Important fact of Foreign Exchange for Bank Promotion Exam

Foreign Exchange:

-Foreign currency and document expressed in foreign currency

-Foreign exchange transaction are regulated by FEMA 1999.

-FEMA (Foreign exchange management Act)- start 1 june 2000

-Exchange control exercised by RBI

-Trade control exercised by DGFT (Director General Foreign Trade)

-Foreign trade policy issued by DGFT OR Ministry of commerce

-Import licence issued by DGFT or its regional office.

-UCPDC= Uniform customs and Practices for Documentary credit

-Latest edition of UCPDC= UCPDC600

-UCPDC issued by ICC,Paris(International Chamber of commerce)

-Inco terms= International commercial terms

                 =Issued by – ICC Paric

                = No. Of Inco Terms- 11

Types of correspondence a/c :

                  §  NOSTRO a/c: Our account with you

-         Account of a bank of india with a correspondent bank abroad in foreign currency

-         E.g. CBI,Delhi a/c with Citi Bank newyork

§  VOSTRO a/c : Your a/c with us

-         a/c of a foreign correspondent bank with a bank in india in Indian rupees

-         e.g. Citi NY a/c with syndicate bank Bombay

§  LORO a/c : Their a/c with them

-         E.g. central bank a/c with citi bank NY

-         For CBI Nostro

-         For Citi Vostro

-         Rest bank Loro

. All foreign exchanged transaction are settled through Nostro a/c

v Types of Branches:

1.    Categories I – Open NOSTRO/VOSTRO a/c

-         Purchase and sale foreign exchange in open market

2.    Catefories II- Deals foreign exchange with customer

3.    Categories III- Not authorised to dealing foreign exchange

AD =Authorised Dealer

AP=Authorised Person

FFMC=Full fledged money changer

-         Licence to deal in foreign exchange given by RBI

-         Import-Export licence –DGFT