As per section 2 of foreign Exchange Regulation act 1947,Authorized Dealer means a person, for
the time being authorizedunder section 3 to deal in Foreign Exchange.In other words Authorized
Dealer means a Bank, authorized byCentral Bank to Deal in foreign Exchange under the FER
Act 1947. There are some persons or firms, authorized by Central Bank todeal in Foreign
Exchange with limited scope, are calledAuthorized Money Changers.
Functions of Authorized Dealers:
Authorized Dealer can handle all kinds of Foreign Exchangetransaction as per FER Act 1947
under the instruction of CentralBank. Following are the main function of an Authorized Dealer
.i . E x c h a n g e o f F o r e i g n C u r r e n c i e s .
ii.To make arrangement with Foreign Correspondent.
iii.Buying and Selling foreign Currenciesiv.Handling of Inward and Outward Remittance
v.Opening of L/C and Settlement of Payment
vi.Investment in Foreign Trade
v i i . O p e n i n g & m a i n t e n a n c e o f A c c o u n t s w i t h F o r e i g n B a n k s under intimation
of Bangladesh Bank
viii.Export Documents handling
ROLE OF BANKS IN FOREIGN TRADE
(CORRESPONDENT RELATIONSHIP)Under correspondent relationship one bank operatesas an
agent of another in places wherever possible.The following services are provided by banks
tosettle international transactions:a) Collection of cheques, drafts, bills, etc. b) Issue of demand
drafts, mail transfers, travelerscheques etc.c) Arrangements for reimbursement on letters
of credit.d) Advising, confirming, amending letters of credit.e) Sale and purchase of foreign
currencies.f) Issue and confirming guarantees.g) Granting and guaranteeing loans &
overdrafts.h) Furnishing of credit information.
TYPES OF BANKS1.
– This bank is primarily responsiblefor the payment under the credit to the beneficiary,i.e.,
– A credit may be advised to the beneficiary through another bank about theauthenticity of
credit. However, the bank is notresponsible for making the payment.3.
– The bank is located in the exporter’s country but it carries the responsibility of
The Indian FOREX market owes its origin to the importantstep that RBI took in 1978 to allow banks to
undertake intra-day trading in foreign exchange. As a consequence, thestipulation of maintaining
“Square” or “near square” positionwas to be complied with only at the close of business eachday.
During the period 1975-1992, the exchange rate of rupeewas officially determined by the RBI in terms of
a weighted basket of currencies of India’s major trading partners andthere were significant restrictions
on the current accounttransactions.The initiation of economic reforms in July 1991
sawsignificant two-step downward adjustment in the exchangerate of the rupee on July 1 and 3, 1991
with a view to placingit at an appropriate level in line with the inflation differentialto maintain the
competitiveness of exports. Subsequently,following the recommendations of the High Level
Committeeon Balance of Payments (Chairman:Dr C. Rangarajan) theLiberalised Exchange Rate
Management System(LERMS) involving dual exchange rate mechanism was instituted inMarch 1992 which
was followed by the ultimate convergenceof the dual rates effective from March 1, 1993(christenedmodified
LERMS). The unification of the exchange rate of therupee marks the beginning of the era of market
determinedexchange rate regime of rupee, based on demand and supplyin the forex market. It is also an
important step in the progresstowards current account convertibility, which was finallyachieved in August
1994 by accepting Article VIII of theArticles of Agreement of the International Monetary Fund.
Exchange Rate is the price of one country's currencyexpressed in another country's currency. In other words,
therate at which one currency can be exchanged for another. e.g.Rs. 48.50 per one USD.
Major currencies of the World
What is a Foreign ExchangeTransaction?
Any financial transaction that involves more thanone currency is a foreign exchange transaction.
Most important characteristic of a foreign exchangetransaction is that it involves Foreign
yef r Ecagrt
Tps f xhne as
There are 4 types of Exchange rates:1 . R e a d y 2.Value Tom3.Spot Transaction4.Forward
Settlement of funds on the same day (date of the deal).
Vl e o :
Settlement of funds takes place on thenext working day of the date of the deal.
Settlement of funds takes placeon the second working day following the date of thedeal.
Delivery takes place on any day after the date of the deal.
A monopoly or a firm within monopolisticcompetition that has the power to influence the price
itcharges as the good it produces does not have perfectsubstitutes.
A monopoly is a price maker as it holds a large amount of power over the price it charges.A price maker that is a
firm within monopolistic competition produces goods that are differentiated in some way from itscompetitors'
products. This kind of price maker is also a profit-maximizer as it will increase output only as
long as its
arginal revenue is greater than its marginal cost, in other words, as long as it's producing a profit.
1. An investor who’s buying or selling transactions areassumed to have no effect on the market.2. A firm that can
alter its rate of production and sales withoutsignificantly affecting the market price of its product.
1. In the context of the stock market, individual investors are price-takers.2. Suppose you sell water,
which of course is supplied bymillions of other places, including the sky. If you decide to setthe price of a
gallon of your water at $10, you will likely sellnothing because this commodity is readily
available elsewherefor a much cheaper price.The main purpose of the foreign currency exchange market isto
make money but it is different from other equity markets.There are various technical terminologies
and strategies atrader must know to deal with currency exchange. In the
market the commodity that is traded isthe foreign currency. These foreign currencies are always priced in pairs.
The value of one unit of a foreign currency isalways expressed in terms of another foreign currency. Thusall
trades incorporate the purchase and sale of two foreigncurrencies at the same time. You have to buy a
when you expect the value of that currency to increase in thefuture.They are always quoted in pairs as USD/JPY.
The firstcurrency is the base currency and the second one is the quotecurrency. The quote value depends on the
currency conversionrates between the two currencies under consideration. Mostlythe USD will be used
as based currency but sometimes euro, pound sterling is also used.The profit of the broker depends on the bid
and the ask price. The bid is the price the broker is ready to pay to buy base currency for exchanging
the quote currency. The ask isthe price the broker is ready to sell the base currency for exchanging the quote
currency. The difference between thesetwo prices is called the spread which determines the profit
or loss of the trade.
R T Q O A I N O V N I N:
AE U T T C N E T S
An exchange system quotation is given by stating the number of unitsof "term currency" (or
"price currency" or "quote currency") that can be bought in terms of 1 "unit currency" (also
called "base currency").For example, in a quotation that says the EURUSD exchange rate
is1.4320 (1.4320 USD per EUR), the term currency is USD and the base currency is EUR.There
is a market convention that determines which is the basecurrency and which is the term currency. In
most parts of the world,the order is: EUR – GBP – AUD – NZD – USD – others. Thus if youare
doing a conversion from EUR into AUD, EUR is the basecurrency, AUD is the term currency and the
exchange rate tells youhow many Australian dollars you would pay or receive for 1 Euro.Cyprus and
Malta which were quoted as the base to the USD andothers were recently removed from this list
when they joined theEuro. In some areas of Europe and in the non-professional market inthe UK,
EUR and GBP are reversed so that GBP is quoted as the base
currency to the euro. In order to determine which the base currency iswhere both currencies are
not listed (i.e. both are "other"), marketconvention is to use the base currency which gives an
exchange rategreater than 1.000. This avoids rounding issues and exchange rates being quoted to
more than 4 decimal places. There are someexceptions to this rule e.g. the Japanese often quote
their currency asthe base to other currencies.Quotes using a country's home currency as the price
currency (e.g.,EUR 0.63 = USD 1.00 in the euro zone) are known as direct quotationor price
quotation (from that country's perspective)  and are used by most countries.Quotes using a
country's home currency as the unit currency (e.g.,EUR 1.00 = USD 1.58 in the euro zone) are
known as indirectquotation or quantity quotation and are used in British newspapersand are also
common in Australia, New Zealand and the Euro zone.
irect quotation: 1 foreign currency unit = x home currency units“Price of one Unit of
Domestic Currency in terms of Foreign Currency”Five Currencies are quoted in Direct
) Pound Sterling2) Euro3) Australian Dollar 4) New Zealand Dollar 5) Irish Punt
“Price of one Unit of Foreign Currency in terms of DomesticCurrency
Indirect quotation: 1 home currency unit = x foreign currencyunits
In the international market, almost all currencies are quoted indirectly. Note that, using direct
quotation, if the home currency isstrengthening (i.e., appreciating, or becoming more valuable)
then theexchange rate number decreases. Conversely if the foreign currency isstrengthening, the
exchange rate number increases and the homecurrency is depreciating.Market convention from
the early 1980s to 2006 was that mostcurrency pairs were quoted to 4 decimal places for spot
transactionsand up to 6 decimal places for forward outrights or swaps. (The fourthdecimal place
is usually referred to as a "pip.") An exception to thiswas exchange rates with a value of less than
1.000 which were usuallyquoted to 5 or 6 decimal places. Although there is no fixed
rule,exchange rates with a value greater than around 20 were usuallyquoted to 3 decimal places
and currencies with a value greater than 80were quoted to 2 decimal places. Currencies over
5000 were usuallyquoted with no decimal places (e.g. the former Turkish Lira). e.g.(GBPOMR :
0.765432 - EURUSD : 1.5877 - GBPBEF : 58.234 -EURJPY : 165.29). In other words, quotes
are given with 5 digits.Where rates are below 1, quotes frequently include 5 decimal places.In
2005 Barclays Capital broke with convention by offering spotexchange rates with 5 or 6 decimal
places on their electronic dealing platform. The contraction of spreads (the difference between
the bidand offer rates) arguably necessitated finer pricing and gave the banksthe ability to try and
win transaction on multibank trading platformswhere all banks may otherwise have been quoting
the same price. Anumber of other banks have now followed this.
Risk Management and Settlement of Transactions in the ForeignExchange Market
The foreign exchange market is characterized by constant changesand rapid innovations
in trading methods and products. While theinnovative products and ways of trading create new
possibilities for profit, they also pose various kinds of risks to the market. Central banks all
over the world, therefore, have become increasinglyconcerned of the scale of foreign exchange
settlement risk and theimportance of risk mitigation measures. Behind this growingawareness are
several events in the past in which foreign exchangesettlement risk might have resulted in
systemic risk in globalfinancial markets, including the failure of Bankhaus Herstatt in1974 and the
closure of BCCI SA in 1991.
The foreign exchange settlement risk arises because the delivery of the two currencies involved
in a trade usually occurs in twodifferent countries, which, in many cases are located in
differenttime zones. This risk is of particular concern to the central banksgiven the large
values involved in settling foreign exchangetransactions and the resulting potential for systemic
risk. Most of the banks in the EMEs use some form of methodology for measuring the foreign
exchange settlement exposure. Many of these banks use the single day method, in which the
exposure ismeasured as being equal to all foreign exchange receipts that aredue on the day. Some
institutions use a multiple day approach for measuring risk. Most of the banks in EMEs use some form
of individual counterparty limit to manage their exposures. Theselimits are often applied to the
global operations of the institution.These limits are sometimes monitored by banks on a regular
basis.In certain cases, there are separate limits for foreign exchangesettlement exposures, while
in other cases, limits for aggregatesettlement exposures are created through a range of
instruments.Bilateral obligation netting, in jurisdictions where it is legallycertain, is an important
way for trade counterparties to mitigate theforeign exchange settlement risk. This process allows
tradecounterparties to offset their gross settlement obligations to each other in the currencies they
have traded and settle these obligationswith the payment of a single net amount in each currency.
Several emerging markets in recent years have implementeddomestic real time gross settlement
(RTGS) systems for thesettlement of high value and time critical payments to settle thedomestic leg
of foreign exchange transactions. Apart from risk reduction, these initiatives enable participants
to actively managethe time at which they irrevocably pay way when selling thedomestic
currency, and reconcile final receipt when purchasing thedomestic currency. Participants, therefore, are
able to reduce theduration of the foreign exchange settlement risk.
Recognizing the systemic impact of foreign exchange settlementrisk, an important element in the
infrastructure for the efficientfunctioning of the Indian foreign exchange market has been
theclearing and settlement of inter-bank USD-INR transactions. In pursuance of
the recommendations of the Sodhani Committee, theReserve Bank had set up the Clearing
Corporation of India Ltd.(CCIL) in 2001 to mitigate risks in the Indian financial markets.The
CCIL commenced settlement of foreign exchange operationsfor inter-bank USD-INR spot and
forward trades from November 8, 2002 and for inter-bank USD-INR cash and tom trades
fromFebruary 5, 2004. The CCIL undertakes settlement of foreignexchange trades on a multilateral net
basis through a process of notation and all spot, cash and tom transactions are guaranteed
for settlement from the trade date. Every eligible foreign exchangecontract entered between
members gets notated or replaced by twonew contracts – between the CCIL and each of the two
parties,respectively. Following the multilateral netting procedure, the netamount payable to,
or receivable from, the CCIL in each currencyis arrived at, member-wise. The Rupee leg
is settled through themembers’ current accounts with the Reserve Bank and the USD leg through CCIL’s
account with the settlement bank at New York. TheCCIL sets limits for each member bank on the basis
of certain parameters such as member’s credit rating, net worth, asset valueand management quality.
The CCIL settled over 900,000 deals for a gross volume of US $ 1,180 billion in 2005-06. The CCIL
the entire gamut of foreign exchangetransactions under its purview. Intermediation, by the CCIL
thus, provides its members the benefits of risk mitigation, improvedefficiency, lower operational
cost and easier reconciliation of accounts with correspondents.
An issue related to the guaranteed settlement of transactions by theCCIL has been the extension
of this facility to all forward trades aswell. Member banks currently encounter problems in terms
of hugeoutstanding foreign exchange exposures in their books and thiscomes in the way of their
doing more trades in the market. Riskson such huge outstanding trades were found to be very
high and sowere the capital requirements for supporting such trades. Hence,many member banks
have expressed their desire in several forathat the CCIL should extend its guarantee to these
forward tradesfrom the trade date itself which could lead to significant increase inthe liquidity
and depth in the forward market. The risks that bankstoday carry in their books on account of
large outstanding forward positions will also be significantly reduced (Gopinath, 2005). Thishas
also been one of the recommendations of the Committee onFuller Capital Account Convertibility.
Apart from managing the foreign exchange settlement risk, participants also need to manage
market risk, liquidity risk, creditrisk and operational risk efficiently to avoid future losses. As
per the guidelines framed by the Reserve Bank for banks to aligns andexposure in derivative
markets as market makers, the boards of directors of ADs (category-I) are required to frame
policy and fix suitable limits for operations in the foreign exchangemarket. The net overnight
open exchange position and theaggregate gap limits need to be approved by the Reserve Bank.
Theopen position is generally measured separately for each foreigncurrency consisting of the net
spot position, the net forward position, and the net options position. Various limits for exposure,viz.,
overnight, daylight, stop loss, gap limit, credit limit, value atrisk (VaR), etc., for foreign exchange
transactions by banks arefixed. Within the contour of these limits, front office of the treasuryof ADs transacts in
the foreign exchange market for customers andown proprietary requirements. These exposures
are accounted,confirmed and settled by back office, while mid-office evaluatesthe profit and
monitors adherence to risk limits on a continuous basis. In the case of market risk, most banks
use a combination of measurement techniques including and managed by most banks onan
aggregate counter-party basis so as to include all exposures inthe underlying spot and derivative
markets. Some banks alsomonitor country risk through cross-border country risk exposurelimits.
Liquidity risk is generally estimated by monitoring assetliability profile in various currencies
in various buckets andmonitoring currency-wise gaps in various buckets. Banks also
track balances to be maintained on a daily basis in Nostro accounts,remittances and committed
foreign currency term loans whilemonitoring liquidity risk.
To sum up, the foreign exchange market structure in India hasundergone substantial
transformation from the early 1990s. Themarket participants have become diversified and
there are severalinstruments available to manage their risks. Sources of supply anddemand in the
foreign exchange market have also changed in linewith the shifts in the relative importance in
balance of paymentsfrom current to capital account. There has also
been considerableimprovement in the market infrastructure in terms of trading
platforms and settlement mechanisms. Trading in Indian foreignexchange market is largely
concentrated in the spot segment evenas volumes in the derivatives segment are on the rise.
Some of theissues that need attention to further improve the activity in thederivatives segment
include flexibility in the use of variousinstruments, enhancing the knowledge and understanding
thenature of risk involved in transacting the derivative products,reviewing the role of underlying
in booking forward contracts andguaranteed settlements of forwards. Besides, market players
wouldneed to acquire the necessary expertise to use different kinds of instruments and manage
the risks involved.
To evolve appropriate environment in discharging the basic objective of the Foreign
Exchange Management Act (FEMA), 1999;
To facilitate external trade and payments and to promote orderly development and
maintenance of foreign exchange market in India; and
To frame prompt and pro-active policy responses, as part of active capital account
management, within the evolving macroeconomic conditions.
To effectively integrate the needs of the users, both resident and non-resident, with the evolving
market dynamics and external sector developments by:
evolving and disseminating rules and regulations in a user friendly language;
moving towards fuller capital account convertibility in a calibrated manner;
having regular interface with the users to assess their needs with greater focus on the
requirements of resident individuals /entities;
rendering effective and efficient customer service with greater transparency;
empowering Authorised Persons and enlarging their role as a conduit to
create awareness about the developments;
facilitating hassle-free cross-border transactions;
capturing data on a real time basis to dynamically induce policy changes; and
disseminating data in a transparent manner.
Foreign Exchange Market Overview
Globally, operations in the foreign exchange market started in a major way after the breakdown of the Bretton
Woods system in 1971, which also marked the beginning of floating exchange rateregimes in
several countries. Over the years, the foreign exchange market has emerged as
thelargest market in the world. The decade of the 1990s witnessed a perceptible policy shift in
manyemerging markets towards reorientation of their financial markets in terms of new products
andinstruments, development of institutional and market infrastructure and realignment
of regulatorystructure consistent with the liberalized operational framework. The cha
nging contours weremirrored in a rapid expansion of foreign exchange market in terms of
participants, transactionvolumes, decline in transaction costs and more efficient mechanisms of risk
transfer.The origin of the foreign exchange market in India could be traced to the year 1978 when banks inIndia
were permitted to undertake intra-day trade in foreign exchange. However, it was in the1990s that
the Indian foreign exchange market witnessed far reaching changes along with the shiftsin the currency regime in
India. The exchange rate of the rupee, that was pegged earlier was floated partially in March 1992 and fully
in March 1993 following the recommendations of the Report of the High Level Committee on Balance
of Payments (Chairman: Dr.C. Rangarajan). The unificationof the exchange rate was instrumental in
developing a market-determined exchange rate of therupee and an important step in the progress
towards current account convertibility, which wasachieved in August 1994. 6.3 A further impetus to the
development of the foreign exchange marketin India was provided with the setting up of an Expert
Group on Foreign Exchange Markets inIndia (Chairman: Shri O.P. Sodhani), which submitted its
report in June 1995. The Group madeseveral recommendations for deepening and
widening of the Indian foreign exchange market. Consequently, beginning from January
1996, wide-ranging reforms have been undertaken in
theIndian foreign exchange market. After almost
a decade, an Internal Technical Group on theForeign Exchange Market (2005) was
constituted to undertake a comprehensive review of themeasures initiated by the Reserve Bank and
identify areas for further liberalization or relaxation of restrictions in a medium-term framework.The
momentous developments over the past few years are reflected in the enhanced riskbearingcapacity of banks along with rising foreign exchange trading volumes and
Theforeign exchange market has acquired depth (Reddy, 2005). The conditions in th
e foreignexchange market have also generally remained orderly (Reddy, 2006c). While it is not possible
for any country to remain completely unaffected by developments in international markets, India
wasable to keep the spillover effect of the Asian crisis to a minimum through constant monitoring
andtimely action, including recourse to strong monetary measures, when necessary, t
o preventemergence of self fulfilling speculative activities
What is Foreign Trade ? External Trade Meaning ↓
Foreign trade is nothing but trade between the different countries of the world. It is also called as
International trade, External trade or Inter-Regional trade. It consists of imports, exports and
entrepot. The inflow of goods in a country is called import trade whereas outflow of goods from
a country is called export trade. Many times goods are imported for the purpose of re-export after
some processing operations. This is called entrepot trade. Foreign trade basically takes place for
mutual satisfaction of wants and utilities of resources.
3 Types of Foreign Trade ↓
Foreign Trade can be divided into following three groups :1.
Import Trade : Import trade refers to purchase of goods by one country from another country or inflow of goods
and services from foreign country to home country.
Export Trade : Export trade refers to the sale of goods by one country to another country or outflow of goods from
home country to foreign country.
Entrepot Trade : Entrepot trade is also known as Re-export. It refers to purchase of goods from one country and
then selling them to another country after some processing operations.
Need and Importance of Foreign Trade ↓
Following points explain the need and importance of foreign trade to a nation.
1. Division of labour and specialisation
Foreign trade leads to division of labour and specialisation at the world level. Some countries have abundant natural
resources. They should export raw materials and import finished goods from countries which are advanced in skilled
manpower. This gives benefits to all the countries and thereby leading to division of labour and specialisation.
2. Optimum allocation and utilisation of resources
Due to specialisation, unproductive lines can be eliminated and wastage of resources avoided. In other words,
resources are channelised for the production of only those goods which would give highest returns. Thus there is
rational allocation and utilization of resources at the international level due to foreign trade.
3. Equality of prices
Prices can be stabilised by foreign trade. It helps to keep the demand and supply position stable, which in turn
stabilises the prices, making allowances for transport and other marketing expenses.
4. Availability of multiple choices
Foreign trade helps in providing a better choice to the consumers. It helps in making available new varieties to
consumers all over the world.
5. Ensures quality and standard goods
Foreign trade is highly competitive. To maintain and increase the demand for goods, the exporting countries have to
keep up the quality of goods. Thus quality and standardised goods are produced.
6. Raises standard of living of the people
Imports can facilitate standard of living of the people. This is because people can have a choice of new and better
varieties of goods and services. By consuming new and better varieties of goods, people can improve their standard
7. Generate employment opportunities
Foreign trade helps in generating employment opportunities, by increasing the mobility of labour and resources. It
generates direct employment in import sector and indirect employment in other sector of the economy. Such as
Industry, Service Sector (insurance, banking, transport, communication), etc.
8. Facilitate economic development
Imports facilitate economic development of a nation. This is because with the import of capital goods and technology,
a country can generate growth in all sectors of the economy, i.e. agriculture, industry and service sector.
9. Assitance during natural calamities
During natural calamities such as earthquakes, floods, famines, etc., the affected countries face the problem of
shortage of essential goods. Foreign trade enables a country to import food grains and medicines from other
countries to help the affected people.
10. Maintains balance of payment position
Every country has to maintain its balance of payment position. Since, every country has to import, which results in
outflow of foreign exchange, it also deals in export for the inflow of foreign exchange.
11. Brings reputation and helps earn goodwill
A country which is involved in exports earns goodwill in the international market. For e.g. Japan has earned a lot of
goodwill in foreign markets due to its exports of quality electronic goods.
12. Promotes World Peace
Foreign trade brings countries closer. It facilitates transfer of technology and other assistance from developed
countries to developing countries. It brings different countries closer due to economic relations arising out of trade
agreements. Thus, foreign trade creates a friendly atmosphere for avoiding wars and conflicts. It promotes world
peace as such countries try to maintain friendly relations among themselves.
hat is Currency Trading?
Currency trading can have a couple of meanings. If you want to learn about how to save time and money
on currency transfers, visit XE Trade Money Transfers. These articles discuss currency trading as
buying and selling currency on the foreign exchange (or "Forex") market with the intent to make money.
How Forex Works
The currency exchange rate is the rate at which one currency can be exchanged for another. It is always
quoted in pairs like the EUR/USD (the Euro and the US Dollar). Exchange rates fluctuate based on
economic factors like inflation, industrial production and geopolitical events. These factors will influence
whether you buy or sell a currency pair.
Example of a Forex Trade:
The EUR/USD rate represents the number of US Dollars one Euro can purchase. If you believe that the
Euro will increase in value against the US Dollar, you will buy Euros with US Dollars. If the exchange
rate rises, you will sell the Euros back, making a profit. Please keep in mind that forex trading involves
a high risk of loss.
Why Trade Currencies?
Forex is the world's largest market, with about 3.2 trillion US dollars in daily volume and 24-hour market
action. Some key differences between Forex and Equities markets are:
1. Many firms don't charge commissions – you pay only the bid/ask spreads.
2. There's 24 hour trading – you dictate when to trade and how to trade.
3. You can trade on leverage, but this can magnify potential gains and losses.
4. You can focus on picking from a few currencies rather than from 5000 stocks.
5. Forex is accessible – you don’t need a lot of money to get started.
Why Currency Trading Is Not For Everyone
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for everyone.
Before deciding to trade foreign exchange you should carefully consider your investment objectives, level
of experience, and risk appetite. Remember, you could sustain a loss of some or all of your initial
investment, which means that you should not invest money that you cannot afford to lose. If you have any
doubts, it is advisable to seek advice from an independent financial advisor.
Directory of Banks in India
List of authorised dealers in foreign exchange
Join "The Bankers Club" - An Exclusive Club for Bankers & Ex - Bankers .... Read more
List of banks to whom licences have been issued to deal in foreign exchange
ABN AMRO Bank N.V.
Abu Dhabi Commercial Bank Ltd.
American Express Bank Ltd.
ANZ Grindlays Bank Ltd.
Arab Bangladesh Bank Ltd.
Bank Internasional Indonesia
Bank of America National Trust and Savings Association
Bank of Bahrain and Kuwait B.S.C.
Bank of Baroda
Bank of Ceylon
Bank of India
Bank of Madura Ltd.
Bank of Maharashtra
Bank of Nova Scotia
Bank of Rajasthan Ltd.
Bank of Tokyo-Mitsubishi Ltd.
Banque Nationale De Paris
Barclays Bank p.l.c.
Benares State Bank Ltd.
Bharat Overseas Bank Ltd.
Bombay Mercantile Co-operative Bank Ltd.
Catholic Syrian Bank Ltd.
Central Bank of India
Centurion Bank Ltd.
The Chase Manhattan Bank
Chinatrust Commercial Bank
Cho Hung Bank
City Union Bank Ltd.
List of banks to whom licences have been issued to deal in foreign exchange
The Development Bank of Singapore Ltd.
Development Credit Bank Ltd.
Dhanalakshmi Bank Ltd.
Federal Bank Ltd.
HDFC Bank Ltd.
The Hongkong and Shanghai Banking Corporation Ltd.
ICICI Banking Corporation Ltd.
IDBI Bank Ltd.
Indian Overseas Bank
IndusInd Bank Ltd.
Internationale Nederlanden Bank (ING Bank)
Jammu and Kashmir Bank Ltd.
Karnataka Bank Ltd.
Karur Vysya Bank Ltd.
Lakshmi Vilas Bank Ltd.
Maharashtra State Co-operative Bank Ltd.
Nedungadi Bank Ltd.
Oman International Bank S.A.O.G.
Oriental Bank of Commerce
Oversea-Chinese Banking Corporation Ltd.
Punjab National Bank
Punjab and Sind Bank
Sangli Bank Ltd.
Saraswat Co-operative Bank Ltd.
SBI Commercial and International Bank Ltd.
South Indian Bank Ltd.
Standard Chartered Bank
State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of India
State Bank of Indore
State Bank of Mauritius Ltd.
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra
State Bank of Travancore
Tamilnad Mercantile Bank Ltd.
The Toronto Dominion Bank
Union Bank of India
United Bank of India
United Western Bank Ltd.
UTI Bank Ltd.
Vysya Bank Ltd.
Definition of 'Authorized Forex
Any type of financial institution that has
received authorization from a relevant
regulatory body to act as a dealer involved with
the trading of foreign currencies. Dealing with
authorized forex dealers ensure that your
transactions are being executed in a legal and
'Authorized Forex Dealer'
In the United States, one regulatory
body responsible for authorizing forex
dealers is the National Futures
Association (NFA). The NFA ensures that
authorized forex dealers are subject to
stringent screening upon registration and
strong enforcement of regulations upon
Foreign Exchange Dealer's Association of India (FEDAI) was set
up in 1958 as an Association of banks dealing in foreign exchange
in India (typically called Authorised Dealers - ADs) as a self
regulatory body and is incorporated under Section 25 of The
Companies Act, 1956. It's major activities include framing of rules
governing the conduct of inter-bank foreign exchange business
among banks vis-à-vis public and liaison with RBI for reforms and
development of forex market.
Presently some of the functions are as follows:
Guidelines and Rules for Forex Business.
Training of Bank Personnel in the areas of Foreign
Accreditation of Forex Brokers
Advising/Assisting member banks in settling issues/matters
in their dealings.
Represent member banks on Government/Reserve Bank of
Announcement of daily and periodical rates to member
Due to continuing integration of the global financial markets and
increased pace of de-regulation, the role of self-regulatory
organizations like FEDAI has also transformed. In such an
environment, FEDAI plays a catalytic role for smooth functioning of
the markets through closer co-ordination with the RBI, other
organizations like FIMMDA, the Forex Association of India and
various market participants. FEDAI also maximizes the benefits
derived from synergies of member banks through innovation in
areas like new customized products, bench marking against
international standards on accounting, market practices, risk
management systems, etc.
Foreign Exchange Dealers
Foreign exchange in India is tightly controlled and the Central Government has wide powers to control
transactions in foreign exchange. Foreign majority holdings were rarely allowed by the Foreign-Exchange
Regulation Act. However, a new foreign investment policy (1991) allowed automatic approval. Transfer of
capital to foreign countries by Indian nationals is only allowed in special cases like immigration.
www.bestindiansites.com finds you a solution for locating your foreign exchange dealers in the country.
The Foreign Exchange Dealer's Association of India (FEDAI) has been in the business since 1958. Framing
rules governing the conduct of inter-bank foreign exchange business among banks and publics and liaison
with RBI for reforms of the forex market is its main activity. Look in to the site to find out their member
banks, the members of their management committee, their local committee members etc. You will also have
the prime rates or the revaluation rates from this site. Go to their FAQs section and take a look at the
commonly faced questions for your reference. Increase your knowledge base with this foreign exchange
dealer. Visit their site and to do that click on the above mentioned link.
ICICI helps take charge of your forex requirements. When you are visiting a place abroad or maybe simply
sending money overseas, you can depend on this foreign exchange dealer. Find out the latest rates and look
for the best that they can offer. Enjoy their professional and personalized service. Make use of their travel
card, traveler’s cheque and foreign currencies. Find out from the site how you can avail of their forex
services. Click the link above to know more.
Reserve Bank of India takes care of your foreign exchange needs. Go to their site and find out what the
norms and regulations are. Find out the restrictions of a person who is a resident of India , on holding
foreign currency account. Learn how you can open, hold and maintain an Exchange Earner's Foreign
Currency Account with this foreign exchange dealer. Also find out your limitations as an account holder and
the responsibilities of foreign exchange dealers. You will get all the information from the site. So visit the
link above and find out more.
Bank of Baroda deals in various types of foreign exchange transactions. A look in to the site will tell you
what the different types of transactions are. It deals in foreign inward remittance, foreign outward
remittance, and resident foreign currency account (RFC) and a lot more. Learn about their NRI accounts and
the deposit schemes they offer. Take a look at their deposit products and also their loan facilities to NRIs
and foreign currency loans to residents of India . To know more visit the site.
With over 33,000 agent locations in India Western Union Money Transfer has made transferring foreign
currency just a matter of a few minutes. You do not need a bank account even to receive the money. Find
out how money can be sent to India with the help of this foreign exchange dealer. Take a look at the step by
step method that has been explained here for you. Find an agent near your place and make transferring
money easier. Also find out how one can receive money in India . Take a look at the site and you will get a
host of information on forex. Click on the link to visit.
Are you scouting for foreign exchange dealers? This portal offers a comprehensive list of the foreign
exchange dealers of Chennai. These foreign exchange dealers offer a varied range of services. Check-out
their profiles and contact details. The Sri Vari Money Exchange Private Limited provides a wide range of
services. There you can both purchase and sell foreign currencies as well as traveler cheques. They also
offer prepaid forex cards. Take a look at their services and facilities by logging on to this site. You can also
cruise through the other related links provided on this portal.
Created in the year 1978, the Foreign Exchange of India is a comparatively new market. Unlike other
financial markets the Foreign Exchange markets does not have any central exchange. Get a clear overview
of the foreign exchange markets by logging on to this portal. Take a look at the services offered by the
Foreign Exchange of India. The Foreign Exchange Dealers of India are the Indian commercial banks -Introduce yourself to the foreign exchange Dealers of India by visiting this portal. Learn about the Foreign
Exchange Association of India.
yellowpages webindia123 (yellowpages.webindia123.com)
Looking for foreign exchange dealers of India? This portal will acquaint you with the foreign exchange
dealers based in the capital city of India, Delhi. Delhi is home to some of the well-renowned Foreign
Exchange dealers of India. Check-out the comprehensive list of the Foreign Exchange dealers of Delhi by
dropping in at this portal. Take a look at their profile before you make your move. Here you will also get the
contact details of all the Foreign Exchange dealers of Delhi.
Well your search for India’s Foreign Exchange dealers ends here. This portal offers you a comprehensive list
of the Foreign Exchange dealers of India –introduce yourself to the Foreign Exchange dealers of India. You
can always keep yourself posted on the latest forex rates by logging onto this portal. If you are interested to
advertise your bank and want to display your products, all you need to do is simply send a mail to the
address provided here.
The United Bank of India or the UBI is a well-renowned commercial bank of India providing foreign exchange
services. The UBI offers a wide range of Foreign Exchange services. Check-out the Foreign Exchange
schemes of UBI for the exporters and importers of India. The UBI has a wide network of 30 Foreign
Exchange dealers spread all across India. Take a look at the authorized Foreign Exchange dealers of UBI and
collect their contact addresses. This portal will offer you comprehensive information on the foreign exchange
services of UBI.
To serve as FEMA’s Geospatial Information Office to oversee and coordinate proper
documentation and use of agency-created geospatial data through shared investment and cost
avoidance, applied use of GIS technology, and administration of robust and high quality
geospatial technology and services in support of emergency management.
Ensure GIS data quality by acquiring and providing accurate, reliable and complete core GIS data
and a central geodatabase.
Operate and maintain a GIS enterprise service bus for easy and common access to geographic
information, tools and services.
Manage the FEMA GIS Enterprise Portfolio as an efficient, cost-effective and sustainable use of
GIS technology throughout the organization.
Improve the FEMA GIS knowledge base through the use of effective, broad-reaching
communications and mission oriented training.
Operate and maintain the Mapping and Analysis Center (MAC) to provide geospatial analysis and
situational awareness during disasters, emergencies, exercises, events, training and normal
About the Industry Liaison Program
The Industry Liaison Program is the one point of entry for vendors seeking to do business with
FEMA. Vendors seeking to do business with FEMA should be registered in System for Award
Management (SAM), previously known as Central Contractor Registration (CCR) database. The
program coordinates vendor presentations with program offices and Industry Days, conducts market
research, responds to informal Congressional requests, and performs vendor analysis reporting.
Industry Liaison also maintains an enterprise-wide repository – used to supplement market research
for Contracting Officers – of vendors who contact FEMA. Staffed with a help desk, the program
processes and routes vendor profile data to the appropriate FEMA program offices, including the
Small Business Office, for follow-up.
Some of the program's goals include:
Implement business provider alliances between vendors and the acquisition community that will assist FEMA
in the preparedness, protection, response, recovery and mitigation of disasters
Leverage vendor capabilities and industry best practices, to assist FEMA in providing timely support to
constituents impacted by a disaster
Provide vendor-supporting industry partners greater visibility into FEMA's requirements
Foster knowledge sharing between FEMA acquisitions and vendors
Provide greater opportunities for local businesses, in accordance with the Stafford Act, in support of FEMA's
FAQs on FEMA: Foregin Exchange Management Act India
Print This Page
Email to Friend
exchange? NRI Banking
From authorised dealers or money changers.
Banks certified by the RBI to transact in foreign exchange and foreign securities are
also referred to as authorized dealers.
USD 25,000 is permitted for a business tour to any country, with the exception of
Nepal and Bhutan. Requirements in excess of this amount require permission of the
RBI. No foreign exchange is permissible for journey to Nepal and Bhutan.
»NRE Interest Rates
Upto USD 100,000 is allowed for medical treatment overseas. Requirements over and
above this will be sanctioned on the basis of an approximation by a doctor or hospital in India or overseas.
Since students studying abroad are treated as NRIs, all rules applicable to NRIs apply to them as well .They are
also entitled to receive forex upto USD 100,000 from relatives towards the cost of their studies.
Upto USD100, 000 is allowed from any authorised dealer on the basis of self-declaration.
Upto USD100, 000 on self- declaration basis is permitted to meet initial expenses in the adopted country. No
foreign exchange remittance outside India is permitted to earn points or credits for immigration. Such outward
remittances have to be supported by the RBI.
One can send upto USD 5,000 a year, though amount exceeding this requires permission from the RBI.
Unlimited foreign exchange is allowed .In case the total value of cash instruments – currency notes and travellers
cheques - exceeds USD 10,000; a Currency Declaration Form has to be presented to the customs officials on arrival
at the airport.
Yes, EEFC Accounts and RFC Accounts can be kept by resident Indians.
In the EEFC account maintained with a bank, residents are allowed to keep 50% of foreign currency remittances
received from abroad which can be used for current account transactions and approved capital account
In the RFC Accounts, returning Indians (ex-NRIs), can hold and maintain foreign currency. These funds are free
A RFC (Domestic) Account can also be maintained by resident Indians for receiving payments for services abroad,
or proceeds of export of goods abroad, or received as gifts from relatives outside India.
Yes, as per Section 6 of the Foreign Exchange Management Act, 1999, if such assets were purchased, held or
owned during their residence outside India or inherited from a person who was resident outside India.
Repatriation is allowed only upto a limit of USD 25,000 in a calendar year, and no further remittances are
permitted, even if the same funds have been remitted back to India.
Transfer by way of sale: A person resident outside India can sell his shares or convertible debentures in the
The sale can take place provided the receiver does not have any venture in India in the same business
A NRI may sell the shares and convertible debentures possessed by him only to another NRI.
An NRI can sell his shares through an authorised broker in India
Transfer by way of Gift: NRIs can gift to resident Indians as under:
Any person be located in outside India, can present stocks or convertible debentures to any person
resident outside India; provided the receiver does not have an existing tie up in India in the same
A NRI may gift his shares and/ or convertible debentures to another NRI only
Any person residing overseas may gift shares and/or convertible debentures to a person resident in India.
A resident Indian may sell shares and convertible debentures of any Indian company whose business falls under the
Automatic Route, to any person living outside India subject to the sectoral limits.
Any Indian company that proposes to sell shares or convertible debentures should not be involved in
extending any financial service;
The sale should not fall within the ambit of the provisions of SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997; and
Pricing procedures, documentation and reporting requirements for such a deal must be as per
requirements of the RBI.
An Indian resident who proposes to gift to a person resident outside India is required to make an application to the
What procedure is to be followed in case the transfer does not fall into any of the above categories?
In such cases, an application to the RBI has to be made with
A copy of FIPB approval.
Consent/approval letter from transferor and transferee stating the number of shares, name of company in
which investment is to be made and the rate at which the transfer is to be made.
Details of equity participation in the company by residents and non-residents.
All approvals and copies of FC-GPR from RBI pertaining to existing shares of the non-residents.
In case the seller is an NRI or an OCB, the copies of RBI approvals of the shares held on repatriation or
In case the shares by the non-resident are under the SEBI Takeover Regulations, an Open Offer document
filed with SEBI
A Chartered Accountant needs to certify the value of shares in a Fair Valuation Certificate as per
If the shares are unlisted, the fair value has to be calculated as per the former Controller of Capital
Yes, except where NRIs invest expressly in non-repatriable schemes. Dividends earned on foreign investments can
Yes, in compliance with the Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through
Depository Receipt Mechanism),1993 provided the External Commercial Borrowing guidelines of the RBI are
Yes. Proposals for such investments, which are considered as part of share capital, are filtered either through the
No. Only NRIs/PIOs are allowed to set up a partnership or proprietorship business in India on a non-repatriation
Such payments are subject to:
a maximum of US$2 million;
Royalty upto 5 % for domestic sales and 8 % for exports, with no bar on the duration of the payments.
The royalty limits are exclusive of taxes and are calculated as per standard conditions.
The royalty is worked on the basis of the net ex-factory sale price of the product.
Payments are made through authorised banks
What is to be done in cases where the Automatic Route of RBI for technology transfer does not apply?
The Ministry of Commerce, Department of Industrial Policy and Promotion, is referred to in such cases.
How does a foreign company obtain RBI sanction to start a Liaison Office in India?
The Liaison Office operates as a channel of communication between its overseas Head Office and parties
in India. No business activity in India is permitted, and neither can it earn any income in India. The
liaison office meets its expenses through inward remittances of foreign exchange from its Head Office
To open a liaison office, an submission in form FNC-1 along with relevant documents is made to
Foreign Investment Division,
Foreign Exchange Department, Reserve Bank of India,
Central Office, Mumbai.
Consent to set up a liaison office at the outset is given for 3 years, which can be subsequently extended
by the RBI’s Regional Office
An annual Activity Certificate from a Chartered Accountant has to be presented at the Regional Office of
the RBI, verifying that the Liaison Office is engaged in only those activities which are allowed by the
How is a Project Office set up?
Foreign companies have been granted General Permission by the RBI to open Project Offices in India
provided they have secured a contract for a project from an Indian company
the project is funded wholly by remittance from overseas; or
the project is funded by a bilateral or multilateral International Financing Agency; or
the project has been agreed to by a suitable authority; or
The Indian company awarding the contract has been extended a Term Loan by a financing institution
In case the above conditions are not met, or if the foreign company is established in Pakistan,
Bangladesh, Sri Lanka, Afghanistan, Iran or China, such requests are sent to the Central Office of the
Foreign Exchange Department of the RBI at Mumbai for sanction.
RBI permits foreign companies in the manufacturing and trading business to set up Branch Offices in India:
To represent its parent company to conduct business in India
To undertake research work in its area of business
To trade on a wholesale basis
To encourage possible technical and financial tie-ups between Indian companies and overseas companies.
Offering professional or consultancy services
Offering IT and software services
Giving technical sustenance to the products supplied by the parent company.
Branch offices are not permitted to carry out manufacturing, processing and trading activities on their own. An
Activity Certificate from a Chartered Accountant has to be submitted annually to the Central Office of FED. For
annual remittance of income, Branch Offices may submit required documents to a bank.
The track record of the Applicant Company, its existing trade relations with India and financial position of the
company are taken into account by the RBI while scrutinizing the application.
regulations made thereunder, or with the general or special permission of the Reserve
Bank, no person shall- (a) deal in or transfer any foreign exchange or foreign security
to any person not being an authorized person; (b) make any payment to or for the
credit of any person resident outside India in any manner; (c) receive otherwise
through an authorized person, any payment by order or on behalf of any person
resident outside India in any manner. Explanation.-For the purpose of this clause,
where any person in, or resident in, India receives any payment by order or on behalf
of any person resident outside India through any other person (including an authorized
person) without a corresponding inwa d remittance from any place outside India, then,
such person shall be deemed to have received such payment otherwise than through
an authorized person; (d) enter into any financial transaction in India as consideration
for or in association with acquisition or creation or transfer of a right to acquire, any
asset outside India by any person. Explanation.-For the purpose of this clause,
"financial transaction" means making any payment to, or for the credit of any person,
or receiving any payment for, by order or on behalf of any person, or drawing, issuing
or negotiating any bill of exchange r promissory note, or transferring any security or
acknowledging any debt.
Holding of foreign exchange, etc.-Save as otherwise provided in this Act, no person
resident in India shall acquire, hold, own, possess or transfer any foreign exchange,
foreign security or any immovable property situated outside India.
FEMA: A limit for Forex transactions
Posted 15 Nov 2004 by Anonymous
In 1993, a review of the Foreign Exchange Regulation Act, 1973 was done. Since then,
the country’s foreign exchange reserves have substantially increased, along with
rationalization of tariffs, current account convertibility, liberalization of Indian
investments abroad, increased access to external commercial borrowings by Indian
corporates, participation of foreign institutional investors in country’s major stock
markets, growth of software, BPO, biotech, pharmaceutical, and telecom industries,
huge inflow of foreign direct investment etc.
Hence the Central Government decided to introduce the Foreign Exchange
Management Act, 1999 and repeal the Foreign Exchange Regulation Act, 1973 to
facilitate external trade and payments and to promote the orderly development and
maintenance of foreign exchange markets in India. The FEMA, 1999 has come into
force on 1 June, 2000 and the FERA, 1973 stands repealed.
Transactions regulated by Foreign Exchange Management Act, 1999
A) Capital account transactions
Capital account transaction means 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, and includes following transactions:
a) transfer or issue of any foreign security by a person resident in India;
b) transfer or issue of any security by a person resident outside India;
c) transfer or issue of any security or foreign security by any branch, office or agency in
India of a person resident outside India;
d) any borrowing or lending in foreign exchange in whatever form or by whatever name;
e) any borrowing or lending in rupees in whatever form or by whatever name between a
person resident in India and a person resident outside India;
f) deposits between persons resident in India and persons resident outside India;
g) export, import or holding of currency or currency notes;
h) transfer of immovable property outside India, other than a lease not exceeding five
years, by a person resident in India; acquisition or transfer of immovable property in
India, other than a lease not exceeding five years, by a person resident outside India;
A resident Indian can purchase forex up to USD 1 lakh or estimation from the institution abroad
(i) giving a guarantee or surety in respect of any debt, obligation or other liability
incurred (i) by a person resident in India and owned to a person resident outside India;
or (ii) by a person resident outside India.
B) Current account transactions
Current account transaction means a transaction other than a capital account
transaction and without prejudice to the generality of the foregoing such transaction
includes:i) payments due in connection with foreign trade, other current business, services, and
short-term banking and credit facilities in the course of business,
ii) payment due as interest on loans and as net income from investments,
iii) remittance for living expenses of parents, spouse and children residing abroad, and
iv) expenses in connection with foreign travel, education and medical care of parents,
spouse and children.
Limits imposed by FEMA
There are some restrictions in FEMA for forex transactions. A resident Indian can
transact in FOREX, for which FEMA specifies some general permission without any
prior approval from Reserve Bank of India. General permission is only up to certain
Travel to place other than Nepal / Bhutan
A resident Indian can purchase forex up to USD 10,000 in any calendar year. Prior
permission of Reserve Bank of India is required to purchase in excess of USD 10,000.
Visit to Nepal / Bhutan
A resident Indian can carry any amount in INR but denomination of INR of 500 and
above are not permitted.
A resident Indian can purchase forex up to USD 1 lakh or estimation from the institution
abroad, whichever is higher for any academic year. Prior permission of Reserve bank of
India is required to purchase in excess of the above.
A resident Indian can purchase forex up to USD 1 Lakh on simple declaration and more
than USD 1 lakh can be purchased on the bases of estimation from the doctor or
Person accompanying patient
A resident Indian can purchase forex up to USD 25,000 per person for meeting
boarding/lodging/travel expenses of the accompanying attendant. In excess of the
above can be purchased on prior approval of Reserve Bank of India.
A resident Indian can purchase forex up to USD 1 lakh while going for employment
abroad. In excess of the above can be purchased on prior approval of Reserve Bank of
A resident Indian can purchase forex up to USD 1 lakh by providing proof of immigration
International credit card
Credit cards /ATM / debit cards, while outside India to meet the expenses up to overall
limit of USD 10000 in a calendar year is permissible.
International credit card outside India can be used to purchase any item, the import of
which is permitted in India.
International credit card, while in India for making payment in Forex for purchase of
books and other items through Internet is permissible.
Purchase of Forex
Any person can buy Forex from any authorised dealer/full pledge moneychanger.
Payment exceeding to Rs 50,000 has to be made by way of a crossed cheque/demand
Retaining and surrendering
A resident Indian can retain Forex up to USD 2000 in the form of foreign currency notes
or Travelers’ cheques (TCs) for future use without any time limit. Cash in excess of that
is required to be surrendered to authorised dealer/money changer within 90 days and
TCs within 180 days of return.
Gifts and donations
Gift or donations up to USD 5,000 per annum is permitted. In excess of USD 5,000 per
remitter per annum can be given with the prior approval of Reserve Bank of India.
Loan from NRI relatives
A resident Indian can borrow a loan from close relatives, who are NRIs, up to USD
2,50,000 which is repayable after a year.
A resident Indian can retain foreign coins indefinitely without any time limit.
In the following cases, prior approval of Reserve Bank of India is required:
1. Release of forex towards commission to agents abroad for sale of residential flats /
commercial plots in India exceeding the limit of USD 25000 or 5% of inward remittance,
per transaction, whichever is higher.
2 Remittance towards consultancy services exceeding USD 10 lakh per project for any
3 Remittance towards trademark / franchise.
4 Remittance exceeding USD 1 lakh by an entity in India by way of pre-incorporation
Role of FEDAI in Foreign
Authorized Dealers in Foreign Exchange (Ads) have formed an association called Foreign Exchange
Dealers Association of India (FEDAI) in order to lay down certain terms and conditions for transactions in
Foreign Exchange Business. Ad has to given an undertaking to Reserve Bank of India to abide by the
exchange control and other terms and conditions introduced by the association for transactions in foreign
exchange business. Accordingly FEDAI has evolved various rules for various transactions in order to
protect the interest of the exporters, importers general public and also the authorized in dealers. FEDAI
which is a company registered under Section 25 of the companies Act, 1956 has subscribed to the
1. Uniform customs and practice for documentary credits (UCPDC)
2. Uniform rules for collections(URC)
3. Uniform rules for bank to bank reimbursement.
Various rules of FEDAI
Rules No 1. of FEDAI deals with hours of business of banks which is the normal banking hours of ADs. On
Saturdays no commercial transaction in foreign exchange will be conducted except purchase/sale of traveller’s
cheques and currency notes and transactions where exchange rates have been already fixed.
Rules No.2 deals with export transactions export bills purchased/discounted negotiation, export bills for collection
export letters of credit, etc.
Application of Rates of Crystallization of Liabilities and Recovers
1. Foreign currency bill will be purchased/ negotiation / discounted at the Authorized Dealers current bill
purchase rate or at the contract rate.
2. Exporters are liable for the repatriation of proceeds of the export bills negotiated/purchased/discounted
sent for collection through the Authorized Dealers. They would transfer the exchange risk to the exporter
by crystallizing, the foreign currency liability into Rupee liability on the 30th day after the transit period in
case of unpaid demand bills. In case of unpaid usance bills crystallization will take place on the 30th day
after notional due date or actual due date. Notional due date is arrived at by adding transit period, usance
period and grace period if any to the date of purchase/discount/negotiation. In case 30th day happens to
be a holiday or Saturday, the export bill will be crystallized on the next working day. For crystallization into
rupee liability the bank will apply the TT selling rate on the date of crystallization the original buying rate
negotiation/purchase/discount of documents till receipt of proceeds thereof in the Nostro account. It is not,
as is commonly misunderstood, the time taken for the arrival of goods at the destination.
Crystallisation of Import Bills (Rules 30)
All foreign currency import bills drawn under letter of credit shall be crystallized into Rupee liability on the
10th day from the date of creceipt of documents at the letter of credit opening bank in the case of
demand bills and on the due date in the case of usance bills. In case the 10th day or due date falls on a
holiday or Saturday the importers liability should be crystallized, into Rupee liability on the next working
Interest on Export Bills/Normal Transit Period
Concessional rate of interest on export bills is linked to the concept of normal transit period and notional
due date. Normal transit period comprised the average period normally in involved from the date of
negotiation/purchase/discount till the receipt of bill proceeds in the Nostro account of the bank. Normal
Transit period is not to be confused with the time taken for the arrival of goods at the destination.
In case of bills payable at sight or on demand basis Concessional rate of interest ad directed by the RBI
on export bill is applicable for the normal transit period in case of all foreign currency bills.
In case of usance bills, Concessional rate of interest as directed by the RBI on export bills is applicable
for the normal transit period plus usance period. Thus a foreign currency bill payable for example at 60
days after sight will be eligible for Concessional interest rate for 60 days usance plus the normal transit
period of 25 days, i.e., a total number of 85 days.
Normal Transit period for purpose of all bills in foreign Currencies 25 days.
Interest on Import Bills
a. Bills negotiated under import letter of credit shall carry domestic commercial rate of interest as
applicable to advances prescribed by Reserve Bank of India from time to time and shall be recovered
from the date of debit to the AD‘s Nostro account to the date of crystallization/retirement whichever
B.From the dates of crystallization up to the date of retirement the bills shall carry the overdue rate of
interest as specified by Reserve Bank of India from time to time.
Exchange contracts shall be for definite amount unless date of delivery is fixed and indicated in the
contract, the option period of delivery should be specified as.
a. The option of delivery shall not exceed beyond, one month. The merchant whether a buyer or a seller
will have the option of delivery.
Early delivery: If a bank accepts or gives early delivery the bank shall recover/pay swap difference if any.
Extension: forward contract either short term or long term contracts where extension is sought by the customers (or
as rolled over) shall be cancelled (at TT selling or buying rate as on the date of cancellation) and re book only at
(current rate of exchange). The difference between the contracted rate and the rate at which the contract is cancelled
should be recovered from/paid to be customer at the time of extension. Such request for the extension should be
made on or before the maturity date of the contract.
Cancellation: In the case of cancellation of a contract at the request of the customer, the bank shall recover/pay as
the case may be difference between the contract rate and the rate at which the cancellation is effected.
b. Rate at which cancellation to be effected.
Purchase contract shall be cancelled at the contracting banks spot TT selling rate current on the dater of cancellation.
Sale contracts shall be cancelled at the contracting banks spot TT buying rate current on the date of cancellation.
Where the contract is cancelled before maturity the appropriate TT rate shall be applied.
a. If any shall be recovered from the customers under advise to him.
b.In the absence of any instruction from the customer contracts which have matured shall on the 15th day
from the date of maturity be automatically cancelled. In case the 15th day falls on a Saturday or holiday
the contract will be cancelled on the succeeding working day.
In the above case the customer will not be entitles to the exchange different if any since the contract is
cancelled on account of his default.
In case of delivery subsequent to automatic cancellation the appropriate current rate prevailing on such
delivery date shall be applied.
Payment of SWAP gains to the customer will normally be made at the end of the swap period.
Outlay and inflow of funds:
a. Interest at not below the prime lending rate of the respective bank on outlay of funds by the bank for
the purpose of covering the swap shall be recovered in addition to be swap cost, in case early delivery of
purchase or sale contracts and early realization do export bill negotiated. The amount of funds out laid
shall be arrived at by calculating the difference between the original contracted rate and the rate at which
swap could be arranged.
B. If such a swap leads to inflow of funds the amount shall be paid at the discretion of banks to the
customer at the appropriate rate applicable for the term deposits the period for which the funds remained
with the bank.
C.Banks will levy a minimum charge of Rs.250 for every request from a customer for early delivery,
extension or cancellation of a contract.
Forex Rules And Guidelines
The Reserve Bank of India had Issued the guidelines to all residents, non residents and foreigners for purchasing,
surrendering foreign exchange. RBI (Reserve Bank of India) is the central bank of the india and that has the authority
to issue guidelines regarding the Foreign Exchange Transaction. (Web site www.rbi.or.in).Contravention of any law is
punishable by the provision of FEMA and other indian laws which are applicable for that offense.
We are here providing very precise information about the Foreign Exchange transaction rules. for Detailed and
Updated information about the Forex facilities please visit (www.rbi.org.in->FEMA->FAQ). Whatever information we
are giving here is for reference use only and need further consultation and cross check from RBI Office. We are not
liable for ANY consequences, which may arise due to these information. So please visit RBI sites for updated
Foreign exchange can be purchased from any authorised dealers, full-fledged money changers for business and
If you are a Resident Indian, you can buy foreign exchange without permission from the Reserve Bank of India for :
You can avail of foreign exchange upto US$ 10,000 in any calendar year for tourism or private travel to any country
other than Nepal and Bhutan on the basis of self-certification.
CLICK HERE TO DOWNLOAD THE DECLARATION FORMAT.
You can avail of foreign exchange upto US$ 25,000 for a Business Trip to any country other than Nepal and Bhutan
on the basis of certification.
CLICK HERE TO DOWNLOAD THE DECLARATION FORMAT.
Endorsement on passport
There is no compulsion for you to get your passport endorsed with the foreign exchange purchased for travel outside
India. Should you desire to get your passport endorsed, the bank/money changer releasing foreign exchange would
Visit to Nepal and Bhutan
You can carry any amount of Indian currency while travelling to these countries, but you are not permitted to take
Indian currency notes of denomination of Rs.500 and above or buy any foreign exchange for visit to these countries.
Bringing in Foreign Exchange
You can bring into India foreign exchange without any limit. If, however, the value of foreign currency in cash exceeds
US$ 5,000 and/or the cash plus TCs exceed US$ 10,000 it should be declared to the customs authorities at the
airport in the currency declaration form (CDF), on arrival in India..
ICICI Bank Forex Broker. ICICI Bank Reviews. ICICI Bank Rating
Min. deposit: $200
Leverage: up to 1:500
Free trial: Yes
Pip Spread on Majors: from 1.6
ICICI Bank Phone Banking Centre, P. O. Box No. 20,
Banjara Hills P. O.,Hyderabad 500 034, India
ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00 billion (US$ 81
billion) at March 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896 million) for the year
ended March 31, 2010. The Bank has a network of 2,035 branches and about 5,518 ATMs in
India and presence in 18 countries. ICICI Bank offers a wide range of banking products and
financial services to corporate and retail customers through a variety of delivery channels and
through its specialised subsidiaries in the areas of investment banking, life and non-life
insurance, venture capital and asset management. The Bank currently has subsidiaries in the
United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong
Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in
United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our
UK subsidiary has established branches in Belgium and Germany.
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National
Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the
New York Stock Exchange (NYSE).
7 February 2013
Participation in the rating
Popular payment methods
Mini account, $
Credit Cards, PayPal, Wire Transfer
Standard account, $
Pip spread on majors
24 hour trading
24 hour support
Interest charges on the balance
Minimum position size
Digits after the dot in quotes
EUR, USD, GBP, JPY
ICICI Bank Phone Banking Centre, P. O. Box No. 20,
Banjara Hills P. O.,Hyderabad 500 034, India
What is a Forex Dealer?
What exactly is a Forex dealer? They aren't exactly like your local auto dealer, but they do
essentially the same thing. A dealer acts like the middle man in Forex investments. While
nobody likes the middle man, they can truly help you in this market. They actually make it
possible for you to participate, in most cases.
Role of the Dealer
A Forex dealer is a type of financial institution which acts as the middle man between two
parties who want to trade Forex. They take the currency from one source and give it to
another source who wants to buy it. This is essentially a Forex broker, although it could be
an individual as well.
Just like a car dealer, they take the product from one source, sell it to another and then
make a little bit of money on each transaction. In the case of a Forex broker, they make
money off of the Forex spread. This is the difference between what buyers are willing to buy
for and what sellers are willing to sell for.
This is typically a very nominal amount of
money for each transaction.
Authorized Forex Dealer
Occasionally, you may hear the term
"authorized Forex dealer" thrown around in
regards to brokers. When you hear this, it's
basically a fancy way of saying that they are a
member of the regulating agency in that
particular country. For example, in the United
States, the National Futures Association is in
charge of Forex brokers. A broker who is an
authorized dealer has received the appropriate licenses and pay the appropriate fees to the
This is designed to give you a warm and fuzzy feeling when you open an account with a
broker. It tells you that they're hopefully not going to take your money and run off to Tahiti
with the babysitter. They have checks and balances in place with their regulatory agency
that will supposedly protect your money and keep you from being scammed.
What Really Happens
Although brokers supposedly trade your currency with other individuals, this is usually not
how it works. In reality, the broker simply takes the opposite position of your trade. They
know that the vast majority of traders will lose more than they win and they just bet against
you. In most cases, your trade never actually makes it to the market. The broker simply
keeps it on their books and pays you if you win. If you lose...well you get the idea.
If you look at it from one perspective, working with a dealer might seem like a bad deal.
Many of them take the opposite position of you and take the spread on top of that.
However, without dealers, you most likely would not be able to trade in the Forex market at
all. With brokers, you get to trade with large amounts of leverage, which is required in the
market. Unless you have $100,000 to invest in each lot that you buy, you're going to need
leverage. This means that brokers are a necessary evil in the FOrex market.
The broker you choose can have a lasting impact on the level of success that you are able to
achieve in the market. The difference between spreads, execution and policies can be the
difference between being profitable and losing money overall.
Because of this, it is important to find out exactly what you are getting into with a broker.
Check out our Forex Brokers page to find out more and to see reviews of some of the most
popular brokers on the market.
If you enjoyed this article, please share it with your friends by clicking on the Facebook,
Twitter and other social networking buttons below. Thanks for stopping by.
aking a trip abroad? Don't know how and how much money you can carry or what to do with the unused money
once you are back? We try to answer these and other related questions to save your time and, of course, money.
Before the trip
How much money can I carry? The maximum amount of foreign exchange that you can buy for your leisure/tourism
purposes abroad for one or more trips is $10,000, or its equivalent, in one calendar year. The most convenient for
you would be to keep $2,000, or its equivalent, in the form of currency and carry the rest either in the form of a
traveller's cheque or a travel card. A travel card is a pre-paid card, into which you can put money in India to be used
At what rate? Foreign exchange, or forex, is available from banks, authorised dealers and moneychangers. The
rates are determined by market forces and vary across dealers. These are quoted based on the prevailing inter-bank
"Normally, the rate at which you would buy forex would be marginally more than the IBR rate," says Madhavan
Menon, managing director, Thomas Cook India.
The good part is you don't have to pay a service fee or encashment fee when you buy forex. Says Kanwar Vivek,
general manager, ICICI Bank: "In case of traveller cheques, authorised dealers may charge a commission. For travel
cards, a one-time card activation charge may be levied."
What are travel cards? Travel cards come in handy if you want to make your trip hassle-free and convenient as far
as managing money is concerned. These cards can be used abroad to withdraw cash in the local currency from over
1 million VISA ATMs. These are valid at over 14 million merchant establishments accepting VISA Flag Cards.
Scope. Some of the leading financial institutions that provide travel cards are HDFC Bank (ForexPlus Card), ICICI
Bank (ICICI Bank Travel Card) and State Bank of India (SBI Vishwa Yatra Foreign Travel Card). The cards are valid
for seven currencies: US dollar, euro, pound sterling, Swiss francs, Australian dollar, Canadian dollar and Japanese
yen (the list varies across institutions). An exchange rate is applied if the card is used for any currency other than the
base currency (with which the card is loaded). According to RBI, you can have a maximum of $10,000, or its
equivalent, in your card in one calendar year. The minimum amount is, however, 200 units of any currency.
Benefits. These cards also give insurance benefits (varying across institutions). The covers range from personal
accident, missing of connecting international flight during transit and loss of travel documents, to hijacking and delay
in flight due to delay in receipt of checked baggage. The policy gets activated once you buy the card. The claim,
however, is applicable only if the travel card is active on the accident date and has some balance left. The costs vary
across institutions (see Costs of Convenience).
The paperwork. Buying forex also involves a bit of paperwork. You will need to furnish a copy of your passport and
confirmed tickets. You also need to fill up Form A2 (stating the purpose of visit) and Basic Travel Quota Form, where
you need to declare that you haven't exceeded the limit of $10,000, or its equivalent, in a calendar year. For a travel
card, you will have to provide a copy of the PAN card or Form 60.
Costs of convenience:
equivalent. One of the safest ways to carry foreign
Bought at inter-bank rates1, sold at below inter-bank Can be bought from authorised dealers/banks
Some authorised dealers may charge a nominal
Some authorised dealers charge 2-3% commission fee.
when you sell.
Can be encashed at prevailing inter-bank rates.
You can use travel cards when going abroad but you need to pay certain charges.
Here are those :
ATM withdrawal fee2
ATM balance enquiry
ICICI Bank Travel
SBI Vishwa Yatra Travel
Rs Rs 110
2For every transaction Cards also charge service fee, some even charge an additional ATM fee.
The maximum foreign currency that can be retained in any of the above forms is limited to $2,000;any
excess amount has to be encashed.
After the trip
Can you keep unused foreign exchange? The Reserve Bank of India allows an individual to retain up to $2,000, or
its equivalent, indefinitely. Any amount over this should be encashed within 180 days of your return. In case of a
travel sneed to get the balance refunded within a specified period. This, too, varies from company to company.
In case you fail to do so, the card would be suspended and you may face legal action. SBI does not levy any fee if
you claim the card refund within 90 days of arrival, but charges Rs 110 (including service tax) if the claim is made
after 90 days.
Selling at what rate? While selling forex, the rate offered is slightly lower than the prevailing inter-bank rates. Says
Thomas Cook's Menon: "Authorised dealers are free to charge a service fee. However, due to competition most don't
charge any. This depends on the dealer as well as the area (tourist spots). Airports always attract service charges."
However, the ministry of finance circular, dated 12 March 2007, meanwhile, states that service tax is not leviable on
money changing as it does not fall under the category of foreign exchange broking. The RBI, meanwhile, is silent on
this issue of levying service charges, and simply asks dealers to be transparent and reasonable.
Clearly, authorised dealers are not heeding the advice. In a recent incident, a customer encashed foreign exchange
with Thomas Cook at Indira Gandhi Inter-national Airport, New Delhi, and was charged Rs 165 as encashment fees
while exchanging 2,590 Thai bhat. Thomas Cook officials were not available for comments despite repeated
ICICI Bank's Vivek, meanwhile, admits that authorised dealers do levy a fee. "Authorised dealers generally charge a
margin (2-3 per cent) on the prevailing inter-bank rate, or on the cost at which they would sell the currency," he says.
However, if you are using a travel card, you don't need to go to any dealer at all. You just need to visit your bank. The
refund on a travel cards is made at the prevailing market rate. There could be a delay of a week or so in refund, if
there are some unsettled transactions.
Way out: go to your bank. You can approach your own bank to encash unsused forex. Most banks do not charge a
fee. While authorised dealers may refuse to encash smaller denominations, banks do not have a problem doing so.
The exchange value gets deposited in your account with the bank. If you face any further problems with the bank, you
can approach the banking ombudsman.