Correspondent A/c : Types of Accounts (FOREIGN EXCHANGE)
•Nostro Account
This is an account of a bank in another country in F/C.
Branches of bank located abroad are considered as separate bank for this purpose.
•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 3rd bank
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.
•In India Foreign Exchange governed by FEMA 1999.
•FEMA stared from 1st June 2000. •
•In India, Exchange control is exercised by RBI & trade control is exercised by DGFT
FOREIGN EXCHANGE
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
•Rate settled today exchange of currency on :
•1. In Cash : Same day
•2. TOM : Next working day
•3. SPOT : Second Working day
•4. Forward : After 2nd working day
•Buying Rate : Rate at which Bank purchases foreign currency on its buying rate.
•Selling Rate : Rate at which Bank sells foreign currency.
•Difference between buying and selling rate is called dealer spread.
•Bank is called Authorized dealer.
•In India Exchange rates are decided by market forces of demand and supply and not by RBI & Govt.
Outward Remittances
•Liberalized Remittances Scheme (LRS)
•Acc to this scheme, Indian resident can send funds aboard up to US $ 2.5 lacs in a financial year for any purpose, excluding lottery & Speculation.
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•The main purpose for which amount is send :
1.Education
2.Medical treatment
3.Gift
4.Donation
5.Pvt travel
6.Business travel
7.Maintaining relatives abroad
8.Employment
9.Immigration
10.Purchasing Assets abroad( eg. Immovable property)
A person can carry up to $3000 in cash & balance taken as travel cheque, travel card or draft.
•Foreign exchange up to Rs 50000 can be released against cash. Higher amt debiting the a/c or against Chq
•Indian Rs. Can be exported up to Rs. 25000 .
Inward Remittances No Restriction on Foreign exchange
•If currency is more than $ 5000 or foreign currency & travel chq Is more than $ 10000 ,
It should be declared on currency declaration form.
•Resident individual can retain up to $ 2000( No restriction on coins) & balance amount to be surrender to authorized dealer with in 180 days of arrival in India.
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JAIIB-AFB | CAIIB- BFM | Bank Promotion | Foreign Exchange | Theory , concept , MCQ
