International Trade

Introduction : ¨International trade is the exchange of capital, and services across international borders. ¨A product that is  sold to the global market is an export and product that is bought from the global market is an import.

Current Account : ¨Visible trade comprise of receipt and payment towards goods/merchandise. ¨Invisible trade comprises of remittances, dividend and interest payments.

Capital Account : ¨Capital account relates to the borrowings and investments.

Balance of Trade : ¨It is a difference between visible export and visible import.

Balance of Payment : ¨It is a record of flow of economic transaction of the residents of a country with the rest of the world during a specified time period.

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.

Foreign Exchange Authorised Persons ¨

AD Category I :

   Commercial, State & Urban Coop. Banks. Deals in all type of foreign exchange Business. ¨

AD Category II :

    FFMCs (Full fledged money changers), Coop banks, RRBs.  Deals in Non-Import transactions. ¨

AD Category III :

   Select Finanacial Institutions.  Deals in transactions incidental to the foreign exchange activities.

¨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)(Foreign Currency Non-Resident) balances ¨Facilities to Small and Medium Enterprises ¨Facilities to Resident individual ¨Loans/ Overdraft

Front office :

Dealing Room, Fund Position, Currency Position

Mid office :

Risk Management,    Fixation of Risk Parameters

Back office :

Settlement, Reconciliation, Accounting

be continue for next part..

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