as UTS ao we Naa) Compilation by Nee ont: 1»). sa 2 a al eeu bee rtFOREIGN EXCHANGE Book-2 (Part-1) + Forex is a commodity. It becomes money on credit to NOSTRO ae. + Forex transactions (sale/purchase) are regulated in India under : FEMA 1999 + Objective of FEMA — To facilitate external trade and orderly management and development of inter-bank forex markets in India, « Inter-bank forex market regulated in India by : RBI « Inter-bank forex market timing ~ 9 am to 5 pm (Saturday-closed) «+ Foreign Currency rates are fixed in India by : Market forces of demand and supply (Higher demand ~ higher rate) + Foreign trade is regulated by : DGFT + Absolute difference between selling and buying rate is ‘SPREAD + Period of year in all trade related cases to be taken as FINANCIAL YEAR + Foreign exchange reserves include foreign currency assets, gold, SDRs and Reserve Tranche Position with IMF. + Wee, 18.1993, in India, direct rates are usd. : ‘Types of Persons (Residents / Non-residents) Non-Resident: As per FEMA, a person vio is not a resident, is called a nonesdent. Person resident in India (D2 person residing in India for more than one hundred and eighty-two days during the course of the ‘preceding nancial year but does not include (A) 2 person who has gone out of india or who stays outside Indi, in either case- (@) for or on taking up employment outside Inca, or | (©) for carrying on outside India a business or vocation outside India, or (©) for any other purpose, in such circumstances as would indicate his intention to stay outside Inca Foran ‘uncertain period; (8) 2 person who has come to or stayin india in either case, otherwise than= {@) for oron taking up employment in Indla, or (0) for carrying om in Inca a business oF vacation in India, or (©) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; {i)__ any person or body corporate registered or inceporated in India, i) an office, branch or agency in India owned or controlled by @ person resident outside Inca, (iv) an office, branch or agency outside India owned or conicled by a person resident in Inca; Non-Resident Indian (NRI) ‘person holding Indian passport, who has gone abroad for a gainful employment or business or vocation or for any other purpose, indicating an indefinite period of stay outside india or wo is working abroad on temporary foreign assignments. Indian students abroad, also treated NRIS from FEMA angle when they cease to be dassifed as residents Person of Indian Origin (PIO) (2) A foreigner (not being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghenistan, China, Nepal, hutan, Tran) whose parents or grand parents were a ciizen of India OR (b) a foreigner spouse of an Indan citzen OR (6) a person who held Indian pass-part, at any tine cose: 81021010 :Authorised persons An authorised person may be an authorised dealer (Category I, Il or Ill) or a money-changer. It may be an off-shore banking unit or any other person appointed under the Act. RBI appoints authorised person and can revoke the authorisation FOREX REMITTANCE FACILITIES FOR RESIDENTS AD banks can release foreign exchange to residents in India as per Rules framed wis Sec 5 of FEMA. Forex cannot be released for Schedule I transactions. For Schedule If transactions, Govt. permission is required. For Schedule II transactions RBI has delegated authority to APS to release foreign exchange up to specified limit. Beyond that approval of RBI is required. Nepal & Bhutan - No release of forex for travel to or for any transaction with persons resident in Nepal and Bhutan, In these countries any amount of Indian currency can be used. But highest denomination is Rs.100 note when amount is above Rs.25000. Requirements for obtaining / syending foreign exchange in other countries Source to purchase: AD and full-fledged money changers. (60 days in advance) Form of foreign currency: Currency notes/coins only up to US$ 3000. Balance as traveller's cheque or banker’s draft, For Iraq and Libya currency notes and coins not exceeding USB 5000 or its equivalent. For tran, Russian Federation, and other Republics of Commonwealth of Independent Countries, no ceiling, on currency notes 3. Time for purchase: Forex to be used within 60 days of purchase. To be surrendered if not to be used 4. Mode of purchase: In cash up to Rs.50,000/-. Above this, payment by way of a crossed cheque/banker’s cheque/pay order/demand draft /Debit card / Credit card only. 5. Time limit for surrender of foreign exchange: Currency notes and travellers? cheques within 180 days of return. 6, Retention of forex : Max USS2,000 or its equivalent. Coins no limit. 7. Use of International Credit Card (ICC): Use of the ICCs / ATMs/ Debit Cards can be made for making personal payments and for travel abroad in connection with various purposes only to the extent ofthe specified limits. 8. Indian currency (import/export) by residents & non-residents : Up to Rs. 25000 (Rs.10000 for Fokstan & Bangadest) each 0 oF from a country other than Nepal or Bhutan (Any amount in denomination not exceeding Rs.100 for Nepal or Bhutan, Up to Rs25000 it can be any denomination). 9. Forex from abroad: Without any limit. Where currency notes or travellers cheques exceed USS 10,000 (or its equivalent) andor the value of foreign currency notes exceeds USS 5,000, it should be declared to the Customs Authorities through Currency Declaration Form (CDF), on arrival in India Form A-2 : For remittances above $ 25000 only. To be preserved for | year. Remittance/Release by ADs without RBI reference, For Individuals under LRS Purpose for which Forex required uss] Liberalised Remittance Scheme — Per person for: (1) gif, (2) donation, (3) investment, (4) | 250000/FY property purchase (5) private visit (6) business trip (7) maintenance expenses of relative. (0.6.15) | Permitted capital account transactions under LRS: (1) opening of FC acount broad, (2) purchase of propery abroed £3) investment abroad, (4) seting up WOS-B (5) Las to NRL in FC or Inean currency No loan fo capita afc trancaction and bank account one year og Over and above LRS limit : Need] (1) Neil Treatment on self ecaration basis upto USD 1 lc (Beyond $ 1 acon the basis of | based | eslimates of dcto/naspta) {2) Studies abroad (per academic session) on self declaration basis up to USD 1 lac (Beyond $1] ~do-~ lac on the basis of estimates of university) 3) immigration, as per requirement of country, if above $100000 a ~to NS Toor & Manjot Kaur compiled BOOK 2 (Part-1) : FOREIGN EXCHANGE OPERATIONS 2 mem| | | i { | | { | | | | (FRAC can release for private visit and business trip only} Remittance/Release by ADs without RBI reference, for non-Individuals under LRS ‘Donation ~ Max 1% of forex eaining in previous 3 years of 50,000,000, [Commission to agent per transaction sale of property (5% of inward remittance) “25000. ‘Consultancy service for infrastructure 70,000,000, Consultancy service for others 1,000,000 Reimbursement of pre-incorporation expense on investment brought in India (SYS of ‘100000 investment) Convertibility ‘A currency is considered to be convertible if its holder can convert it, at any time, into gold or any other generally acceptable foreign cumency at market determined rates both for affecting payment against the current transactions and capital transactions. (Conversion of foreign currency in domestic currency and vice versa) Current account convertibility- Full convertibility was introduced on 19.08.94 (by accepting the IMF Article VI" which makes it mandatory to have no inward or outward restrictions on current account ie, the trade transactions such as import/export of goods & services). Capital account convertibility ~_Not fully convertible presently in India Current Account & Capital Account Current account transactions ~ That are not capital account transactions (ie. exportlimport of goods! services, payment /receipt of interest etc. Capital account ~ A transaction which alters 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, These include investments by RBI in US govt. securities, obtaining loan from institutions abroad by Indian firms and companies, repayment of such loans etc Exchange Rates Buying and Selling Rates ag ne om ais we poi ‘Seng Wate rom Ban view point TES ose case of ila of FC Tt happens When Bank | Ts used incase of outin of Fc. It Rappens when bank receives FC fom customer devrs Fo custome ron hs behat Examples: Purctase of expat bil or encashment of FC | Examples: Payment of import bil cr issue of foreign travels’ cheques or resp of remitance am abroad | cureney travelers cheques or sending of remiance ‘On such transaction, buying rate i sed. abroad (On such transection, sling ate is used Direct and Indirect Ratos Direct Quotation or Direct Rates niet Quotation o Test Rakes Foreign curency unt is fed (Say $) and heme curency | When forégn curency units variable and ome currency is variable (1.§ = Rs. 4350 and change to Rs. 44), sop as fed unt (2 100 = 2.20 § or 2.20 §) sn india Direct rates are quoted wel 28:93, ule : Buy high sel ow IFC depreites, 8s benefial to the Importer and when FC appreciates, benefits the exporter. Rul Buy lo el ih, ‘Spot Rates and Forward Rates ‘Spot Rates: Forward Rates ‘Spot rates are used on Spot transecions (ie. the | Foward rates are used for forward tansacions (ie @ twansactions where setlement/debvey) is completed within | transaction which 1 not a spot transaction is @ forward set 2 banking days (T+ 2 days) The rtes usd are: | ransacion), Same day settlement ~ Cash rte or rendy ate The FC rate may te at @ premium (when fture rte is Next Cay setlernen (#4 day) : Tom Rate Nghe than the Spot rte) or a a discount (when Future day setenent (142 days): TT ate or sot ate, rate is loner than the spt te) fet ‘Summary of Foreign Currency Rates Rate Description Fixed Rate Faxed rate refers to maintenance of extemal valve of @ currency at @ pre-determined level. Whenever rate differs, i is comected through official intervention of Central Banking authority ie. RB in India. Fee Iisa system where the exchange rate is fixed but is frequently adjusted in ne with the ‘market conditions. Under this system there is better confidence and liquidty and gains from free trade, Floating Iisa system where the excwnge rates are determined by the condiions of demand for DS tosituteof Banking, Chandigarh. Ph. 0172 266 5623, 3‘and supply of the foreion exchange fa the market. The rates fluctuate freely tn tre ine with the demand and supply without any restrictions on buying and seling, Under this rate no par value is deciared. Interbank rates and bid and offer rates Tn the inter-bank marke, the rates are quoted both for the buying and seling the currency Uke (43.20/40). The quoting bank indicates that it's ready to buy dolar at 5.43.20 and sel at RS 43.40. The buying rate (43.20) sls called bid rate and the seling rate (4.40) called offer rate The thumb rule forthe bank to gain aut of sale purchase is “by low and sl high. This indicates the said bank would pay lesser amount of rupees wien dollars are purchased and take more rupees, while seling the some. Card Rate (Card rates are calculated at the beginning of each day, based on the curren rates in the Inter-bank market and cross rates in the international market. The rates are quoted by the authorized dealers to the cients for various currencies for buying and selling of cheques, drafts etc. From spot rates and forward margins in various currences, the banks able to calculate the rates which are conveyed to branches. ‘Spat IRis cash / valve today or immeciately. TOM = T+" Le. rate today and deal completion by next day. Th=T/2 (ve. 48 hours), Forwar Deal today and delivery later on say 12,3,46,12 months afierwards. It can be al 8 Premium or at a discount If foreign currency wil be available at a higher price (ve, for more rupees), it caries premium. I avalable ata lower price (say for lesser rupees), it is ata discount Transaction-wise Exchange Rate Application Rate “Transaction TT-Seling rate ‘When handing of documents by bank isnot involved, TT seling rate to be applied. Tis celculated on the basis of inter bank seng rate by adding exchange margin. It is used for: + All dean outward remittances such a5 DD, TC etc. + Cancellation of bills purchased (i. cystalzation ~ transfer to collection). + Canceliation of dean inward remittances + Cancelation of forward purchase contracts Bik-saling rate + Outward remittances sqainst import documents received directly by the importers. ‘When transactions involve handling oF documents, such as payment for import documents, bits seling rate is applied, which is caloulated by adding exchange ‘margin to the TT selling rate. It's apple for: + Retirement of import bils even if proceeds ofthese bls are by way DD or TT. + Crystalisation of import docy. Bis TCH currency note —| » At the escretion ofthe AD seling rate. TT-Buying Rate Wihen no delay iS Involved In realisation of the foreign exchange by the bank or | Nostro account is already credited, TT Buying rate is applied which is calculated alter deducting the exchange margin fram the inter-bank buying rate, determined by the bank. tis used for: + Cancellation of outward TT, MT etc + clean inward remittances (TT,D0, HT) where cover already received abroad + Conversion of proceeds of instruments that are sent for collection + Cancellation of forvard sale contract = iis Buying rate Wihen some delay in realisation of foreign exchange by the bank is involved, say in +280 of purchase of bil draan on 3 customer in London, when NOSTRO acceunt \would be credited after cofection ofthe bill by the correspondent bank in London, bil buying rate appied. Such cates are calculated by aang the forward premium for transit and usance period, rounded off to lower month (or reducing the forward discount rounded off to the higher month) and reducing the exchange margin fama the spot buying rate. It's used fr: + Purchase, discount_and negotiation of bis ‘Tes/ currency nate — | Banks quote lower rates as it takes longer period for credit to NOSTRO account Buying Rate involve higher uctuation risk Rules relating to application of exchange rates Forward rate | Premium is added to spot rate (1 USD = 66.1000) to calulate the Forward rate for calculation | purchase or sale. If forward points are given in ascending order (1 M = 0.2000 / 0.2500), indicates NS Toor & Manjot Kaur compiled BOOK 2 Part-1): FOREIGN EXCHANGE OPERATIONS | | | | iprem IF forward points ace given in descending order (1M = 0,3000 f 0.2500), indicates discount. Decimal points | Exchange rate i quoted and rounded up to 4 decimal points in multiple of RS0.0025. Fs 63.12358 = 63.1225. TT and bills | TT buying is quoted, i there is no delay in realization of FC no handing of documents rate (ay NOSTRO already credited) Bis buying is quoted wien there is gap in realization ~handing of documents is volved (say purchase or discount of bi Exchange EM is deducted in cose of purchase wansacton. Its added in case of sale tansedlon. margin Forward points | If FCis at premium, to caluate,blls buying rate, bank wal use the lover month INFCis at escount, the higher month sto be taten. et Correspondent Bank Accounts Hecaunt Description NOSTRO ‘Account Of @ domestic bank ouside The country. Say, ale of SBI with Ciibank in New Yorkin $. ro caled our account with you. VOSTRO ‘Account of a foreign bank in domestic area. Say Ciibank alc with SBI in New Delhi in Incian Rupee. Also caled your account with us. TORO NOSTRO & VOSTRO account of other banks are LORO account fora bank Also called thelr account wth them, SB ac or Citbank alc in above example are LORO account for PNB. Categorisation of branches for forex business Category Description A ‘Branch that maintains NOSTRO & VOSTRO accounts 8 Branch that does net maintain NOSTRO & VOSTRO accounts but could operate such accounts maintained by A calegory branch é Braich that conducts ts business through A or 6 Gass branches Gain or toss to parties in exchange rate movements Party FE rateapprection Ferate depron porter who has forex) Gains ses [importer (who need forex) Loses ‘Gains ‘Bank with overbought postion Gains Loses Bank wth oversold postion Loses Gain Positions in Foreign Currency ‘Where no balance 5 receivable or payable (sale = purchase) | Closed poston Balance is either receivable or payable (Le. sle > purchase or | Open position purchase > sale) Where sale > purchase (oversold) Short position Where purchase > sale (over bought) Long postion ‘Qversod (Short) position is squared by Purchase of foreign curency Irrates are aporediating Bank incurs loss rates are dedining Bank gains ‘Overbousht or lng pasion is squatted by Sale of foreign currency rates are increasing Bank gains rates are decining Bank incurs loss Balance in hand during day time (ts more than balance at | Day ight postion | cose of a¢ay) (CBatance in hand at close of the day Overnight position Important ~ Position limits are fixed by Board of Directors and reported to RBI. Daylight Position limit is $ times of overnight limit (RBI 10.5.12). Aggregate gap limit can be max 6 times of capital fund of the bank. Net overaight open position limit (NOOPL) fixed by Board can be max 25% of capital fund. DS tastitute of tanking, Chandigarh Ph, 0172 266 5623 5INCOTERMS INCOTERMS or international commerce terms are a series of international sales terms, published by Intemational Chamber of Commerce (ICC), These terms have 4 groups ie, Departure (E-Group), Main carriage unpaid (F-Group), Main Carriage paid (C-Group) and Arrival (D-Group). Wef Jan 1, 2011 the 8* edition has been introduced. As per this revision, there are 11 terms instead of earlier 13 terms, Baisting (wat 7000) Reveed (L053) Baw, FCA, FAS, FOB, CFR oF CNF,CIECPT;CIP, DAR, | BxW, FA, FAS FOB, CR or CF, CI, CPT CIP, DAT, OAP, ODP es, 089/00, 007 Contact ‘eller, adon to coat of goods, Buyer boars bears Eanes Geode aval at eclony “cost ance a Fen aUbeequet ew, tasers later Free longs the sip(FAS) | Cost relaing to pace tho goods Al cost relaing 1 Gadi, Pawance aad longs the ship fran ater neg ae paced elong te ehip Free on Board Cost uptoleading te goods onthe ip | Al east relains to insurance and freight (£08 ence hse are on Bordo ie sip Cost & Freight (2F) ‘er sips caso esgtialzo —nswrance ‘Cost insurance & tig (CF) | Subsequent to shipment insurance and | His cot clans ale’ The Goals reach We eign cost patot destination ‘otvered at Frnt OAF) J Al coe i be goods veach he can | His labty sls aye Goods each To boarder — nary by ade road feni LETTER OF CREDIT Nophet Seneca ore pte) cucrcomerng ht tle ——_A Letter of eredit is a commercial | instrument of assured payment, Tt is an undertaking of issuing avert Dosim’ bank to make payment to a seller EP RERIREASIE| on production of documents sises4! stipulated in the credit, Also called Documentary Credit. in LC all parties deal it « Mechanism of Letter of Credit documents and not in goods and services. Obligations of parties in LC Applicant: On whose request the LC 1s opened (normally buyer / importer of goods). He is Liable to pay documents as per LC, delivered to him. Cannot refuse the payment on the pretext of defective goods / services. Opening bank ~ Issues LC and sends to advising bank, Liable to make payment against documents stated in LC, irrespective of recovery from applicant or not (Gets 5 banking days for checking of documents). Beneficiary: In whose favour LC is issued (seller). Can get payment from nominated bank only on dalivery of documents mentioned in LC. (Gets 21 days from shipment date to present the document), Advising bank: Receives LC from issuing bank to verify authenticity and advise LC to beneficiary. JF unable to verity, to seek instrucons from opening bank or deliver LC to beneficiary without any liability. Amendment i any, to be advised, through same advising bank. Confirming bank ~ it guarantees payment to be made by issuing bank. Lablity i ike the issuing bank, Such LC is called Confirmed LC. Nominated bank or negotiating bank : Bark that makes payment to beneficary against documents and claims payment from issuing bank (gets § banking days to check the documents). NS Toor & Manjot Kaur compiled BOOK 2 (Part-1): FOREIGN EXCHANGE OPERATIONS 6 || | | Reimbursing bank: that releases the payment on behalf of issuing bank and claims payment from opening bank ucpbc-600 Uniform Customs and Practices for Documentary Credits - 600 (referred to as UCP-600), prepared by ICC, Paris has been implemented wef July 01, 2007. It is 6th revision of Rules since first edition in 1933, ‘Some important provisions are: * UCPDC-600, shall be applicable to LCs (inland or foreign) that expressly indicate that these are subject to UCPDC-600, + If provisions of LC and UCPDC are contradictory, LC will prevail + Branches of a bank in different countries, are treated as different banks. ‘* A credit is irrevocable even if there is no indication to that effect. + On or about ~ Means an event is to occur during 5 calendar days before or 5 calendar days after the specified date, both start and end dates included, * The terms ‘first hal? and ‘second half of a month means 1St to the 15th and the 16th to the last day of the month, all dates inclusive * ‘Beginning’, ‘middle’ and ‘end? of a month means the 1St to 10¢M, the 11* to the 20th and the 21St to the last day ofthe month, all dates inclusive ‘+ Branches of a bank in different countries are considered separate banks. * I there is no indication in the credit about insurance coverage, amount of insurance coverage must be at least 110% of CIF or CIP value of the goods. ‘© Unless otherwise stipulated, insurance policy in the currency of LC only. + Nominated bank and issuing bank shall each have a max of S banking days following the day of presentation to determine if the documents are in order. ** Confirming bank’s lability is similar to the issuing bank. + Advising bank's obligation is to check apparent authenticity of the LC, Amendment if any, to be ‘conveyed through same advising bank, * If dispatches are in instalments, the LC will cease to operate if there is default + Beneficiary should present the documents within expiry period of LC but not later than 21 calendar ays after the date of shipment. * A bill of lading, must indicate that the goods have been shipped on board a named vessel, atthe port of loading stated in the credit. + Variation in Amount, quantity & unit price - If LC mentions any of these as about or appx, variation can be 10% (+) or () + Variation in quantity ~ where LC does not state quantity in terms of a stipulated no. of packing units or individual items and the total amount of the drawings does not exceed the amount of LC. the quantity variation can be 5% (+) or (). + Variation in days ~ if date is stated as “on and about’, variation of 5 calendar days, before or after. * Ifinsurance policy is dated earlier to date of shipment it can be accepted provided cover is effective from date of shipment + Documents dated pi 10 LC can be accepted during validity period for negotiation, * Partial drawings or shipments are allowed. * A transferable LC may be made available in whole or in part to 2nd beneficiary atthe request ofthe first beneficiary. It cannot be transferred atthe request of a second beneficiary. DS institute ot anking, Chandigaeh Ph, 0372 266 5623 7TYPES OF LETTERS OF CREDITS DA (Usance) or DP LCs: DA Les are those, were the payment is to be made on the maturity date in terms of the credit, The ‘documents of tte to goods are delivered to applicant merely on acceptance of documents for payment. DP Les are those where the payment Is made against documents on presentation. Irrevocable & Revocable LCs: In irrevocable LC, the issuing bank can amend or cancel the LCi the beneficiary and confirming bank give consent. ‘A revocable cre is one that can be cancelled or amended at anytime without the prior knowtedge of the beneficiary. If the negotiating bank makes payment to the seller prior to receving natice of cancelation or amendment, the issuing bank must honour the laity. With or without recourse L¢s: ‘where the beneficiary holds himself lable to the holder of the bili dshonoured, is considered to be with- recourse. Where he does not hold himself ficble, the credit is sald to be.withaut-recourse. &° per RBI dective dated Jan 23, 2003, banks should not apen LCs and purchase / discount / negotiate bls bearing the ‘without recourse’ clause. A restricted LC is one wherein a specfic bank s designated to pay, accept or negotiate Confirmed LCs: A credit to which a bank at the request of the issuing bank, adds its confirmation that payment will be made. The liaiity of canfining bank is similar to Issuing bank. It negotiates documents if tendered by the beefiiay. ‘Transferable LCs: It is the LC where the beneficiary makes available in whole or part, the LC to one of ‘more other partes (called 2 benefidary). For partial transfer to one or more second benefcaryfies the credit must provide for partial shipment. 11s lesfereble only once. 2" beneficiary cannot trenstr it turther. ‘tcan transfer hack the unused part to 1% beneficiary, ‘A back to back creditis the 2% LC opened by the 1* beneficary In favour of bis supplier on the strength of the original LC. The terms of such LC would be identical, except that the price may be lower and vality earlier. A ted clause credit also referred to ‘packing or anticipatory credit has a clause permitting the correspancent bank in the exporters country to grant advance to boneficiory at issuing bank's responsiblity, “These advances are adjusted from proceeds ofthe bls negalial A green clause LC permits the advance for storage of goods in 2 warehouse in adtltion to pre-shipment advance, ‘Standby credits is sila to performance bond or guarantee, but issued in the form of LC. The beneficiary an submit his Gaim by means of a daft accompanied by the requisite documentary evidence of non-nefar= mance, as slivlated in the cre, Revolving Credits: These provide that the amount of drawings made thereunder would be reinstated and made avalable to the beneficiary again and again for further drawings during the currency of credit. It ig used lke CC account. Instalment Credit: itis a letter of credit for the full value of goads but requires shipments of specific ‘quantities of goods within nominated period and allows for partshipment. Ir case any instalment of shipment |s missed, credit will nat be avatable tor that and also for subsequent instalment, unless of LC permits the same. Types of Bill of Lading (BL) +Claused Bill of lading -Defect in packing of goods mentioned on BL by the shipping company. (defective document) +Clean Bill of lading -No defect in packing of goods mentioned on BL by the shipping company. | (defect free document) | «Stale Bill of lading Last date for negotiation has expired which can be maximum 21 days. (Defective document) On-board Bill of lading ~means where the goods have been put on board of the ship NS Toor & Manjot Kaur compiled BOOK 2 (Part-1): FOREIGN EXCHANGE OPERATIONS 8Exports from India Export trade is regulated by DGFT under Govt. of India. AD-I banks conduct export transactions in conformity with the Foreign Trade Policy, the Rules framed by the Govt, of India and the directions, issued by RBI Realisation and Repatriation of export proceeds: (@ Units in SEZs: maximum 9 months; (b) Exported to a warehouse established outside India : Max 15. months from the date of shipment of ‘goods; and (6) Other cases: 9 months. Diamond Dollar Account (DA) : Firms and companies dealing in purchase / sale of rough or cut and polished diamonds etc. with a track record of at least 2 years in import / export of diamonds, gold Jewellery ete. and having an average annual turnover of Rs. 3 crores or above during the preceding 3 licensing yeats (April to Marchi) can transact their business through DDA. They can open maximam 5 Diamond Dollar Accounts with their banks. Offices and Immovable Property for Overseas Offices: For setting up ofthe office, AD-I banks may allow remittances towards initial expenses up to 15% of the average annual sales/incomte of turnover during the last 2 financial years or up to 25% of the net Worth, whichever is higher. For recurring expenses, remittances up to 10% of the average annual sales/income or turnover during the last 2 financial years may be sent. ‘Advanee Payments against Exports: Exporter shall ensure that - i. the shipment of goods is made within one year; i, the rate of interest payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points Long term supply contracts- advance payments for exports : Banks can allow up to 10 years. ROL max LIBOR + 2%, Ifamount is USD 100 million or above, RBI to be informed immaly. Banks can issue BG/Standby LC up to 2 years which can be rolled over 2 years. Part Drawings /Undrawn Balances: Where it is the practice to leave a small part of the invoice value undrawn for payment after adjustment due to differences in weight, quality, etc. to be ascertained after arrival AD-I banks may negotiate the bills, subject to a maximum of 10% of the full export value. Opening / Hiring of Ware houses abroad: Banks may grant permission for opening / hiring warehouses abroad if export outstanding does not exceed 5% of exports made during the previous financial year and applicant has @ minimum export turnover of USD 100,000/- during the last financial year Pre-Shipment Credit ‘+ Exporter has importer-exporter code no. (IEC No.) allocated by DGFT, he is not on caution list of RBI, on restricted list of ECGC. « Its allowed on the basis of confirmed order, letter of credit or other evidence for export of goods from India. Can be allowed for exhibition and sale abroad. « Period isto be decided by the bank on the basis of shipment dates, + ROL min base rate of the bank. On ad hoc limit, no additional ROL + Amount is linked to FOB value or domestic cost of goods. Where domestic cost is higher than FOB, value advance can be more than FOB value. In such cases, for advance beyond the FOB value, concessional interest not available. This portion tobe adjusted with in 30 days. * Liquidation is out of export proceeds or EEFC account. If not adjusted from post-shipment proceeds for 360 clays, it will nat be allowed concessional rate from the beginning. # Itcan be a demand loan or a running account (to be adjusted on First in First out basis). Running account not for sub-suppliers. DSS institute of tanking, Chandigarh Ph. 0172 266 5623 9*» Contract or order can be substituted. + Pre-shipment credit for deemed exports is available at same concessional rate of interest, Post-Shipment Credit + Delay in submission of shipping documents : If documents are presented after the prescribed period of 2idays, banks may handle them without prior approval of RBI if satisfied with the reasons for the delay. « Export proceeds realisation period: Demand bills - normal transit period. For usance bills max- 9 months (including NTP and grace period) 20.05.13. For SEZ exporters, 100% EOU, Status Holders -9 months (17.11.14) and for warehouse exports ~ 15 months. + Rate of interest: ROT min base rate of the bank. On ad hoc limit, no additional ROI. For export credit in Foreign Currency, itis at discretion of banks w.e.f5.5.2012. + Normal transit period means period normally involved from date of negotiation to credit to NOSTRO al. It is fixed by FEDAL + Overdue bill in case of demand bill means the payment of which has not been made before expiry of normal transit period. In case of usance bill, where the payment has not been mace on due date + Follow-up of Overdue Bills : Where bills remain outstanding, beyond the due date and the exporter fails to arrange proceeds within 12 months or seek extension of time, matter showld be reported to RBI, The copies of GR Forms should, be held by banks until the full proceeds are realised * Report to RBI: Banks should furnish a statement in Form XOS, to the RBI (end of June and Dev), siving details ofall export bills outstanding beyond 6 montis from the date of expor, in triplicate, within 15 days ftom the close of the relative half-year. Separate report not to be sent from Dec 2015 ‘onwards as information has been integrated in EDPMS, + Crystallization : It means conversion of foreign currency liability to rupee liability to cover the fluctuation risk when a bill becomes overdue. The period of crystallization as per discretion of the bank concerned (from Aug 2005 onwards). Itis done at TT selling rate. + Banks can allow payments for export of goods / software received from 3rd party (party other than the buyer) subject to certain conditions. Extension of time and Self write-off by the exporters: An exporter who has not been able to realise the outstanding export for more than one year, may either self write off or approach the AD Category ~ I banks for write off of the unrealized portion, subject to certain conditions. The limits prescribed for “write-offs” of unrealized export bills are as under: 2. Self “write-off” by an exporter (Other than Status Holder Exporter) 5% b, Self “write-off” by Status Holder Exporters 10% ¢. ‘Write-off” by Authorized Dealer Bank- 10% of the total export proceeds realized during the previous calendar year and will be cumulatively available in a year. + Within a month from the close of the financial year, exporters should submit a statement of export proceeds due, realised and not realised to the AD-I banks concerned. ‘+ Extension of Time: AD- I banks can extend the period of realisation of export proceeds beyond 12 ‘months from the date of export, up to a period of 6 months, ata time. For extension beyond one ‘year, the total outstanding of the exporter does not exceed USD one million or 10% of the average export realisations during the preceding 3 financial years, whichever is higher. * Write off by AD Category ~ I banks: Banks can allow write off if the amount has remained ‘outstanding for one year or more and the aggregate amount of write off allowed during a financial year does not exceed 10% of the total export proceeds realised by the concerned exporter during the previous financial year. NS Toor & Manjot Kaur compiled BOOK 2 (Part): FORETGN EXCHANGE OPERATIONS 10 | | en s‘+ AD- banks are to send a statement in form EBW to RBI, indicating details of write offs etc, every half year ended 31st March and 30th September within 15 days from the date of completion of the relevant half year. «i by Customs Deptt, ROI min base rate of the bank, + Export credit limit can be fixed in FC also to take care of impact of fluctuation of FC rate. + Status Holders can export freely exportable items fee of cost up to RS.10 lac or 2% of annual export realization of 3 years (DGFT - 4.6.2016) Gold Card Scheme for Exporters Eligibility criteria for issue of gold cards: ‘A credit worthy exporters (Incuding inthe small and medium sector) with good track record are eligible. ‘Loan accounts have been Standard a/c continuously for a period of 3 years to be treated good track record. +Eiporters black listed by ECSC or on RBI'S defaulters/caution Ist or making losses fr past 3 years are nat eligible Credit limit fixation for issue of gold card: On the basis of anticipated export tumover, the banks can determine need-based finance with a liberal approach, ‘It-pringple imit will be sanctioned for a period of 3 years with a provision for automatic renewal, + Gold Card holders would be given preference in the matter of granting of packing credit in foreign currency. ‘Time limit for disposal of applications: Fresh proposals : 25 days, renewals : 15 deys and adhoc limits: 7 ays, Stand-by limits: A limit of not less than 20% of the assessed limit may be made availabe to facilitate lugent creit needs for executing sudden order. Rate of Interest : Concessional rate on_post-shipment rupee credit, may be for @ max period up to 365 cays. For loans against FCNR-B funds, in Foreign currency, preference to them, Export Declaration Forms Exporters have to declare for all exports before the Customs authority, full export value of the goods (Garlier exports were exempted from declaration up to $ 25000) w.2.£1.10.13. For export of goods, the declaration (in duplicate) is before the Commissioner of Customs. Duplicate copy is given to ‘exporter, who submits it to Customs along with cargo. After certifying the quantity for shipment, this duplicate is returned to exporters for submitting to AD at the time of negotiation. In case of software export, the declaration is before the Designated Official of Ministry of Information Technology in ‘tplicate. Presently there are 4 types of export declaration forms in use, as under: Form Where to use/ where to submit/No. of copies Export Declaration | Exports are made otherwise than by post and Custom Office fs not computerized Form (EDF) | fie. where €D1 factity & not available). Prepared in duplicate. Submitted. to {earlier GR) Commissioner of Customs. SDF Form Ie has been dispensed with as requirement subsumed in shipping Bill (RBI 14.05.15) Earlier it was used when exports were made otherwise than by post and Custom Office has EDI facility. EDF (earlier PP | When exports are made to any country by post parcel. Prepared in Duplicate, Form) Submitted to AD Bank. Vicon orm | vnen exper are made by post prcel under eangenens to ease proceed | {heough postal channels on ale payable o cas dele bass, SOFTEXFom [in case of export of conputer sofware & nonphyscally Yorn. Prepared in Triplicate. Submitted to Ministry of IF (GOH) EXPORT CREDIT REFINANCE SCHEME Scheme replaced by system level uy facty wes, 7.22105, DS institute of Banking, Chaadignth Ph. 0172 2665623, nInterest rate in export credit 41. Cannot be below Base Rate ofthe bank. 2. For ad hoc limits, no aditional interest to be charged. 3. ROI for Export credit in foreign currency (PCFC) is at discretion of banks. Celing ROI on FC fine of creot availed by bank LIBOR + 250 bps. Interest Equalization Scheme for export credit Palcy period : 01.04.15 to 31.03.20 ighle exports : 416 tai ines + MSM enterprises (not avaliable to merchant exports) Rate of subvention = 3% (for the periad of date of disbursement til date of adjustment) Amount 0 be claimed from RBI on monthly basis within 15 days from close ofthe month. IMPORTS * Proof of import : Exchange Control copy of the Bill of Entry (BEF), Postal Appraisal Form or Customs Assessment Certificate, et. to be submitted to AD for import payment, if the amount is above USD 100000. (BEF replaced by Integrated Declaration w.ef. 1.4.16 being part of IDPMS) * BEF Statement: For delayed / non-submission of proof of import for 6 months or more, HY report for June & Des to be submitted by banks, to RBI within 15 days. merged in IDPMS in 2016) ‘+ Remittances for usance imports are to be completed within 6 months from date of shipment. * Advance remittance for services up to USD 5 lac without eny counter guarantee from International Bank can be made, + Advance remittance for goods up to USD 5 million without any counter guarantee from Intemational Bank can be made. + Advance payment for Merchant Trade Transactions up to USD 200000. + Crystallization : Import bills: If drawn under LC and_is not retired within 10 days, account of iporter is to be debited on 10 day (as per FEDAI rules). * Application form for import payments : Form A-1 when the amount of payment is above US $ ‘5000 (raised from USDS00). Plain paper up to $5000, Form A-I has been discontinued in May 15, + Payment of import bills directly received by importers: Normal importers-$300000, Status holders 10 ceiling, non-status holder of rough diamonds and rough precious and semi-precious stones - § 300000. ‘+ ADs can approve trade eredit or open LC or issue BG, LoC, LoU up to USD 20 million for capital ‘goods import period I-3 year (5 years in infrastructure). ‘« Importers can book forward contract for purchase under Past Performance Route up to 100% of eligible limit ie. 3-yr actual import tumover, External Commercial Borrowing (ECB) & TRADE CREDITS ‘Trade Credits : It can be inthe Form of Supplier's Credit or Buyers’ Credit. Importers can arrange trade crecit in Rupees from overseas lender. Tt can be permitted by AD-1 banks up to USD 20 milion per import tansaction. The period 's max 1 year for non-capital goods/services and 5 years {or capital goods /servoes ‘Supplier's Credit: Crecit for imports into India, extended by overseas supplier af for period less than 3 years. (3 years or above is part of ECB) Buyer's Credit: Greit for imports into Inia, arranged by buyer from a bank abroad for @ maturity of less than 3 years. (3 years or above is part of ECB) AD banks can approve trade credit up to USD 20 bilion for maturity up to 1 year (S years in case of capital ‘goods as classified by DGFT, forall sectors), External Commercial Borrowing (Nov 30, 2015) ECBS are borrowinas by eligible resident entities from recognised non-resident entities. ECB can be Bank loans, floating rate notes, fixed rate bonds, non-convertible optionally convertible or partially convertible reference shares / debentures, Buyers’ credit, Suppliers’ cred, FC Convertible Bonds (FCCBS), FC Exchangeable Bonds. Types or Tracks : The framework comprises 3 tracks: 1S Toor & Manjot Kaur compiled BOOK 2 (Pat-1): FOREIGN EXCHANGE OPERATIONS. 2 arti a aetna aoe WER Goo -a Flat“Track F: Medium term foreign currency denominated ECB with Minimum Average Maturity (MAM) of 3/5 years ()3 years upto USD 50 milion and i) 5 years beyond USD 50 milion or Rs equivalent) ‘Track TT : Long term FC denominated ECB with MAM of 10 years. ‘Track IIT: Indian Rupee denominated ECB with MAM of 3/5 years (as per Treck-1). Individual ECB limits under automatic route for all 3 tracks: 1. Upto USO 750 milfon or equivalent for the companies in infrastructure and manufacturing sectors; 2. Upto USO 200 milion or equivalent for companies in software development sector; 3. Upto USD 100 milion or equivalent for entities engaged in micro finance activities; and 4. Up to USD 3 milion for Stertups (27.10.16) 5._Upto 500 milion or equivalent for remaining entities. IMPORTANT FOREX RETURNS Tame Period ‘Objective ‘eRowurn | Fortignly on 15° and lat | Trnsacians avr execs. Comcliated bank wide Tetum Oy ay, within? ey OE THY Jun & Dec within 15 | Oustanding export ls »& months, Submiivon wet Dac 15 Baconinued a2 ays Infomation §roitored in EPH. z oF THY -Tun& Dec within 15 | Inport in respec of wich documentary prGel Re ot been aDmited by re ay nerter. ew HY - Aan Dee witin 5 | Oxon ils writen oF ys TOC hoaty Non-resident depos comprehensive Sage retum en WAUFIR dezaals end tansadiens ina month (STATS @ STAB merged inthis and dbconinved om Mar) mL Fac Foreign cuency balances of Autborted Dears and rupee balances OF nen resent bls ani Eseral Commerc Boroninae aly eps, Posons, ané Slences (PB): Gaps of feign cavern, net omen exchange postions and cash balarces iat Cancellation and rebooking of Forward Contracts If Rupee is one of the currency, for exporters, it is allowed up to 50% of contracts booked in FY to cover exports. For importers, it is up to 50% (earlier 25% before 27.05.14) of contracts booked in a FY for import. Limit for residents, firms, companies up to USD 1000000 (earlier 250000) on self declaration basis, ‘Asian Clearing Union Asian Clearing Union ~ ACU which started functioning wef. 1.1.1996, has 9 counties (India, Sri Lanka, Pak, Bangla Desh Nepal, Bhutan, Iran, Mynamar, Maldives-1.1.10) as members. The HQ is in ‘Tehran. They settle accounts amongst themselves in ACU $ or ACU Euro which will be = 1 US $ ot | Euro, respectively for import and export transactions, ‘Swap: Exchange of forex flows maturing at diferent time period. Brample - Sale of FC foward & simultaneous purchase of FC spot & vice-versa Arbitrage: Simultaneous sale of one currency in one market (with bigher FC rate) and purchase of seme currency in another market having lower FC rate. STAR EXPORT HOUSE CATEGORIES ‘Sper Foreign Trade Policy 2015-20, the categorization depends on total FOB (FOR - for deemed exports) export performance during current plus previous 3 years (taken together) upon exceeding limit below. Export erformance is necessary in a least 2 out of 3 years: ‘Category FOB value in USD + ‘One Star Export House ‘USD 3 million | “Two Star Export House. ‘USD 25 milion “Three Star Export House {USD 100 milion Four Star Exgort house ‘USD 500 milion Five Star Export House USD 2500 milion “++ For deemed exporters, FOR abe taken as cnveredin to USD a ale applicable as on Apr 01 DS testiute of tanking, Chandigarh Ph. 0172 266 5623 8FC Deposit accounts for Non-Residents Foreign Currency Non-Resident (Bank) Account (FCNR ~(B) A/c) ~ (wef 15.5.1993) 1, Account holder : NRI or PIO (RBI approval for Bangladesh/Pakistan citizens), 2. Joint account : Can be in the names of two or tore NRIs. With close resident relatives, joint account (Former or Survivor) can be opened, Relatives can operate ale as power of attorney holder for local withdrawals or remittance abroad in name of account holder. 3. Currencies : Any convertible currency, 4. Type of account: FDR only (a) 1 year and above less than 2 years (b) 2 years and above less than 3 Years (c)3 years and above less than 4 years (d) 4 years and above less than 5 years (e) 5 years only. RD, SB or CA is not allowed, 8. Repatriation : Principal and interest permitted, §. Souree of funds: Foreign Inward remittance (FIR) or transfer from NRE-RA account (et TT selling rate) 7 Interest rate and interest payment : Ceiling rate fixed by RBI (presently LIBOR +2% (1 year to less than 3 years) and LIBOR + 3% (for3 years to 5 years w.e.f 01.03.14). No interest payment if cancellation before one year. For one year deposit, no compounding of intrest. For above one year, compounding on 180 days basis, Interest payment on 360 days in year basis. On floating ROL, halFyearly reset is allowed. §. Fund or non-fund Rupee loan against FDR : Up to value of FDR with proper margin (Oct 12, 2012) to depositor or 3°4 party. Margin / interest rate bank discretion, Loans proceeds to be credited to NRO account, Loans can be repaid from Fresh Inward Remittance, FCNR, NRE or NRO account balances. Banks should not mark any type of lien, director indirect, against these deposits, Premature Payment net allowed if loan is granted. FC loan can be given in India or abroad. 9. Nomination facility is available. 10. Income Tax : Interest is not taxable. TDS not applicable, 11, Additional ROT not available to Staff w.e-. Jul 18, 2012, 12, At the request of the depositor, banks can permit remittance of the maturity proceeds to third parties outside India, provided bank is satisfied about the bonafides of the transaction, Non-Resident External (Rupee Account) 4. Account holder : NRis or P[Os (RBI approval for Bangladesh/Pakistan citizens), 2 Joint acenunt : Can be in the names of two or more NRIs. With close resident relatives, joint account (Former or Survivor) can be opened, Relatives can operate alc as power of allemey holder for local withdrawals or remittance abroad in name of account holder, 3. Currencies : Indian rupee by converting foreign currency, 4. Type of account: Current, saving or FDEVRD. FDR period at discretion of banks, ‘5. Repatriation : Principal and interest permitted, § Souree of funds: Foreign Invard remittance (FIR) or transfer from FCNR-B account (a! TT buying ‘ate) or transfer of repatiable funds (current income like rent, dividend, pension, interest) from NRO acoount. 7. Interest rate and inferest payment : Bank discretion but not more than domestic deposit (deregulated we.f. Dec 16, 2011). ‘8. Rupee loan : Same provisions as in case of FONR-B account, 9. Nomination facility is avaitable 10. Income Tax : Interest is not taxable. TDS not applicable, 11, Additional ROI not available to Staff'w.e.£. Jul 18, 2012, 12. Important Notes (a) PoA holders cannot credit foreign currency notes and foreign travellers NS Toor & Manjot Kaur compiled 800K 2 (Part-4) : FOREIGN EXCHANGE OPERATIONS 4 1 2 u fe or 3 a in pe Kcheques in NRE accounts. (b) Banks may credit the proceeds of account payee cheques! demand ras / bankers’ cheques, issued against encashment of foreign currency to the NRE account of the RI account holder where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category-1/ Category-I. Non-Resident Ordinary Account (NRO) 1, Account holder : NRs or Person of Indian Origin (individuals & not entities from Bangladesh, can be allowed without RBI permission w.e.f, 11.2.13 ~ Pakistan citizen not to be allowed). Foreign students can also open NRO accounts (RBI 20.09.13). 2, Joint a/c: Allowed with resident individuals. 3. Currencies : Indian rupee. 4. Account: Current, saving, RD or FDR. FDR 7 days to10 years. ‘5, Repatriation : Interest and current income is permitted. Remittance, including of sale proceeds of immovable property also allowed @ USD 1 million per financial year for bonatide purposes. 6. Source of funds: New account can be opened with Foreign Inward remittance. Existing account of ‘an NRI opened when he was resident, will be designated as NRO by the bank. 7. Interest rate: Bank discretion, Not more than domestic deposit interest rates. 8, Nomination facility is available, 9. Income Tax : Interest is taxable and TDS provisions are applicable both for all interest payments (@DISB account). 10. Transfer of repatriable amount from NRO to NRE permitted (May 8, 2012) within USD 1 million /FY subject to payment of tex, as applicable. 11. Additional ROJ not available to Staff w.e-f, Jul 18,2012. 12. Rupee loan : Up to value of FDR with proper margin to depositor or 3 party, FC loan of loan abroad, not permitted, Power of attorney : The facility of operation of accounts by PA holder is permitted for local withdrawals or remittance abroad in name of account holder. ‘Spectal Non-Resident Rupee (SNRR) account 1, Persons resident outside India but doing business in India can open max for 7 years. 2. Non-interesting bearing account. Debit or credit incidental to business. Accounts of Foreign Students in India 1. NRO account can be opened on the basis of passport, photo and admission letter, for KYC purpose. 2, Local address proof to be provided within 30 days. 43, Daring this period monthly withdrawal will be up to Rs.50000 and foreign inward remittance up to USD 1000. On receiving local address proof, normal operations can be allowed, 'NRO Accounts of Foreign Nationals of Non-Indian Origin on a |. NRO (current/savings) le allowed - max period of 6 months, 2. Source and use of funds: Funds remitted from outside India through banking channel or by sale of forex brought into India. All payments to residents exceeding INR 50,000 by means of cheques / pay orders / demand drafts. 3. Remittance : The balance may be converted by AD bank into foreign currency for payment to the account holder atthe time of his departure from India provided the account has been maintained fora period not exceeding 6 months and the account has not been credited with any local funds, other than interest accrued thereon. If account maintained for more than 6 months, account holder to seek permission on plain paper fom Regional Office of RBI. Accounts of Foreign nationals resident in India Foreign nationals resident in India can open and maintain a resident Rupee account in India in terms ‘of Notification No.5/2000-RB dated May 3, 2000 viz., Foreign Exchange Management (Deposit) it to India DS tasttute of Banking, Chandigarh Ph, 0372 266 5623 45Regulations, 2000, as amended irom time to time, ‘Accounts for Nepal & Bhutan 4) Whon a person resident in India leaves India for Nepal and Bhutan for taking up employment or for carrying on business or vocation or for any other purpose indicating his intention to stay in Nepal and Bhutan for an uncertain period, his existing account will continue as a resident zecount. Such account should not be designated as Non-resident (Ordinary) Rupee Account. ) ADs may open and maintain NRE / FCNR (B) Accounts of persons resident in Nepal and Bhutan ‘who are citizens of India or of Indian origin, provided the funds for opening these accounts are remitted in free foreign exchange, Inerest eared in NRE / FCNR (B) accounts can be remitted only in Indian rupees to NRIs and PIO resident in Nepal and Bhutan. £ ADs may open and maintain Rupee accounts for a person resident in Nepal and Bhutan FC Accounts of residents Resident Foreign Currency Account (RFC) 1. Account holder: A resident in India who was earlier an NRI (atleast one year stay abroad) and became resident again on or after 18.04.92 2, Source of funds: (a) Foreign exchange received as pension/ superannuation /other benefits from employer abroad (b) Realisation of assets held abroad (c) Foreign exchange acquired as gift or inheritance from person who was NRI (d) Existing FCNR account or NRE-ED to be converted to RFC ED at discretion of account holder before or after maturity 3. Joint account : It can be single account. With close resident relatives, joint account can be opened as FORMER or SURVIVOR account. 4. Type of account : Savings, Current, Fixed Deposit (min 7 days and max 10 years) 3. Repatriation is permitted. 6. Interest rates : The banks are free to determine interest rates. 7. Use of funds: No restrictions Resident Foreign Currency (Domestic ) Account RFC(D) 1, Account holder: Resident Individuals 2. Source of funds: Foreign exchange acquired, (a) while on a visit abroad (b) from any person on visit to India or honorarium or gift or for services or settlement uf ny lawful obligation (¢) by way of honorarium or gift while on a visit abroad (4) representing unspent foreign exchange acquired during travel abroad. Amount to be converted in rupees, latest by last day of next month, 3. Type of account : Only current account + No interest payable on this deposit 5. FC amount credited to the account during a month, to be converted into Rupees by last day of next month, 4. Interest 6, Use of funds : For all permitted transactions Exchange Earner’s Foreign Currency Account(EEFC Account) 1. Account holder : Exporters of goods and services, resident in India 2. Source of funds : Up to 100% of forex earnings can be kept in the account, But amount credited in 4 particular month, to be converted in rupees, latest by last day of next month, 3. Use of funds : Balance can be transferred to NRE/FCNR account on change of status from resident tonon-resident, Funds can be used for adjustment of pre-shipment loans, 4. Loan: No loan can be allowed against the balances in such account, 5. Type of account ; Only current account. It can be a joint account (FORMER ot SURVIVOR) with close resident relatives, NS Toor & Manjot Kaur compiled BOOK 2 (Par-1): FOREIGN EXCHANGE OPERATIONS. 166. FC amount credited to the account during month, to be converted into Rupees by last day of next month, 7. Interest : No interest is payable Diamond Dollar Accounts 1. Account holder : Importer/exporters of diamonds / jewellery with a track record of 2 years 3. Average annual tumover : 3 cr and above for previous 3 licensing years 4,No. of account ~ max 5 INFORMATION ABOUT FOREIGN CAPITAL: ‘Oversees investment i fer Indian corpanies' investment in jit venture / whol ved substiar abroad : 400% of ‘net worth (erie £008 tl 3.7.14). 1f amounts USD 1 billon or above, REL pemisson i equred. 2. Portfleivestment abroad in listed overseas companies by Ese Indian comparies: SOY of net worth (Sep 07), 3. Aggregate eng on overseas investment by mutual finds 7 billion USD “%- Remittances on 2acount of donations by copoetes for specified purposes, subject toa lm of 1 percent of her foreign exchange earings during the previous thee fnncial years or US § 5 milfon whichever I lower. 5Indian camoanies can remit upto US $ 10 miflon for consultancy services for executing infasructue projects. 6 Remittance of foreign exchange tovards rembursement of greincorporation expenses incured in India wheve the remitance does not exceed 5% ofthe inestment brought into India of US § 100,000 whicheer i Nghe, onthe bass of certain from statutory audtrs. 7,0 Catt banks can borow fom oversees max upto 100% of TI unimpaired capital or USD 10 milion, whichever is Higher. Beyond 50% level, only for min maturity 3 years and CAR of 12% (10.09.13) 8 Limits to book forward contracts: Al ingividuals, fms, companies USD 1000000 (earler 250000 upto OctS) witout documentation. 9.NRI or freaners having asses in India can cenit up to {milion USD ina FY. DS institute of tanking, Chandigath Ph. 0472 266 5623 ”gooeegaoesgancegancs OBJECTIVE TYPE QUESTIONS TEST-1 : FOREIGN EXCHANGE BASICS 1n Inca, foreign exchange transactions are regulated under __Act, w.ef. 10,2000? Foreian Exchange Regulation Act Foreign Exchange Management Act er Act Banking Regulation Act In India, the regulator of foreign exchange markets and transactions is: Reserve Bank of India Director General Foreign Trade Security & Exchange Board of India Bl and SESI together In India, the foreign currency rates are fixed by: RBI Foreign Exchange Dealers’ Assocation of India Director General Foreign Trade Market demand and supply forces Under Foreign Exchange Management Act (FEMA) 2000, the foreign exchange transactions are classified 25 (1) capital account trensoctions (2) current account transections () trade transactions: 1to3 al 1 and 2 only 1 and 3 only Zand 3 only Copital account transactions are those transactions that result into chan in (find which one 1s not correct): ‘asset positon of resident Indian, outside India only lability postion of resident Indian, outside India unly asset or liability poston of non-residents, in India only all the above Which ofthe folowing foreign exchange transaction is nota curent account transaction? payment of fee of Indian student toa foreign university ‘mecical treatment of resident Indian, outside India import of capital goods from UK, in Inca joint venture promoted by an Indian company in US Foreign exchange transactions in Indla can be conducted through: CCategory-1 aullrised dealers only Category-2 authorised dealers only money changers only all the above For a person to be classified as resident, which ofthe folowing concltion should be satisied? he should have resided in Inca for more than 182 days during the previous financial year he should have resided in Inca For more than 180 days during the previous nancial year he should have resided inInuia for more than 182 days duting the previous calendar year he should have resided in India for more than 180 days during the previous calendar year An Indien citizen who is resicing outside India for indefinite period in connection with his business or profession or residence, is called: ‘non-esident Indian person of Indian origin foreign national any of these For a foreign national to become Person of Indian Origin (PIO), which of the folowing condition is required to be complied with he/she was citizen of India by virtue of Indian Constitution hisfher spouse fs an Incian citizen Fisyher parents or grand parents are/were Indian citizen any of these conditions NS Toor & Manjot Kaur compiled BOOK 2(Part-1): FOREIGN EXCHANGE OPERATIONS 2B ~ pe iN ROSES | sane snares niennnn stnRemittances and LRS Under Liberaized Remittance Scheme (LRS), a resident Indian can send, outward remitance up to ‘maximum of ___for curent or capital account transactions: {USD 250000 per financial year USD 250000 per calendar year {USD 125000 per financial year USD 125000 per calendar year Under Uberaized Remittance Scheme (LRS), the remittance for which of the folowing is nat a part of aurent account transactions? private Vist or business travel ‘pening of foreign curency acount raking oor donations employment or immigration Under Uberaized Remittance Scheme (LRS), remittance for wich of the following is part of current account transactions? purchase of property investment in shares and securities medical treatment setting up a subsidary company Wie making remittance uncer Libertzed Reritance Scheme (LRS), which of the folowing is correct? remittance can be made only by quoting PAN for remittance covered under capital account trensections, banks cant gve any loan remittances cen be consolidated in respect of faily members all the above Under Liberalaed Remittance Scheme (LAS), for which ofthe following purpose, the amount of cemittance can be mare than USD 250000 per fnancal year, subject ofullment of oer conditions: medical treatment abroad studies abroad ‘migration al these options Foreign exchange cannot be remitted or release for travel to or transactions with residents of Nepal and Bhutan Srlanka and Nepal Bangladesh and Bhutan Stilanka and Bangladesh For travel to Nepal or Bhutan or for transactions with resents of Nepal or Bhutan, the highest nomination of indian curency is restricted to R100, wien te total amount is: more than Rs.10000 ' more than R5.25000, ‘more than Rs 50000 ‘more than Rs. 100000 What is the maximum amount of export of Indian curency, in case of a person going toa country other than Nepal or Bhutan? s.10000 s.25000 fs.50000 s.100000 What is the maximum amount Nepat or Bhutan? s.10000 °s.25000 °s.50000 s.100000 Foreign currency can be purchased by tendering cash for an amunt up to fs.10000 fs.25000 s.50000, Rs.100000 For remittances under Liberalized Remittance Scheme of RBI, which isthe application Form? DS msttuteofsanking, Chncirh Ph 01722665623 9 ort of Indian currency, for persons coming from countries other than2 Format b Form a2 Form AS 4 Form ad 22 Whats the maximum amount of FC that AD banks release in foreign currency bank notes or coins? a Usb 1000 b Usb 2000 Usb 3000 usp S000 23 Unused foreign exchange can be retained by resident Indians up to? a Usb 2000 b Usp 3000 ¢ USD 5000 any amount 24 What the time lim for surrender of unused foreign exchange? 2 curtency notes within 90 days and travelers’ cheques within 180 days b currency notes within 180 days and travellers’ cheques within 90 days c _ currency notes within 180 days and travellers cheques within 180 days 4 currency notes within 90 days and travelers’ cheques within 90 days 25 Whats the maximum amount of foreign currency, which canbe imported into Ina? 2 Usb 1000 b Uso 2000 < — UsD 3000 d— anyamount 26 When amnint of import of foreign exchange into India is __, a. declaration fs veuied lo be made on Form CDF to Custom Department: a total amount more than USD 5000 'b total amount more than USD 10000 © currency notes more than USD 3000 4 for aimports Forex Test No.1 — Foreign Exchange Basics —__ ob a TB: O5:d Os: O76 ir [op 10:0 1a 1b Bic ted 15:0 16:2 a7 16: 19:b 20s¢ 2b zc Bib 2a 25d 26:b : ‘TEST-2 : FOREIGN CURRENCY ACCOUNTS OF BANKS, POSITIONS, EXCHANGE RATES 01 An account opened by a domestic bank ina foreign country is called a _ account a NOSTRO account > VOSTRO account © LORO account ESCROW account (02 Your account with us represents which ofthe folowing account? a NOSTRO account b WOSTRO account © LORO account 4 ESCROW account (03 An account opened by Bank of Beroda with Midend Bank London, Is_ account for SB, 2 NOSTRO account b YOSTRO account & — LORO account 4 ESCROW account Positions in Foreign Currency (04 When amount payable in a particular foreign curency by a bank is more than the amount receivable in @ particular foreign currency, iis: dosed position 1N Toor & Manjot Kaur compiled BOOK 2(Par-1): FOREIGN EXCHANGE OPERATIONS. 20aogegaocegancegancagance ‘pen position day light postion ‘overnight position ‘When amount payable in a particuar foreign currency by a bank is less than the amount receivable in 2 foreign currency, itis: short position long position dosed position ‘currency postion ‘Open position limit in foreign curency is fixed by ___within a bank? Board of Directors inthe Bank Asset Liability Committee in the bank Foreign Exchange Deslers’ Assocation (FEDAT) Reserve Bank of India Bank has long positon in a particular FC. There is change in the exchange rate. bank shall make profit bank shall incur ass FC rates increase, bank shall gain and if FC rate dedine, bank shall make loss if FC rates decrease, bank shall gain and if FC rate increase, bank shall make loss Bank has short position ina particular FC, There is change in the exchange rate. ‘bank shall make profit bank shall incur loss If FC rates increase, bank shall gain and if rate decline, bark shall make loss IF FC rates decrease, bank shall gain and if rat increase, bank shall make loss Which ofthe following statement isnot stated correctly, in the context of R-Retumn?. the statement i requited ta be submitted to RBI within @ period of 10 days from due date the statement is submitted for 15° and last day of each month ‘he statement covers transactions indifferent foreign currencies undertaken by the bank the statement is submitted as single return for bank as a whole, XYZ, an exporter, purchases USD at spot rate to meet urgent requirement, He seis USD of sere quantity ‘at 2 month forward rate, as he expects to receive USD by end of 2 months. This i call arbitrage transaction forward transaction ‘swap transaction spot transaction ‘The foreign exchange dealer of a bank purchases USD in New York market at lower rates and sells the same in London market ata sight higher rate. This i called: arbitrage transaction forward transaction ‘snap transaction spot transaction FC Rates or Exchange Rates When foreign exchange rate Is quoted a fixed unit of foreign currency and fraction or variable unit of home currency, itis called: spotrate forward rate rect rate indirect rate When foreign exchange rate is quoted as fixed unit of home currency and fraction or variable unit of Foreign currency, iis called: spot rate forward rate sirect rate indirect rote Buy low and sell low is the rule, used by banks to make profs In sale purchase transactions in foreign ‘currencies, in case of spot rate forward rate DS institute of Banking, Chandigarh Ph 0172 2665523, ac 2 23 er direct rate indiect rate ‘The inter-bank USD rate quoted by a bank is One USD = Rs.6,40/50. In this rate, RS.6.50 ste rate at which bank is ready to buy the FC from customer bank is ready to sll the FCto customer customer is teady to sell the FC tothe bank none of the gven options What is meant by cross rte or chain rule methed of callin of exchange rate? when exctunge rate between two currence is calculated through a 3 common currency when exchange is calculated asthe lowest one when exchange is calculated asthe highest one ‘when exchange rat is calculated ether by division or by muitiplcation ‘transaction took place on Jum 23. June 25 is Saturday (when inter-bank foreign exchange markets ere closed), To be dasied as spot transaction, the sttlement mast take place on or before: Sune 25 Sune 26 Sune 27 Sune 28 ‘The exchange rate used for settlement cn T+1 day Is called: cash or ready rate Tom rate spotrate or TT rate Forward rate Tae exchange rate sed for same day settlements called: cash or ready rate Tom rate spot rate or TT rote forward rate ‘Te exchange rate used for settlement after T#2 day i called: cash or ready rate Tom rate spot rate or TT rate forward rate The exchange rate used fr settlement on T#2 day is calle: cash or ready rate Tom rate spot rate or TT rate forward rate | buying rates used by the bank when there is inflow of foreign currency into bank utfiow of foreign currency rom bank delivery offoregn curency by bank to customer inal these cases Aseling rate is used by the bank when there is: inflow offoceign currency into bank outflow of foreign curency from bank detvery of foreign currency by customer to bank inal these cases, ‘customer requested the bank to fsue a FC demand draft (0D) on Jan 12, Next day, the customer requested the bank to cancel the DD, as he does at recur it any more. What exchange rte wil be used in these transactions? TT sling rate TT buying rate ‘TF buying rat fr issue and TT selng rate for cancelation ‘TF seing rte for issue and TT buying rate for cencelation ‘io NR customer tenders USD to open a non-resident external- Rupee account (NRE-RA). Aer few days, ve requests for closing the account and remit the amauntabrcad. Wht rte wil be used? NS Toor & Manjot Kaur compiled BOOK 2 (Par): FOREIGN EXCHANGE OPERATIONS. 2 oceeantea'ange“Tr buying rate at the time of opening the account and TT seling rate atthe time of closure of account a bTTseling rate atthe time of opening the account and TT buying rate at the time of closure of account ¢ Bills buying rate at the time of opening the account and bils selling rate at the time of clasure of account d Bills seling rate atthe time of opening the account and bils buying rate atthe time of clasure of account 26 An exporter tenders a FC export bill (representing export of goods by him), to be purchased by the bank. Which rate wil be used? a Tbuying rate b — Trseling rate ¢ Bills buying rate Bills seling rate 27 A customer requested to transfer the amount from his non-resident external ~ rupee account to FCNR. ‘account, For this transfer, which rate will be used? 2 TT buying rate b — Trseling rate c_ Bils buying rate dlls seling rate 28 A customer requested to transfer the amount from his FCNR account to non-resident external ~ rupee ‘account. For this transfer, which rate will be used? a TT buying rate b TTseling rate ¢ _ Bills buying rate d Bils seling rate 29 A London based NRI customer transfers USD 6000 to NOSTRO account of the bank in London and ‘requests the bank to credit the amount in NRO account In New Delhi maintained in his name jointly with his mother. Which of the following rate shall be used? 2 Thbuying rate b — Trseling rate c Bills buying rate d Bills seling rate 30 Gitibank is maintaining an account with SBI in Mumbal, Tt needs Rs.200 cr for some urgent payment. It ‘requests SBI to credit Rs.200 cr in its account immediately and it will credit the amount in SBI's NOSTRO- ‘account in US, within 2 days. Which rate will be used? 2 Tr buying rate b Trseling rate Bills buying rate 4 Bils seling rate Forex Test No.2 ~ FC Accounts of Banks, FC Positions, Exchange Rates 025 03:c. 4b. O53). 06a O7:c. [oad i 10: isa ic 13d 140. 15:b | t6:a 18:b 19:4 20:4 wc 2: wb | ard 26:¢ Bib. 28:4 29:4 30:c on ‘TEST-3 t INCO TERMS, UCP-600 AND LETTER OF CREDIT Uniform Customs and Practices- 600 (UCP-600), are the rues that regulate transactions under letter of ‘credit, Which ofthe following is correcty stated, relating to UCP-6002 LUCP-600 has been framed by ICC, Pars for the purpose of UCP-600, branches of a bank in diferent countries, are treated as citerent bank letter of credits also caled a documentary credit all the given options are correct Uniform Customs and Practices- 600 (UCP-600) becomes applicable an which types of LC? only infand LC only foreign LC LC which proves for application of UCP-600 all types of LCs If there is any contradiction between provisions of UCP-600 and provisions of LC, what will be the status? what is stated in LC will prevail iat is stated in UCP-600 wil prevail since there is contradiction, the LC Is not a valid LC DS tostute or tanking, Chandigarh Ph. 0172 266 5623 Bbeoce what nominated bank decides, wil previ ‘Where the words about or approximately are used in connection with the amaunt of LC or quant or the uni price stated in LC, it wil be assumed that variation of in these us allowed: 10% plus or minus 5% plis or minus 2% plus or minus 1% plus or minus 11 a letter of credit, there is no condition related to stipulated no, of packing units, In this case, the ‘aration is permitted, to wich of the folowing extent? 10% plus or minus 5% plus or minus 2% plus or minus 1% plus or aus ‘an LC has been issued and it expres on Dec 22 ono about. Wha s the period of variation inno. of days, isinterpreted in ts case? 10 calendar days before 10 calender days fer 10 calendar days before or after 5 calendar days before o after In te liter of ere, te term begining ofthe month has been used instead ofa spectc dat. This wil be interpreted as: 1 day to S® day ofthe month 1% cay to 7 day ofthe month 418 day to 10" day ofthe month 1 ay to 15% day ofthe month Inthe letter of cred, the term 1*haf ofthe month hes been usad instead of a specific date, This ll be interpreted as: {F day to 5® day ofthe month 18 day to day ofthe month day to 10" day ofthe month 1 day to 15 day ofthe month ‘The bank branch has received Uscument drawn unter LC issued by the branch, which ate strictly as por terms menoned in LC. When these are presented to the applicant, he infrms thatthe goods received under LC are not of the same specification and that tie qualty is aso infrir. He requests the bank to return the document, as unpaid bank will make the payment and recover the amount from applicant. bank wil keep the document with seif and seek instructions of the nominated bank bank wil ken the document with self and seek inractons ofthe nominated bank and benefiiay ‘bank wil follow te instructions ofthe applicant and return the documents Ina eter of creat, the value of insurance cover has nat been given. tn this case: there is no need for insurance the insurance amount shoul be equal to FOB value the insurance amount shouldbe equal to 110% of FOB value the insurance cover should be equal to 110% of CF valve ‘The insurance poey mentions the dat of insurance iter than date of shipment, a part of LC documents the insurance document can be accepted, It effective on date of negotiation alsa the insurance document cannat be accented the insurance document can be accepted, ifthe insurance is made effective Fem dete of shipment the insurance document can be accepted i indemnity is gven by the insurance company ‘An LCi dated Jul 12, 2017 but the cocuments are dated Ju 07, 2017, The valet period for negotiation 's sl 25, 2617. The documents are presented for negotiation on Ju 22,2017 for documents dated before date of LC, negotiation can take place within vay period for negotietion the documents must have date ater than the date of LC, tobe vali the documents must have the same date, as tat of LC, tobe valid one ofthese options Under UCP-600, the nominated bank gets __days to examine the documents and make payment to beneficiary on presentation of documents, 5 calendar days NS Toor & Manjot Kaur compiled BOOK 2 Part-1) : FOREIGN EXCHANGE OPERATIONS 24 t c c apeeee pace S banking days 7 calendar days 5 banking cays Under UCP-600, the issuing bank gets __ days to examine the documents recelved from nominated bank, and make payment to nominated Bankon due date, 5 calendar days S banking days 7 calendar days 5 banking days Beneficary can present the documents to nominated bank for obtaining payment within vality period of negotiation, as provided in LC It should not be beyond __ days fom date of shipment. 5 calendar days 7 calendar days 14 days 2 days Letter of Credit ‘The bank which reeves LC from issuing bank to forward the LC to benefiry, after authentication of Lc that iis genuine, i called ‘pening or issuing bank ‘confirming bank nominated bank advising bank “The bank which is authorised to make payment to beneficiary against presentation of documents and then claim payment frm issuing bank on due date, sca reimbursing bank ‘confirming bank nominated bank advising bank “The bank which gives guarantee on request of opering bank that it will make payment In case opening bank fast pay, scaled: reimbusing bank confirming bank ominated bank advising bank Which ofthe folowing is a document, which s normaly, part ofthe documents reauired under LC? bill of exchange and nvcice insurance pocy or insurance cxrtcate document of ttle te goods all the above IF te shipping company makes mention about defect in packing of goods onthe bil of facing issued byt, itis cated: dean bil of lading claused bil of lacing ‘on-board bl of eding stale bil of lading Tf the documents Including bil of fading isued by the shipping company are not presented within the ‘ality period or max 21 days from dat of shipment, the bl of cing is cae ean bil of acing Caused bl of ading on-board bil of aging stale bil of ading ‘An LC Is issued where the documents wil be delvered to be applicant by the opening bank against acceptance alone andthe applicant wil make payment later, on due date. Such LCi called: revolving LC standby iC sence LC sight UC The letter of rel is operated ikea cash credit advance in which of the following cases? revoling Lc DS tnsthuteof Banking, Chandigarh Ph. 0172 2665623, 2Bstandby LC wsance LC sight Lc ‘An LC provides guarantee of another bank that it will make payment, if isuing bank oled to make payment. Such LCis called: with recourse LC without recourse Lc confirmed iC sandby LC ‘An LC which provides that the rs of nonpayment of documents by opening bank /aplican, wil be that of the nominated bank, insteed of beneficary, is called: with recourse Lc without recourse LC revocable LC irevoceble ic ‘The LC wich can be canceled or amended only with consent of issuing bank, beneficiary and confirming bank, ifany, is called: vith recourse LC without recourse Lc revocable Lc irrevocable LC Which f the following LC is most safe LC forthe beneiany? revolving Usance, without recourse LC confirmed, revocable, without recourse LC irevocabe, standby, transferable LC back to back LC ‘0 LC provides for avalablty of advance to beneficiary for manufacture and shipment of goods. Its called: green dluse LC re clause LC back to back Lc transferable LC In an LC there is provision of warehouse storage of goods before sale an alco availabilty of advance to ‘beneficiary for manufocture and shipment of good. tis calle: green dause LC red clause LC back to back Uc transferable LC ‘An LCis issued in teu of bank guarantee, its called revolving Lc standby LC intent Lc confirmed Lc An LC provides thatthe beneficiary can trensfr this LC to another person, in fl or in par. Its called green clause LC red cause LC back to back Lc transferable LC Benefidary of an LC, gets another LC issued from his bank, in favour of his supplier, on stength of orignal LC ith almost similar conditions. it is ealed: seen dause LC red cause LC back to back Lc transferable LC ‘An LC provides thatthe beneficiary can make the shipment on 5 occasions on monthly basis. Such LC is ale revelving LC standby LC NS Toor & Manjot Kaur compiled OOK 2 (Part): FOREIGN EXCHANGE OPERATIONS 26© intalment Lc 4 confirmed 1c International Commercial Terms 34 Which ofthe following intemational commercial term (INCO Term) stipulates thatthe insurance vail be arronged by the seller and not the buyer? 2 Bemerks b Fos © OF a GF 35 The goods are to be delivered to the buyer at factory gate ofthe seller, in terms of which ofthe following international commercial term: a Beworks b Fos OF OF 36 The isk and cost to sellers up to loading of goods on ship, as per which af the fllowing INCO term: 2 Beworks b FOB c OF cr 37 Whatis risk of the seer, in case of FAS (INCO term)? 2 sellers to detver the goads at factory gate b _seleris to deliver the goads near the ship ¢ sellers to deliver the goods on the ship d__sellerto dever goods on ral Forex Test No.3 ~ INCO Terms, UCP-600, Letter of Credit oc 3a 4a 06: ore 08 10: thc sa) 14 15:4 16 18) 130d 20:0 2 23:3) 24 26:0) 2b. 2b 302b Bie 32 3d 35:2 36:0 TEST-4 : FOREIGN CURRENCY ACCOUNTS OF CUSTOMERS (01 Foreign Currency Non-Resident Bank (FCNR-B) account can be opened by which ofthe fllowing graun of persons: Non-resident Indians and foreigners “Yoreigners and persons of Incian origin persons of Indian origin and non-resident Indian foreigners, persons of Indian origin and non-resident Indian (02 Foreign Currency Non-Resident Bank (FCNR-B) account can be opened as single name account joint account © joint former and survivor) account with close resident relative 4 anyol the above (03 ‘The matuity period of Foreign Currency Non-Resident Bank (FCNR-B) FD account can be: a Lyearto S years b uptos years, © Lyearto 3 years dup to3 years 04 Which ofthe folowing statement is nat corcec in the context of rate of interest on Foreign Currency Non- Resident Bank (FCNR-B) account? a Interests linked to LIBOR b for ess than 3 years matunty, the interest rate is LIBOR + 2% ¢ for 3-5 years maturity, the interest rate (S LIBOR + 1% d none of the above 05 Which of the following statement is correct in tie context of payment of interest on Foreign Currency Non-Resident Bank (FCNR-B) account ? D S tostituteof Banking, Chandigarh 30172266 5623 2if deposit is canceled before one year no interests payable for one year deposi, the compouncing shal be on hal-yeary basis for depost above one year maturity, the compounding period is quarterly the compounding of interest is quarry in all cases ‘Wich ofthe folowing statement is correct regarding loan agenst Foreign Curvency Non-Resident Bank (FoNR-B) FD? the foan can be alowed upto fl value of FD with appropriate margin the loan can be allowed to depositor or 3 party the foan can be in INR oF all the statements are correct ‘Which of the folowing features of Foreign Currency Non-Resident Bank (FCNR-B) account, are stated correcty? : interest payable on FOR is taxzble and TDS is applicable amount of interest cn be remitted outside India and principal amount cannot be on request of depesitr, the maturity proceeds canbe remitted abroad in 3 party name also all these are correct Non-Resident External Rupee Account (NRE-RA) can be opened by which of persons: Non-resident Indians and foreigners foreigners and persons of Indlan origin persons of Incian origin and non-resident Indian {ereigners, persons of indian origin and non-resident Indian Non-Resident External Rupee Account (NRE-RA) account can be opened as: single name account Joint account joint (former and survivor) account with lose resident reative ‘any of the above From which of the folowing accounts, the amount can be transferred to Non-Resident External Rupee Account (NRE-RA) account, subject to fulfilment of certain cnavitins? FFCNR account and NRO Account "NRO account and EEFC Account EFC acoount and RFC ~ D account RC account and FCNR account “The maturity period of Non-Resident External Rupee Account (NRE:RA) account can be: 1 year to3 years 1 year to 5 years upto years ! at bank dlscretion with mn ot 2 year. ‘Whats the rate of interest paid by banks on Non-Resident External Rupee Account (NRE-RA) account? Interests linked to LIBOR for less than 3 years maturity, the interest rate i LIOR + 2% for 3-5 years maturity, the interest rate is LIBOR + 1% a bank dscretion but nat more than domestic interest rate ‘What type of Non-Resident Extemal Rupee Account (NRE-RA) account can be opened? carrent account saving bank account term deposit account any of the above \Wihich ofthe foiowing statement is corectregaréing loan against Non-Resident External Rupee Account (NRE-RA) FO? the loan can be allowed upto ful value of FO with aporopriate margin the loan can be allowed to depositor or 3° party the loan can be in INR or FC allthe statements are correct. Non-Resident Ordinary (NRO) account cannot te opened by: Non resent India Person of Ind Origin Resident Inca NS Toor & Manjot Kaur compiled BOOK 2(Part-t); FOREIGN EXCHANGE OPERATIONS 8 following group of16 accepance 20 ancepaces S all the above Non-Resident Ordinary (NRO) account can be opened a5: Sole name account joint account joint account with close resident relative any of the above \What type of account can be opened as Non-Resident Ordinary account? ‘ourrent account saving bark account term deposit account any of the above Remittance outside Incia from Non-Resident Ordinary (NRO) account can be made: ‘up to USO 1 millon per financial year up to USD 1 lac per financial year ‘yp to USD 1 lac per calendar year any amount, no restriction {In which ofthe folowing types of accounts, the Interest is taxable and TDS is applicable? FCNR-B account (NRO account PNRE-RA account all the accounts ‘The nomination facity is available, in which ofthe folowing non-resident account? FCNR-B account ‘NRO account INRE-RA account all the accounts ‘The foreign currency rate fluctuation rise is borne by bank, in which of the following accounts? FCNR-B account ‘NRO account INRE-RA account all the accounts Resident Fareign Currency (RFC) account can be opened by: on-resident Indian Person of Indian origin returning Indian resident Ingian Resident foreign currency (RFC) account can be opened asi ' ‘current account term deposit account saving bank account any of the above Resident foreign currency ~Domestc (RFC-D) account can be opened by: non-resident Indien Person of Inclanerigin returning Indian resident Indian Resident foreign currency “Domestic (RFC-D) account can be opened as: current account term deposit account sing bank account ‘any of the above FC amount credited to the account curing a particular month, is required to be converted into INR by last dy of next month in case of which of the folowing account? Resident foreign currency ~Domestic (RFC-D) account and Exchange Earners’ Foreign Currency account, Resident foreign currency (RFC) account and Exchange Earners’ Foreign Currency account. Resident foreign currency (RFC) account and Resident foreign currency Domestic (RFC-D) account all these accounts Exchange Eamers’ Foreign Currency account can be opened DS mstute of anking, Chandignh Ph.0172 266 5623 2»@ nonresident Indians b Indian Exporters call Resident Indans dretuming Indians 28 Exchange Eames! Foreign Currency account cen be opened as a carrent account b term depost account cc seving bank account 3 any of the above 29 Special non-resident rupee (SNRR) account can be opened by: 2 Indian exporter b Indian business enterprise doing business outside India © Persons resident outside Incia but doing business in India 6 any of the above ‘30 Which of the folowing feature of Special non-resident rupee (SNRR) account is not correct? : a Itcan bea current account debit or credit should be incidental to business transactions © account can be opened max for 3 years dno interest to be paid on the balance 34 A foreign national on short vst to India can open Non-resident ordinary account. Which of the following features ofthis account is corect? a nolocal cea is alowed account can be max for 6 months ‘¢ _ If account isnot closed within 6 months, RBI permission is required for outward remittance d—allthe above Forex Test No.4 ~ Forsign Currency Accounts of Customers. O20) 3:3) Oare 05:3 os [ore Oe 10) tid 12 13d tad 15:c 15: 18 20d 2a 2c B: 2d 26.3 2b 28:3 29: 30% 31d 1 on ‘TEST-5 : EXPORTS, EXPORT CREDIT & IMPORTS For obtaining export credit in Ini, a person should fulfil the folowing conditions: have Inporl Export Code (IEC) no. Issued by UGH! he should not be on caution lst of EOC fee he should not be on blacklist of RBI. i al these shoul be flies The export proceeds ae required to be reakzet and repatriated to Incl within a specc period. This period doesnot match in which of the fallowing? : special economic zone exporters ~ 12 months ‘ exports to warehouse esabshed outside Inia ~15 months 100% export oriented units ~9 months other exports = 9 months ; Exporters can obtain advance payment against exports from India. On such advance, maximum cate of ‘ interest which canbe gids: : MUR ofthe bank > Bankrate ; LUBOR + 1% depo Rate 5 Which ofthe ftioning feature of pe-shigment advance i stated correty? the period of advance is determined by bank in relation to shipment date : the loan is inthe form a demand loan : for creditworthy exporters, CC type runing loan can be allowed i all these are corect ‘The amount of preshipment Ioan is related to, which of the Following? : FOB value > CRF value c iF value d any ofthe above : Where domestic cost of goods to be exported Is higher than FOB value, Joan amount can be more than NS Toor & Manjot Kaur compiled BOOK 2(Part-1): FOREIGN EXCHANGE OPERATIONS 30ge 0 FOB value but it is required to be adjusted within ___ from date of export 15 days b 30 days 45 days d 60 days ‘Which ofthe following statement related to interest on export credit is stated corecty? interest rate can be determined by banks themselves interest rate cannot be below MCLR of the bank IF export does not take place for one year from date of pre-sipment loan, commercial interest will be ‘charged from date of advance, lithe above Which of the following features of interest subsidy available to exporters under Interest Equalization Scheme is not stated correctly? rate of subsidy is 3% from exporters, interest of 7% i tobe recovered subsidy isto be daimed by banks from RBI on monthly basis daim isto be sent to RBI within 15 days fom close of respective month In post shipment finance, FC demand bills purchased by the bank, should be realized within what period? within their due date within 10 cays vithin normal transit period of 25 day fixed by FEDAT within normal transit period of 15 day fixed by RBI In post shipment finance, what i the max usance period of FC Usance bis discounted by the bank? ‘normal transt period of 25 days fied by FEDAL Normal transit period of 15 day fixed by RAT 9 months 15 months In post shipment finance, what isthe max usance period of FC Usance bis discounted by the bank, where export ison warehouse basis? normal transit period of 25 days fxed by FEDAT ‘norma trast period of 15 day fixed by REL 9 months 15 months When FC export bill purchased or discounted is not paid on due date, the foreign currency liability i converted into Indian currency liabilty which is known as ? crystallization of export bill ‘noting of export bil protesting of export bil 6 reporting of export bit When export ils are not realized for more than one year from their due date, these can be written eff by AAD banks up to_ of total export proceeds realized during te previous financial year. 2% b 5% ' 10% 6 125% ‘When export bills are not realized on due date, AD banks can extend the period beyond 12 months up to months at atime, 6 months b 5 months 3 months d 2months ‘What is the amount of standby limit, which Is sanctioned in addition to normal Smit, under Gold Card Scheme for Exporters? 25% of normal init 1b 20% of normal it 15% of normal limit 410% of normal nit \Whatis the in-principlevalicity period af Gold Credit Card for Exporters? (one year b two years thee years five years Jn case of export of goods, the export dedarations are made on which of te follwing form? e0F b SOFTEX GR od SOF In case of export of software in non-physical form, the export declarations are made on wihich of the folloring form? ee b SOFTEX ce a SDF 2-Star Export House Is an exporters, whose export performance in 2 years out of 3 years is minimum 1S tastiute of Banking, Chandigarh Ph, 0:72 266 5623, aLin £08 terms ? 2 USD 3 milion b USD 25 milion USD 100 milion @ USD 500 milion Imports Into India 20 When importer imports goods into India on usance basis, the remittance 1 to be completed within a period of: a 12months b 6 months 3 months dL month 24 An importer customer has requested for sending advance payment for import of services. What is the ‘maximurn amount, which can be remitted by AD banks, without any bank guarantee or LC? a USD 10 milion USD Smilion © USD 1 millon d USD Siac 22 An importer customer has made request for sending advance payment for Import of goods. What is the ‘maximum amount, which can be remitted by AD banks witiout any bank guarantee or LC? 2 USD 10 milion b USD Smilion USD miton 4 USDSIac 23 AD banks cen make advance payment for merchant trade transactions up to __ without insisting of bank ‘uarantee or letter of credit. a USS lec b USD 3iac © USD2 ee 4 USD Lhe 24 When import documents are received directly by the importer, the banks can make payment up to. In case of company, there is no such cling. USD 5 lac b USD lac © USD2lac d USD tae 25 An importer had not made payment of Uacuments received under foreign currency LC opened by bank on his request. The tank should complete crystallization by debiting importer's account on day, as per FEDAI rules to stop FC ris, 2 -Wday b 15 day 10" day a SM day 26 Ona FCline of crit aranged by a bank, from outside the country, the rate of interest can be? 2 UBOR + 1% b LiBoR + 2%, cc UIBOR + 3% d bank discretion 27 What's the minimum average maturity period! af medium term foreign currency denominated ECB? 2 10 years bh 7 years © 500r7 years according to amount of ECB 6 300° 5 years according to amount of ECB ' 28 What i the minimum average maturity period of long term foreign currency denominated ECB? a 10 years b 7 years © S.0r7 years according to amount of ECB d3.rS years according to amount of ECR 29 The amount of individual ECB can be ___miion for manufacturing and infrastructure: 3 USD 750mifon USD £00 milion {USD 500 milion 4 USD 3 milion 30 The amount of individual ECE can be milion for ather than specified sectors : 2 USD 750 milion b USD 100 mition © USD 500 mition d USD 3 milion Forex Test No.5 ~ Exports, Export Credit & Imports Oud oa Be Oe Osa 06:b, Ord 08: 09:0 10:c isd) aa BC 14a 15:0) 16c ia 18:b 19:b) 20:b) 2d) 2b 1 ae 242 | 25% 26:3 2d 28:3 2 30 NS Toor & Manjot Kaur compiled BOOK 2 (Part-t): FOREIGN EXCHANGE OPERATIONS 2ELECTRONIC PAYMENT SYSTEM Book-2 (Part-2) E-Payments are regulated under Payment and Settlement Systems Act 2007. Directions issued by RBI. Access Criteria for Payment Systems: RBI revised the access criteria w.e.f. Oct 01, 2011. There are 2 sets of access criteria (1) one for centralised payment systems (2) other for decentralised payment systens. Access criteria for centralised payment systems : The centralised payment systems include Real ‘Time Gross Settlement (RTGS) System, National Electronic Fund Transfer (NEF) system and National Electronic Clearing Service (NECS). The membership is open to all licensed banks. Access criteria are given below: i, Minimum CRAR of 9% (latest audited balance sheet); ii, Net NPAs below 5% (latest audited balance sheet); iii, Minimum net-worth of Rs. 25 crore; and REAL TIME GROSS SETTLEMENT (RTGS) Management: Operated by RBI and managed by Standing Committe. Member: Licensed banks & members of INFINET / SMS and maintain current a/c, settlement a/c & subsidiary general ledger alc with RBI. These include (i) RBI (ii) banks (ii) primary dealers (iv) clearing house. Options for accessing : 3 options (thick-client, Web-API and PO module). Transaction Type Code (TTC): To identify the type of individual payment messages TTC values are “0000” to *9999”. Priority: RBI can assign priority “01” to “10”. Others from “11” to “99”. Settlement: When Settlement A/c is debited and receiver is credited. ‘Transaction time (1.9.18) ~ Intal cut-off (Customer transactions) - 8 am to 4.30 pm. Final cut-off (Inter-Bank transactions) : 8 am to 7.45 pm. Adjustment of intra-day liquidity transactions: 7.45 pm to 8 pm, Intraday Liquidity ((DL) Facility: RBI may grant [DL to settle RTGS transaction. For delay to adjust, bank to pay interest at twice of Repo Rate. Exit: Members may resign with 30 days prior notice to RBI ‘Obligations of Members : 1. Originating bank to release payment message from their system to RTGS system within 30 minutes of debiting a customer’s account. 2. Amount received by bank to be credited to customer account within 30 minutes ofthe receipt of the message at the Member Interface. 3. For delay in credit to customer account, receiver bank to pay compensation at current repo rate plus 2% to customer per day. For delay in returning payment to remitting bank, the recipient bank liable to pay compensation at current repo rate plus 2% to the originating member. Record preservation : For atleast 10 years. DS Institute of Banking, Chandigarh Ph. 0172266 5623 3BAmount : Minimum Rs.2 lac Instructions in advance : Can be given 3 working days in advance Hybrid Feature : Offsetting will be done every 5 min using funds in settlement account. If settlement does not happen in 2 cycles (10 min), it will be treated urgent and settled instantly. Processing charges / Service fee payable by members (1.4.16) Membership fee | (b) Transaction fee per | (c) Time varying tariff: (Time of settlement transaction : 0.50 at RBI) ) SCBS ~ Rs.5000 (1) 8am to LL pm— nil (2) After 11 pm to 1.00 pm ~Re.2 (G3) After 1.00 pm to 4.30 pm ~ Rs.S and after 4.30 pm ~ Rs.10 RBI prescribed RTGS/NEFT Service Charges ‘Tnward RIGS|NEFTIECS No charges ‘Outward-RTGS Rs.2 lac to less than Rs.5 lac Rs,25/transaction + time varying tariff, Total max Rs.30 (exclusive of service tex) Rs.5 lac and above Rs.SO/transaction time varying tariff, Total max Rs.5S (exclusive of service tax) ‘Outward-NEFT Up to Rs.10000 £R5,2.50 /transaction Above Rs.10000 to Rs.t lac Rs.Sftransaction ‘Above Rs.1 lac to RS.2 lac s.15}transaction Above Rs.2 lac Rs.25/transaction Credit to account for RTGS J NEFT / ECS / NECS : To be done on the basis of account number and not account name National Electronic Funds Transfer (NEFT) « Ibis ubalel systess (und no un online continuous system). It is an accannt ro account transfer # Weed. 19.11.12 There are 23 settlements on half-hourly basis from 8 am to 7 pm + Settlement period B + 2 (destination bank to credit within 2 hours or retum). For delay repo rate +-2% interest payable to customer. + There is no minimum and maximum amount ofa transaction, « NEFT uses an Indian Financial System (IFS) code an Alpha numeric code that identifies the bank branches. It has 11 digits- 1% 4 represent bank code, 5* reserved as control code (presently 0) and remaining 6 are branch code, «+ Process ~ (a) remitter provides information in a prescribed form and authorises debit to account (b) branches prepares SFMS message 10 send to service centre of NEFT (c) Service centre forwards it to RBI to include in the next remittance cycle. (4) at clearing centre, RBI sorts bank ‘wise transactions for debit or credit on net basis and forwards the information to concerned bank (© the receiving bank processes the message to give credit to the beneficiary. + Penal interest for delay : 2% + Repo rate ‘Withdrawal of cash at Point of Sale with Debit card (Per day limit): Tier 1 8 If = Rs.1000, Tier II to VI (places below population of $0000) = Rs.2000. Available fr open system prepaid payment instruments als. Banks can levy charges upto 1%, 1S Toor & Manjot Kaur compiled Book -2 (Pat-2): LATEST BANKING -OBJECTIVETYPE 34Use of Card at POS Terminals If card holder approaches the issuing bank for any fraudulent POS transaction’s in India, the following course of action has been mandated by RBI a) Issuing bank to ascertain, within 3 working days, whether the respective POS terminal is compliant with Terminal Line Encryption (TLE) and Unique Key Per Terminal (UKPT( Derived Unique Key Per Terminal (DUKPT) as mandated. ») Ifit is found that the POS terminals are non-compliant, the bank shall pay the disputed amount {0 customer within 7 working days. Failing this a compensation of Rs.100 per day will be payable to the customer from the 8th working day. ¢) The POS terminal acquiring banks to pay the amount without demur, within 3 working days of issuing bank raising the claim, filing which RBI would compensate the issuing bank by debiting acquiring bank’s account with RBI Payment Codes Unique Transaction Reference (UTR- 22 characters) QOOKRCYYYYHMDDonnnann) COOK first 4 characters of IFSC of sending participant, R ~ RTGS system, C- ‘Channel of transaction, YYYYHMDD - year, month and date of trarsaction and nnnnnan is sequence nube MIR line: 5 parts ~ 6 digt cheque number, 9 cigs code (1° 3 city code, next 3 bank code, lst 3 branch ode) 6 dgt afc number, 2 digit ac type. Amount field is encoded in 13 ig TFSC (Lt dais): 14 bank identifier, last 6 branch idenier and 5 reserved a5 Zero for Future use. Personal Identification number (PIN} = 4 digit rumber for ATH Money Transfer Service Scheme (MTSS) + To become MTSS agent, min net owned funds Rs.50 lac. + MTSS cap USD 2500 for individual remittance + Max remittances 30 received by an individual in India ina calendar year, ‘+ Min NW of overseas principal USD 1 million, as per latest balance sheet, Electronic Clearing Service (ECS) ‘+ ECS has two components ECS-Debit and ECS-Credit + ECS-Debit is used for payment of utility bills by consumer where in the service provides recovers the charges on the basis of authority given by the consumer. * ECS-credit is used by the companies, mutual funds etc. to make payment of large no. of small ‘amount transactions relating to interest or dividend payment. + Services of clearing house are used in this process, * Process : The ECS user submits the request / data to one of the approved clearing houses. On the siven day, the clearing house debits the account of ECS user through his bank and credits the amount to recipient bank for allowing credit to the beneficiary. Nepal Remittance Scheme * It is across border one-way remittance facility from India to Nepal, * Up to Rs.50000 can be transferred by remitter through NEFT. *+ Maintaining of account by remitter not mandatory. But KYC of remitter is mandatory DS Institute of Banking, Chandigath Ph 0172 266 5623 35'* Process : Remittance can be from any NEFT branch but it will be routed through SBI to pass on the information by end of the day to Nepal SBI Bank Ltd, that will arrange credit to beneficiary's account, © Charges: wef Feb 09, 2009. Originating bank Rs.5 per transaction. SBI Rs.20 per transaction (Rs.10 to be shared with NSBI Bank). If beneficiary does not have account with Nepal SBI Bank, additional charge of Rs.50 for amount up to Rs.5000 and Rs.75 for amount above Rs.5000. + No. of remittances by a remitter is restricted to 12 ina year. FREE ATM ACCESS POLICY Customers can use ATM of any bank for transactions in SB accounts. These rules are also applicable for White Label ATMs (ATMs by non-bank entities. 1, Amount of single withdrawal ~ Max Rs.10000. 2, No. of fiee financial and non-financial transactions ~ min 5 (can be restricted to min 3 in six metro towns). 3. Charges beyond fiee per transaction - Rs.20. 4, As regards bank’s own ATM, the min can be 5. Failed ATM Transactions (ic. debited of account without dispensing cash): 1. Customer to inform bank within 30 days. 2, Bank to resolve within 7 days. 3. For delay period Rs.100 compensation per day without obtaining request from customer. White-Label ATM ATMs owned and operated by non-bank entities incorporated in India, ‘Net worth of such entities : Min Rs.100 er PRE-PAID INSTRUMENTS RBI guidelines (01.10.12) ws 18 of Payment and Settlement Systems Act, 2007: Prepaid instruments ~ Max value Rs.i00000 (Rs 0000 for Gift Min valicity instrument) (Banks to submit details of value/volume of transactions on | 6 months (3 year for Gift instrument) Monthly basis to RBL within 7 days) ‘Under Semi Closed syster By obtaining customer details up to Rs.10000 -By obizining offically valid documents of PML. Act (non-reloadable) > Rs.10000 up to Rs.50000 With full KYC (re-oagable) Up to Rs. lac (3.12.14) Overseas branches can issue rupee PPI to NRI/ foreigners up to Rs.2 lac. Cash withdrawl for such PPI ‘max Rs,50000 per month. PPI-Mass Transit System : Min validity 6 N. Max reloadable value Rs.2000 (1.7.15) MOBILE PAYMENTS: Tobie Phone payments ~ Dally cap both for funds transfor and | Bank dstrelon (Rs S000 up to 22.12.11) purchase of goods ‘Such payment through ATM with single transaction of Rs.10000 and | Rs.25000 sax in a month CHEQUE TRUNCATION SYSTEM (CTS)-2010 STANDARD RBI prescribed following benchmarks known as “CTS-2010 standard”, NS Toor & Manjot Kaur compiled Book 2 (Part-2): LATEST BANKING - OBJECTIVE TYPE 36, un Th phe int lang theMandatory features applicable wef 1.12.2010 1. Paper: Paper should have protection against alterations, Paper should not glow under Ultra-Vi light ie, it should be UV dull. 2. Watermark : Each cheque to have min one full watermark “CTS-INDIA”, oval in shepe and diameter 2.6 103.0 oms, 3. VOID pantograph : Pantograph with hidden / embedded “COPY” or “VOID” feature shall be included the cheques. This should be visible in photocopies and scanned colour images as a deterrent. 4. Bank’s logo: Bank’s logo shall be printed in ultra-violet (UV) ink. The logo will be captured by / visible in UV-enabled scanners / lamps. 5, Mandating colours and background : Light / Pastel colours, Print / Dynamic Contrast Ratio (PCR / DCR) more than 609 6. Alterations / corrections on cheques Not allowed even by drawer (except for re-validation. 7. Printing of account field : Cheques for current accounts and corporate customers, shoutd be issued with the account number field pre-printed, 8, Preservation period : 10 years including for cash or transfer payment truncated cheques (Courtesy amount = Amount in figures. Legal amount = in words). et (UV) National Payment Corporation of India [NPC was incorporated in Dec 2008 as a Sec 25 company under Companies Act 1956 (naw Sac 8 of Companies Act 2013) and is aimed to operate for the benefit of all the member banks and thelr customers. The authorized capital fs Re 300 cr ‘and paid up capital Rs 100 cr. [NPCI has major 10 promoter banks and offers ano. of product, the brief of which i provided as under: ‘National Financial Switch NES was intally launched by Institute for Development and Research in Banking Technology (IORBT). The objective was to ‘make ATM deployment economical and viable to members, by pooling resources. and increase use of ATM, trough out the ‘county. The operations were taken over by NPCI during Dec 2009, [NFS i a shared ATM network which interconnects NFS members at ATM switches. The network i operational on 24 x 7 bass. ‘There are 3 types of members (1) direct members (2) sub-memers and (3) White Label ATM Operators. The members Joining NFS network have to pay one time fee of R53 lx. ‘Bharat Interface for Money (BHIM) {is an app which enables the users to make quick payment wansactons using Unified Payment Interface (UPI) of National Payment Corporation of India (NPC). It can be used to make direct bank payment and collect money using Mobile Ho, or Payment Address (PA is an address which uniquely identifies a persor’s bank acount). BA can be used by installng BHIMt app in the smart phone ar by caling894, incase ofa feature phone. The phone no should be linked to bank account and bank shouldbe live on UPI. UPL-PIN is used in BHIM, which is 4-6 digit code created by the customer atthe tie of registration. Immediate Mobile Payment System INS is @ realtime payment service offered by NPCL for tansfer of money through barks and PPE instrument issuers, Within in Inca, IMPS fs used for funds transfer for merchant payments and remittances, For using IMPS, 9 customer has to o mabile banking registration with the bank (fr intiating IMPS using bank branch, intemet banking and ATM channels, registration not required), In INPS Motile Money Identifier (MPI, 2 7 dat account no 2, Issued by bank. Combination of Motile no, and ML is inked with Unified Payment Interface (UPI) LUPLis an instant payment system. Its built over IMPS infastucture. Its used with the help of UBE-PIN. 99% service ‘This service has been launched to fake the barking services to every common man ac‘oss the country. Banking customers an aval this service by dialing 99, a "Common number across al Telecom Service Providers (T3Ps)" on their mobile hone en transact through en interactive menu displayed on the mobile screen. Key services offered under 994 senace include, interbank account to accoont fund trensfer, balance enquiry, mini statement besides host of other services, 96H service is currently offered by mast ofthe leaing banks & all GSM service providers and con be accessed In 1? ferent languages including Hind! & Englsh. $93 sarice isa unique interoperable direct to consumer service that brings together the diverse ecosystem partners suc as Banks & TSPs (Telecom Service Providers). DS institute of Banking, Chandigarh Ph. 0172 266 5623, 7LATEST BANKING ISSUES FINANCIAL INCLUSION Committee - C Rangarajan Committee Financial inclusion (also known as Swabhimaan) means the delivery of financial services at an affordable cost to the vast sections of disadvantaged and low income groups. Business correspondents: Banks can use services of Business Correspondents under financial inclusion, who can accept small deposits, recover loans, distribution of coins/notes ete. but cannot collect fee from customers. Opening of bank branches: In branch expansion plan, banks to provide for opening 25% branches in unbanked rural Tier 5 and 6 centres. As part of 2013-16 Financial Inclusion Plan (FIP), SLBC to prepare road map to provide banking services by 15.08.15, for places less than 2000 (490000 places). All village with population over 5000 to have one bank branch by 31.03.17 (SLBC responsibility). Distance limits between office of BC and bank branch : Bank discretion. Ulira Small Branches (USB): Between base branch and BC office for 8-10 BCs within 3-4 kms, USB to have CBS terminal. Risk Associated with BC — Reputation risk PM Jan Dhan Yojna: Launched on 28.08.14, Phase-1 (15.08.14 to 14.08.15) : (a) each household to have min one basic saving bank account to be given Rupay Card (b) card provides accidental insurance of Rs.| lac (c) For account opened up to 26.01.15, life insurance cover Rs.30000 (4) Overdraft up to Rs.5000 for satisfactory operation for 6 m. Comprehensive Financial Inclusion implemented w.e.£ 15.08.14 under Mission Mode involving 6 Pillar, Under ths, instant overdraft faility of Rs.5000 to be provided at Base Rate + 3% (out of this 1% to be paid to BC and 1% to CGF) which will be guaranteed by a Credit Guarantee Fund (CGF). Districts to be mapped as sub-service areas catering to 1UJU-S000 households. Every habitation to have access to banking services within 5 KMs by Mar 2016. All families / beneficiaries of govt. schemes to have bank accounts by Mar 2016, DOOR-STEP BANKING RBI laid down general principles/parameters (Feb 21, 2007) to be followed by banks while offering “doorstep” services to their customers: “The operation of the scheme to be reviewed by the banks on a half-yearly basis, during the first year and subsequently on an annual basis. ‘The services can be delivered by the banks either (a) through own employees or (b) through the agents. (@) For Corporate Customers/ Govt. Departments! PSUs ete. : (i) Pick up of cash, (i) Pick up of instruments, (ii)Delivery of cash against cheques received at the counter and (iv) Delivery of demand drafts. (t) For Individual Customers/Natural persons: ()Pick up of eas, (i) Pek up of instraments and (i) Delivery of demand drafts. NS Toor & Manjoc Kaur compiled Book-2 (Pat-2: LATEST BANKING -OBJECTIWETYPE 38 a a to Fac dot is] and Fur kee Inc Frees fact Fort It is repa Prov Una arrat thes TheUNIVERSAL BANKING & NARROW BANKING Universal banking (Khan Committee) means to undertake all kinds of activity of banking or development financing activity, subject to compliance of statutory’ and other requirements prescribed by RBI, Govt. and related legal Acts. Activities include low tisk activities (like acceptance of deposits and investing in securities), medium risk activities (like granting of home loans), high tisk activities (Like credit cards, forex and insurance, project financing). Narrow banking (Tarapore Committee) refers to the banking with low risk activities / products, CROSS SELLING Cross selling is a marketing tool where efforts are made to sel to the customers, more than one Product. It leads to per customer (a) reduction in operational cost and (b) increase in business and profits SECURITISATION Securitisation is the process by wihich the selected loans of a bank are purchased by & trust or company called Special Purpose Vehicle, (say, SBI sells a part of its housing finance loans to the SPV). The SPV in tum, issues marketable paper securities (called Pass Through Certificates which is something like debentures) against the backing of such assets and sells the same to prospective investors. The major advantage or objective of securitisation is (@) reoyeling of funds (b) concentration risk management, FACTORING Factoring is an arrangement under which a FACTOR company purchases a seller firm’s short term domestic receivables/book debts arising on account of credit sale to a large firm. The seer firm is paid around 80% of the book debt amount immediately by the FACTOR. On due date, the FACTOR recovers the amount of book debt from the buyer firm. The factor’s revenue is interest and collection charges. Functions of a FACTOR include (@) financing the seller firm by purchasing its book debts (6) keeping record of book debts and their follow-up and (o) collect the payment on due date In case of default by the buyer firm, ifthe loss is borne by the factor itself, itis called without Tecourse factoring. But if the loss is recovered from the seller firm, it is called with recourse factoring. FORFAITING Forfaiting is on the pattern of factoring. In forfaiting there are long term and medium export receivables (deferred payment exports) while in factoring there are short terms receivables, TAKE OUT FINANCE It is a mechanism through which the large size projects with long gestation period and long Tepayment period (such as road building), can be financed by different banks and institution by providing funds on 2 medium term basis. Under the process, a part of the cost is financed by one bank for a limited period under an arrangement with a financial institution, which takes out the account from the financing bank, at the pre-agreed stage. ‘The risk remains with the financing bank tll the account is taken over by the institution. ‘DS Institute of Banking, Chandigarh Ph, 0172.266 5623, 39Bharat Bill Payment System (BBPS) BBPS system will function as an authorised payment system under Payment and Settlement Systems Act, 2007, It is a structure for operating the bill payment system in India with a single brand image providing convenience of ‘anytime anywhere” bill payment to customers. ‘There will be 2 level units (i) Bharat Bill Payment Central Unit (BBPCU) the single authorized entity operating the BBPS which will be NPCI. (ji) Bharat Bill Payment Operating Units (BBPOUS), the authorised operational units, to have paid up capital of Rs.100 or. Trade Receivable Discounting System (TReDS) A system to facilitate discounting of invoices and bills of exchange with focus on MSME. TReDS would put in place a standardized mechanism / process for on-boarding of buyers and sellers on the ‘TReDS. Access would be through IDs / Passwords for TReDS participants. To establish TReDS minimum paid up capital is Rs.25 or. Money Laundering Money laundering means acquiring, owning, possessing or transferring any proceeds (of money) of crime or knowingly entering into any transaction related to proceeds of the crime either directly or indirectly or concealing or aiding in the concealment of the proceeds or gains of crime, within or outside India. It is a process for conversion of money obtained illegally to appear to have originated from legitimate sources. Parliament passed “The Prevention of Money Laundering Act 2002’ during December 2002. The Offences are cognizable/non-bailable. Punishment is rigorous imprisonment for 3 years to 7 years and fine up to Rs.5 lee. Ways & Means Advances (WMA) It is temporary overdraft that RBI allows to Govt. w/s 17 of RBI Act, to cover the mismatch between Govt. receipt and payment, For Central Govt. it is for max. 10 days and for State govt. for 14 days. Interest is Repo Rate (for ‘overdrawn WMA Repo+2%). On use of 75% limit, fresh floatation of loan by RBI. ‘Min balance Rs.1 er on Mar 31 and Rs.10 cr on Jun 30. ‘The limit is fixed by RBI and Govt. in the beginning of a financial year (Central Govt. limit for 2017-18 Rs.60000 cr for I" HY.. It is Rs.32225 cr (consolidated) for States for 2016-17. Marginal Standing Facility Under MSF wef 9.5.2011, banks can avail loan from RBI on overnight basis up to 2% of their NDTL oulstanding as on 2 preceding fortnight, Rol is repo rate + 0.5%. Iti available on Monday to Friday (3.30 to 4.30 pm). Min amount is Rs.1 cr. 5% margin will be applied on the Govt securities. Liquidity Adjustment Facility (LAF) It is short term Joan that RBI allows to a commercial bank to cover the short term liquidity problem. It is done through repo-reverse repo mechanism at Repo rate (i.e. RBI purchases govt. securities from the bank with the condition of re-purchase by the bank at the end of loan period). NS Toor & Manjer Kaur compiled Book-2 Par-2; LATEST BANKING OBJECTIVE TYPE 40Overall cap 0.25% of NDTL. Term Repos under LAF (w.e.f, 08.10.13) Period ~ 14 days and 7 days. System of issue - Auction on CBS E-Kuiber platform. Total amount for banking system ~ 0.75% of NDTL of banking system. Min bid amount Rs.! cr. Allotment in multiples of Rs.1 cr. Special Term Repo up to 0.25% introduced wae 4.6.14 Sterlisation Operation {sates to negating the impact of temporary liquidity erated by inflow of foreign exchange, Market Stablisation Scheme (MSS) bonds are used by RBI for this purpose. MSS bonds are issued as per arrangement between Central Govt. and RBI. Ceiling on o/s amount Rs.30000 for 2016-17 Limit enhanced to Rs,600000 er during December 2016, due to monetization effect. Threshold for issue of new securities ~ Rs. 15000 cr. REPO / REVERSE REPO Repo : (injection of liquidity) When RBI purchase govt. securities from banks to inject liquidity in the banking system. Ie increases the liquidity with banks, I is done at Repo Rate changed ftom time to time by RBI Reverse Repo : (absorption of liquidity) When RBI sells govt. securities to banks to absorb liquidity Itreduces liquidity with banks and done at reverse Repo Rate, Intra-Group Transactions & Exposure (ITE) Limits Category (exposure 28% of paid up captal + reserves of bank | Single | Group Non-financial companies OR non regulated financial companies [5% [10% Regulated Financial Companies 10% [2086 Foreign Investment in Govt. Securities (residual maturity of on year or more) and Corporate Securities Govt securities : USD 30 billion (Including investment in dated securities : 10 bilion), Corporate Securities : USD 51 billion (including investment in commercial paper USD 3.5 billion and credit enhanced bonds up to USD 5 billion). This i expressed in Indian Currency, Eligible investors: FUls, QF ls, Long term investors registered with SEB Foreign Investment in Banks Ciesnyaf ana (ora OL a Taal Buble Sr Eas 208 te 70% Piva Sedo ans 7% 2% 72% } 26% must be held by Residents except in case of Wholly Owned Subsidiaries. individual Fll ean hold up to 10%. Individual NRI can 5% on repatriation and 5% on non-repattation basis, FIL beyond 24% with shareholders approval. Group company for FDI purpose means (1) company that can exercise min 26% of voting tights (2) company that can appoint at least 50% directors, Foreign Portfolio Investors (FPI) AS per SEBI guidelines (Jun 25, 2013), erstwhile Flls, sub-accounts and qualified institutional DS Institute of Banking, Chandigarh Ph, 0172:266 5623, at