(c) "Foreign Currency" means any currency other than Indian currency;
(d) "Foreign Exchange" means includes any instrument drawn, accepted, made or issued under clause (8) of section 17 of the Banking Regulation Act, 1956, all deposits, credits and balance payable in any foreign currency, and any drafts, traveler’s cheques, letters of credit and bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency;
BASIC CONCEPTS/TERMINOLOGIES Foreign Currency vs. Foreign Exchange
“ An FX swap is a contract to buy an amount of currency for one value date at an agreed rate, and to simultaneously resell the same amount of currency for a later value date, also at an agreed rate, to the same counter party”.
FX swap is essentially a ‘funding’ or ‘Money Market’ transaction and does not involve exchange risk.
Post detonation crisis (May ’98) and move towards market based ERM.
Two-tier was finally abolished in May 1999.
Currency was freely floated.
Regulations pertaining to current account transactions remained more or less unchanged. However all transactions were to be done at interbank rate and every bank was to offer its own rate to customers.
However, an unofficial narrow band was imposed on banks, which remained there till July 2000. when it was finally done away with.