CAIIB banking financial management module A-international banking

Add to Favourites
Post to:

Description
ppt. tutorial on International banking , Module A of CAIIB Bank Finance Management. the content will cover the topics of International Banking as per the CAIIB syllabus.


Type: ppt

Discussion

Bobston

Hello, someone knows what model I can occupy in a bank if I handle forex, is that I use the https://www.kaigaifxforex.com/ page but I do not want the banks to charge me interest every time my money arrives, how can I do that ? Of course there is a solution without so many problems bSee more

51 days 20 hours 9 minutes ago

Lisa

I think that you should examine this post https://resumecvwriter.com/blog/sales-associate-resume for some ideas on how to write a sales associate. It should be a really helpful tips

873 days 23 hours 47 minutes ago

Presentation Transcript Presentation Transcript

WELCOME PARTICIPANTS : WELCOME PARTICIPANTS Presentation on International Banking

Meaning of Foreign Exchange : The foreign trade leads to foreign exchange The foreign exchange stock include foreign currency assets, balances kept abroad, instruments payable in foreign currency and instruments drawn abroad but payable in Indian currency In exchange rate system, the foreign currencies are commodities having prices, which can be bought or sold to settle transactions between parties. Meaning of Foreign Exchange

Exchange Rate Mechanism : Concept In the absence of single currency for the whole world there is a need to convert one currency to another and the mechanism by which this process is done is widely known as foreign exchange and the tool used for this conversion is the exchange rates. Exchange Rate Mechanism

Foreign Exchange Market & Participants : It is OTC (over the counter) market. It is global market, efficient and operate round the clock. The main participants of market are : Merchants Commercial Banks Central Banks Foreign Exchange Market & Participants

Factors Determining Exchange Rates : Balance of payment of the country Demand and supply Inflation Interest Rates Fiscal and Monetary policy Political Factor Central Bank Interventions Technical Reasons Factors Determining Exchange Rates

Various Terms in Exchange Rates : Type of transactions Direct/Indirect quotes Base currency/variable currency Two way quotes Buy low sell high Bid and offer rate Big figure and points Spread Cross rate/chain rule Deal date/value date Forward points/Premium/Discount Inter-bank rate Exchange margin/ Merchant rate Various Terms in Exchange Rates

Slide 7 :

Slide 8 : Conversion rate for CHF. (Export ) Mumbai Geneva 1 USD=Rs.55.65/6700 1USD=CHF 0.9590/9600 How many Rs. = 1 CHF If 1 CHF is 0.9600 = 1 USD And 1 USD = Rs. 55.65 Therefore CHF 0.9600=USD 1=Rs.55.65 Hence 1 CHF=Rs.55.65/0.9600= Rs.57.96

Slide 9 : Conversion rate for GBP (Import) Mumbai London 1 USD=Rs.55.65/67 1GBP=USD1.5660/5670 How many Rs.= 1 GBP If 1 USD=Rs.55.67 And 1 GBP=USD 1.5670 Hence 1 GBP=USD 1.5670X55.67= Rs. 87.24

Slide 10 :

Premium and Discount : Premium: i) When the currency is costlier in future, as compared to spot, the currency is said to be at a premium vis-à-vis other currency. ii) Premium is always added to both buying and selling rate. iii) It is the base currency for which premium is mentioned. Discount: i) When the currency is cheaper in future, as compared to spot, the currency is said to be at a discount vis-à-vis other currency. ii) Discount is always deducted to both buying and selling rate. iii) It is the base currency for which discount is mentioned. Premium and Discount

Slide 12 : Buying Rates Selling Rates TT Buying TT Selling Bill Buying Bill Selling

Slide 13 : Front office : Dealing Room, Fund Position, Currency Position Mid office : Risk Management, Fixation of Risk Parameters Back office : Settlement, Reconciliation, Accounting

Foreign Exchange Authorised Persons : AD Category I : Commercial, State & Urban Coop. Banks. Deals in all type of foreign exchange Business. AD Category II : FFMCs, Coop banks, RRBs. Deals in Non-Import transactions. AD Category III : Select Finanacial Institutions. Deals in transactions incidental to the foreign exchange activities. Foreign Exchange Authorised Persons

Correspondent Banking : It is relationship between two banks having mutual accounts with each other or one of them is having account with each other. OR A relationship and servicing of banking needs, as agent without having account relationship. Correspondent Banking

Types of Accounts : Nostro Account This is an account of a bank in another country in F/C Vostro Account This is an account of a foreign bank in our currency in India Loro Account This is an account of a bank in another country which is used by 3 rd bank Mirror Account This is a shadow account, used for reconciliation purpose Types of Accounts

Electronic Modes of Transmission/Payments : SWIFT : Society for Worldwide Interbank Financial Telecommunication CHIPS : Clearing House Interbank Payment System Fedwire : Payment system operated by Federal Reserve Bank in USA ABA No. : It is the number allotted by Federal Reserve of USA to banks participating in Fedwire to identify the senders/receivers of payment CHAPS : Clearing House Automated Payment System in UK RTGS : Real Time Gross Payment Settlement NEFT : National Electronic Fund Transfer Electronic Modes of Transmission/Payments

Accounts of Non-Residents - Definitions : Non-Residents Person : As per FEMA, a person who is not a resident, is called a non- resident Person Resident in India : A person residing in India for more than 182 days during the course of the preceding financial year Non-Resident Indians (NRI) : A person holding Indian passport, who has gone abroad for an indefinite period of stay outside India Peron of Indian Origin (PIO) : 1) A foreigner, whose parents or grand parents were citizen of India 2)A foreigner spouse of Indian citizen 3) A person , who held Indian passport at any time Accounts of Non-Residents - Definitions

Non-Resident (External) Rupee Account : Eligibility : NRIs are permitted to open and maintain these account Types of Accounts : S/F, C/A,RD,FD Operation : Joint Accounts Operation by Power of attorney Change of resident status of the account holder : A/c should be re-designated as resident account Loan against security of funds held in account : To account holder To third party To loans outside India Permitted credits and debits : Nomination facility : Available No tax in India on interest income : Non-Resident (External) Rupee Account

Foreign Currency Non-Resident (Banks) Accounts (FCNR) : Currencies for opening the account : USD , GBP, EURO, JPY, CAD, AUD Eligibility : NRIs can open such accounts Type of account : Fixed Deposit – Min. oneyear, max. five year,no interest if cancelled before one year Repatriation : Repatriation of funds in foreign currency permitted Loan against security of FD : Advance will be adjusted from remittance from abroad/proceeds of FD Nomination facility : Available No Tax in India on interest income : Foreign Currency Non-Resident (Banks) Accounts (FCNR)

Non-Resident (Ordinary) Rupee Account : Eligibility Any person resident outside India may open NRO Account Type of Account S/F, C/A, RD, FD Operation Joint account can be held with resident/non-resident Permissible Credits/Debits Remittance of Assets Outward remittance up to 1 Mio per FY is available Nomination Facility Available Tax is applicable on interest income Non-Resident (Ordinary) Rupee Account

NRO Accounts of Foreign Nationals : NRO (S/F and C/A ) can be opened by foreign national of non-Indian origin visiting India with funds remitted from outside India or by sale of foreign exchange brought by them The balance in NRO accounts may be remitted back in foreign currency on departure provided account has been maintained for a period not exceeding 6 months and the account has not been credited with local funds NRO Accounts of Foreign Nationals

Investments by NRIs : Purchase of immovable property in India : Allowed Transfer of immovable property : Allowed Payment for acquisition of property : By way of remittance from outside India By debit to his NRE/FCNR account Purchase of Securities : NRI can invest on repatriation/non-repatriation basis. Payment for acquisition by way of inward remittance ar to the debit of NRE/FCNR account Housing Loans : Allowed as applicable to resident Indian Investments by NRIs

Documentary Letter of Credit : It is an instrument by which a bank undertakes to make payment to a seller on production of documents drawn in accordance with the terms of the credit The letter of credit is governed by the provisions of UCPDC – 600. It is 6 th edition, first in 1933. Documentary Letter of Credit

Parties to Letter of Credit : Applicant : The buyer of goods Issuing Bank : Buyer ’ s bank Advising Bank : To whom LC is sent for onward transmission to the seller Beneficiary : The party to whom, the LC is addressed i.e. seller Negotiating Bank : The bank to whom the beneficiary will present the documents Reimbursing Bank : Third bank, which repays/settles the funds at request of issuing bank Confirming Bank : The bank, which undertake the responsibility of issuing bank on his failure Parties to Letter of Credit

Types of Letter of Credits : Documents against Payment LC : Where payment is made against documents ( D/P LC ) Documents against Acceptance LC : Where payment is made on maturity date ( D/A LC ) Irrevocable LC/ Revocable LC : In Irrevocable LC : Issuing bank can amend/cancel LC with the consent of beneficiary (Seller) In Revocable LC : Issuing bank can amend/cancel LC without the consent of beneficiary (Seller) With or Without Recourse LC : With Recourse : Where the beneficiary holds himself liable to the holder of the bill, if dishonoured. Without Recourse : Where the beneficiary does not hold himself liable, if the bill is dishonoured. Types of Letter of Credits

Types of Letter of Credit (Contd.) : Restricted LC : Where a specified bank is designated to pay, accept or negotiate the documents Confirmed LC : Where the advising/other bank at the request of issuing bank adds confirmation that payment will be made Transferable LC : At the request of the opener, the LC can be transferred to one or more parties. Back to Back LC : Where an exporter request for opening of LC in favour of local suppliers in cover of original LC received from his buyer Types of Letter of Credit (Contd.)

Types of Letter of Credit (Contd.) : Red Clause LC : Where the LC permit the negotiating bank to grant of packing credit to the beneficiary at issuing bank ’ s responsibility Green Clause LC : LC permits the advance for storage of goods in addition to pre-shipment advance Stand by LC : It is similar to performance bond or guarantee. The beneficiary can submit the claim alongwith requisite documents to issuing bank Revolving LC : The amount of drawing made under LC would be reinstated and made available to the beneficiary again Types of Letter of Credit (Contd.)

Articles under UCPDC-600 : Article 1 : UCPDC – 600 Article 2 : Definitions. Article 3 : Various Interpretations : Article 4 : Credit vs contracts Article 5 : Documents vs goods Article 6 : Availability, expiry date and place of presentation Article 7 : Issuing Bank undertaking Article 8 : Confirming Bank undertaking Article 9 : Advising of credits and amendments Article 10 : Amendments Articles under UCPDC-600

Articles under UCPDC-600 (Contd.) : Article 11 : Tele transmitted and pre-advised LC/ amendment Article 12 : Nomination Article 13 : Bank to bank reimbursement Article 14 : Standard for examination of documents Article 15 : Complying presentation Article 16 : Discrepant documents, waiver and notice Article 17 : Original documents and copies Article 18 : Commercial invoice Article 19 : Transport documents covering atleast two different modes of transport Article 20 : Bill of lading Articles under UCPDC-600 (Contd.)

Articles under UCPDC-600 (Contd.) : Article 21 : Non-negotiable sea waybill Article 22 : Charter party bill of lading Article 23 : Air transport documents Article 24 : Road, rail or inland waterway transport document Article 25 : Courier receipt, post receipt or certificate of posting Article 26 : “ on deck ” Shipper ’ s load and count Article 27 : Clean transport document Article 28 : Insurance document and coverage Article 29 : Extension of expiry date or last date for presentation Articles under UCPDC-600 (Contd.)

Articles under UCPDC-600 (Contd.) : Article 30 : Tolerance in credit amount, quantity and unit prices Article 31 : Partial drawings or shipments Article 32 : Instalment drawings or shipments Article 33 : Presentation time Article 34 : Disclaimer on effectiveness of documents Article 35 : Disclaimer on transmission and translation Article 36 : Force majeure Article 37 : Disclaimer for acts of an instructed party Article 38 : Transferable credits Article 39 : Assignment of proceeds Articles under UCPDC-600 (Contd.)

Interpretations Used in UCPDC - 600 : A credit is irrevocable : Even if there is no indication to that effect. On or about : An event is to occur during a period of 5 calendar days before until 5 calendar days after the specified date, both start and end dates included. To, until, from and between : To determine a period of shipment include the date mentioned and the words “ before and after ” exclude the date mentioned. From and after : To determine maturity date exclude the date mentioned. First half and second half : Related to Ist to 15 th and 16 th to the last day of the month, all dates inclusive. Interpretations Used in UCPDC - 600

Interpretations Used in UCPDC – 600(contd.) : Beginning, middle and end : Relates to 1 st to 10 th , 11 th to 20 th and 21 st to last day of month, both date inclusive. Date of issuance of transport document : If the transport document indicates, date of despatch taking in charge, shipped on board, this date will be deemed to the date of shipment. Trans shipment : Unloading from one means of conveyance and reloading to another means of conveyance during the carriage. Clean transport document : Bearing no clause of notation expressly declaring a defective condition of goods or packaging. Interpretations Used in UCPDC – 600(contd.)

Interpretations Used in UCPDC – 600(contd.) : Insurance : If there is no indication, amount of insurance coverage must be atleast 110% of CIF/CIP value of goods Commercial invoice : Description of goods must correspond with the credit. In other documents, the goods may be described in general terms. Time for scrutiny of documents : The issuing bank, the confirming bank, if any, or a nominated bank shall each have 5 banking days following the day of receipt of the documents, to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the documents accordingly. Interpretations Used in UCPDC – 600(contd.)

International Commercial Terms (INCOTERMS) : Incoterms are a series of international sales terms, published by ICC and widely used in international commercial transactions. These are accepted by governments, legal authorities worldwide for the interpretation of most commonly used terms in international trade. Incoterms deal with division of cost and also of risk between the parties but they do not deal with the transfer of property rights in the goods. Such matters are decided by way of contract of sales. The 1st version of Incoterms was introduced in 1936 and 8 th version came into effect from 1 st Jan. 2010. International Commercial Terms (INCOTERMS )

Explanation of Incoterms : 1) EXW - Ex Works : Seller has the goods ready at his place. Cost and risk for bringing the goods to final destination will be of buyer. 2) FCA - Free Carrier : Seller hands over the goods, cleared for export, into the custody of the first carrier( named by the buyer) at the named place. 3) CPT – Carriage Paid To : Seller pays for carriage to the named point of destination, but risk passes when handed over to first carrier. Explanation of Incoterms

Explanation of Incoterms (Contd.) : 4) CIP – Carriage and Insurance Paid : Seller pays for carriage and insurance to the named destination, but the risk passes when handed over to first carrier. 5) DAT – Delivered at Terminal : Seller delivered at the named terminal, except for cost related to import clearance, and assume all risk prior to the point that the goods are unloaded at terminal. Explanation of Incoterms (Contd.)

Explanation of Incoterms (Contd.) : 6) DAP - Delivered at Place : Seller delivered to the named place, except for cost related to import clearance, and assume all risk prior to the point that the goods are ready for unloaded by the buyer. 7) DDP – Delivered Duty Paid : Seller deliver the goods to the named place in buyer ’ s country and pays all cost in bringing the goods to the destination including import duties and taxes, if any. 8) FAS – Free Alongside Ship : Seller must place the goods, cleared for export, alongside the ship at the named port. Explanation of Incoterms (Contd.)

Explanation of Incoterms (Contd.) : 9) FOB – Free on Board : Seller must load the goods on board the vessel nominated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel. 10) CFR – Cost and Freight : Seller must pay the cost and freight to bring the goods to the port of destination. However , the risk is transferred to the buyer once the goods are loaded on the vessel. 11) CIF – Cost, Insurance and Freight : Exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. Explanation of Incoterms (Contd.)

Exports from India : Importer-exporter code number (IEC) : To obtain from DGFT and to quote in all declarations. Manner of receipt of export proceeds : The amount of proceeds can be received through AD banks a) By draft or personal cheque b) F/c notes or TC from buyer on his visit c) To the debit of FCNR/NRE a/c of the buyer d) Any other accepted banking channel Realization and repatriation of export proceeds : a) 9 months from the date of shipment except b) 15 months from the date of shipment, if export to warehouse outside India Advance payment against export : The shipment of goods to be made within one year and rate of interest does not exceed LIBOR + 100 BPS Exports from India

Operational Guidelines for Banks : Submission of shipping documents : 21 days from the date of shipment, however bank may handle delayed submission of documents, if satisfied with the reason for delay. Reduction in invoice value : a) Reduction not to exceed 25% of invoice value b) Exporter is not on RBI caution list c) It not relate to export subject to floor price d) Exporter to surrender proportionate export incentive availed of, if any. e) Exporters in the export business for more than 3 years, reduction can be without any % ceiling subject to export outstanding do not exceed 5% of the average annual export realization during the preceding 3 financial years. Operational Guidelines for Banks

Operational Guidelines for Banks (Contd.) : Extension of Time : i) Banks are permitted to extend period of realization up to 6 months irrespective of invoice value and such export transactions are not under investigation. ii) While considering extension beyond one year, the total outstanding of exporter does not exceed USD 1 million or 10% of the average export realization during the preceding 3 financial years, which ever is higher. Write off of Export bills : The limit prescribed for “ write off ” of unrealized export bills are as under : i) Self write off by an exporter - 5% * Ii) Self “ write off ” by status holder exporter - 10% * Iii) “ Write ” off by banks - 10% * * Limits are of the total export proceeds realized during the previous calendar year and the relevant amount remained outstanding for more than one year. Operational Guidelines for Banks (Contd.)

Operational Guidelines for Banks (Contd.) : Reporting to RBI : Banks furnish a statement in Form XOS to the RBI (end of June & December) giving details of all export bills outstanding beyond 6 months from the date of export within 15 days from the close of relative half year. EDPMS (Export Data Processing & Monitoring System): Introduced by RBI, it is a system where all the export transactions are captured and followed up till their realization. BRC (Bank Realization Certificate) : Issuance of physical copy of BRC has been dispensed w.e.f. 16.08.12 and now banks transmits BRC data electronically to DGFT server for issuance of e-BRC. Forms to be used for declaration of export : EDF – Declaration of export, where custom office is not computerized SDF - Declaration of export, where custom office is computerized SOFTEX –Declaration for software export to customs Operational Guidelines for Banks (Contd.)

Exemptions from Declaration : Export of goods and services may be made without furnishing the declaration in following cases : a) Trade samples and publicity material free of payment. b )Personal effects of travelers. c) Ships ’ stores, trans-shipment cargo and goods supplied under govt. orders. d) By way of gift of goods, if they are not more than Rs.5 lac in value. e) Goods imported free of cost on re-export basis. f) Aircraft/spares for overhauling/ repairs abroad subject to re-import with 6 months from the date of their export. Exemptions from Declaration

Export Credit : Pre-shipment/Packing credit : Any advance provided by the bank to the exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment on the basis of export order from an overseas buyer. Period of advance : i) On the basis of time required for purchase, processing, manufacturing or packing of goods. Ii) If it is not adjusted with in 360 days from the date of advance, advance will cease to qualify for the concessive rate of interest to the exporter ab initio. Liquidation of Packing credit : By submission of export documents on its purchase/ discount or negotiation under LC. It can also be repaid out of balances held in EEFC account as also from rupee resources of the exporter to the extent exports have actually taken place. Export Credit

Export Credit (Contd.) : Post-shipment export credit : Any advance granted to an exporter after shipment of goods/rendering services to the date of realization of export proceeds. Period of advance : i) In case of demand bills, the period of advance will be Notional Transit Period (NTP) Ii) In case of usance bills, the period of advance will be up to due date of bill, maximum up to 270 days from the date of shipment . Liquidation of Post-shipment advance : i) It is to be liquidated by proceeds of export bills received. Ii) It can be repaid out of balances held in EEFC account or from proceeds of other unfinanced (collection) bills Export Credit (Contd.)

Pre-shipment Credit in Foreign Currency : Objective : Make credit available to exporters at internationally competitive rates. Choice of currency : PCFC is available to exporter in any convertible currency I.e. USD, GBP, EURO, JPY etc. Source of funds for banks : i) The foreign currency balances in EEFC/FCNR/RFC accounts Ii) Foreign currency borrowings (Line of credit) Interest : It relates to 6 month LIBOR + spread Period of Credit : It is available for a maximum period of 360 days. Liquidation of PCFC : By submission of their export documents on purchase/ discounting or can be repaid out of balances held in EEFC accounts. Pre-shipment Credit in Foreign Currency

Post-shipment Credit in Foreign Currency : Objective : Make credit available to exporters at internationally competitive rates. Choice of currency : It is available to exporter in any convertible currency I.e. USD, GBP, EURO, JPY etc. Source of funds for banks : i) The foreign currency balances in EEFC/FCNR/RFC accounts Ii) Banks can also rediscount export bills abroad at rates linked LIBOR at post shipment stage under Bankers ’ Acceptance Facility Interest : It relates to 6 month LIBOR + spread Period of Credit : It is available mainly for a maximum period of 180 days, however, it may be provided beyond 180 days. Liquidation of Post-shipment advance : It is to be liquidated by proceeds of export bills received. Post-shipment Credit in Foreign Currency

Gold Card Scheme for Exporters : Eligibility criteria : Exporters with good track record. Exporters ’ accounts have been classified standard for a period of 3 years. Credit limits : A stand by limit of 20% of assessed limit. Time frame for disposal of application : Fresh proposal 25 days Renewal proposal 15 days Ad-hoc proposal 7 days Other facilities : ECGC guarantees may be exempted at the discretion of bank. Charges/ interest may be lower at the discretion of the bank. Preference in granting PC in foreign currency. Gold Card Scheme for Exporters

Imports into India : Import trade is regulated by Director General of Foreign Trade (DGFT) and imports into India should be in conformity with the Foreign Trade Policy and ITC(HS) code in force and FEMA rules and RBI notifications from time to time. Imports into India

General Guidelines for Imports : Import payment application : Request to be made to the bank giving all requisite details and remittance is for bona fide trade transaction as per applicable laws in force. Import Licences : Exchange control copy of import licences is required for opening an LC, if the item to be imported is under restricted category. Time limit for Import Payment : Normal imports, maximum 6 months from the date of shipment.In case of advance remittance, maximum 6 months from the date of remittance. No time limit for import of books. Import of foreign exchange into India : a) a person can send into India, without limit, foreign exchange in any form other than currency notes, bank notes and traveller cheques. b) A person may bring into India, without limit, foreign exchange subject to the declaration at customs in Currency Declaration Form (CDF) if the amount of foreign currency exceeds :USD !0,000/- equ .or aggregate value of foreign currency notes alone exceeds USD 5000/- equ. General Guidelines for Imports

General Guidelines for Imports(Contd.) : Import/ Export of Indian Currency : a) A person may bring/ or take out of India, currency notes up to an amount not exceeding Rs.25000/-. b) A person may bring/ or take out of India, currency notes for any amount in denomination upto to Rs.100/-. However, they are also allowed to bring/ or take out currency notes for denomination above Rs.100/- i.e. Rs.500/- and Rs.1000/- up to a limit of Rs.25000/-. General Guidelines for Imports(Contd.)

Advance Remittances for Import of Goods : Banks allow advance remittances without any ceiling subject to i) If the amount exceeds USD 200,000 or equ.and in case of import of services, if the amount exceeds USD 500,000 or equ., an unconditional LC or guarantee from an international bank is required. Ii) If the bank is satisfied, advance remittance can be made up to USD 5 Mio without requirement of LC/Guarantee. iii) In case of PSU or Deptt. of Govt. if the amount exceeds USD 100,000 or equ, specific waiver of LC/ Guarantee from Ministry of finance, Govt. of India is required. iv) No limit for advance remittance for rough diamonds without LC or guarantee subject to certain conditions. v) Advance remittance for import of aircraft/ helicopters or aviation related purchases without LC or bank guarantee, limit is up to USD 50 Mio or equ. subject to certain conditions. Advance Remittances for Import of Goods

Evidence of Import : Physical Imports : If the value of forex exceeds USD 100,000 or equ., banks to ensure that exchange control copy of bill of entry, custom assessment certificate or postal appraisal form etc. has been submitted. Non Physical Imports : If the imports are in the form of software, data through internet, drawings and design through e-mails/ fax etc, a certificate from chartered accountant that same has been received by the importer, may be obtained. Verification & Preservation : Documents regarding evidence of import should be preserved for one year from the date of verification. However if the investigation is going-on, it should be preserved till logical end. Evidence of Import

Follow-up for Evidence of Import : i) If the importer does not submit evidence of import within 3 months from the date of remittance for amount exceeding USD 100,000 or equ., bank will follow up for the next 3 months. ii) Bank will submit a statement on half yearly basis at the end of June and December every year in form BEF furnishing details of import transactions, exceeding USD 100,000 or equ. In respect of which importers have defaulted in submission of evidence of import with 6 months from the date of remittance. The captioned statement will be submitted within 15 days of following month. Iii) In case of remittance below USD !00,000 or equ., Bank should be satisfied about the genuineness of import transaction. Follow-up for Evidence of Import

Import Credit : Suppliers ’ credit : Credit for imports into India extended by overseas supplier. Buyers ’ credit : Credit for import into India arranged by importer from a bank or financial institution outside India. Maturity Period : Up to 5 years – Up to one year for current account transactions and more than one year and up to five years, from the date of shipment, for capital account transactions. However the period is to be linked to operating cycle of trade transaction. All in cost Ceilings: Over 6 month LIBOR + 350 Bps Import Credit

External Commercial Borrowing : It is a commercial loan from a non resident lender with a minimum average maturity of 3 years. It may be in the form of foreign currency bank loan, foreign currency bonds, preference shares etc. The maximum limit of loan is USD 750 Mio or equ. for corporates in misc. sectors during a financial year. The maximum limit of loan is USD 200 Mio or equ. for corporates in hotal, hospital or software sectors during a financial year. NGOs engaged in micro finance activities can avail up tp USD 10 Mio or equ. Aii in cost ceiling : 6 month LIBOR + 350 Bps for 3 year and up to 5 years,and 6 month LIBOR + 500 Bps for more than 5 years External Commercial Borrowing

Factoring & Forfaiting : Factoring : The arrangement in which, short term domestic receivables on sale of goods and services are sold to an agency (factor) is called the factoring. Forfaiting : It represents the purchase of obligation, which fall due at some future date and arise from delivery of goods or services in export transactions, without recourse to the previous holder of the obligation. Factoring & Forfaiting

RBI Guidelines for Ads in respect of Operation & Risk Management : AD Cat. I banks may open/close Rupee accounts of their overseas branches/ correspondents without reference to RBI Funding of account of Non-resident banks Overdraft/ loans to correspondents Opening of Rupee account of Exchange Houses Investments by AD Cat. I banks Use of FCNR(B) balances Facilities to Small and Medium Enterprises Facilities to Resident individual Loans/ Overdraft RBI Guidelines for Ads in respect of Operation & Risk Management

Exposure and Risk in International Trade : Exposure and Risk in International Trade

Risks Related to Forex Transactions : Positions in Foreign Currency Long or Overbought Position Short or Oversold Position Overbought or Oversold Position Covering of Position Risk The position is covered by fixing suitable limits: Day-light position Overnight posiion Stop loss position Gap position Risks Related to Forex Transactions

Various Risk in Forex Operations : Sr. no. Risk Nature Control measure 1 Open position Risk Exchange Rate Changes Fixing of daylight, overnight & stoploss limit 2 Cash Balance Risk Nostro Balances Reconciliation of Balances 3 GapRisk Maturity Period of Purchase and Sale are not conciding Undertaking Swap, fixing of gap limit 4 Credit Risk Failure of Counter party Fixation of Counter party limit 5 Country Risk Inability of Country to serve its external Liability Country risk analysis and Country Limit 6 Liquidity Risk Inability of counter party to meet its funding requirements. Proper Reporting system 7 Legal Risk It arises on account of improper documentation Internationally accepted approved agreements 8 Market Risk Adverse movement in the level of market prices Fixing Exposure limit by currency and maturity, market monitoring, closing positions 9 Settlement Risk Debit & Credit are not synchronized Exposure Limit for interbank counter party 10 Operational Risk Human error & Aministrative inadequates Audit Scrutiny and Follow up Various Risk in Forex Operations

Role of ECGC : Introduction : Known as Export Credit & Guarantee Corporation Ltd. The primary goal of ECGC is to support and strengthen the export promotion drive in India. Activities of ECGC : i) Provide credit risk insurance covers to exporters against loss in export.. Ii) Offer guarantees to banks and financial institutions against export credit iii) Provide overseas investment insurance to Indian companies investing in joint venture abroad. iv) Provide guidance in export related activities and information on credit worthiness of oversea buyers. Role of ECGC

ECGC Policies : Standard Policies : The standard policies provide cover to exporters for short term credit i.e. credit not exceeding 180 days. These policies covers both commercial and political risk from the date of shipment depending upon type of policy. ECGC normally pays 90% of losses on account of commercial or political risk. Commercial risk covered by ECGC are subject to the condition that credit limit is approved by ECGC on each buyer. Premium rates vary according to the risk involved and the country for which the goods are exported. ECGC Policies

Financial Guarantees of ECGC : Export Credit Insurance Packing Credit (Party-wise & Whole Turnover) Eligibility : A bank or financial institution Period of cover : 12 months Eligible advance : All packing credit advances as per RBI guidelines Protection offered : Against losses incurred due to default or insolvency of exporter Percentage of cover : 66-2/3% ( party-wise) and 75% ( whole turnover) Maximum liability : 66-2/3% and 75% of packing credit limit Premium : as per applicable rate,- paisa per Rs.100 p.m. on the highest amount outstanding on any day during month Important obligation of the bank : Monthly declaration of advances Premium before 10 th of succeeding month Approval of corporation for extending due date beyond 360 days from due date Default to be reported with 4 months from due date, and if not recovered, claim within 6 months of the report of default. Recovery action and sharing of recovery Financial Guarantees of ECGC

Financial Guarantees of ECGC : Whole Turnover Post –shipment Export Credit Guarantee Eligibility : A bank or financial institution Period of cover : 12 months Eligible advance : All post-shipment advances as per RBI guidelines Protection offered : Against losses incurred due to default or insolvency of exporter Percentage of cover : 85% in ECGC policy holder and 60% for non policy holders Premium : as per applicable rate,- paisa per Rs.100 p.m. on the highest amount outstanding on any day during month Important obligation of the bank : Monthly declaration of advances Premium before 10 th of succeeding month Approval of corporation for extending due date beyond 360 days from due date Default to be reported with 4 months from due date, and if not recovered, claim within 6 months of the report of default. Recovery action and sharing of recovery Financial Guarantees of ECGC

Export Import Bank of India : Introduction : Exim Bank was established under Exim Bank Act 1981for for providing financial assistance and services in export and import trade in India. Operations of Exim Bank : 1) For importers and exporters 2) For banks 3) For foreign government, importers and institutions 4) For deferred payment export 5) For assistance to project export / turnkey project / construction projects 6) Guaranteeing of obligations Export Import Bank of India

Foreign Exchange Management Act (FEMA) : Introduction : The act came into effect with June 1, 2000 and extend to entire country. FEMA deal with foreign exchange matters. Objective of FEMA : i) Facilitating external trade and payment. ii) Promoting the orderly development and maintenance of foreign exchange market in India. Administration of FEMA : By RBI i) It can give direction, rules, notification, guidelines etc. ii) For contravention of these, RBI can impose penalty upto Rs.10,000/- and may extend up to Rs.2000/- per day in case of continuation of default / delay. Foreign Exchange Management Act (FEMA)

Transactions : Crurent Account Transactions : i) Sch I : Prohibited transactions ii) Sch II : Require government approvals iii) Sch III : Personnel remittances up to a limit iv) Other transactions : Trade, services and unilateral remittances etc without any monetary limit Capital Account Transactions : These transactions includes investment and borrowing in foreign currency as notified by RBI. These transactions affect the asset and liabilities Transactions

Foreign Exchange Remittance Facilities for Residents : Nepal & Bhutan : No release of forex for travel or trade Form of Forex : i) Cash up to USD 3000 equ. Balance in TC or bank draft or any other mode. ii) For Iraq and Libya, cash upto USD 5000 equ. Balance in TC or bank draft or any other mode. iii) For Iran, Russian Federation and other Republic of commonwealth countries, no ceiling for cash. Time for Purchase : Forex to be used within 180 days of purchase Mode of purchase : In cash up to Rs.50,000/-, above this, to the debit of account by way of cheque, draft Surrender of unspent foreign exchange : 180 days from the date of return Retention of foreign exchange : USD 2000 equ., lawfully acquired. No restriction on coins. Foreign Exchange Remittance Facilities for Residents

Exchange Earner’s Foreign Currency Account (EEFC) : Account holder : Exporters of goods and services, joint account with close resident relative in former/survivor style. Source of funds : Up to 100% of foreign exchange earning can be placed in this account. Use of funds : As per permitted debit and credit allowed by RBI Type of account : Only current account. Amount deposited in particular month, to be converted into rupee by last day of next month. Loans : No loan can be allowed against balances held in such account. Exchange Earner ’ s Foreign Currency Account (EEFC)

Foreign Exchange Dealers’ Association of India (FEDAI) : Introduction : i) FEDAI, a non profit making body was established in 1958 to regulate the dealing of and between Ads. ii) The major functions includes to frame rules for level playing field and granting accreditation to forex brokers. iii) All Ads are required to abide by the FEDAI rules relate to operations in foreign exchange for having uniformity in dealing. Foreign Exchange Dealers ’ Association of India (FEDAI)

FEDAI Rules : Rule 1 - Hours of business Rule 2 – Export transactions Rule 3 – Import transactions Rule 4 – Clean instruments Rule 5 - Foreign exchange contracts Rule 6 - Early delivery, extension and cancellation of foreign exchange contracts Rule 7 - Business through exchange brokers Rule 8 - Inter-bank TT settlement FEDAI Rules

Global Depository Receipt & American Depository Receipt : A GDR or ADR means any instrument created by the Overseas Depository Bank outside India and issued to non-resident investers against the issue of ordinary share of issuing company. The GDRs are listed on European stock exchange and ADRs are listed on US stock exchange and can be traded in their existing form. Each GDR/ADR represent underlying share of issuing company. Global Depository Receipt & American Depository Receipt

Swap & Arbitrage : Swap : It is a transaction where bank purchases or sells the foreign currency simultaneously, for different maturities. Arbitrage : A foreign currency is generally quoted at different rates in different market due to uncertainties prevailing. The banks may purchase and sell foreign currency in different centres to take advantages of these rate differentials. Such transactions are called arbitrage operations. Swap & Arbitrage

Liberalised Remittance Scheme : Eligibility : Resident individuals including minors. Purpose : permissible current/capital account transactions. The facility is in addition to those already available in Sch III (Misc. remittances). Amount : USD 250000/- equv. per FY per family member subject to individual family member complying to the terms and conditions of the scheme. It is mandatory to have PAN no. to make remittances under the scheme. Liberalised Remittance Scheme

Slide 78 : Thanking You & Wish you success

Your Facebook Friends on WizIQ