FOREIGN EXCHANGE

1. Can you name the committee which recommended changes in

rules & regulations to
free exchange control and to develop
healthy speculations.
ANS: Sodhani Committee.
2. What do you know about the balance of payment?
ANS: It is the net of value of exports and imports both visible & non
visible
3. What do you know by the term visible forex flow?
ANS: It represent proceeds of commodity import & export.
4. What is meant by invisible in flow and out flow under the balance
of payment?
ANS: It is the inflow and outflow of forex relating to tourism, insurance,
banking transportation etc.
5. Some times we use the term mirror account for recording foreign
exchange transaction in our bank. What is this mirror account.
ANS: It is the IOBs replica account of the NOSTRO Account which it is
maintaining with the correspondent.
6. What are the various Foreign Exchange Markets?
ANS: a) Merchant Market
b) Inter bank market
c) International market
7. What do you mean by convertible currency?
ANS: Any currency which is freely traded active and convertible in the
market for
e.g.U.S. Dollar, G.B. Pound ,Jap yen etc
8. Can you give few important function of RBI as exchange control
Authority?
ANS: Control and Manage Forex
Regulate and conserve Forex
Administer all Forex transaction
Regulate Foreign investment

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9
What do you know about the various foreign exchange
quotations?
ANS:There are two types of foreign exchange quotations.
a) Direct quotations /USD= Rs.46.40
b) Indirect quotations Rs.100 = GBP1.523
In India we use direct quotation w.e.f 2.8.93
10. Buy Low Sell High . This is a maximum used in one type of
Quotation . What is the Quotation.
Ans: Direct Quotation
11. In forex transactions banks can make profit using the disparities
in price in different market This is known as
ANS: Arbitrage transaction
12. What is the difference between an Authorised Dealer in Foreign
exchange and money exchangers
ANS: Authorised Dealers in Foreign Exchange are authorised by RBI to
undertake all types of foreign exchange transactions like import, export,
opening and maintaining NRE SB A/c FCNR RFC EEFG A/c where as
money changers can only convert Foreign currency into Indian currency
and vice versa.
13. What is the difference between full fledged money changers and
Restricted money changers
ANS: Full fledged money changers can buy forex and also sell forex.
Where as Restricted Money changers can only buy forex from Travelers
14. What are the different type of Foreign exchange transaction that
can take place in the merchant Market?
ANS: Only two types of foreign exchange transaction take place between
customers and bank in merchant transaction one is spot transaction,
second one is forward transaction.
15. What are the different type of inter bank transactions?
ANS: Inter Bank transaction include
a) Cash Transaction
b) Tom transaction
c) Spot transaction

d) Forward transaction
16). What are the different types of exchange rate quoted by a
banker?
ANS: Banks quote exchange rate for
a) TT Buying
b) Bills Buying
c) TC Buying
d) Currency Buying
17. A customer had booked a forward sale contract. But he could not
import the item as per schedule and he approaches you to cancel the
same on the due date. What you would do
ANS: We have to cancel the contract at TT Buying rate. The exchange loss
incurred
is any has to be recovered from the customer. Exchange gain has to be
passed on
the customer. Flat charge of say Rs.250/- for the cancellation to be
collected.
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18. You received one import bill under your LC. Party however
request for time to retire. What you have to do in this case?
ANS: As per reimbursement instructions our corespondents would have
paid the
Money to the negotiating bank. We have to wait for 10 days and if the
customer
Does not make payment, crystallise the foreign currency liability by
applying bills
Selling rating on the 10th day and intimate the customer to meet the
payment with
Interest at the earliest.
19. An import customer has accepted an usance bill under your LC
for 1 lac. On the due date the party request for few more dates for
making payment. What you would do in this case.
ANS: Bank has to crystallise the liability on the due date by applying bill
selling rate.

FOREX
19 1. Can you expand LIBOR?
ANS: London inter bank offered Rate.
20 2. Can you explain the function of DGFT?
a)

DGFT (Director General of Foreign Trade) is the trade control

Authority..
b) They are empowered to issue import licences to genuine importers
requiring
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import of restricted items.
19 3. What do you know about negative list items for import under
EXIM policy?
20 ANS: Exim policy classifies the available items into 2 one is positive items
and another is negative items. Negative items are further classified into
Restricted, canalised and prohibited.

Items for import

--------------------Positive
----------

Negative
------------

Restricted canalised
Prohibited
------------ --------------------i
4. One of your valuable customer request you to remit $ 80000/towards advance for import of capital goods covered under
valid import licence immediately. What all formalities you would
undertake?
Ans: The remittance comes within the powers of AD can be remitted
subject to the customer is maintaining satisfactorily operated current
account and is in the activity for which the machine is imported and CIF
value of machines is equal to or more than the value of remittance
5.

What is XOS statement?

This is a statement to be submitted by branch on a half yearly basis as on

June &
Dec incorporating details of overdue export bills.
6.

What is BEF statement?

Statement furnishing details of import exceeding $100000 where the

evidence of
Import is not furnished.
7. An export customer has to submit export declaration form. What
are the various Forms and when they are used
Ans: a) EDF. /SDF forms
c) P.P. forms
d) Softex form
e) EDI form when exports are made through computerized ports
GR is used where export is physical forms through Sea/Land/Air.
SDF is a form used where the customs office has EDI facility
PP forms when export through post office.
Softex when export of computer software in non physical forms.
8. An exporter customer tenders an LC for US$ 120000/- under (CIF)
and request for Release of PC in Rupee. How much can be
finance under PC?
PC can be released maximum of 100% FOB value or domestic value of
goods which ever is less. Mostly banks would stipulate a margin on FOB
value. FOB value can be worked out based on CIF less insurance charge
and Freight charges.
9. What do you know about ECGC. How they support banks in
financing Exporters?
Export credit guarantee corporation LTD is giving guarantees to banks
and policies to exporters. The whole turnover packing credit guarantee of
ECGC and whole turnover post shipment guarantee of ECGC etc are very
much useful to banks in getting cover for their pre shipment and post
shipment finance.
10.One of your export customer wish to avail foreign currency
packing credit. He has LC for $ 2 lac for export to USA. How
would you react and how you would recover the foreign currency
loan .
Exporters are eligible for PCFC packing credit in foreign currency for
arranging for export at the preshipment stage.
When bill is submitted banks can allow RDBF/RUBF facility i.e. foreign
currency facility at post shipment stage and adjust the packing credit in
foreign currency.

11.What do you know by EEFC Account?

These are foreign currency account maintained by exchange earners both
exporters
and residents recipients of forex.

13. You have negotiated/purchased a foreign bill for US $ 2 lac from

a valuable customer. The bill is remaining unpaid even after due
date. The customer is requesting you to wait for some more time as
the buyer is expected to make payment in another 1 month. How
you would react?
We have to crystallise the foreign currency liability of US$2 lacs on the 30 th
days from the due date.
14. What is meant by counter trade in export and import?
Counter trade is an arrangement where exports are paid by import of
commodities.
15. What is meant by Escrow account? Where it is used?
Escrow account is a specific account maintained for the purpose of counter
trade arrangement. Here the value of exports are debited to this account
and the value of imports are credited. For exports to Russia we make use of
this technique.
16. What are the different types of account that can be opened by
NRIs?
a) NRE s Rupee deposit, CA, SB and TD
b) FCNR, Deposit only TD
c) NR(O) Rupee deposit account, CA, SB & TD
17. Whether Residents can open RFC accounts?
Yes. RFC (Domestic) for Resident & RFC for (NRIs Returned) are available
where foreign currency account can be maintained.
18.What is the present EXIM policy?
The present policy is for 2015 -2020 & is a liberal policy.