USDINR Rate: 74.99 – 75.

01

This means the bank is willing to buy $ at Rs. 74.99 and willing to sell $ at Rs. 75.01

But if the bank wants to buy/sell $ from other banks, it will also face a similar spread

Interbank rate in India: 4%-4.01%

Interbank rate in US: 0.2%-0.21%

Bambani wants to purchase a 100M$ 6-mth forward

He calls DB and ask for quotes on a 100M$ 6-mth forward

If DB is short the forward (Bambani is long), it will have to deliver 100M$ in 6 months

So it buys 100M$/(1+0.2%/2) today

It needs Rs. [100M$/(1+0.2%/2)]*75.01 today, which it borrows for 6 months

Hence it needs to repay Rs. {[100M$/(1+0.2%/2)]*75.01}*(1+4.01%/2)

This leads to a ask quote of : 76.4375 Rs/$

Similarly, the bid quote would be {[100M$/(1+0.21%/2)]*74.99}*(1+4%/2) = 76.4095

Hence the DB quote for a 6mth forward on USDINR is 76.4095 – 76.4375

Note that this is the par value quote. At the this quote DB does not make any profit.