Forex And Trade Forex And Trade Forex And Trade Forex And Trade Disclaimers The material is for general training purpose only and does not constitute professional advice. Important Statutes And Rules Foreign Exchange Management Act,1999 Notifications, Master circulars, A.P.(Dir) Series of circulars issued by RBI. Circulars issued by DGFT FEDAI guidelines ICC rules including for Uniform rules for collection 522 Uniform Custom and Practice (UCP) 600 Uniform rules of Demand Guarantees (URDG), 758 The International Standby Practices 1998 (ISP98) Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credit (URR), 725
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Forex And TradeForex And TradeForex And TradeForex And Trade
Disclaimers
The material is for general training purpose only and does not constitute
professional advice.
Important Statutes And Rules
Foreign Exchange Management Act,1999
Notifications, Master circulars, A.P.(Dir) Series of circulars issued by RBI.
Circulars issued by DGFT
FEDAI guidelines
ICC rules including for
Uniform rules for collection 522
Uniform Custom and Practice (UCP) 600
Uniform rules of Demand Guarantees (URDG), 758
The International Standby Practices 1998 (ISP98)
Uniform Rules for Bank-to-Bank Reimbursements under Documentary
Credit (URR), 725
Some concepts
• Cash date/ Trade date- Date of Transaction
• Spot Date - Second Working day from cash date
• Tom Date - Next working day from cash date
• Spot Rate - Rate quoted and transacted today for settlement on spot date.
Foreign Exchange Rates
A currency exchange rate is the value of a certain world currency with respect to
another currency.
Direct Quote
It is the amount of local currency needed to buy one unit of the foreign currency
and the amount of home currency respectively due to be received when one unit
of foreign currency is being sold.
i.e. 1 foreign currency unit = x home currency units
Indirect Quote
It is the amount of foreign currency needed to buy one unit of the home currency
i.e. 1 home currency unit = x foreign currency units.
Cross Currency Quote
When a currency quote is given without the Indian Rupee as one of its
components, this is called a cross currency, i.e. when home currency is not
involved in the currency pair.
Foreign Exchange Forward Contracts
Foreign Exchange Swap
In a swap, two parties exchange currencies for a certain length of time and agree
to reverse the transaction at a later date.
Currency Future
Futures are standardized forward contracts and are usually traded on an exchange
created for this purpose.
Foreign Exchange Option (Fx Option)
A foreign exchange option is a derivative where the owner has the right but not
the obligation to exchange money denominated in one currency into another
currency at a pre-agreed exchange rate on a specified date.
Forex
• Sale of foreign currency and Travellers Cheques
• Sale of Travel Card and reload of balance on card.
• Private Visits
Maximum of USD 10,000 or equivalent currency in a financial year (April1- March
31) for one or more private visit under Basic Travel Quota (BTQ) to any country
(Except Nepal and Bhutan), wherein a maximum of USD 3,000 in currency notes.
USD 5000 in currency notes for Iraq or Libya
Full amount in currency notes for Islamic Republic of Iran, Russian Federation and
other Republics of Commonwealth of Independent States
• Business travel, attending a conference or specialized training or attendant
for medical treatment of a patient.
Maximum of USD 25,000 to a person per visit may be issued, irrespective of
period of stay and the conditions of release of forex in cash remains the same as
stated in clause (a) relating to Private Visits
• Medical Treatment Abroad
USD 100,000 or its equivalent, on the basis of self declaration that the applicant is
buying exchange for medical treatment outside India, without insisting on any
estimate from a hospital/doctor. However if the amount exceeds the above limit,
estimate from the doctor in India or hospital/ doctor abroad.
• Overseas education, employment, emigration and maintenance of close
relatives
USD 100,000 each for education, employment, emigration and maintenance of
close relatives abroad without insisting on any supporting documents but on the
basis of self declaration incorporating certain basic details of the transactions
• Foreign Currency against surrender of forex done earlier for non residents
and foreign nationals
Reconversion of unspent Indian currency held by non-residents and foreign
nationals, at the time of their departure from India, into forex on the basis of Valid
Encashment Certificate. In case of ATM slips reconversion of Indian rupees to the
extent of Rs.50000/- may be allowed to foreign tourists only and not non-
residents against original ATM receipts duly verified with original debit/credit card
and Valid Passport and Visa and confirmed Ticket for departure within 7 days.
• AML requirement
Sale may be made upto a maximum amount of Rs.50,000/- against cash receipt.
Further for cash received exceeding Rs.25000/- till Rs.50,000/- copy of PAN/Form
60 is mandatory under Rule 114B of the Income Tax Act. It should be kept in mind
that all sales to one person within 30 days of the last transaction is to be treated
as a single transaction for computation of above limit of Rs.50000/-. Also in case
of travel outside India where the rupee equivalent of foreign exchange drawn
exceeds Rs 50,000 either for any single drawal or more than one drawal reckoned
together for a single journey/visit, it should be paid by cheque or draft.
Forex
• Purchase of Foreign Currency
• Purchase of Travelers Cheques
• Refund of balance in Travel card
Purchase of foreign currency and Travellers Cheques
- Forex purchased for a specific purpose and not utilized for that purpose can
be utilized for any other eligible purpose for which drawal of foreign
exchange is permitted. However resident individual needs to surrender
received / realised / unspent / unused foreign exchange to an Authorised
Person within a period of 180 days from the date of receipt / realisation /
purchase /acquisition / date of return of the traveller, as the case may be
other than for export of goods and services.
- Returning traveller is permitted to retain with him, foreign currency
travellers cheques and currency notes up to an aggregate amount of USD
2000 and foreign coins without any ceiling beyond 180 days.
AML Requirement.
- Payment in cash against purchase of forex from a resident individual upto a
limit of USD 1000 or its equivalent currency
- Limit USD 3000 or its equivalent currency in case of a Non resident or
Foreign National.
- All purchase within a period of 30 days from the date of first transaction
would be aggregated for the purpose of considering the above limits.
- Currency Declaration Form (CDF) is required to be obtained in case of
purchase of currency exceeding USD 5000 or its equivalent currency and
USD 10000 or its equivalent currency for purchase of currency and Travellers
Cheque put together.
Special accounts under FEMA
Eligible credits to NRE
Transfer from other NRE/FCNR accounts.
- Interest accruing on the funds held in the account.
- Repayment by resident individual of loan obtained from close relatives
outside India upto USD 250,000/- or its equivalent, if the loan was extended
by way of inward remittance in foreign exchange through normal banking
channels or from NRE/FCNR accounts. (RBI/2011-12/465 dated March 21,
2012)
- Dividend income paid by Indian companies after the 1st April, 2003,
irrespective of source of investment.
- Interest on NRO account at the time of credit.
- Refund of application/earnest money made by the house building agencies
on account of non-allotment of flat/plot, together with interest (net of
income tax payable thereon) provided the original payment was made out
of NRE/FCNR account or from remittance from outside India through
normal banking channels.
- Interest and Maturity proceeds of Govt Securities and dividend on units of
mutual funds, provided purchase from NRE/FCNR account or inward
remittance.
- Refund of share/debenture subscriptions to new issues of Indian
companies, if subscription was paid from NRE/FCNR account of remittance
from outside India.
- Proceeds of remittances to India in any permitted currency.
- Current Income such as rent, pension, interest, with CA certificate and
undertaking for payment of tax.
- Proceeds of personal cheques drawn by account holder on his foreign
currency account and of travellers cheques (issued outside India), bank
drafts payable in any permitted currency, deposited by the account holder
in person to AD during his temporary visit to India.
- Proceeds of foreign currency/bank notes tendered by account holder during
his temporary visit to India, provided
1) CDF is attached, where applicable.
2) notes are tendered to the AD(not money changer) in person by the
account holder himself and AD is satisfied that account holder is a person
resident outside India.
- Transfer from NRO account of NRI within the overall ceiling of USD one
million per financial year subject to payment of tax, as applicable.(i.e. as
applicable if funds were remitted abroad) (RBI/2011-12/536 dated May 07,
2012)
Special accounts under FEMA
Scheme of FCNR Account
o Only in form of term deposits of minimum period of 1 year and maximum
period of 5 years from NRIs
o Interest paid on basis of 360 days to a year and calculated and paid at intervals
of 180 days each.
o No interest paid if premature done for less than 1 year and penalty to cover
swap cost may be charged.
Eligible credits to EEFC Account
o Only in form of non-interest bearing current account. No credit facilities are
allowed against the same.100% export proceeds can be credited to EEFC
account.
o Sum total of the accruals in the account during a calendar month should be
converted into Rupees on or before the last day of the succeeding calendar
month after adjusting for utilisation and forward commitments.
o WEF 22.01.2013 , EEFC holders are permitted to access the forex market for
purchasing forex without utilizing fully the available balances in the EEFC
� Permitted remittances subject to ceilings (Schedule III)
�In respect of remittance applications for miscellaneous non trade
current account transactions of amount not exceeding USD 25,000,
Authorised Dealers may obtain simplified Application-cum-Declaration form
(Form A2)
� Other remittances including under Liberalised Remittance Scheme.
Prohibited transactions
a) Remittance out of lottery winnings.
b) Remittance of income from racing/riding etc. or any other hobby.
c) Remittance for purchase of lottery tickets, banned /proscribed magazines,
football pools, sweepstakes, etc.
d) Payment of commission on exports made towards equity investment in
Joint Ventures / Wholly Owned Subsidiaries abroad of Indian companies.
e) Remittance of dividend by any company to which the requirement of
dividend balancing is applicable.
f) Payment of commission on exports under Rupee State Credit Route, except
commission up to 10% of invoice value of exports of tea and tobacco.
g) Payment related to "Call Back Services" of telephones.
h) Remittance of interest income on funds held in Non-Resident Special Rupee
(Account) Scheme.
Purpose of Remittance Ministry /Department of GOI whose approval is required
Culture Tours Ministry of Human Resources Development, (Department of Education and Culture)
Advertisement in foreign print media other than for tourism, foreign investments and international bidding (exceeding USD 10,000) by a State Govt. and its PSU
Ministry of Finance, (Department of Economic Affairs)
Remittance of freight of vessel chartered by a PSU
Ministry of Surface Transport,(Chartering Wing)
Payment of import through ocean transport by a Govt. Department or a PSU on c.i.f. basis
Ministry of Surface Transport, (Chartering Wing)
Multi-modal transport operators making remittance to their agent abroad
Registration Certificate from the Director General of shipping
Remittance of hiring Charges of transponders by
(a) TV Channels (b) Internet Service provider
Ministry of Information and Broadcasting Ministry of Communication and information Technology
Remittance of container detention charges exceeding the rate prescribed by Director General of Shipping
Ministry of Surface Transport ( Director General of Shipping)
Remittance of prize/sponsorship of sports abroad by a person other than International /National/State Level sports bodies, if amount exceeds USD 100,000.
Ministry of Human Resources Development (Development of Youth Affairs and Sports)
Remittance for membership of P&I Club Ministry of Finance (Insurance Division )
Transactions with ceilings
a) Gift and donation upto USD 5000 per financial year per remitter or donor
other than resident individual
b) Donations by Corporate, upto 1% of their forex earnings during the previous
3 FY or USD 50,00,000 whichever is less for specified purposes.
c) Exceeding net salary for a person resident but not permanently
resident(less than 3 years) in India for remittance for maintenance of close
relatives abroad.
d) Commission, per transaction, to agents abroad for sale of residential flats or
commercial plots in India exceeding USD 25,000 or 5% of the inward
remittance whichever is more.
e) Remittances exceeding US$ 10,000,000 per project for any consultancy
services in respect of infrastructure projects and US$ 1,000,000 per project,
for other consultancy services procured from outside India.
f) Remittances exceeding 5% of investment brought into India or USD
1,00,000 whichever is higher, by an entity in India by way of reimbursement
of pre-incorporation expenses.
Liberalised Remittance Scheme
AD may freely allow remittances by resident individuals up to USD 75,000 per
financial year (April-March) for any permitted current or capital account
transactions or a combination of both.
The facility is available to all resident individuals including minors for transactions
other than which are otherwise not permissible under FEMA and those in the
nature of remittance for margins or margin calls to overseas exchanges / overseas
counterparty.
Resident individuals are not allowed to acquire immovable property but can
acquire shares (of listed companies or otherwise) or debt instruments or any
other asset outside India without prior approval of the Reserve Bank.
Individuals can also open, maintain and hold foreign currency accounts with a
bank outside India for making remittances under the Scheme without prior
approval of the Reserve Bank.
Banks should not extend any kind of credit facilities to resident individuals to
facilitate remittances under the Scheme.
The facility is not available for making remittances directly or indirectly to Bhutan,
Nepal, Mauritius and Pakistan or any country identified by FATF as non co-
operative country.
Application-cum-declaration form and PAN number with bank account with a
bank for a minimum period of one year prior to the remittance are mandatory
conditions. AD should be satisfied about source of funds.
Export outside India
� Export bill under LC from foreign bank.
� Export bills for collection.
The exporter must submit a request letter stating clearly the documents to
be delivered to the foreign buyer and covering all instructions for the Indian Bank.
The documents must be accompanied by Commercial Invoice, Packing List,
Bills of Exchange, /signed and endorsed full set of original Bill of Lading/Airway
Bill/ other transport document and insurance policy, in case of CIF contracts.
� Export bill under LC from foreign bank/ Export bills for collection.
Further exchange control copy of shipping bill with relevant EDF/SDF /Softex
form should be attached nominating the concerned bank.
Original LC duly endorsed and stamped should also be attached therewith,
which should be endorsed with the bill amount and returned back to
customer. The documents must be submitted within 21 days of the bill of
lading.
Export outside India
AD Category – I banks may regularize cases of dispatch of shipping documents by
the exporter direct to the consignee or his agent resident in the country of the
final destination of goods, up to USD 1 million or its equivalent, per export
shipment, subject to the following conditions:
a) The export proceeds have been realised in full.
b) The exporter is a regular customer of AD Category – I bank for a period of at
least six months.
c) The exporter’s account with the AD Category – I bank is fully compliant with
the Reserve Bank’s extant KYC / AML guidelines.
d) The AD Category – I bank is satisfied about the bonafides of the transaction.
Advance Against Export
Where an exporter receives advance payment from a buyer outside India, the
exporter shall be under an obligation to ensure that -
i) The shipment of goods is made within one year from the date of receipt
of advance payment;
ii) The rate of interest, if any, payable on the advance payment does not
exceed LIBOR + 100 basis points, and
iii) The documents covering the shipment are routed through the
Authorised Dealer through whom the advance payment is received;
Provided that in the event of the exporter’s inability to make the shipment,
partly or fully, within one year from the date of receipt of advance payment, no
remittance towards refund of unutilised portion of advance payment or towards
payment of interest, shall be made after the expiry of the period of one year,
without the prior approval of the Reserve Bank.
� Export bills under Advance payment
Banks may allow exporters to received advance payment for exports of
goods which may take more than 1 year to manufacture and ship and export
agreement provides the same subject to prescribed conditions, such as;
a) KYC and due diligence for overseas buyer
b) AML guidelines are ensured
c) Export advance to us to execute export
d) No instance of refund exceeding 10% of the advance payment in last 3 years
e) Rate of interest, if any should not exceed LIBOR+ 100 basis points.
� Manner of Export Realisation
Full export value of goods exported shall be received through an AD Bank in
following manner:
a. Bank draft, pay order, banker's or personal cheques.
b. Foreign currency notes/foreign currency travellers’ cheques from the buyer
during his visit to India.
c. Payment out of funds held in the FCNR/NRE account maintained by the
buyer
d. International Credit Cards of the buyer.
e. All transactions between a person resident in Nepal or Bhutan may be
settled in Indian Rupees or routed through ACU mechanism.
f. In precious metals, equivalent to value of jewellery exported.
g. Through Online Payment Gateway Service Providers (OPGSPs) for export
value not exceeding USD 10000.
h. Settlement system under ACU mechanism
� Realisation of Export Proceeds
Exporter to realise and repatriate the full value of goods or software to India as
under:
(i) By Units in Special Economic Zones (SEZs): 12 months till June 10, 2014.
(ii) By Status Holder Exporters, 100 % Export Oriented Units (EOUs) and units
set up under Electronic Hardware Technology Parks (EHTPs), Software
Technology Parks (STPs) and Biotechnology Parks (BTPs) schemes : 12
months
(iii) Goods exported to a warehouse established outside India : As soon as it is
realised and in any case within fifteen months from the date of shipment of
goods; and
(iv) In all other cases: With effect from June 3, 2008, this period of realization
and repatriation to India has been enhanced to twelve months from the
date of export till March 31, 2013 and now nine months till 30.09.2013.
Follow-up of Overdue Bills
Banks should furnish to the RBI, on half-yearly basis, a consolidated statement in
Form XOS giving details of all export bills outstanding beyond six months from the
date of export as at the end of June and December every year. The statement
should be submitted in triplicate within 15 days from the close of the relative half-
year. Now centralised and online wef December, 2013.
� FIRC
a) Printing of FIRC on security stationery only in cases where the Foreign
Inward Remittance has been received for any one of the following
purposes:
o Advance Payment for Exports
o Receipt of export proceeds by an AD Bank other than the one who
handles/handled the GR Form
o FDI/FII
� Issue of Duplicate FIRC
a) Customer request requesting for issuance of duplicate FIRC.
b) Stamped (as per state Stamp Act) indemnity from the beneficiary.
c) Check that the FIRC has not been utilized.
d) The duplicate FIRC may be issued after a period of 10 days has elapsed from
the date of uploading the details on the FEDAI website.
e) Write/Affix a rubber stamp on the duplicate copy as prescribed.
� Issuance of GR waiver certificate.
1. GR waiver from exporters for export of goods free of cost, for export
promotion up to 2 per cent of the average annual exports of the applicant
during the preceding three financial years subject to a ceiling of Rs.5 lakhs. For
status holder exporters, the limit as per the present Foreign Trade Policy is
Rs.10 lakhs or 2 per cent of the average annual export realization during the
preceding three licensing years (April-March), whichever is higher.
2. Export of goods not involving any foreign exchange transaction directly or
indirectly.
3. Goods are being exported for re-import after repairs / maintenance / testing /
calibration, etc., subject to the condition that the exporter shall produce
relative Bill of Entry within one month of re-import of the exported item from
India.
4. Goods being exported for testing are destroyed during testing, banks may
obtain a certificate issued by the testing agency that the goods have been
destroyed during testing.
5. Firms / Companies and other organizations participating in Trade
Fair/Exhibition abroad can take/export goods for exhibition and sale outside
India.
The exporter shall produce relative Bill of Entry within one month of re-import
into India of the unsold items and the sale proceeds of the items sold are
repatriated to India in accordance with the FEMA.
The exporter shall report to the bank the method of disposal of all items exported,
as well as the repatriation of proceeds to India.Such transactions approved by the
AD Category – I banks will be subject to 100 per cent audit by their internal
inspectors/auditors.
� Issuance of Bank Realisation Certificate (BRC)
BRC is issued in Format as prescribed by DGFT and available as Appendix 22 A at