WHAT ARE THE NEEDS OF CUSTOMERS IN

INTERNATIONAL BANKING BUSINESS?

THE NEEDS ARISE MAINLY IN THE FOLLOWING MATTERS:

INTERNATIONAL TRADE

INTERNATIONAL MONEY TRANSFER

NON-RESIDENT RUPEE ACCOUNTS

FOREIGN CURRENCY ACCOUNTS BOTH FOR RESIDENTS AND NON-RESIDENTS

INTERNATIONAL TRADE INVOLVES-

EXPORTS

&

IMPORTS

INTERNATIONAL MONEY TRANSFER INVOLVES-

INWARD REMITTANCES FROM ABROAD

&

OUTWARD REMITTANCES FROM ABROAD

IN THE CASE OF EXPORT AND IMPORT TRADE THE COMMERCIAL BANKS RENDER THE FOLLOWING SERVICES:

A. COLLECTION OF EXPORT AND IMPORT BILLS

B. EXTENDING FUNDED / NON-FUNDED FINANCIAL ASSISTANCE FOR EXPORT AND IMPORT TRADE OF THE CUSTOMERS

IN THE CASE OF INWARD REMITTANCES THE FOLLOWING SERVICES ARE RENDERED BY THE BANKS-

A. ENCASHMENT OF FOREIGN CURRENCY NOTESB. ENCASHMENT OF FOREIGN CURRENCY

TRAVELLERS CHEQUESC. PAYMENT OF INWARD SWIFT TRANSFERS

FROM ABROAD D. COLLECTION / PURCHASE OF

CHEQUES/DRAFTS DENOMINATED IN FOREIGN CURRENCY

IN THE CASE OF OUTWARD REMITTANCES THE FOLLOWING SERVICES ARE RENDERED BY THE BANKS-

A. SALE OF FOREIGN CURRENCY NOTES B. SALE OF FOREIGN CURRENCY

TRAVELLERS CHEQUESC. SALE OF FOREIGN CURRENCY

DEMAND DRAFTSD. SENDING OUTWARD REMITTANCES

TO FOREIGN COUNTRIES IN FOREIGN CURRENCIES (SWIFT TRASNFERS)

OTHER SERVICES INCLUDE-

A. OPENING ACCOUNTS IN THE NAMES OF NON-RESIDENTS

B. OPENING ACCOUNTS IN FOREIGN CURRENCY IN THE NAMES OF RESIDENTS

C. EXTENDING FOREIGN CURRENCY LOANS TO BOTH RESIDENTS AND NON-RESIDENTS

FUNDAMENTAL DEFINITIONS

Currency - Any form of money issued by a government or central bank and used as legal tender and a basis for trade.

Exports – It means taking out of home country to a place outside home country any goods or provision of services from India to any person outside India.

Foreign Currency- Any form of money issued by a government or central bank other than the home country, used as Legal tender and a basis for trade.

Foreign Exchange – It means and includes: deposits, credits and balances payable in any

foreign currency drafts, travellers cheques, letters of credit or bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency, drafts, travellers cheques, letters of credit or bills of exchange drawn by banks, institutions or persons outside India, but payable in Indian Currency.

Import – Import means bringing into home country any goods or

services from another country.

LIBOR - The London Inter-Bank Offered Rate. Banks use LIBOR when

borrowing from another bank.

SWIFT- This is acronym for Society for World Wide Interbank Financial Telecommunication. It is a co-operative society registered in Brussels. It enables the member banks to transact between themseklves quickly (i) international payments (funds transfer) and (2) messages connected with international banking (especially for letters of credit)

Traveller’s Cheque- It is an instrument used for travel purposes. Branded traveller’s cheques (American Express, Thomas Cook etc.,) in different currencies and in denominations are sold by authorised agents like banks and money changers. The traveller purchases them. He should sign the instrument at the appropriate place in front of the seller. He should once again sign at the specified place in front of the person encashing the traveller cheque at a different centre, usually a banker or a money changer, to get the currency notes of his choice.

A.DsPOLICY

RBI FED DIRECTIVES

FEMA 1999

The Foreign Exchange Management Act, 1999 has come into force with effect from the 1st June 2000. As from the same date (1.6.2000) the Foreign Exchange Regulation Act 1973 (FERA 1973), which was in operation for about 27 years, stands repealed.

  All foreign exchange transactions which take place from the 1st June 2000 onwards will be governed by the provisions of the new law Foreign Exchange Management Act 1999, (FEMA 1999) and the Rules, Regulations, Notifications, Directions and Orders issued/ framed under the new Act.

  The objective of the FEMA is “ to facilitate external trade and payments and to promote the orderly development and maintenance of foreign exchange market in India”.

Authorised Person: Reserve Bank of India is empowered to grant

authorization to any person to deal in foreign exchange or in foreign securities. The persons so authorised by RBI will be known as authorised dealers in foreign exchange or authorised moneychangers. RBI has powers to revoke such authorizations in public interest at any later date

Capital account transactions:  Investments in India by persons resident

outside India, investments outside India by persons who are resident in India, lending and borrowing between residents and non-residents (in foreign currency or in Indian rupees), purchase of immovable property situated in India by persons resident outside India, purchase of immovable property situated outside India by persons who are resident in India are some of the important items falling under the category of capital account transactions.

Current account transactions:  Transactions other than capital account

transactions fall under the category of current account transactions. Examples:

  a. Those relating to export trade and import trade.

   b. Release of exchange for foreign travel undertaken by

  - businessmen- students for higher studies- individuals for medical

treatment/checkup abroad - professionals like scientists,

technocrats etc. for attending conferences abroad individuals for private visits/employment/ emigration abroad.

  c. Gift / donation remittances

CURRENT ACCOUNT TRANSACTIONS - Transactions of a current account in nature are freely allowed. At the same time, in public interest, the Government of India is empowered to place reasonable restrictions on certain current account transactions. Accordingly a few restrictions of a very reasonable nature have been placed on current account transactions in public interest.

Responsibilities of authorised dealers: Reserve Bank of India has delegated wide powers to

authorised dealers for allowing outward remittances in foreign exchange. At the same time, authorised dealers are accountable to RBI for each transaction put through by them under the delegated authority. Applications, declarations and other documents obtained from customers at the time of putting through the transactions must be preserved by authorised dealers and should be made available to RBI for verification purposes whenever required. Authorised dealers are free to call for such documents from customers as may be required by them for allowing outward remittances in foreign exchange. If a transaction cannot be allowed for want of adequate documentation or for any other reason such refusal should be conveyed to the applicant in writing by the authorised dealer mentioning the reasons for the refusal.

 

EXPORT AND IMPORT TRADE ARE GOVERNED BY FOREIGN TRADE POLICY (FTP) ANNOUNCED BY DIRECTOR GENERAL OF FOREIGN TRADE (DGFT)

FTP WILL LIST OUT-A. ITEMS THAT COULD BE FREELY

EXPORTED AND IMPORTED WITHOUT ANY RESTRICTION

B. ITEMS THAT COULD BE EXPORTED OR IMPORTED SUBJECT TO CERTAIN RULES AND REGULATIONS OF DGFT

C. ITEMS THAT ARE BANNED FOR EXPORT AND IMPORT

FEMA 1999 AND RBI DIRECTIVES WILL REGULATE THE MODE OF MONETRY SETTLEMENT FOR EXPORT AND IMPORT TRADE

FEDAI RULES AND REGULATIONS WILL STATE THE GROUND RULES THAT ARE TO BE FOLLOWED BY A.Ds WHILE HANDLING EXPORT AND IMPORT BUSINESS

CONVERSION OF ONE CURRENCY INTO ANOTHER

PROTECTION AGAINST FOREIGN EXCHANGE RISK

EXCHANGE RATE

THE RATE AT WHICH ONE CURRENCY IS EXCHANGED INTO ANOTHER IS CALLED THE EXCHANGE RATE.

CURRENCY CONVERSION

SETTLEMENT OF INTERNATIONAL TRADE AND SERVICE

LENDING, BORROWING AND INVESTMENT

SPECULATION

EXCHANGE RATE DETERMINATION

DEMAND AND SUPPLY FOR THE CURRENCY

PURCHASING POWER PARITY

MONEY SUPPLY AND INFLATION

FOREIGN EXCHANGE MARKET

- MARKET WHERE FOREIGN CURRENCIES ARE BEING BOUGHT AND SOLD AT VARIOUS EXCHANGE RATES

&

FOREIGN MONEY MARKET

- MARKET WHERE FOREIGN CURRENCIES ARE BEING BORROWED AND LENT AT VARIOUS INTEREST RATES

SPOT EXCHANGE RATE

WHEN TWO PARTIES AGREE TO EXCHANGE CURRENCY AND EXECUTE THE DEAL IMMEDIATELY THE TRANSACTION IS REFERRED TO AS A SPOT EXCHANGE AND THE RATE APPLIED IS CALLED THE SPOT EXCHANGE RATE

FORWARD EXCHANGE RATE

WHEN TWO PARTIES AGREE TO EXCHANGE CURRENCY AND EXECUTE THE DEAL AFTER A LAPSE OF TIME BUT FIX THE EXCHANGE RATE NOW ITSELF THEN THE TRANSACTION IS REFERRED TO AS A FORWARD TRANSACTION AND THE RATE APPLIED IS CALLED THE FORWARD EXCHANGE RATE

FOREIGN EXCHANGE MARKET PARTICIPANTS

INTERNATIONAL BANKS FINANCIAL INSTITUTIONS CORPORATES PUBLIC AT LARGE

CONVERTIBILITY OF A CURRENCY IS THE ABILITY TO CONVERT THE CURRENCY INTO ANY OTHER CURRENCY WITHOUT ANY GOVERNMENT RESTRICTION.

FOREX TRADE

EXPORTS IMPORTSOTHER

REMITTANCES

FOREX TRADE

PROCEDURALMATTERS

REGULATORY ASPECTS

PROCEDURALMATTERS

DOCUMENTATION CONVENTIONS

FOREX TRADE CREDIT

EXPORT CREDIT

PRE-SHIPMENTCREDIT

POST-SHIPMENTCREDIT

LOCAL CURRENCY FOREIGN CURRENCY LOCAL CURRENCY FOREIGN CURRENCY

LOANACCOUNT

RUNNINGACCOUNT

LOANACCOUNT

RUNNINGACCOUNT

FOREX TRADE CREDIT

POST-SHIPMENTCREDIT

BILL PURCHASENOT UNDER

L.C.

USANCEBILL DISCOUNT

NOT UNDERL.C.

ADVANCE AGAINSTEXPORT BILL

SENT FORCOLLECTION

BILL NEGOTIATION/PAYMENT/

ACCEPTANCE UNDER

L.C.

COMMON DOCUMENTS IN A BILL IN INTERNATIONAL TRADE

BILL OF EXCHANGE COMMERCIAL INVOICE PACKING LIST CERTIFICATE OF ORIGIN INSPECTION CERTIFICATES TRANSPORT DOCUMENTS INSURANCE DOCUMENTS

THE LIST IS NOT EXHAUSTIVE. THERE CAN BE EVER SO MANY OTHER DOCUMENTS DEPENDING UPON THE REQUIREMENT OF EACH INDIVIDUAL TRADE TRANSACTION

TRANSPORT DOCUMENTS

BILL OF LADING AIRWAY BILL COMBINED TRANSPORT DOCUMENT ROAD,RAIL AND INLAND WATERWAY TRANSPORT

DOCUMENT POSTAL RECEIPT/COURIER RECEIPT TRANSPORT DOCUMENT ISSUED BY FREIGHT

FORWARDERS

INSURANCE DOCUMENTS

INSURANCE COVER NOTE

INSURANCE POLICY

o OPEN POLICY

o SPECIFIC POLICY

INTERNATIONAL TRADE SETTLEMENT

CONTRACT OF SALE/ORDER

LETTERS OF CREDIT