Concepts of Export- Import & Forex Mechanism
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Transcript of Concepts of Export- Import & Forex Mechanism
Prof S P GargJaipuria Institute of Management , Jaipur
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
“Globalization is about producing where it is most cost
effective ,sourcing capital from where it’s cheapest and selling it where it is
most profitable.”N R Narayana Murthy
Toward A Better Future
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Trade across the borders involve Payments and Receipts in Foreign Exchange
Banking System as intermediaries between foreign exchange inflows and outflows
Transfer of money and process of transfer Process of transfer varies
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Forex Market As per BIS Study : In April 2010, Global
Forex Market Daily Turnover : $ 4 trillion (20% higher than in April 2007)
Significant Contributors: Mutual Funds, Pension Funds, Hedge Funds,Insurance Funds
Top Currencies : US$, Euro , Japanese YenEuro & Yen recorded highest rise and GBP
Recorded highest declineUSD –EURO : HIGHEST SHARE among all
currency Pairs (28%)National Workshop on Export-Import &
Forex Mechanism- 19 Oct, 2010
65% cross border transactions 35 % local transactions Indian Rupee share in global forex market
increased to 0.9% Share $ 27.4 billon per day USD-INR Pair Currency turn over more than
23%
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
IMPORT MECHANISM Good received in India and Forex remitted
out of India Importer is Purchaser of Forex and Bank is
SELLER Obligations on both
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Banks deal in documents ,not in goods Buyer and Seller rarely meet each other Deal on the basis of documents and papers Possibilities of documents
misunderstood/misconstrued
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Important publications of International Chamber of Commerce (ICC)):
UCPDC 600 : for Documentary Credit URC 522: for Collection Documents ISBP 681: SUPPORT PUBLICATION INCOTERMS 2000(13 Trade Terms) Now
2010
Role of FEDAI (Foreign Exchange Dealers’ Association of India) is a non-profit making body formed in 1958 with the approval of RBI
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Export Credit Export finance is governed by various Acts and
guidelines issued by various departments /organisations:
EXIM Policy• Foreign Trade policy• FEMA (TO BE STUDIED IN CONJUCTION WITH
OTHER ACTS/GUIDELINES FEDAI Rules Reserve Bank of India Export Credit Guarantee Corporation (ECGC) rules• International Chamber of Commerce (ICC),
Paris(165 countries Members) KYC POLICY
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Import Finance facilities are subject to the prevalent rules of the Banks/
RBI guidelines. The various facilities provided are:
Collection of import bill. Opening of Import L/Cs (Sight/ DA) Financing of import by way of Foreign Currency Loans Issuing Guarantees etc. on behalf of importers. COLLECTION OF IMPORT BILLS: LETTER OF CREDIT: granted to the importers after assessing their
requirement/ credit worthiness/ financial strength and other parameters.
BANK GUARANTEES: (Performance /Financial) on behalf of importers/ other customers issuance of
guarantees in favour of beneficiaries abroad.
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Characteristics of foreign exchange market
An Over The Counter market: - No physical presence in the same
sense as a stock exchange or commodity market
- The participants deal among themselves and settle their transactions directly
- There is no exchange or clearing house
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
No single location – no barriers - FX market is not located in a single
building- No specific market place exists- FX market has few restrictions in this
modern world- FX market is global in nature / character- While the market does not exist at each
and every center in the world, it is accessible from any part of the world
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
foreign exchange:An expression to denote foreign currency
Also covers the method by which a currency of one country is exchanged for that of another.
Guidelines relating to foreign exchange management
All foreign exchange transactions are to be routed through Authorised Dealers for whom guidelines are issued by RBI under the provisions of Foreign Exchange Management Act .FEDAI governs operational aspects
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Exchange rates fluctuate very frequently
Settlement of transactions normally
does not take place simultaneously
Highly liquid market
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Authorised Dealers (AD) licences : AD I :banks, all India financial institutions
and a few co-operative banks to undertake foreign exchange transactions in India(87)
AD II: Money Changers licences alongwith other activities :Full Fledged/Restricted
ADIII: Institutional licences to a large number of established firms, companies, hotels, shops, etc
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Maxims: Cause & Effect Relationship No one can receive money unless some one
pays Payment must always precede receipt. Credit is a natural corollary Location of Account The currency of the country never leaves
its borders where it is a legal tender. Transaction flow would take place for that
currency in that Country only.National Workshop on Export-Import &
Forex Mechanism- 19 Oct, 2010
Purchase and Sale : With reference to what a bank does All sales mean sale of foreign currency to
others All purchase mean purchase of foreign
currency from others Cover Operations: Squaring off the position
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Transaction Date: The date on which a trade occurs
Ready or cash – To be settled on the same day
Tom – To be settled on the next working day to the date of transaction(1 day for Dollar/Canada )
Spot – To be settled on the second working day from the date of contract
Forward – To be settled at a date farther than the spot date
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
No of Days : 360/365 Days as Base In International Banking generally 360 days
for calculation purposes Calendar of Holidays Information to calculate maturity dates,
Value dates, follow up deliveries International Style of Amount : hundreds,
thousands, millions,billions
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
NOSTRO Account: Nostro is derived from the latin term "ours." our account with you A foreign currency account maintained by a
bank in India with a bank abroad BOI’s US$ ACCOUNT WITH CITI BANK
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
VOSTRO account: Vostro is latin for yours
Your account with us
A rupee account of a foreign bank (abroad) with a bank in India
CITI BANK RUPEE ACCOUNT WITH BANK OF INDIA
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Role of Society for Worldwide Interbank Financial Telecommunication(S.W.I.F.T )
To provide communications platform, products and services that allow institutions to connect and exchange financial information securely and reliably.
To enable institutions to automate and standardize financial transactions, thereby lowering costs, reducing operational risk and eliminating inefficiencies from their operations.
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
ONLY IF YOU ARE
G: Growth oriented L : Linked O : Organizational Belongingness B : Building Bridges A : Attitude L : Leadership
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
G L O B A L
If you don't create a BRAND for yourself, your competition will
be happy to do it for you Brands to Last: Build a Winning and
Enduring Brand
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010
Wishing You All The Best In Your Endeavours
for suggestions/feedback/[email protected]
Mob: 093092 92080
National Workshop on Export-Import & Forex Mechanism- 19 Oct, 2010