Foreign Exchange Part-2 for Bank Promotion Exam
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Types of Transaction in foreign exchange (Based on
rate settled today and Delivery different day or same time)
Types of Transation
|
Rate settled today and Delivery
|
1. Cash Transaction
|
Same
Day – T + 0
|
2. TOM
|
Next
working day- T+1
|
3. SPOT
|
Second
Working Day –
T +2
|
4. FORWARD
|
After
second working day-
T +3
onward
|
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Exchange Rate :
1. Buying Rate :- Rate at which bank purchase foreign
exchange.
:- In this case Bank
inflow of Funds
:- Export bill
Purchase/ Inward remittance.
2. Selling Rate :- Rate at which bank sell foreign
exchange.
:- Bank out flow of funds
(Import Bills)
ü
Difference between Buying rate and selling
rate is called Dealers spread.
3. Direct Rate :- When foreign exchange are remains
constant and home currency changes.
e.g. :-
US $ 1= Rs. 63.41
US $ 1= Rs. 62.69
4. Indirect Rate :- When home currency remains constant
and foreign currency changes.
e.g. :-
Rs. 100 = US $ 1.41
Rs. 100 = US $ 1.45
ü
In India direct rate are applied.
ü
In India exchange
rate are decided by market forces of demand & supply , Not decided by RBI.
ü
Exchange rate of
currency are most adverse compare to travel cheque, Draft etc because holding
cost of currency is high.
A. Buying Rate :-
It is of 2 types
a. TT Buying : When Nostro Account of Banks is credited
before making payment to customer.
e.g. :- Payment of
foreign DD drawn on US.
:- Collection of Export
Bills.
b. Bills Buying:- When Nostro Account of the bank is
credited after making payment to customer.
e.g. : Purchase /Discount of
Export bills
B. Selling Rate :-
It is also devided into two parts
a. TT Selling :- When Foreing Exchanged is sold but
import bill are not handled.
e.g. :- Issue of
Foreign DD/TT/MT
:- Crystallisation of
overdue export bill.
b. Bill Selling :- When import bill are handled while
selling foreign exchange.
e.g. :- A Retirement of
Import Bill.
