Prof S P Garg Jaipuria Institute of Management , Jaipur

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

³Globalization is about producing where it is most cost effective ,sourcing capital from where it¶s cheapest and selling it where it is most profitable.´ N R Narayana Murthy
Toward A Better Future

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Trade across the borders involve Payments and Receipts in Foreign Exchange Banking System as intermediaries between foreign exchange inflows and outflows Transfer of money and process of transfer Process of transfer varies

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

Forex Market  As per BIS Study : In April 2010, Global Forex Market Daily Turnover : $ 4 trillion (20% higher than in April 2007)  Significant Contributors: Mutual Funds, Pension Funds, Hedge Funds,Insurance Funds  Top Currencies : US$, Euro , Japanese Yen  Euro & Yen recorded highest rise and GBP Recorded highest decline  USD ±EURO : HIGHEST SHARE among all currency Pairs (28%)
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National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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65% cross border transactions 35 % local transactions Indian Rupee share in global forex market increased to 0.9% Share $ 27.4 billon per day USD-INR Pair Currency turn over more than 23%

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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IMPORT MECHANISM Good received in India and Forex remitted out of India Importer is Purchaser of Forex and Bank is SELLER Obligations on both

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Banks deal in documents ,not in goods Buyer and Seller rarely meet each other Deal on the basis of documents and papers Possibilities of documents misunderstood/misconstrued

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Important publications of International Chamber of Commerce (ICC)): UCPDC 600 : for Documentary Credit URC 522: for Collection Documents ISBP 681: SUPPORT PUBLICATION INCOTERMS 2000(13 Trade Terms) Now 2010
Role of FEDAI (Foreign Exchange Dealers¶ Association of India) is a non-profit making body formed in 1958 with the approval of RBI

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Export Credit

Export finance is governed by various Acts and guidelines issued by various departments /organisations: ` EXIM Policy ‡ Foreign Trade policy ‡ FEMA (TO BE STUDIED IN CONJUCTION WITH OTHER ACTS/GUIDELINES ` FEDAI Rules ` Reserve Bank of India ` Export Credit Guarantee Corporation (ECGC) rules ‡ International Chamber of Commerce (ICC), Paris(165 countries Members) ` KYC POLICY
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Import Finance facilities are subject to the prevalent rules of the Banks/ RBI guidelines. The various facilities provided are: Collection of import bill. Opening of Import L/Cs (Sight/ DA) Financing of import by way of Foreign Currency Loans Issuing Guarantees etc. on behalf of importers. COLLECTION OF IMPORT BILLS: LETTER OF CREDIT: granted to the importers after assessing their requirement/ credit worthiness/ financial strength and other parameters. BANK GUARANTEES: (Performance /Financial) on behalf of importers/ other customers issuance of National Workshop on Export-Import & guarantees in favour of beneficiaries abroad. Forex Mechanism- 19 Oct, 2010

Characteristics of foreign exchange market An Over The Counter market: - No physical presence in the same sense as a stock exchange or commodity market - The participants deal among themselves and settle their transactions directly - There is no exchange or clearing house
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

No single location
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no barriers

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FX market is not located in a single building No specific market place exists FX market has few restrictions in this modern world FX market is global in nature / character While the market does not exist at each and every center in the world, it is accessible from any part of the world

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

foreign exchange: An expression to denote foreign currency Also covers the method by which a currency of one country is exchanged for that of another. Guidelines relating to foreign exchange management ` All foreign exchange transactions are to be routed through Authorised Dealers for whom guidelines are issued by RBI under the provisions of Foreign Exchange Management Act .FEDAI governs operational aspects
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National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Exchange rates fluctuate very frequently Settlement of transactions normally does not take place simultaneously Highly liquid market

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Authorised Dealers (AD) licences :

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AD I :banks, all India financial institutions and a few co-operative banks to undertake foreign exchange transactions in India(87) AD II: Money Changers licences alongwith other activities :Full Fledged/Restricted ADIII: Institutional licences to a large number of established firms, companies, hotels, shops, etc

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Maxims: Cause & Effect Relationship No one can receive money unless some one pays Payment must always precede receipt. Credit is a natural corollary Location of Account The currency of the country never leaves its borders where it is a legal tender. Transaction flow would take place for that currency in that Country only.
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Purchase and Sale : With reference to what a bank does All sales mean sale of foreign currency to others All purchase mean purchase of foreign currency from others Cover Operations: Squaring off the position

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

Transaction Date: The date on which a trade occurs Ready or cash To be settled on the same day Tom To be settled on the next working day to the date of transaction(1 day for Dollar/Canada ) Spot To be settled on the second working day from the date of contract Forward To be settled at a date farther than the spot date

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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No of Days : 360/365 Days as Base In International Banking generally 360 days for calculation purposes Calendar of Holidays Information to calculate maturity dates, Value dates, follow up deliveries International Style of Amount : hundreds, thousands, millions,billions

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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NOSTRO Account: Nostro is derived from the latin term "ours." our account with you A foreign currency account maintained by a bank in India with a bank abroad BOI¶s US$ ACCOUNT WITH CITI BANK

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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VOSTRO account: Vostro is latin for yours Your account with us A rupee account of a foreign bank (abroad) with a bank in India CITI BANK RUPEE ACCOUNT WITH BANK OF INDIA

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National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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Role of Society for Worldwide Interbank Financial Telecommunication(S.W.I.F.T ) To provide communications platform, products and services that allow institutions to connect and exchange financial information securely and reliably. To enable institutions to automate and standardize financial transactions, thereby lowering costs, reducing operational risk and eliminating inefficiencies from their operations.
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

ONLY IF YOU ARE
G: Growth oriented L : Linked O : Organizational Belongingness B : Building Bridges A : Attitude L : Leadership GLOBAL
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

If you don't create a BRAND for yourself, your competition will be happy to do it for you ` Brands to Last: Build a Winning and Enduring Brand
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National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

Wishing You All The Best In Your Endeavours for suggestions/feedback/assistance spgarg@jimj.ac.in Mob: 093092 92080

National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010

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