The Foreign Exchange Market

• Presented by Dr. S.N.L Das University Professor and Dean Fac!"ty of #o$$erce % &!siness Manage$ent 'anchi University 'anchi

Foreign Exchange • Foreign Exchange is a methods and instruments used to adjust the payment of debts between two nations that employ different currency systems. • Bills of Exchange. rafts. A nation’s balance of payments has an important effect on the exchange rate of its currency. !hec"s and #elegraphic orders are the principal means of payment in $nternational transactions. .

.Foreign Exchange • #he rate of exchange is the price in local currency of one unit of foreign currency and it is determined by the relati%e supply and demand of the currencies in the foreign exchange mar"et. • Arbitrage & Buying or selling foreign currency in order to profit from sudden changes in the rate of exchange is "nown as Arbitrages.

agencies purchasing goods and ser%ices abroad and tra%elers. go%ernment.Foreign Exchange • #he chief demand for foreign exchange within a country comes from importers from foreign goods. . purchasers of foreign securities.

Definition of Foreign Exchange $arket • A mar"et for con%erting the currency of one country into that of another country. . internet and other means of communications. • A computeri*ed communications networ" embracing all the major financial centres in the globe. where sellers and buyers of any national money can +uic"ly and efficiently carry out any desired currency exchange. • An o%er the country mar"et where buyers and sellers conduct foreign exchange business by telephone. Also referred to as a 'Forex (ar"et).

Str!ct!re of Foreign Exchange $arket .

Str!ct!re of Foreign Exchange $arket • #he world wide Forex (ar"et is a . 0urich. 3ingapore.hours of a day in at least one of the financial mar"ets of the world. /os Angles. Bahrain. .-. it is open %irtually all the . 3idney.-. 1ew 2or". #o"yo. Fran"furt. etc. 4ong"ong. hours mar"et. • /ondon.

The Foreign Exchange $arket in (ndian #ontext .

The Foreign Exchange $arket in (ndian #ontext • #he $ndian 5upee has been con%ertible on the trade account since August. • But now the scenario has been changed. since around August. . 6<< millions or so during the day. • !apital inflow on one side and the 5B$ on the other side ha%e "ept it sandwiched at 86.89 $15 to the :3.. 1ow it is fairly easy to buy :3. 677. 677-.

both on a spot and on a forward tas"s. . =arious "inds of transactions are facilitated by the Ban"s.The Foreign Exchange Transactions •#he foreign exchange mar"et in $ndia is growing in both %olume and depth.

> #he ?arliament has enacted the Foreign Exchange (anagement Act @FE(AA. the !entre Co%t.FEM)- .<<<. 6798. > #o in%estigate pro%isions of the Act. has established the irectorate of enforcement with irectors and other officers as officers of the enforcement. . 6777 to replace the foreign exchange regulation act @FE5AA. The Foreign Exchange Manage$ent )ct *+++ . #his Act come into force on 6st day of Bune.

. etc.FEM)'eg!"ation % Manage$ent ealing in Foreign Exchange. or foreign securities to any person not being an authori*ed person. no person shall • eal in or transfer any foreign exchange. • 3a%e as otherwise pro%ided in this Act.The Foreign Exchange Manage$ent )ct *+++ . 5ules or regulations made there under or with the general or special permission of the 5B$. • (a"e any payment to or for the credit of any person resident outside $ndia in any manner.

no person resident in $ndia shall ac+uire. foreign security or any immo%able property situated outside $ndia.• 4olding of foreign exchange. The Foreign Exchange Manage$ent )ct *+++ . • 3a%e as otherwise pro%ided in this Act. etc. hold.FEM)'eg!"ation % Manage$ent . own. possess or transfer any foreign exchange.

in public interest and in consultation with 5B$ impose such reasonable restriction.!urrent Account #ransaction and !apital Account #ransaction • Any person may shall or draw foreign exchange to or from an authori*ed person if such sale or drawl in a current or capital account transaction. • ?ro%ided that the !entral Co%t. may. The Foreign Exchange Manage$ent )ct *+++ .FEM)'eg!"ation % Manage$ent .

directions or order issued in exercise of the powers under this Act. . notifications. #he irector ha%e been empowered to ta"e up in%estigations.Enforce$ent Directorate • ?ertains to the establishment of irectorate of Enforcement and the powers to in%estigate the %iolation of any pro%isions of Act. rule. regulation.

-. i.Enforce$ent Directorate • #he irectorate of Enforcement is mainly concerned with the enforcement of the pro%isions of the FE(A to pre%ent lea"age of foreign exchange which generally occurs through the following malpractices.e. 8. through compensatory payments. Ac+uisition of foreign currency illegally by person in $ndia. :nauthori*ed maintenance of accounts in foreign countries. E. . D. 3ecreting of commission abroad.. $llegal ac+uisition of foreign exchange through 4awala. 5emittances of $ndians abroad otherwise than through normal ban"ing channels. .

. . which are headed by the Asstt. Cuwahati and Coa. irectors > #he irectorate has 7 sub *onal offices at Agra. Baipur.rgani/ationa" Set0U1 > #he Enforcement directorate. irectors. elhi. Balandhar. (adras. #ri%endrum. #he *onal offices are headed by the y. with its 4Fs at 1ew elhi has se%en *onal offices at Bombay. !alicut. =aranasi. 4yderabad. 3rinagar. !alcutta. Ahmedabad and Bangalore.

S.N.Presented by Dr.L Das University Professor and Dean Department of Commerce & Business Management Ranchi University Ranchi .