictions on technology transfer. and government approvals. 1. This could be explained by the invoicing of imports in India in US dollars (80-90 per cent) and the presence of menu cost in changing invoice price. India was isolated from the world markets. i. exchange rate movements .

1.and exchange rate pass-through to domestic prices. subject to a specified ceiling. It recommended that banks be allowed to initiate cross currency positions abroad and to lend or borrow short-term funds up to six months. This project has been prepared with such focus on the issues faced to types of foreign exchange dealing and techniques to resolves the issues faced by export/import International trade and finance.  Acquire essential skills for managing foreign exchange risks and operating exposure. Another important suggestion related to allowing exporters and importers to retain 100 per cent of their earnings in any foreign currency with an Authorised Dealer (AD) in India.  Operations for the bank in an informed and effective manner. subject to liquidation of outstanding advances against export bills.  To equip participants with the updated acknowledge for Trade Finance. There are possibilities that the visible cost advantage apparently gained by the firm may erode if the export or import risk factors were not properly identified and managed. have implications for exchange rate management and trade competitiveness. thus.  To utilize new process improvements for operational efficiency. .  To acquire skills to understand how Interbank Dealings is done in the bank.  To understand the Operating model in remittance business.2 Objective of Research/Study  Study the operation of foreign exchange markets and alternative exchange rate systems.

verify. etc. • Limitations (a) Unavailability of the data from the Bank.1. It uses primary sources.  Banks official website  Journals on Foreign Exchange  Indian Institute of Banking and Finance’s book on Practitioners of Trade Finance  Statistical Tools used in the study. synthesize evidence to establish facts that defend or refute your hypothesis.Presentations in Graphical Form. Sources of Data Data Collections from various sources like. secondary sources.  RBI circulars  Bank’s Forex Management Guide Book. reports. diaries.3 Research Methodology Historical Research Design – The purpose is to collect. official records. The limitation is that the sources must be both authentic and valid. and lots of qualitative data sources such as logs. (b) The study is limited to period to one and half months only .

as well as of more in-depth research. A wide range of issues related to remittances became the subject of political debate. While foreign direct investments and capital market flows fell sharply in the last years due to the recession in the high income countries.4 billion in 2002. This introduction presents a critical overview of the state-of-art literature on remittances and is organized as follows: in the following section. global and regional trends in remittance flows. resulting in a mushrooming of scientific literature. partly because of the sharp increase in remittance flows. the transfer channels used and their economic impact on the remittance receiving countries. the research on these issues gained momentum. the data on migrant remittances.Introduction Migrant remittances are a steadily growing external source of capital for developing countries. methods of estimating the amounts of remittance flows. reaching USD 149. and their importance as a source of capital for developing . The importance of remittances in compensating the human capital loss of developing countries through Migration and their potential in boosting economic growth was already recognised in the beginning of the 1980s. Over the past years. migrant remittances continued to grow. These topics include the determinants of remittances.

countries. This activity is generally known as “remittance business” in banking parlance. Banks are allowed to perform certain activities which are ancillary to this business of accepting deposits and lending. The last two sections examine the literature on the effects of remittances on inequality. revolves around accepting deposits and lending money. The law governing Banking Activities in India is called “Negotiation Instruments Act 1881”. Banking Sector: An overview Banking Regulation Act of India. for the Purpose of lending or investment of deposits of money from the public.” Most of activities a Bank performs are derived from the above definition. Another activity which is assuming increasing importance is transfer of money –both domestic and foreign – from one place to another. repayable on demand or otherwise and withdraw able by cheques. and order or otherwise. The banking activities can be classified as:   Accepting Deposits from public/others (Deposits) Lending money to public (Loans) . 1949 defines Banking as “accepting. are discussed. In addition. A bank’s relationship with the public. the cost involved with international money transfers and the evolutions of money transfer markets. and present the conclusions. therefore. The third section gives an overview of the theoretical and empirical research on the determinants of remittances and the following section outlines the transfer channels. drafts. growth and the balance of payments. The so called forex (foreign exchange) business is largely a part of remittance albeit it involves buying and selling of foreign currencies.

as carried out by credit unions. deposits. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. building societies and cooperatives. Co-operative banks generally provide their members with a wide range of banking and financial services (loans. includes retail banking. banking accounts). Co-operative banks differ . mutual savings and loan associations.      Transferring money from one place to another (Remittances) Acting as trustees Acting as intermediaries Keeping valuables in safe custody Collecting Business Government business Co-operative Banks Defined A co-operative bank is a financial entity which belongs to its members. Cooperative banking institutions take deposits and lend money in most parts of the world. Introduction of Cooperative Bank Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking (for the purposes of this article). as well as commercial banking services provided by mutual organizations (such as cooperative federations) to cooperative businesses. who are at the same time the owners and the customers of their bank.

Depending on countries. Even if their organizational rules can vary according to their respective national legislations. In most countries. the needs of the customers meet the needs of the owners. Some co-operative banks only operate with their members but most of them also admit non-member clients to benefit from their banking and financial services. one vote”. with legal or statutory limitations in most cases. this control and supervision can be implemented directly by state entities or delegated to a co-operative federation or central body. which is related to the number of shares subscribed by each member. they are supervised and controlled by banking authorities and have to respect prudential banking regulations. a significant part of the yearly profit. Profit allocation: in a co-operative bank. benefits or surplus is usually allocated to constitute reserves. as co-operative bank members are both. according to the co-operative principle of “one person. which put them at a level playing field with stockholder banks. the first aim of a co-operative bank is not to maximize profit but to provide the best possible products and services to its members. co-operative banks share common features Customer-owned entities in a cooperative bank. their goals. Profit is usually allocated to members either through a patronage dividend. As a consequence. who democratically elect the board of directors. .from stockholder banks by their organization. Members usually have equal voting rights. or through an interest or a dividend. Democratic member control: co-operative banks are owned and controlled by their members. which is related to the use of the co-operatives products and services by each member. their values and their governance. A part of this profit can also be distributed to the cooperative members.

Aundh. Dadra and Nagar Haveli. Diu. Karnataka. • The Bank with a modest beginning in 1917. • Today the Bank has 64 branches spread over in the state of Maharashtra. Nashik – (Nashik & Ambad) & Sindhudurg – (Kudal) and Ratnagiri • Goa. 1917. Goa . Gujarat and Union territories of Daman. Belgaum & Sirsi. These are take over of Shahu Co-operative Bank. Hubli. • Mumbai . • • .34 branches Navi Mumbai – Vashi.NKGSB Profile • NKGSB was founded by a great visionary Sheth Shantaram Mangesh Kulkarni on 26th September.Pune – (Kothrud. Karnataka & Gujarat. Goa. Karwar -Baad.Main. Kolhapur – (Kolhapur Main & Uma talkies. Madgaon & Mapusa Karnataka – Karwar. Chikhli. Panaji. Ichalkaranji). Gujarat – Vadodara. Kharghar & Kamothe (6 branches) • • Maharashtra other than Mumbai . is now a Multi-State Bank having its area of operation in the States of Maharashtra. Chakan. CBD Belapur. Panvel. Nerul.Ponda. Bhosari & Magarpatta). Surat.

Being driven by the co-operative principles. customers can access their accounts and perform banking operations ‘anywhere anytime’ with value added services. management lays emphasis on profits but with focus on the welfare of our stakeholders. so also the bank has occupied a place of pride with those who are financed for offering tailor-made complete credit solutions under one roof packaged at liberal. customer focus.e. Technology. • As a part of good governance practice. • In terms of our commitment for harnessing the state of art technology. • The Bank has varied Deposit products to suit every needs of customers. but has multiplied its net worth making the institution financially sound and fundamentally strong. The business philosophy is based on four core values i. Business and Management. networking all 64 branches counter under ‘Core banking solution’. product innovation and resourceful people. the Bank has adopted code of good business principles and accepted the responsibility to ensure that they are observed down the line as a work culture in its true spirit. The Bank has not only grown in size of deposits and advances. the Bank has consistently shown robust growth both quantitatively and qualitatively.• Over the years. • The Board of Directors of the Bank consists of well qualified professionals enriched with varied experience in the strategic fields of Finance. pillars of service excellence. .

competitive and flexible terms. • • Provides Demand Draft facility under arrangement with private sector bank Amongst few Co-operative banks. let it be personal finance or loan facilities for Short term as well Long term requirement of Small Businessman.Pension a/cs. Professionals. Small & Medium Enterprises and Corporates. Providing facilities . which provides instant realization of funds & speedy remittances including Electronic Clearing System (ECS) both account debit & credit. • Also caters to Forex business needs through foreign exchange arrangement made with private sector bank. • The Bank has always been in the forefront to add on value to its products and has entered into correspondent relationship and strategic alliances to offer best of the services to its customers efficiently and with convenience such as: Tied-up with Insurance Companies to sell both the insurance products. having secured License as Authorised Dealer Category II of RBI which offers sale and purchase of foreign exchange. ‘SMS Banking’ and also ‘iConnect’ for hassle free payment of taxes. . life insurance with “Max New York Life” and non-life with “Oriental Insurance Company Ltd. • • Tied up with UAEXchange for fast inward remittance of foreign exchange. etc. foreign remittances.” • A member of payment & settlement gateways of RBI through INFINET and RTGS system by way of Electronic Fund Transfer (EFT) and Electronic Cheque Clearing (ECC).

well qualified professionals enriched with varied experience in the strategic fields of Finance. Technology. the management lays emphasis on profits but with entire focus on the welfare of stakeholders. Business and Management. devotion and commitment of our employees . Shareholders and Community at large very proud  We will always strive to provide Customers the best products and services that leads to their progress and prosperity  We shall act with high level of integrity. As a part of good governance practice. product innovation and resourceful people. the bank has adopted code of good business principles and accepted the responsibility to ensure that they are observed down the line as a work culture in its true spirit.• Tied up with NSDL as a Depository Participant offering Demat services at all our branches Management Board of Directors is composed of eminent. The business philosophy is based on four core value pillars of service excellence. customer focus. achieving the set goals with active involvement. Being driven by the Co-operative principles. Vision A premier co-operative bank Operating Principles  We will make our Customers.

 Banking Hours: It has Banking Hours from 8am to 8pm. hence provide greater value to customers in preference of time saving. Online Login. They provide faster services along with bonding & personal relationship with the customers. proper sitting arrangements to the customers.  Other Facilities to the Customers & Employees: NKGSB also provides other facilities like drinking water facilities. It is more convenient to customers.  Money Transfer Banking: Newly introduced “Money Gram” by NKGSB to facilitate all money transfers electronically can be wire transfer through this services.  Advanced Infrastructure: Branches at NKGSB are well equipped that provide the customers with taster banking services..  SMS Banking: NKGSB sends sms to its customers for their new products and services and can be access from any place any where.  Friendly Staff: The staff at NKGSB in all branches is very friendly & help the customers in all cases. Weakness  No Proper Facilities to Uneducated customers: NKGSB provides all services through electronic computerized machines. RTGS.SWOT Analysis: Strengths:  Online Services: NEFT. This creates problems to the less educated . All the computerized machines are located in suitable manner & are very useful to the customers & staff of the bank.

it should increase its investments in capital markets such as securities market. But this threat falls in the 4 th quadrant so it’s negligible. The company can avoid this threat. . mutual fund and insurance. Threats  Competition from Other already established Nationalized Banks. There can be a Threat of Hacking.  Competition from Private Banks which provide more Speedy Transactions. Opportunities  Increase in percentage of Returns on increase: The bank should provide higher returns on deposits in comparison of the present situation. This will also upto large extent help the bank earn profits & popularity. The confidential information of the customers can be leaked easily through the e-mail ids.  Net Services: NKGSB provides all kind of services on-line.  Popularity in Investments in Capital Markets: As an on going situation as market capitalization of NKGSB increases.people.

The retail market for foreign exchange deals with transactions involving travelers and tourists exchanging one currency for another in the form of currency notes or travelers’ . and foreign exchange transactions are physically completed. 1999 (FEMA) came into force with effect from June 1. The foreign exchange market provides the physical and institutional structure through which the money of one country is exchanged for that of another country. 1973 (FERA) was repealed and a new Act called the Foreign Exchange Management Act. multinational corporations. The foreign exchange market exists wherever one currency is traded for another. and includes trading between large banks.Foreign Exchange Market: An Overview The Foreign Exchange Regulation Act. The trade happening in the forex markets across the globe currently exceeds US$1. 2000. the rate of exchange between currencies is determined. with a view to facilitating external trade and payments and promoting orderly development and maintenance of foreign exchange market in India. It is by far the largest market in the world. currency speculators. Retail traders (individuals) are currently a very small part of this market and may only participate indirectly through brokers or banks.9 trillion/day (on average). governments. in terms of cash value traded. central banks. and other financial markets and institutions.

cheques. Any financial institution authorized for limited kind of transactions. depending on their activity. Authorised Persons for Foreign Exchange Transaction Foreign Exchange Management Act (FEMA) stipulates that all foreign exchange transactions are required to be routed only through the entities that are licenced by the Reserve Bank to undertake such transactions. Any other entity authorized by the Reserve Bank. or d. such authorised person may be: a. A Commercial bank (AD). Foreign Exchange Market participants: The foreign exchange market consists of two tiers: • • The client or retail market and The interbank or wholesale market  Five broad categories of participants operate within these two tiers: 1. corporations and central banks. or b. or c. Such entities are defined as Authorised persons in Section 10 of the Act. The wholesale market often referred to as the interbank market is entirely different and the participants in this market are commercial banks. Under current dispensation. Bank and nonbank foreign exchange dealers . A Money changer (FFMC).

Speculators and arbitragers Speculators and arbitragers seek to profit from trading in the market itself. Central banks and treasuries . tourists. Multi National Enterprises. Dealers in the foreign exchange departments of large international banks often function as market makers. They operate in their own interest.Banks and a few nonbank foreign exchange dealers operate in both the interbank and client markets. A large proportion of speculation and arbitrage is conducted on behalf of major banks by traders employed by those banks. Thus banks act both as exchange dealers and as speculators and arbitrages. without a need or obligation to serve clients or to ensure a continuous market. 4. 2. Instead of maintaining significant inventory positions. international portfolio investors. Individuals and firms conducting commercial or investment Transactions Importers and exporters. They profit from buying foreign exchange at a ‘bid’ price and reselling it at a slightly higher ‘ask’ price. and others use the foreign exchange market to facilitate execution of commercial or investment transactions. Small to medium sized banks are likely to participate but not as market makers in the interbank market. Some of these participants use the market to ‘hedge’ foreign exchange risk. Currency trading is quite profitable for commercial and investment banks. they buy from and sell to large banks to offset retail transactions with their own customers. 3.

Central bank and treasuries use the market to acquire or spend their country’s foreign exchange reserves as well as to influence the price at which their own currency is traded. Foreign exchange brokers Foreign exchange brokers are agents who facilitate trading between dealers. Foreign Exchange Department . They may act to support the value of their own currency because of policies adopted at the national level or because of commitments entered into through membership in joint float agreements. They maintain instant access to hundreds of dealers world wide via open telephone lines. 5. Brokers charge small commission for the service provided to dealers.

1999. and • To frame prompt and pro-active policy responses. Moving towards fuller capital account convertibility in a calibrated manner. within the evolving macroeconomic conditions. with the evolving market dynamics and external sector developments by: • • • Evolving and disseminating rules and regulations in a user friendly language. . both resident and non-resident.Vision • To evolve appropriate environment in discharging the basic objective of the Foreign Exchange Management Act (FEMA). • • • Facilitating hassle-free cross-border transactions. Having regular interface with the users to assess their needs with greater focus on the requirements of resident individuals / entities. Capturing data on a real time basis to dynamically induce policy changes. • • Rendering effective and efficient customer service with greater transparency. • To facilitate external trade and payments and to promote orderly development and maintenance of foreign exchange market in India. Mission To effectively integrate the needs of the users. Empowering authorized persons and enlarging their role as a conduit to create awareness about the developments. as part of active capital account management. and Disseminating data in a transparent manner.

EXCHANGE DEALINGS • • • • • Rate computation Nostro/Vostro Accounts Forward contracts Derivatives Exchange position and cover operations 4. Encashment of cheques. MT. EXPORTS • • • • • • Pre-shipment Advances Post-shipment Advances Export Guarantees Advising/Confirming Letter of Credit Facilitating project exports Bills for collection 2.Foreign Exchange department in a bank has following functions: 1. MT. TT etc. IMPORTS • • • Opening letters of credit Advance bills Import loans and guarantees. DD. REMITTANCES • • • • Issue of DD. Issue and encashment of travelers' cheques Sale and encashment of foreign currency notes . 3. TT etc.

Non-resident deposits 5. STATISTICS

• •

Submission of returns Collection of credit information Under the FEMA, foreign exchange transactions are divided into two broad categories current account and capital account transactions. Transactions that alter the assets or liabilities, including contingent liabilities outside India, of persons resident in India or assets or liabilities in India of persons resident outside India are classified as capital account transactions. All other transactions are current account transactions.

Capital Account Transactions
Capital account transaction is defined as a transaction which: Alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India. In other words, it includes those transactions which are undertaken by a resident of India such that his/her assets or liabilities outside India are altered (either increased or decreased). For example: - (i) a resident of India acquire an immovable property outside India or acquire shares of a foreign company. This way his/her overseas assets are increased; or (ii) a resident of India borrows from a non-resident through External commercial Borrowings (ECBs). This way he/she has created a liability outside India.

Alters the assets or liabilities in India of persons resident outside the India. In other words, it includes those transactions which are undertaken by a nonresident such that his/her assets or liabilities in India are altered (either

increased or decreased). For example, (i) a non-resident acquire immovable property in India or acquires shares of an Indian company or invest in a Wholly Owned Subsidiary or a Joint Venture with a resident of India. This way his/her assets in India are increased; or (ii) a non-resident borrows from Indian housing finance institute for acquiring a house in India. This way he/she has created a liability in India.

The Act also contains a list of some of the most common capital account transactions:• • •

Transfer or issue of any foreign security by a person resident in India; Transfer or issue of any security by a person resident outside India; Transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India;

Any borrowing or lending in rupees in whatever form or by whatever name called;

Any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India;

Deposits between persons resident in India and persons resident outside India;

• •

Export, import or holding of currency or currency notes; Transfer of immovable property outside India, other than a lease not exceeding five years, by a person resident in India;

Acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a person resident outside India;

Giving of a guarantee or surety in respect of any debt, obligation or other liability incurred(i) By a person resident in India and owed to a person resident outside India; or (ii) By a person resident outside India.

The Act has empowered the Reserve Bank of India (RBI) to specify, in consultation with the Central Government, the permissible capital account transactions and the limits up to which foreign exchange may be drawn for these transactions. But it shall not impose any restriction on the drawal of foreign exchange for payments due on account of amortization of loans or for depreciation of direct investments in the ordinary course of business. The FEMA Notification contains the list of permissible capital account transactions as well as list of prohibited capital account transactions. The permitted capital account transactions have been classified into two categories:Capital account transactions by persons resident in India includes,
• • • • •

Investment in foreign securities; Foreign currency loans raised in India and abroad; Acquisition and transfer of immovable property outside India; Guarantees issued in favour of a person resident outside India; Export, import and holding of currency or currency notes;

This prohibition is subjected to the conditions specified by Reserve Bank in . or on behalf of. Import and export of currency/currency notes into/from India. Sale and purchase of foreign exchange derivatives in India and abroad and commodity derivatives abroad. • • Foreign currency accounts in India of a non-resident. Deposits between a person resident in India and a person resident outside India. • Investment in India such as (i) issue of security by a body corporate or an entity in India and investment therein by a non-resident and (ii) investment by way of contribution to the capital of a firm or a proprietary concern or an association of persons in India. Remittance outside India of capital assets of a person resident in India. Remittance of the assets in India held by a non-resident. a person resident in India. Capital account transactions by non. Guarantee in favour of. Maintenance of foreign currency accounts in India and outside India.residents includes. Taking out the insurance policy from an insurance company outside India.A person shall not undertake or sell or draw foreign exchange to or from an authorized person for any capital account transaction.• • • • • Loans and overdrafts (borrowings) from a person resident outside India. There are generally two types of prohibitions on capital account transactions: General Prohibition: . • • • • Acquisition and transfer of immovable property in India.

Payments due in connection with • • • • Foreign trade. whether incorporated or not.000 per calendar year for a capital account transaction specified in Schedule I to the Notification. Other current business. Services and Short-term banking and credit facilities in the ordinary course of business. Current Account Transactions The Act defines the term 'current account transaction' as a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes.A non resident person shall not make investment in India in any form. or construction of farm houses or (v) in trading in Transferable Development Rights (TDRs). For example. Reserve Bank of India has issued an AP (DIR) Circular. in any company or partnership firm or proprietary concern or any entity. or (iii) in agricultural or plantation activities or (iv) in real estate business. Payments due as • Interest on loans and .(i) in the business of chit fund.  Special Prohibition:. wherein a resident individual can draw from an authorized person foreign exchange up to US$ 25.its circulars and notifications. which is engaged or proposes to engage:. or (ii) as Nidhi Company.

Accordingly.   . It contains the list of current account transactions for which drawal of foreign exchange is:Totally prohibited. Under the Act. Above definition implies that even if the transactions listed above may fit into the definition of capital account transactions. Permitted. Remittances for living expenses of parents. subject to prior approval of the Reserve Bank of India.• Net income from investments. in public interest and in consultation with the Reserve Bank. it can be treated a capital account transaction but. Central Government. As a general rule. For example. Medical care of parents. impose such reasonable restrictions for current account transactions as may be prescribed.  Permitted. such transactions shall be treated current account transactions. the Central Government has issued the Foreign Exchange Management (Current Account Transaction) Rules. subject to the prior approval of concerned Ministry. spouse and children. he is creating a liability outside India and thus. spouse and children. it is specifically included in the above definition as a current account transaction. Central Government may. Education and Medical care of parents. spouse and children residing abroad and Expenses in connection with • • • Foreign travel. resident of India imports goods from outside India on a short term credit (for a period of less than 6 months). any person may sell or draw foreign exchange if such sale or drawal is a current account transaction.

regulations made there under. Indian rupee has become fully convertible so far as current account transactions are concerned. foreign education. or any rules. This implies that foreign exchange is freely available to the residents for remittance on account of current account transactions for the various purposes like foreign travel. in respect of capital account transactions. In today's changed scenario. the Indian rupee. even today. No restrictions or limits are applicable for undertaking the transactions that are not covered by the above rules and the authorized dealers are free to release foreign exchange upon the satisfaction that the transactions will not involve and is not designed for the purpose of. is not fully convertible. The non-residents are also freely allowed to remit outside India the income or capital gain generated in India. . But. violation of the Act. and medical treatment abroad etc.

Estimates of remittances to developing countries vary from International Fund for Agricultural Development's US$301 billion (including informal flows) to the World Bank's US$250 billion for 2006 (excluding informal flows). in the receiving countries. through either a . exceeding international aid. remittance transfers can also promote access to financial services for the sender and recipient. This activity is known as "remittance business". thereby increasing financial and social inclusion. Banker's Cheques and Money Orders etc. Banks issue Demand Drafts. Remittances also foster. Moreover. a further economic dependence on the global economy instead of building sustainable.both domestic and foreign from one place to another.e. Banks also have the facility of quick transfer of money also know as Telegraphic Transfer or Tele Cash Orders. local economies. Money sent home by migrants constitutes the second largest financial inflow to many developing countries. designated by 'C' as the recipient. a person or entity. Remittances contribute to economic growth and to the livelihoods of people worldwide. Apart from accepting deposits and lending money. on behalf of their customers the act of transfer of money .REMITTANCE Overview “Remittance is the act of transmitting money to a distant location to fulfill an obligation”. Bank 'A' at a place 'a' accepts money from customer 'C' and makes arrangement for payment of the same amount of money to either the customer 'C' or his "order" i. Banks also carry out. In Remittance business. A remittance is a transfer of money by a foreign worker to his or her home country. for transferring the money.

Dominant migration corridors have been formed between various countries/regions. This also differs depending upon the mode of transfer and the time available for affecting the transfer of money.Branch of Bank 'A' or any other entity at place 'b'. Reasons: In this globalizing world. A few examples:  Migrant-sending country: • • • • • Lack of job opportunity Lower wage rates Social insecurity Political instability Extreme geographical conditions  Migrant-receiving country: • • • Availability of employment Friendly migration policies Shortage of skilled resources . Faster the mode of transfer. higher the charges. This is primarily due to the socio-economic conditions prevailing in the migrants’ countries of origin and destination. In return for having rendered this service. the Banks charge a pre-decided sum known as exchange or commission or service charge. This sum can differ from bank to bank. migration of people from one country to another for employment opportunities h a s b e c o m e a c o m m o n phenomenon.

of which US$316 billion went to developing countries that involved 192 million migrant workers. For some individual recipient countries. remittances can be as high as a third of their GDP. remittances promote access to financial services for the sender and recipient. As remittance receivers often have a higher propensity to own a bank account. most of it in monthly installments of between $100 and $250. .• • Financial liberalization Abundance of natural resources A few examples of such corridors (sender country-receiving country) are MexicoUS. South Asia-UAE and India-US. It is estimated that over $350 billion was sent to home countries from foreign lands in 2007 alone. contributing to economic growth and to the livelihoods of less prosperous people (though generally not the poorest of the poor). According to World Bank estimates. Benefits of Remittances Remittances are playing an increasingly large role in the economies of many countries. remittances totaled US$414 billion in 2009. an essential aspect of leveraging remittances to promote economic development It’s easy to look at the numbers surrounding money sent overseas and realize that there are a very large number of people who leave their home and families behind to pursue better wages and opportunities in other countries.

Developing nations would be wise to make the remittance process as easy as possible to encourage even more money to be sent by citizens working abroad. Migrant workers often leave home with no guarantees or promises of jobs. they leave a country with a corrupt or violent government in hopes of eventually building a new life abroad and then sending for their family to join them. For others. however. . clothing. Many leave home knowing that they will not see their children again for up to several years. and medicine. it is to escape the clutches of poverty that pass from generation to generation in many developing countries. only hope that they will find something that suits them when they arrive at their destination. we get an understanding of the sheer size of the money flowing to developing nations. family. Remittances do a great deal of good for developing economies. These workers leave home for a variety of reasons. The money that is sent in the form of remittances often is more than sufficient to meet the daily needs of living in these small countries and it allows family members to save and invest in themselves and their community. and country to pursue opportunities overseas. remittances can make up as much as one-third of a nation’s gross domestic product. and their reach is more powerful than helping family members buy groceries. the decision to leave is usually a difficult one that calls for great sacrifice both for the worker moving abroad and the family staying behind. What we can’t get by looking at the numbers. is a sense of the decision making process that goes into leaving one’s home.In several countries with developing economies. No matter the reason. When we look at the remittance market on a macro level. For some.

has encouraged action such as this by matching remittances sent through these organizations Types of Remittances: Foreign remittance can be defined as ‘the purchase and sale of freely convertible foreign currencies as admissible under Exchange Control Regulations of the country’.. currency notes and coin etc. Debit to banks' nonresident Rupee accounts also constitutes an inward remittance.T. many workers will contribute to funds that are pooled and used in times of need. A looser translation is the sending of money home while working in a foreign country. draft etc. . where the beneficiary resides. and sending funds regularly back to their families in their home country.. There are two types of remittances:  Foreign Inward Remittance: The receiving country..In the United States. bills of exchange. Mexican immigrants in the United States have formed thousands of groups to pool funds and send money to those who need it most. Thousands of people are currently working and living in a country that is not their home.T. such as after natural disasters. For instance. T. The Mexican government. The term 'inward remittance" means purchase of foreign currencies in whatever form and includes not only remittances by M. In addition to sending money to their individual families. but also purchase of travellers cheques. drafts under travellers letters of credit. many migrant workers from the same home country have banded together to make the money they send home even more powerful. realizing the potential for more money to flow into their country. The bank receives the money that has been sent from the sending person in the country in which the money has been earned.

The sender uses a bank or foreign exchange company to send money to .  Foreign Outward Remittance: The sending country. where the wage earner is located.Inward remittances: India gets a lot of money from remittances abroad mostly from expats who transfer money for families back home.

Outward remittances: Indians like to give gifts to people abroad. They also like to invest in international equity and debt.. There is also no objection to their obtaining reimbursement in foreign currency from their overseas branches and correspondents in respect of Rupee bills and drafts which are purchased by them under letters of credit opened by non-resident banks or under other arrangements. drafts. . Between April and November of the current fiscal.foreign country. money sent abroad by resident Indians crossed the $1 billion mark for the first time in 2010-11. But they invest less in overseas deposits. bills etc. M. Authorised Dealers may freely purchase T. There is no restriction on receipt of remittances from abroad either in foreign currency or by debit to non-resident Rupee accounts of banks' overseas branches or correspondents. According to RBI data. Many of the receiving banks have established remittance relationships with currency houses and banks in other countries to better facilitate the flow of remittances into the country.Ts.Ts. expressed and payable in foreign currencies or drawn in Rupees on banks' non-resident Rupee accounts.

000 in a financial year for various purposes.such outward remittances stood at $628 million or around Rs 3. immovable property. well over a fifth of total remittances were made for investing in equity and debt instruments abroad. for Indian investors to diversify internationally. donations. money spent on travel or for medical treatment abroad. Investment made abroad in deposits.00.3 million in 2010-11 after a dip in 2009-10. Investments made in these overseas instruments expanded at a compounded annual rate of 22 per cent in the last three years to $266 million in 2010-11. this limit has been increased over the years. Gift. it is still not as popular as investing in equity or debt. From $25. The RBI's liberalized remittance scheme currently allows residents to remit up to $2. This could be due to better performance by some of the markets and because of the products or vehicles offered by portfolio/wealth management firms. The dip was mainly on account of a drop in money sent for maintenance of close relatives living abroad. both for capital and current account transactions. Investments abroad: Of these.000 crore.000 in 2004. down 15 per cent over a similar period in 2010-11. both in 2010-11 and till November this fiscal. . equity or debt instruments are all included under the scheme. Although purchase of property rose to $66. The same stood at $148 million for the eight months ending November 2011. money sent for maintenance of close relatives living abroad as well as funds used for studying overseas also fall under the scheme.

the value of gifts rose from 20 per cent of total outward remittances last fiscal to 25 per cent this financial year so far. Operating Models In the Remittance Business An International Remittance business may follow the conventional banking model or any of the non-banking models.Value of gifts: Indians also seem to splurge in gifting. money sent for maintenance of close relatives saw a sharp increase in 201011 but has declined in 2011-12 thus far. allowed gifts in the form of shares. This limit was earlier $25. For the eight months ending November 2011.000 in a financial year.an intermediary bank which has . Indians sent $95 million under this category. The RBI.Th e b a n k w h e r e t h e remitter has an account that is debited for transferring money to the beneficiary • Beneficiary’s Bank .5 million till November 2011 of this fiscal. debentures or any security up to $50. through a notification in September 2011. Improved employment numbers in countries such as the US may have resulted in Indians sending less money to their relatives abroad. Interestingly. down 46 per cent over a similar period a year ago.The bank where the beneficiary of the remittance has an account that is credited for the remittance money received • Correspondent Bank (only in cases where the above-mentioned entities do not have a direct business tie-up) . At $242 million in 2010-11 and $166. an end-to-end remittance transaction involves the following parties: • Remitter’s B a n k . • Conventional Banking Model In this model.000 a year.

through which remittance transactions are routed Figure 4 Nostro-based setup Figure 4 illustrates the Nostro-based setup. while Figure 5 shows the generic process involved in a remittance transaction based on a Nostro account model. which are used by the remitter to transfer . Modes of Remittance • There are various Origination Modes.associated with various banks globally. wherein the Beneficiary Bank has an account with the Correspondent Bank.

money. The remitter can issue a remittance request to his bank either. Direct Credit to the beneficiary’s account with the Beneficiary Bank 2. 1. Transfer of Money by the Beneficiary Bank to the beneficiary’s account with some other local bank using the local payment mechanism 4. a. Disbursement of Cash to the beneficiary on furnishing appropriate photo identification/ address proof in the event of his not having a bank account 3. DD issuance in the name of the beneficiary • Non-Banking Channels . By dropping a cheque from an account with the Remitting Bank along with the Remittance Instruction Form. • Listed below are the various Disbursement Modes of remittance using which the money can be tendered to the beneficiary. bearing all details necessary for effecting the remittance along with an account debit mandate or b. the Remitter’s Bank debits his bank account and sends a SWIFT message to transfer the money to the Beneficiary’s Bank. Based on the details in the form. By visiting the branch and furnishing a Remittance Instruction Form prescribed by the Remitting Bank.

Following depicts the process for an International Remittance transaction effected through an MTO: . These entities operate in various forms: Money Transfer Operators MTOs (Money transfer Operators) like Western Union and Money Gram have a network of agents across the globe and serve as non-bank remittance channels.Non-banking players play a vital role in the remittance space and have a larger share in the Global Remittance business than conventional banks. The remitter can visit an MTO outlet and pay cash in foreign currency to send money to any part of the globe where the MTO’s agent is present. The receiver can visit the MTO agent at his location and collect the money in local currency.

The settlement between the MTOs in the two countries takes place through their partner banks. On receiving the remittance amount in cash from the remitter, MTOs deposit those funds in their local bank accounts. MTOs request their bank to transfer the consolidated amount to the bank account of the MTO agent in the receiving country. In order to minimize costs, only the net amount (total amount to be sent to the recipient country minus total amount to be received from that country) is sent. Please note that the beneficiary receives the money much before the settlement between the MTOs

Costs The fixed costs incurred by an MTO are listed below: 1. Origination and Disbursement Agent Network Costs

Setting up agency networks/outlets in the country of origination and disbursement forms a significant portion of an MTO’s costs. Though traditionally, MTOs have had proprietary agents, of late, third party agents have also been appointed by Western Union and Money Gram. While these agents receive a fixed minimum compensation, major incentives are linked to the number and value of transactions. The MTOs thus share the risk of expanding their network with these partners. 2. Processing and Money Transfer Costs

These are the fees to be paid to the local bank which buys and sells various international currencies, on behalf of the remittance service provider. These costs are linked to the aggregate transaction value and MTOs with large volume transactions could negotiate lower fees. 3. Marketing Costs

This simple transaction processing business has now become commoditized and players have started spending on advertising and brand building. 4. Compliance and Regulatory Costs Various mandatory compliance/regulatory procedures in the remittance business are listed below. Expenses involved in following them form a sizeable part of the total cost. • KYC of Remitter / Beneficiary: To prevent practices like transfer of money between anti-social elements, the “Know Your Customer” checks are done by the Remitter ’s and the

Beneficiary’s Bank. KYC would typically involve obtaining documents such as photo-ID, address proof, passport details, driving license details etc. • Regular Reporting of Transaction: Details to the Central Bank Central Banks place limits on the value of an individual’s remittances within a certain time frame. Additionally, institutions are also supposed to comply with Anti-Money Laundering requirements and report any suspicious/fraudulent transactions to the Central Bank. 5. Administrative and IT costs

The MTO will also have to bear office maintenance expenses as well as system development and maintenance costs. Salient Features of the MTO model1. It is the fastest mode of transfer since the beneficiary can receive the money within seconds after it is sent. 2. People without b a n k a c c o u n t s c a n a l s o transact in this model. 3. The cost per transaction is lower compared to other models. 4. MTOs have the biggest market share in the remittance business. 5. Setup costs are high, acting as a barrier for new entrants.  E-mail: The exchange house sends e-mail to the Beneficiary Bank instructing it to transfer the amount to the furnished beneficiary account.   Integration of exchange house and Beneficiary Bank systems B e n e f i c i a r y B a n k ’s p r o p r i e t a r y remittance platform

Exchange Houses: Exchange Houses are extensively used for remittances from the Middle East. Unlike the banking channel, this channel is based on Vostro accounts i.e. the accounts

maintained by exchange houses with various banks in the beneficiary countries. These accounts are pre-funded by the exchange houses. Salient Features of the Exchange House Channel 1. Since the Vostro accounts are pre-funded, the paid based on beneficiary amount is

the funding in this account. Hence o n r e c e i v i n g instruction, the beneficiary

t h e E x c h a n g e H o u s e’ s

Alternatively. The Exchange House has to fund its account with the Beneficiary Bank hence the latter enjoys the float. which can then be dispatched by courier or even sent along with a friend travelling home. This is a secure option for blue collar workers who would otherwise have to travel with hard cash. 2. back the DD can also be drawn in favor of the remitter. who can then carry it back to his home country on his return and get it cleared there. 3. Step 2 The exchange rate and the transaction fee are communicated and confirmed over the counter.receives the amount almost instantaneously. The Remittance Transaction Process Step 1 The remitter deposits the remittance money in the overseas currency in cash at the Exchange House counter. Step 4 The exchange house instructs the Beneficiary Bank with whom it has a tie-up for transferring the requisite amount in the beneficiary country’s local currency using one of the following modes: . The Exchange House can draw a DD on its Vostro account in favor of the beneficiary and hand it over to the remitter over the counter. Step 3 The beneficiary account details are provided by the remitter.

Figure depicts the Vostro-based setup wherein the Correspondent Bank has an account with the Beneficiary Bank Impact on Global economy This section highlights the magnitude and impact of increased migration on the world economy. .o u t o f w h i c h $317 billion went to developing countries .and involved some 192 million migrants or 3.0% of the world population. The World Bank estimates that remittances in 2 0 0 9 t o t a l e d $ 420 b i l l i o n . Figures 1 and 2 respectively depict the remittances of top remittance sending and receiving countries for 3 consecutive years.

Figure 1 Top Remittance-Sending Countries (figures in US $ million) Figure 2 Top Remittance-Receiving Countries (figures in US $ million) .

(Source: World Bank website) NKGSB’s AD-II Activities: .Figure 3 Remittances as a Percentage of GDP Figure 3 expresses the quantum of this incoming money as a percentage of GDP thereby indicating its significance to the destination country’s overall development.

sponsorship and prize money. Thane. (e) Remittance for participation in international events/ competitions (towards training. Dadar. The above mentioned activities can be carried out for the purpose mentioned as under: (a) Private visits. Dindoshi. .  Forex Dept. (d) Fee for participation in global conferences and specialised training.Reserve Bank of India has renewed NKGSB’s AD II license and also given a permission to start AD II activities in all branches. (h) Disbursement of crew wages. (b) Remittance by tour operators/travel agents to overseas agents/principals/hotels. At present following Branches are doing the AD – II Activity and acting as a focal point for designated branches. Mulund (East). (i) Overseas Education. Girgaum. Under AD-II License following activities can be carried out by NKGSB bank –  Foreign Demand Draft remittances  Telegraphic Transfers  Purchase & Sale of Foreign Currency Notes  Purchase & Sale of Foreign Travellers Cheque Under Telegraphic Transfer and Demand Draft remittances only clean remittances are allowed. (c) Business Travel. (g) Medical Treatment abroad. (f) Film shooting.

Eligibility: • Resident Indian Nationals. (l) Employment and processing. • Foreign born wife of Indian nationals. . (n) Skills/ credential assessment fees for intending migrants. assessment fees for overseas job applications. etc. Registration/Subscription/ Membership fees to International Organisations. (k) Remittance towards fees for examinations held in India and abroad and additional score sheets for GRE. savings etc . TOEFL.abroad in terms of the existing FEMA regulations. (q) Registration / Subscription/ Membership fees to International Organisations. • Foreign Nationals permanently resident in India are also eligible to avail of this quota provided the applicant is not availing of facilities for remittance of his salary.  Personal/ Private/ Leisure Visits Foreign exchange for private visit can also be released to a person who is availing of foreign exchange for travel outside India for any purpose up to the limits specified in Schedule III to the Rules. (o) Visa fees. (m)Emigration and Emigration Consultancy fees. (p) Processing fees for registration of documents as required by the Portuguese/ other Governments.(j) Remittance under educational tie up arrangements with universities abroad.

• Individual traveling to countries like Nepal & Bhutan are not eligible to withdraw foreign exchange under this scheme. • Foreign exchange quota for personal visit can be availed over & above the specified amount under all other schemes for release of foreign exchange. Quantum of Exchange: • UptoatotalofUS$10000orits equivalent per resident individual on a financial year basis. Libya. Russian Federation and other Republics of Common wealth of Independent States.• Children endorsed on parent’s passport are also eligible for full entitlement. Russian Federation and other Republics of Commonwealth of Independent States entire exchange can be released in the form of currency notes. Islamic Republic of Iran. • For Travelers proceeding to the Islamic Republic of Iran. Documentation: • Request cum FEMA Declaration form for release of exchange under personal visit scheme. • Form A2 or Simplified Application cum Declaration up to USD 5000 Equivalent . • For Travelers proceeding to Iraq or Libya exchange in the form of currency notes may be sold up to limit not exceeding USD 5000orits equivalent per resident individual on a financial year basis. • Out of which maximum of US$3000or its equivalent in Currency notes per visit and resting Travelers Cheques for all the countries except for travel to Iraq.

• Photocopy of the crossed account payee cheque /draft or pay order along with debit advice. • Request form should have the undertaking from the Counter Staff that all originals including the passport &he/she has dully verified the ticket. However. abroad in terms of existing FEMA Regulations. Exceptions to be noted by Counter Staff: o Visa may not be insisted up on in cases where travel is to a country-offering visa on arrival. Photocopies need to be kept.  Sales to Business Visit Foreign exchange may be released for undertaking business travel or attending a conference or specialised training or for maintenance expenses of a patient going . valid visa & passport number and validity should be verified by the Counter Staff & details to be note don their quest form Confirmed ticket-showing travel within 60days of taking foreign exchange should be verified & details of the ticket number should be noted on their quest form by Counter Staff. he/she should give an undertaking on the application itself that he/she is permanently resident in India and is not availing of facilities for remittance of his/her salary. undertaking for the same may be obtained o For Airline staff open ticket may be accepted. • If the applicant is a foreign national permanently resident in India.• Original passport for pages showing name. address. Proof of Airline staff may be kept in record. Saving etc.

technical or educational nature. Participation in international conferences /seminars which are of a scientific. • Specialized training/study tour sponsored by institutions or undertaken by professionals like Doctors. • Exchange may also released to foreign nationals if the visit is sponsored by the company/firm/organization in India where they are employed on regular basis.abroad for medical treatment or check up abroad or for accompanying as attendant to a patient going abroad for medical treatment / check up to the limits specified in Schedule III to the Rules. • Personal Visit entitlement can be availed over and above the specified amount under this scheme Documentation: • Request cum FEMA Declaration form for release of exchange under business visit scheme on company’s letter head. duly signed by Authorized official of the . • If a passenger plans to club both Conference and business visit together the entitlement remains only up to a maximum of USD25000. Quantum of Exchange: • • Up to USD25000 per business trip irrespective of period of stay Release of exchange beyond USD 25000 for a single business visit requires prior approval of RBI. Eligibility: • • Executive’s sponsored by firms/companies/ organizations in India.

on the basis of self declaration that the applicant is buying exchange for medical treatment outside India.company. Authorised Dealers may release foreign exchange up to an amount of USD 100.) In case of Travel for a conference/ seminars the brochure giving full particulars of the Conference/seminar shall also be submitted along with the application.000 or its equivalent. • • A -2 form (Only for the amounts exceedingUSD 5000equivalent. and certifying that the expenses are being borne by the organization. • In case of Travel related to Training/ Study tours the details of training/study tour along with a letter from the overseas institutions agreeing to provide necessary facilities for the training /study tour.  Medical treatment abroad Resident Indian proceeding for permanent emigration abroad (needs to be confirmed) With a view to enable residents to avail of foreign exchange for medical treatment abroad without any hassles and any loss of time. • All the above documents to be kept on record along with Copy of Cash Memo. without insisting any from on estimate a .

000 Documentation:  Request cum FEMA Declaration form for release of exchange by filling the relevant portion as per the type of remittance. estimate from the doctor in India or hospital/ doctor abroad. A person who has fallen sick after proceeding abroad may also be released foreign exchange by an Authorised Dealer for medical treatment outside India. or processing fees for  Medical treatment abroad for Resident Indian: Quantum of exchange: Exceeding U S D 1 0 0 0 0 0 o n submission to AD of an estimate from the Doctor in India or hospital/ doctor abroad.2 form (Only for the amounts exceeding USD 5000 equivalent.  Resident I n d i a n f a l l e n s i c k a f t e r proceeding abroad  Going abroad for Medical Check Up.)  For application fees in case of foreign education immigration. and medical treatment and for permanent emigration. . valid visa is not required. education abroad. is required to be submitted to the Authorised Dealers. For amount exceeding the above limit.hospital/doctor.  A . Eligibility:  Resident Indian  must be suffering from an ailment requiring specialized treatment abroad.  Photocopy o f t h e p a s s p o r t h a v i n g valid visa in case the remittance is for employment. Quantum of exchange: USD 100.

Authorised Dealers may release foreign exchange. Cultural Tours Dance troupes. • Photocopy of t h e p a s s p o r t h a v i n g valid visa in case the remittance is for employment. to the extent and subject to conditions indicated therein. Government of India. etc. for their foreign exchange requirements.  Emigration: Eligibility: USD 100.2 form (Only for the amounts exceeding USD 5000 equivalent. artistes. • • A .) For application fees in case of foreign education or processing fees for .000 or amount prescribed by country of Emigration (lower of the two) Quantum of exchange: • Resident Indian Proceeding for permanent emigration abroad Documentation: • Request cum FEMA Declaration form for release of exchange by filling the relevant portion as per the type of remittance. on the strength of the sanction from the Ministry concerned. education abroad. and medical treatment and for permanent emigration.. who wish to undertake tours abroad for cultural purposes should apply to the Ministry of Human Resources Development (Department of Education and Culture).

provided in each case the Authorised Dealer is satisfied that the remittance is being made out of the foreign exchange purchased by the traveler concerned from an Authorised Person (including exchange drawn for private travel abroad). Regulations and Directions in force. provided the Authorised Dealer is satisfied that the remittance is being made out of the foreign exchange purchased by the traveler concerned from an Authorised Person(including exchange drawn for private travel abroad) in accordance with the Rules.immigration.. tour arrangements. in the countries proposed to be visited by him or for making other tour arrangements for travelers from India. Eligibility: Traveler traveling abroad on personal/Leisure visit or business visit can remit up to a . etc. in accordance with the Rules. etc.. Regulations and Directions in force. Authorised Dealers may effect remittances at the request of agents in India who have tie-up arrangements with hotels / agents. abroad for providing hotel accommodation or making other tour arrangements for travel from India. at the request of a traveler towards his hotel accommodation. valid visa is not required.  Remittances for Tour Arrangements (At the request of the traveler) Authorised Dealers may remit foreign exchange up to a reasonable limit.

in the countries proposed to be visited by him. tour arrangements. [In case of difference in amount between underlying document/s against the actual remittance amount. provided it is out of foreign exchange purchased by the traveler from us (including exchange drawn for private travel abroad) Quantum of exchange: Quantum of Exchange is not specified in the RBI Circulars Documentation: • Letter from the Client duly signed by their authorized signatories clearly indicating • the following details/particulars : - Request for the remittance with the currency. having a good track record and s a t i s f y i n g a l l KYC norms.reasonable limit towards his hotel accommodation. Form A2 – Dully filled – in and signed by authorized signatories FEMA Declaration format duly signed by authorized signatories  Remittances for Tour Arrangements (At the request of the Agent) Eligibility: Agents in India. amount and date of remittance. such adjustments should be explicitly stated along with the reason and final net amount to be remitted should be specified] • • Purpose of Remittance Debit authority – a u t h o r i z i n g t h e bank to debit their INR/EEFC account with us towards the amount of remittance and our charges / commission and • • • Beneficiary & Bank details for remittance. etc.. and .

abroad for providing hotel accommodation or making other tour arrangements for travelers from India. Regulations and Directions in force. Regulation and Direction in force. Documentation: • Agent’s Declaration from the client to the effect that the remittance is being made out of the foreign exchange purchased by the concerned traveler from an in person by the concerned drawn (including exchange authorized person (including exchange drawn for private travel abroad) accordance with the Rules.have tie up arrangements with hotels/agents etc. • That he (agents) has received the undertaking from the travelers in addition to the normal required conditions applicable for release of foreign exchange that the traveler has/will purchase the foreign exchange from the Authorized person only and within the prescribed limits (including the amount now being remitted abroad as advance payment) in accordance with the Rules. • That he will take care and follow up that t h e tour/services for which the advance is being/has b e e n remitted should be executed and ensure that the beneficiary of advance remittance has fulfilled his obligation under the Contract/agreement/tieup and will inform the Bank within reasonable time from the completion of . provided the remittance is made out of foreign exchange purchased traveler from us or from an authorized for private travel abroad) Quantum of exchange: Amount as per the invoice of the overseas hotels/agent within the prescribed limits of personal / business visit Forex quota as mentioned above..

and medical treatment and for permanent emigration.  A -2 form (Only for the amounts exceeding USD 5000 equivalent.the Tour and undertake to repatriate the unspent advance remittance.  Photocopy of the passport having valid visa in case the remittance is for employment. education abroad.)  For application fees in case of foreign education or processing fees for immigration.  Employment abroad Eligibility: USD 100.000 Quantum of Exchange:   Resident Indians Employment Visa / Wo r k P e r m i t and letter from the overseas employer Documentation:  Request cum FEMA Declaration form for release of exchange by filling the relevant portion as per the type of remittance.  Maintenance of close relatives abroad ( by resident Indian) Eligibility: Resident Indians can remit to their close relative who are Nonresident and require funds abroad for their maintenance. valid visa is not required. Quantum of exchange: . if any.

2 form (Only for the amounts exceeding USD 5000 equivalent. contribution to provident fund and other deductions) Documentation:  Request cum FEMA Declaration form for release of exchange by filling the relevant .000 (per year.  A . valid visa is not required. who is on deputation to the office or branch or subsidiary or joint venture in India of such foreign company Quantum of exchange: Not exceeding net salary (after deduction of taxes.USD 100. or processing fees for  Maintenance of Close relative abroad (By resident but not permanently resident in india) Eligibility:  By resident but not permanently resident in India and  Is a citizen of a foreign state other than Pakistan or  Is a citizen of India.)  For application fees in case of foreign education immigration.  Photocopy of the p a s s p o r t h a v i n g valid visa in case the remittance is for employment. education abroad. per recipient) Documentation:  Request cum FEMA Declaration form for release of exchange by filling the relevant portion as per the type of remittance. and medical treatment and for permanent emigration.

2 form (Only for the amounts exceeding USD 5000 equivalent.portion as per the type of remittance. education abroad. • Photocopy o f t h e p a s s p o r t h a v i n g valid visa in case the remittance is for .000(Academic year) FEES: Agreed Documentation: • Request cum FEMA Declaration form for release of exchange by filling the relevant portion as per the type of remittance.  Photocopy o f t h e p a s s p o r t h a v i n g valid visa in case the remittance is for employment. and medical treatment and for permanent emigration.)  For application fees in case of foreign education or processing fees for immigration. valid visa is not required.  A . Student h o l d i n g I n d i a n p a s s p o r t s that had earlier gone abroad for pursuing studies without availing of exchange can avail foreign exchange for the balance period of the course • Students holding foreign passports dependent on their parents resident in India Quantum of exchange: USD 100.  Education abroad: Eligibility: • • • Resident Indian Confirmed admission in overseas college/university/educational institution.

partnership firms. HUF. Quantum of exchange:  USD 200. valid visa is not required.000 under the Scheme would also include remittances and donation by a resident individual.  Remittance under Liberalized Remittance Scheme: Eligibility:  All Resident Individuals including Minors are eligible to avail the facility under scheme.000  The facility will be per financial year basis (April-March).employment. • A . Trusts. education abroad.) • For application fees in case of foreign education or processing fees for immigration.  Under this facility. .  Limit of towards Purpose:  This facility is available for making remittance up to USD 200. etc. resident individuals will be free to acquire and USD Gift 200.2 form (Only for the amounts exceeding USD 5000 equivalent.000 per financial year basis (April-March) for any current or capital account transactions or a combination of both. and medical treatment and for permanent emigration.  The facility will not be available to corporate.

Donation Purchase of objects of Art. Requirements to be complied by Branch.hold immovable property or shares. Counter (Counter Staff)  To  Comply with KYC & AML Guidelines while allowing the facility If the applicant is an existing account holder. R emittance of funds for acquisition of ESOPS. Documentation: Requirements to be complied with the remitter (Customer)  Request cum FEMA Declaration form for release of exchange  The remitter individual will have to designate our branch through which all the remittances under the scheme will be made. he should have maintained the account for a period of one year. Counter Staff must take respective confirmation from the respective branch that they have carried out due diligence on the opening. units of Mutual Funds or any other asset outside India and will also able to open and maintain and hold foreign currency accounts with a bank outside India for making remittances under the scheme.  If the applicant is a new customer.  Application cum declaration duly filled in all respect and signed by the applicant is to be taken.    Gift. operations & maintenance of the account . The foreign currency account may be used for putting through all transactions connected with or arising from remittances eligible under this scheme.

Guatemala. If unavailable. Nauru. in that case the payment to be taken in the form of Cheque drawn on applicants accounts/ debit to his account or by Demand Draft/ Pay Order.  The remitting office (CPU) must certify that remittance is not being made directly or indirectly to ineligible entities and follow RBI guidelines. Nepal.  Remittance made directly or indirectly to Bhutan.  Remittances made directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories” (as available on FATF website) viz Cook Islands.  Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as notified separately by the Reserve Bank to the Banks. Philippines and Ukraine. Nigeria. Egypt. Indonesia. Mauritius or Pakistan. 2000. Myanmar. tickets proscribed magazines etc) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules. FES: Agreed . please ask for latest Income Tax Statement Order/ Return filed by the applicant / PAN  In case the applicant doesn’t have account with us. Exceptions to be noted by Counter Staff  Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery/sweep stakes. Obtain the bank statements from the applicant for to check the source of funds.

deposit.  It is clarified that the banks should not allow any kind of credit facilities to resident individuals to facilitate remittances under the Scheme. Transactions in the nature of remittance for margins or margin calls to overseas exchanges/overseas counterparty are not allowed under the Scheme. Inter-bank transactions Authorised dealers may freely undertake foreign exchange transactions as under: A. Placing/Accepting deposits and Borrowing/Lending in foreign currency. With authorised dealers in India: i. Inter Bank Dealings Bank transactions that deal with foreign exchange and money markets within other banking facilities and financial institutions that are not banks in the local areas and overseas. Buying/Selling/Swapping foreign currency against rupees or another foreign currency ii. Describing any loan. Buying/Selling/Swapping foreign currency against another foreign currency to cover client transactions or for adjustment of own position. Interbank interest rates are often used as benchmarks for other rates. B. . With banks overseas and Off-shore Banking Units in Special Economic Zones i. transaction or other relationship between two banks. Interbank transactions provide a great deal of liquidity to the market.

Initiating trading positions in the overseas markets. . take acknowledgement from the customers (format attached) & contact TCIL for pick-up & delivery of Foreign Currency Notes or Travelers Cheque as & when required • The Branch Manager should confirm the Exchange Rates from Forex Department via e-mail before undertaking any transactions & subsequently take a print copy of the same to be forwarded to the dept. take proper precautions as per given guidelines. Under Interbank Dealings. for carrying out sale & purchase of Foreign Currency Notes & Travelers Cheque.ii. following activities can be carried out by NKGSB co-op bank –  Purchase of Foreign Currency Notes  Sale of Foreign Currency Notes  Purchase of Foreign Travellers Cheque  Sale of Foreign Travellers Cheque  Purchase of foreign currency from customer  Sale of foreign currency to customer Procedure to be followed in Sale and Purchase of foreign currency notes and Travellers Cheques – • • Presently this facility will be extended only to our existing account holders. • If customer comes to your Branch for sale & purchase of Foreign Currency Notes & Travelers Cheque. & Pheroze Framroze & Co. Ltd. Bank has made arrangements with Thomas Cook (India) Ltd. take the applicable rate from Forex department.

3.s for pick up and delivery of foreign currency notes / travellers cheques. Accounting entries to be passed as per guidelines. 2. The following documents are attached herewith for your reference – 1. RBI License copy. 5. How to quote Foreign Currency Notes rates & Travellers Cheque? 7. Documents required for A2 transactions. 11. tie-up agreement. Specimens Registers of FLM 1 to FLM 7 is enclosed for maintaining records. 10. Cash Memo & A2 form. Encashment Certificate. 13. 6. Example. Specimen of FEMA declaration. FLM – 8 Report should be filled up & sent to Forex dept. BTQ as per FEMA specifications will be delivered by Forex Dept. List of Thomas Cook branches. Acknowledgement specimen for purchase & sale foreign currency. 9. Guidelines for encashment of Foreign Currency Notes & Travellers Cheque. and Pheroze Framroze & Co. Ltd. Thomas Cook (India) Ltd. on or before 5 th of every month.• In respect of any further queries related to Foreign Exchange activities needs to be directed to Forex dept. Guidelines for detecting of counterfeit notes.  Guide Line for Encashment of Foreign Currency Notes & Travellers Cheques . contact person name & telephone no. 8. 12. 4.

Also most of the banks which are issuing FTC (including American Express) have stopped the practice of issuing periodical list of Lost/Stolen Travelers Cheques. Taking out Foreign Exchange in any form.B. Therefore. Non-resident however has general permission to take out an amount not exceeding the amount originally brought in by them subject to compliance with the provision of above para. Under AD – II License. Category – II License by R.I. II. . they can do Foreign Exchange Business as Full Fledged Money Changers (FFMCs) Bringing and taking out of Foreign Exchange I.NKGSB have been granted A. When Foreign Exchange brought in the form of currency Notes or Travelers Cheques does not exceed US $ 10000/-or it’s equivalent and/or the value of Foreign Currency Notes does not exceed US$ 5000/.or its equivalent declaration thereof on CDF is not insisted upon. encashing staff must be more careful and vigilant while encashing the Foreign Travelers Cheques. other than Foreign Exchange obtained from an authorised dealers or a money changer is prohibited unless it is covered by a general or special permission of Reserve Bank. D. Foreign Exchange in any form can be brought into India freely without any limit provided it is declared on Currency Declaration Form (CDF) on arrival.  Purchase / Encashment of Foreign Currency Travelers Cheques (FTC) Need to exercise care and caution Encashment of Foreign Currency Travelers Cheques is very sensitive department as “Reported Lost/Stolen Travelers Cheques are in large circulation.

 It should be ensured that the cheques presented for encashment are not already countersigned at the place where it is specified on the cheque “Countersign here in the presence of person cashing”  The Travelers Cheques should be verified by placing under Ultra-violet ray Machine.How to Scrutinise  The encashing Staff should exercise maximum care and caution while encashing the Foreign Travelers Cheques. (bonafide) by referring to the Security features as per details supplied by issuing bank including comparing the specimen provided by the respective Travelers cheque issuing banks/institution. They should first take the FTCs from the customer than see whether the Travelers Cheques presented for encashment are genuine & no countersign have been made prior.e. should not be accepted for encashment. Cheques which were not signed by the purchaser at the Space for Original (holder’s) signature” (when countersigned below with this signature) at the time of purchasing them. Such person should be politely directed to the nearest office of the bank/organization that issued the travelers cheques.  Paying Officer must ensure that the person presenting the travelers cheques for encashment makes the second signature (counter signature) with a ball point pen . The fact is that the cheques are blank and the procedure for their issuance to the purchaser has not been properly followed is an indication that the person presenting the FTCs for encashment may not be the person who purchased the cheque. These details should be readily available at the time of Encashment of FTCs  Blank Travelers cheque i.

Sketch Pen / thick pen countersigned FTCs do not accept it.  Gift travelers cheque will only come in golden color.  The Pass port of the presenter/customer should be scrutinized to establish her/his identity. date of issue entry visa particulars etc should be held on record.  The paying officer must carefully compare this second signature/countersignature with the original signature on the Travelers cheques to ensure that both the signatures are exactly the same and there is no variation in the signature. Photocopies of Pass port along with relevant pages indicating Pass port Number and date. A careful watch should be kept when customer is countersigning the cheques. Foreign Travelers Cheques should not be encashed if there is the slightest variation between the counter signature and original signature.in the space provided thereon in her/his presence. following accounting entries need to be passed – . is always on the right-side top corner.  Take his/her permanent and local address on the reverse of the voucher. The photograph in the Pass Port should be of the same person encashing the Travelers cheques.  You can ask him/her to submit Travelers Cheques Purchase Agreement Copy also if there is any doubt. validity date. Accounting Entries to be passed – • Purchase of Travelers Cheque - When a customer approaches our Bank for encashment of Travelers Cheque. as signature might have been forged.  FTCs series no.

Sale of above Foreign Currency Travelers Cheque to FFMCs (KBL. At present persons bringing Foreign Exchange in to India are required to declare in Currency Declaration Form (CDF) Foreign Currency brought in by them where the aggregate value of Foreign Currency Notes and Travelers .  Purchase / Encashment of Foreign Currency Notes (FCs) Purchase of Foreign Currency Notes from our customer Full fledged Money Changers may purchase Foreign Currency Notes. Cr…. R.  Sale of Foreign Currency Travellers Cheques General Since we are not holding Stock of Travellers cheques. Reconciliation should be carried out for this.• We will purchase from customers Foreign Currency Travelers Cheque Dr …… Foreign Currency Travelers Cheque Purchase A/c Cr…… Customers A/c (SB / CD / Cash) Cr…… Service Tax A/c 2. Coins from Residents as well as non-residents. Bank may issue Encashment Certificate as per Specimen (EC). I A/c Foreign Currency Travelers Cheque Purchase A/c P&L commission A/c AD II Outstanding entries in Ledger/Register should be tallied with GLB every month.e. B.. TCIL & PFC) Dr……. Cr…… Outward Clearing Cheque i. any requirement of customer for travellers cheques is fulfilled by routing this business to Thomas Cook and Thomas Cook passes 50 % commission/exchange profit to us on these transactions. Encashment Certificate Tourists/ customer encashing Travelers cheque may request for Issuance of Encashment Certificate.

or their equivalent or where the value of Foreign Currency Notes brought by them EXCEEDS US $ 5000/. the tenderer should be asked to produce the same.Cheques EXCEEDS US $ 10000/. the CDF form should be retained by the bank on its record Need to Exercise Care and Caution • Proper Care and Caution should be taken at the time of Encashment of Foreign Currency Notes as Fake/Fictitious currency notes are in circulation in large number. If entire Foreign Exchange covered by the CDF form is encashed.  Also verify his/her pass port & note down the following particulars - . (d) Where CDF is produced. (c) Where the Foreign Currency Notes was brought in by declaring on form CDF. currency notes denomination & series number. his / her telephone no. • Currency Notes Encashing Staff should follow some of the procedures of encashment of Foreign Currency notes like Ask the customer to write a letter to the Bank for encashment of currencies bearing his / her name. A copy of the form should be retained for branch record.or it's equivalent. It is thus imperative that the encashing Staff should be more careful and vigilant while encashing Currency Notes. & his / her local address. particulars of purchaser should be endorsed on the reverse of the form giving number and date of encashment certificate issued under the stamp and signature of the authorised Official.

 We advised you that never to “Corner Count” the notes but always check & count the notes full – way to check the denomination as well as features of the currency notes.  Small denomination note is altered to higher value by using chemicals. Currency notes can also be verified by placing under ultra violet rays’ machine or magnifying machine. country of issuing pass-port. Thomas Cook training circular is enclosed for your ready reference. Details relating how to scrutinize the counterfeit notes. Pass port Number. Foreign Address etc.   Always check the watermark. Encashment Certificates Bank should issue Encashment Certificate in form of EC in all cases of purchase of Foreign Currency Notes from Public irrespective of whether the tenderer asks for the certificate or not. which can be detected under ultraviolet rays’ machine. It should be valid for three months for the purpose of reconvertion the . validity date.  Following are the denomination of the foreign currency notes available at present: US Dollar 1 2 5 10 20 50 100 • • Pound 5 10 20 50 Euro 5 10 20 50 100 Aus Dollar 5 10 20 50 100 Do not accept mutilated notes.Nationality. security thread & hologram in currency notes.

RBI A/c Cr…. The validity period for the purpose of reconvertion should be prominently indicated at the top right hand corner of each certificate. . Accounting Entries to be passed • Purchase of Foreign Currency Notes - When a customer approaches our Bank for encashment of foreign currency notes to us. if any in to Foreign Exchange. Foreign Currency Notes on hand A/c Cr…… P&L commission AD II A/c  Sale of Foreign Currency Notes We have to follow some of the steps/procedure of sale of Foreign Currency Travelers Cheques. Outward Clearing Cheque i.. TCIL & PFC) Dr…….unspent balances. we should not hold Foreign Currency Notes Stock. Rate of Exchange Foreign Currency Notes should be sold at Currency Selling Rate Procurement of Currency Notes for Sale. We should sell to Money Changer like Thomas Cook or Pheroze Framroze. following accounting entries need to be passed – 1. We will purchase from customers foreign currency notes Dr …… Foreign Currency Notes on hand A/c Cr…… Customers A/c (SB/CD/Cheque) Cr…… Service Tax A/c 2. Holding Stock of Foreign Currency Notes Due to inherent risk involved in handling Foreign Currency Notes. Sale of above currency notes to FFMCs (KBL.e.

Accounting Entries Since we do not keep stock of Currency notes we have to purchase Foreign Currency Notes from Authorised Money Changers.e.I A/c Cr…… Service Tax A/c Delivery of currency notes to the public / customers Dr …… Customers A/c – SB/CD (Currency notes selling rate + Commission + Service Tax) Cr…… Foreign Currency Notes on hand A/c Cr…… Service Tax A/c Cr ….. Foreign Currency Notes on hand A/c Cr…… Outward clearing Cheque i. 71.528/ Sale of FC's purchased from TCIL GBP 1000/.e.72.) ABB/HO FCCASH on hand a/c ABB/HO PL 4103 AD–II Comm ABB/HO Service Tax Payable ABB/HO PL 4104 FC Ex rate Diff Dr…… Rs.500/ADD .@ Rs.639/Cr…… Rs. P & L Commission AD II A/c  SALE OF FOREIGN CURRENCY TO CUSTOMER Please refer to the transaction mentioned below & apply the rate for this transaction only –  Purchase of FC's GBP 1000/. 11/Total Amt collected from customer a/c = Rs. Foreign Currency Notes should be delivered to customer only after receipt of equivalent Rupee amount + Charges if any.50 from TCIL Gross amount of currency exchange in rupees = Rs.528/Cr…… Rs. 28/Service Tax charged by TCIL = Rs. 72.50 to our customer Gross amount of currency exchange in rupees = Rs.. 11/Cr…… Rs..Service Tax charged by TCIL = Rs. 100/Cr…… Rs. etc Dr……. 28/Total Amt paid by us to TCIL by PSI = Rs.71. 72.500/ADD . 1000/- . Pheroze Framroze. 71.. . 72. Following Accounting entries should be passed for purchase of Foreign Currency Notes from Money Changers i. 71. = Rs.AD-II commission chgs. The names of the money changers should be approved by banks' management.639/En tries to be passed – Customers A/c (SB/CD/.@ Rs. R.B. 100/Service Tax Payable on commission = Rs.Foreign Currency Notes to be sold should be procured from Reputed Authorised Money Changers after negotiating best price. Thomas Cook.

30% = Rs. 100/SRTax on Rs. 4.528/Pay slip A/c (paid to TCIL) Cr…… Rs.119/Entries to be passed –  For Purchase of currency THB 2960/.144/(-) TCIL will recovered their SRTax from us = Rs.@ Rs. 11/Total Amt. 4. = Rs. 1.. 4.PSI to be issued in the name of Thomas Cook (I) Ltd.916/ABB/HO PL 4103 AD–II Comm Cr…… Rs. 1. Amt. 100/ABB/HO Service Tax Payable Cr…… Rs.37 from Customer Gross Foreign Ex.916/Above purchased THB 2960/. 4900 @ 10.055/Less.71.119/- .528/TCIL . = Rs.from customers – ABB/HO FCCASH on hand a/c Dr…… Rs.  PURCHASE OF FOREIGN CURRENCY FROM CUSTOMER Please refer to the transaction mentioned below & apply the rate for this transaction only Purchase of Foreign Currency THB 2960/. 71. 3. Cr…… Rs. 4. 25/Pay Slip to be received from TCIL of Amt..119/Customers A/c (SB/CD/CC. to be paid to customer = Rs. 4.to TCIL Cheque/Pay slip A/c (received from TCIL) (SRYCR) Dr…… ABB/HO FCCASH on hand a/c Cr…… Rs. 4. For purchase of currency from TCIL ABB/HO FCCASH on hand a/c Dr…… Rs.@ Rs.119/Rs. Amt. = Rs.40 to be sold to TCIL Gross Foreign Ex. 92/ For Sale of currency THB 2960/.SRTax of TCIL = Rs 28/Transaction Cost (AD II Commission) = Rs. 3.etc) Cr…… Rs. 11/ABB/HO PL 4104 FC Ex rate Diff.

Nirmal Parekh. Maintenance of close relatives abroad. As a part of this arrangement. As we maintain NOSTRO account in 8 different currencies and being a member of SWIFT.Why Thomas Cook? – Which mentions the inherent features that we would bring to this association. TIE-UP ARRANGEMENT FOR SALE AND PURCHASE OF FOREIGN CURRENCY NOTES This has reference to your correspondence dated 20th October 2008 regarding the above and subsequent discussion we have had with Mr. Thanking you and assuring you of our Quality Service at all times. At Thomas Cook. The proposal also includes a brief note . For Thomas Cook (India) Ltd. Additionally.THOMAS COOK (I) LTD. We look forward for your response and please feel free to get in touch with us for seeking any clarifications. we send updates on email to our business partners on the latest in the currency / retail foreign exchange market. We can provide remittance facilities (non-trade) to your bank. etc. We have enclosed a proposal that we wish to offer in order to have an exclusive arrangement for servicing the bulk foreign exchange requirements of your bank. Jayadev Rajagopal Senior Manager Foreign Exchange . Application Fees. we share a Commitment to Quality and a determination to be the Best in the Business.Mohan Tamhankar and Mr. We would also like to explore other business avenues of common interest like. Through this workshop we endeavour to equip them with the updated information on counterfeit notes and also all the necessary tips to be followed while handling Foreign Currency and Travellers Cheques. we can provide quick remittances apart from issuing Foreign Demand Drafts. • • Providing Overseas Education Loan to students referred by us. We truly believe in Exceptional Service from Exceptional People and are committed to being The First Choice Worldwide. viz University Fees. Yours Sincerely. we would be conducting a dedicated workshop for your staff on identifying counterfeit currency.

 Settlement would be effected by means of a local crossed rupee cheque to the NKGSB location immediately on purchase of foreign exchange.  For currencies where a forward purchase has not been undertaken through a telephonic call / email. TCIL would in turn treat the same as a forward purchase and the said rate would apply for those volumes. . the same is signed by the NKGSB representative and TCIL representative. TCIL may make a listing of Currency Note distinctive numbers on the purchase bordereaux or as an Annexure at the Bank's premises.BULK FOREIGN EXCHANGE SERVICES TO NKGSB LOCATIONS Rupee Settlement of Foreign Exchange purchased Principal Operating Guidelines  Thomas Cook (India) Limited (TCIL) offers to purchase foreign currency notes and encashed travellers cheques against rupee payment from NKGSB locations. All encashed Travellers Cheques would have the NKGSB stamp on the back of the cheque to assist in identification and tracking of the cheques.  The transaction currency and volumes can be confirmed through a telephonic call / email and the rate agreed would stand for the volume confirmed. In case of such a listing.  TCIL will pick up currencies at mutually agreed periodicity from NKGSB branches.  In case of an alert on counterfeit currency notes. the Rate would be agreed at the time of pick up.

RS. the same is signed by the TCIL and NKGSB representatives.18 PER US DOLLAR US DOLLAR TRAVELLERS CHEQUES .20 PER EURO Miscellaneous Currency Notes – 3% Rupee settlement for Sale of Foreign Currency Notes Principal Operating Guidelines  TCIL offers to sell foreign Currency Notes to NKGSB  In case of an alert on counterfeit currencies. In case of such a listing.RS.RS.18 PER EURO EURO TRAVELLERS CHEQUES . 0.0.  The rate would be communicated at the time of confirming the transaction.25 PER GB POUND GB POUND TRAVELLERS CHEQUES.FINANCIALS TCIL would offer the following discount on the IBR Rate prevailing at the time of Purchase For Purchases USD CURRENCY – RS. 0. TCIL . 0.28 PER GB POUND EURO CURRENCY . 0.RS.0.20 PER US DOLLAR GB POUND CURRENCY . NKGSB may make a listing of Currency Note distinctive numbers on the sales bordereaux or as an Annexure at the Bank's premises.RS. The transaction currency and volumes can be confirmed through a telephonic call / email and the rate agreed would stand for the volume confirmed.  The payment will be made by the NKGSB location to the respective TCIL location through a bankers cheque on the date of foreign currency note sales.

Effective 16th May 2008.0. 0.would in turn treat the same as a forward sale and the said rate would apply for those volumes.18 PER US DOLLAR GB POUND CURRENCY . an additional amount of Rs. .28 PER EURO MISCELLANEOUS CURRENCY NOTES – 3% Note: As per the new directive by the Ministry of Finance.28 (Transaction Fee and Service Tax) would be levied on all transactions. FINANCIALS For Sales TCIL would offer the following premium on the IBR Rate prevailing at the time of Sale USD CURRENCY .RS.RS.25 PER GB POUND EURO CURRENCY .0. purchase and sale of foreign exchange has been brought under the ambit of Service Tax.RS.

max up to Rs. 4.NKGSB Profit Margin = Rs.40 depending on our Banking relationship with the customers. 48.(NKGSB) will go to P&L 4103 Commission on AD II A/c  Same treatment needs to be carried out for Purchase of Travellers Cheque. 49.00 Cost of purchase of Currency notes from customer = Rs. but in order to provide convenience & good rates to tap our existing customer needs. IBR Less TCIL cost of US$ Purchase from us = Rs. Inter Bank Rate (IBR) of USD as on 5/12/08 is Rs. 49. 46.52 ----------. 100/. Rs. 1. So in the above case we can purchase from the customer as follows – TCIL cost of US$ purchase from us = Rs. 49.70 = Rs. our profit margin is as under – Selling cost to TCIL = Rs.e. Rs. 1 to Rs.18 ps discount from = Rs.(1) us) We can purchase from customer i. 28 Service Tax Rs. 49. 49. See the rate sheet attached dated 5/12/08 only.52 from (2) Profit = Rs. Now.52 Less .Cost of Purchase of FC notes from customer = Rs. 11 (NKGSB) Remaining Transaction cost i.52 -------. 00.  Purchase of Foreign Currency Notes & Travelers Cheque – 1.(2) So.18 (TCIL will purchase @ 0.52 from (1) Less . 2. 48. 3. 1. 10.95 (refer card rate).e. 1. Read the tie – up Agreement of TCIL.3 % Thomas Cook Chgs. .00  Also collect transaction + service tax of Rs.70. we can keep profit margin up to Rs.Example How to Quote Purchase & Sale of Foreign Currency Notes & Travelers Cheque taking today’s base rate only of Thomas Cook (India) Ltd.

1. 00.70 Add = Rs.(NKGSB) will go to P&L 4103 Commission on AD II A/c  Same treatment needs to be carried out for Sale of Travellers Cheque. but in order to provide convenience & good rates to tap our existing customer needs. Rs. 52.70.88 Add . 1 to Rs. 3. 49. 49. Read the tie – up Agreement of TCIL. max up to Rs. 50.88 from (1) Profit = Rs. our profit margin is as under – Cost of sale of Currency notes to customer = Rs. Inter Bank Rate (IBR) of USD as on 5/12/08 is Rs.88 ----------. . IBR = Rs. 4.(2) So. 28 Service Tax Rs. Now. 11 (NKGSB) Remaining Transaction cost i.18 ps premium to TCIL cost of US$ sale to us = Rs. 128. 49.e. we can keep profit margin up to Rs. See the rate sheet attached dated 5/12/08 only. Rs.e. 49.18 (TCIL will sale @ 0.NKGSB Profit Margin = Rs.(1) us) We can sale to customer i. So in the above case we can purchase from the customer as follows – TCIL cost of US$ sale to us = Rs.88 from (2) Purchase cost from TCIL = Rs. 50.88 -------. 1.40 depending on our Banking relationship with the customers.00 Cost of sale of Currency notes to customer = Rs. Sale of Foreign Currency Notes & Travelers Cheque – 1. 1.25 (refer card rate). 49. 100/. 2. Thomas Cook Chgs.00  Also collect transaction + service tax of Rs.

Copy of Passport. A2 form 2. FEMA declaration 3. Acknowledgement receipt from the customers. 2. Purchase of Foreign Currency Notes / TCs by NKGSB from the Customers 1. Request Letter in case of minor from guardian. OR Business Trip Form for Business / Conference /Business Promotion purpose. BTQ Form for Private / Travel visit. Copy of Passport & Visa 4. . 4. FEMA declaration 3. Visa & Air-ticket.Documents required for A2 transactions – Sale of Foreign Currency Notes by NKGSB to the Customers 1.

a teenager embarking on their gap year in Asia. Seize the moment Make the most of a favourable exchange rate and top up your currency card when the conversion rates are favourable.Travel Currency Card: Whether you plan on spending a romantic weekend in Venice or you’re taking a break with a few months in the Big Apple. This makes it favourable when compared to credit and debit cards that often charge you for purchases. unlike most debit and credit cards. Top five reasons to use Travel Currency Card 1. If you worry about your currency changes when you travel and dislike carrying around large wads of cash. then this could be the perfect solution. 2. If you’re sick of the additional payments so often associated with debt and credit cards and want an effective secure way to carry your currency abroad then a currency card could be for you. whether it be a family vacation in the USA. the travel money card could be the solution for all your currency needs. will not charge you every time you use it. or you regularly visit a summer house in Europe. timing is everything and a savvy attitude to your top up moment could save you a bundle. No hidden charges A currency card. the travel money card could be a wise investment for your holiday wallet. In the finance industry. When you’re travelling abroad. giving you the most for your money. . Travel money cards are a new breed of foreign exchange method.

3. Although it must be topped up with currency in advance. the travel money card could be the ideal way to simplify your travel finances and save you money. A travel currency card is safer than carrying around loose notes. or even if you fancy tracking down Route 66 this summer. it’s easy to use and could save you money as there are no charges on singular purchases and it can be used anywhere from shops to cash machines. Some card providers also return the money to you in the case of theft. 5. Travel money cards are relatively easy to get hold of. Rather than leaving it lying around in a drawer. meaning that you will be relatively familiar with how it works. whether you’re a regular traveller and want one for euros and one for dollars. 4. Some companies allow you to get a secondary card. It also has the added convenience of letting you monitor roughly how much you are spending as you place a certain amount of money on the card. or being charged to change it back you should think of it for a bonus holiday spend for the next year. of your child is going on a gap year. or want to see every major art gallery in Europe. Whether you’re spending a summer in the South of France. Convenience A travel money card works in a very similar way to a debit card. Cash n Carry If you feel uncomfortable carrying around lots of cash then this could be the ideal solution for you. They are supplied from a plethora of outlets from the Post Office to Lloyds. circumstance dependant of course. . Reuse If there is money left on your currency card after your trip then just pop it somewhere for safekeeping and then you can use it again when the moment strikes.

This means that you know exactly how much you are spending when abroad and is unlike credit and debit cards whose rates can change every time you use them. 5. Anyone can have a travel money card as long as they have a bank account to link to it. Much higher and better exchange rates than any other form of foreign currency. Euros or Pounds Sterling. No commission fees. The exchange rates are fixed at the time of loading your money onto your currency travel card.75%. No foreign exchange charges on purchases unlike credit cards. 6. You can choose to have a currency card either in Dollars. usually an extra levy of approximately 2. No foreign currency exchange rate fees. 4. You can even have a separate prepaid currency card for each different currency. This makes these cards ideal for students or young people who haven’t had time to build up a good credit rating. However as these currency cards are still fairly new many people do not understand how they work or what their benefits are. Simple to load money on to them and can be easily topped-up at any time. 8.ADVANTAGES OF CURRENCY CARDS There are many great advantages to having a currency card when you travel abroad. 1. 3. No credit checks required. As we believe that these currency exchange cards are the best way of taking travel money abroad then we would like to point out all the great advantages that they offer. . 2. 7.

You don’t need to show any ID to use a currency card. Secure. The Banking Sector is also on a Positive track for continous Growth in . 11. As always it is worth comparing the best currency cards to find the latest offers and to get the right deal for you. meaning you face less risk of losing them and being a victim of fraud. If you lost your currency card you can only lose the money that is on the card at most. As currency cards are completely separate from your bank account if your card did get lost or stolen it would contain no bank details for anyone else to use. 12. 10. Some card suppliers include protections against theft and offer replacement cards. So as you can see currency cards have many fantastic benefits and are a great choice of holiday money when you go overseas. unless an until Government collapses.9. unlike traveller’s cheques. There are. Some providers will even be able to get some or all of your money back. depending on the circumstances. This increases the safety of these cards and means that you don’t have to carry so many important documents around with you. Recommendations & Suggestions NKGSB Co-operative Bank is more favourable because Customer has No Risk that the bank may collapse as they are supported by Government. Any funds loaded onto your card and not used on your trip can be rolled-over and used on further holidays or trips. some minor disadvantages that you should also be aware of before you choose your currency exchange card. however. Also these travel money cards don’t include any identity details so anybody who found your card couldn’t use it to impersonate you.

If we are First time customer of Issuing LC then it is normal time. Each article should be written in clear and concise language that can be understood easily for practice. Most of the People are dealing with Banks as they provide a correct and safe process for transaction of money through Foreign Countries. It is also recommended that the International Chamber of Commerce must use a clearer language to evaluate its presence in the current scenario must use a clearer language on each article. The best way to eliminate the discrepancies in presentation of import and export documents for payments and financing is to proper circulation of notices that signifies restrictions made on the goods transferred and documents discrepancy can be avoided . It is recommended that for speedy recovery of faulty occurences in currency margins for bank a quick surveillance process should be implemented to over gain marketable revenues. Laws of the Other Counrty are different here only RBI is there for all money transaction and DGFT for the Trade related matter like License and Guidelines on import and export of goods to trade with for better transaction analysis. But when the same process is done for same time and importing or exporting of same goods is also done then that process is little time consuming because the bank also know it is the same thing which is getting repeated all over time.Business and Profitability. The Process of LC is time consuming because it covers all the essential paper work needed to be done for importing and Exporting of Goods and Services. In appropriate contexts of the Uniform Customs and Practice must be changed.

Although still there is an important role for traditional trade finance instruments in many geographical markets and at beginning stages of a new trading association between . trade finance banks are struggling hard to re-identify their role. the personnel involved in documentary preparation and documentary examination must be trained and certified to ensure they have enough skills to handle the import and export documents properly.and trade transitions can be made productive and successful in both level of finance for banks and bank’s clients. At lastly. Conclusion In today’s changing world.

bringing sine qua non success to both buyers and suppliers is the elixir for survival today. However. BIBLIOGRAPHY  Book Reference: Research Methodology : BY C.nkgsb-bank. Underlying the functions provided by the different players is the need for a clear and effective legal environment.com .in  www. a reflection of the customers’ own activities. The role of the government and other parties involved in trade finance will need to evolve along with the country’s economy. Trade Finance and Cash management activities are undoubtedly merging within banks. financial institutions and co-operative banks. the best long-term solution in resolving the constraints in trade financing is to encourage the growth and development of a vibrant and competitive financial system.parties in distant locations. in-transit and post shipment finance solutions. Whichever be the market of operation. it is also undisputed that there is a shift towards open account in certain markets and verticals. Only those banks that provide holistic products through a complete range of trade finance and open account management solutions not withstanding liquidity management and payment capabilities will be competent to meet the dynamic needs to customers and remain successful in the industry. KOTHARI  www.rbi. R.org. The commercial legal system must be transparent. comprising mainly private sector players. In order to compete in the dynamic international trade scenario. today's primary trade finance banks need to offer a full suite of pre-shipment.

eximguru.igate.com  www.com  www.com  www.com  www.in  www.Gtnews. www.gov.dgft.com .globip.com  www.easy-forex.unzco.Tradeevolution.com  www.clasic.Celent.com  www.

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