BFM- MODULE - A Chapter 1: Exchange Rates and Forex Business(PART-IV) *What is TT BUYING RATE *What is TT SELLING RATE *What is BILL BUYING RATE *What is BILL SELLING RATE *How to Calculate Cross rate *Concept of Exchange Margin Edit with WPS Office Scanned with CamScanner*Keep in mind that YOU ARE BANK OR BANKER. 1- TT buying rate (NOSTRO) 2- Bill buying rate 3-TT selling rate (DOCUMENTS) 4- BILL Selling rate The process of converting foreign currency liability of the exporter into Indian Rupee liability is called ‘crystallization of foreign currency export bills’. Edit with WPS Office Scanned with CamScannerIf money is coming India =buying Dollar coming to pocket =buying A customer came in branch with dollar and ask you to give rupee now dollar is coming in ur pocket so buying. If money is going out of India =Selling Dollar going from pocket =selling A customer came to branch and need dollar or euro now the dollar is going out of ur pocket selling. You send something to US (export) means goods goes out of India So Money comes to India (buying) Edit with WPS Office Scanned with CamScannerYou imported something from US means Goods came to India So Money goes out of India (Selling) Bank will earn profit only when it charge you for your buying or selling of Foreign Exchange. This charge is called Margin. Your friend ask you to sell his mobile for Rs 10000/- You said ok | will sell but you wanted to earn profit also so you need to sell it for more than 10,000/- Say you sell it for 12000 to earn profit of 2000. So the rate is 10000 +2000. Edit with WPS Office Scanned with CamScannerRs 10000 is spot rate and Rs 2000 is margin. Similarly when bank will sell dollar it will also add it's margin to get profit. So You want to buy a laptop and the market price is say 40000 Rs. Now when will you get profit? On buying at 42500 or at 35000. Obviously you will buy at 35000 to get profit so rate was 40000 and you take the discount of 5000 so final rate = 40000-5000 =35000 Similarly when bank will buy dollar it will also deduct it's margin to get profit. So Edit with WPS Office Scanned with CamScannerBUYING AND SELLING RATES: :When NOSTRO account of bank is credited before making payment to customers, TT buying rates are applied. Ex: 1- Payment of Foreign demand draft 2- Inward electronic remittance 3- Collection of Export bill 4-Cancellation of DD When payment to the customer is made before credit to NOSTRO account of bank, bills buying rates are applied. Ex: 1-Purchase or Discount of Export bill 2-Realization of export bill 3- Cheque or DD purchased by bank Edit with WPS Office Scanned with CamScannerIf Money is at Premium : If Money is at Discount : When foreign exchange is sold but no documents are handled then TT selling rate is applied. Example : 1-Issue of Foreign demand draft 2-Outward remittance 3-Crystallization of export bill(note) Edit with WPS Office Scanned with CamScannerWhen foreign exchange is sold and documentes are also handled then we use Bills selling rate. Example : 1- Retirement of import bill 2- Payment of import bill *Always remember all the Forward contact cancelation are done on opposite TT rates so Forward purchase cancelation =TT selling rate Forward selling cancelation = TT buying rate Edit with WPS Office Scanned with CamScannerWhen we are deal in market where rates fora particular currency pair (GBP/INR) is not directly available, then the price for such currency pair is obtained indirectly with the help of cross rate mechanism. We need GBP/INR but quote given are USD/INR =68.10 and GBP/USD=1.2100. le need INR/JPY but quote given are INR/Euro =0.016 and Euro/JPY:=116.50 le need SGD/INR but quote given are USD/INR = 68.2500/2600 and USD/SGD =116.50/60 (Use TT selling rate) Edit with WPS Office Scanned with CamScannerExample 4:We need INR/JPY but quote given are GBP/INR =12.2345/65 GBP/JPY=120.2432/86 (use TT buying rate) Edit with WPS Office Scanned with CamScannertnivon VSD/ INR = 6810 OOP] YSp = 1. 2h00 Ms Ge hard ell eve ye fuer | : te | @ tind ¢ nd Om on wrany = ae @ writs bee _ wap ye USD Tut USD TNE = bRloox $819 = Gauao BP ITVR= $2.u0¥g Gea) Given ty hy Fuvo = 0016 Evre/ Jpy = 16.50 @ wo nora IWR] JPY jee ® fing Common, CUNY 2S Bury @ wets EWR SHE yo Eure “PY Fura ity = Ob XY S160 — SREY ive J Bb40 Scanned with CamScannerBiv Woryind = )2 2945/6" GBP [-aPy = 12024221 BG @ ww» rad TN] sey fe Jane [sey @ uri seh An y war apy BP : GW WR TT bwying vols C buy low, sof Regd) ant. apy “nee XM 1202432 — rns oe tee ya.2gas ] 607 wh : INR a | ! bP 12.2365 $22 Soy ay TNR 3Py \252365 gue|ary = 918266 +t— x}20°2432 Scanned with CamScannerBa3) Bion - USD [tv = 68 2509/2400 USP] gud = 116S0f bo De rod suofang te [Sw tne @ We he te cme TT DDS ons Chey tow, allt Liga) GD conte. SHd SwWd x USD TNR USD Ink 4 = Tes % $B: 2600 = of BY Couey USd _ 1168) 60 Swd Scanned with CamScanner