BY: ANVIN ANISH DORIN SANDEEP SHREYANS PRADEEP

Foreign Exchange Dealer's Association of India (FEDAI) was set up in 1958 as an Association of banks dealing in foreign exchange in India (typically called Authorised Dealers - ADs) as a self regulatory body and is incorporated under Section 25 of The Companies Act,

Guidelines and Rules for Forex Business Training of Bank Personnel in the areas of Foreign Exchange Business Accreditation of Forex Brokers Advising/Assisting member banks in settling issues/matters in their dealings Represent member banks on Government/Reserve Bank of India/Other Bodies Announcement of daily and periodical rates to member banks

Public Sector Banks Foreign Banks Private Sector Banks/Co-operatives Financial Institutions/Others Total Membership=94

1. The directives issued by the Reserve Bank of India in respect of Interest rates on Export & Import Finance shall be adhered to by the Authorised Dealers. 2. The member banks are totally free to determine their own charges for various types of forex transactions, keeping in view the advice of RBI that such charges are not out of line with the average cost of providing services.

3. Authorised Dealers shall ordinarily not be parties to any guarantees for an unlimited amount and/or an unlimited period. Authorised Dealers shall ensure to include a specific clause in all the guarantees stating the exact period within which claims must be made under the guarantee besides the expiry date for the guarantee. 4. With a view to simplifying and liberalising import, authorised dealers are permitted to open standby letters of credit on behalf of their importer constituents for importing goods into India permissible under Foreign Trade Policy.

5. Guidelines for calculation of Merchant Rate have been deleted from the Rule Book as the procedure for calculating the rate for Merchant transactions have been left for our member banks to decide.

1.A-1 Each Authorised Dealer will establish its business hours for various types of foreign exchange transactions at each centre where its branches undertake forex business. 1.A-2 It is upto the management of each Authorised Dealer to decide whether they would like to have uniform hours of business for all categories or different business hours for different categories of forex business. 1.A-3 Heads of International Divisions/Forex Departments of Authorised Dealers shall advise their designated branches regarding the establishment of business hours for various types of foreign exchange transactions.

2.A-1 General Authorised Dealers will purchase only Approved Bills and the decision as to what is an approved bill lies solely with Authorised Dealers. This includes bills tendered under forward contracts, letters of credit, letters of guarantee, letters of authority, orders to negotiate, orders for payment and any other type of document of similar nature. Authorised Dealers will have the discretion to handle export bills on purchase/discount/negotiation or collection basis.

[2.A-2 Export Bills purchased/discounted/negotiated

i. Application of rates
Foreign currency bills will be

purchased/negotiated/discounted at the Authorised Dealers current bill buying rate or at the contracted rate. Interest for the normal transit period, and usance period shall be recovered simultaneously.

ii. Crystallisation and Recovery

Exporters are liable for the repatriation of proceeds of

the export bills sent for collection by the Authorised Dealers.

2.A-3 Application of interest

i. The rates of interest applicable for all export transactions shall be as prescribed by Reserve Bank of India from time to time. ii. Concept of Normal Transit Period and Notional Due Date
Concessional rate of interest on export bills is linked to

the concept of normal transit period and notional due date. Normal transit period comprises the average period normally involved from the date of negotiation/purchase/discount till the receipt of bill proceeds in the Nostro account of the bank.

2.A-5 Fixed Due Date

In case of export usance bills (foreign currency and rupee bills) where due dates are reckoned from date of shipment or date of bill of exchange etc. no Normal Transit Period shall be applicable, since the actual due date is known. Overdue interest in all cases shall be recovered from the customer in case payment is not received on or before the expiry date of Normal Transit Period in case of demand bills

2.A-7 Overdue Interest

3.A-1 General

i. Bills shall include all documentary/clean bills received under letter/s of credit, standby letter/s of credit, letter/s of guarantee, letter/s of authority, order/s to negotiate, order/s for payment and other document/s or undertaking/s of a similar nature or on collection basis covering imports into India. ii. Establishment and amendment of all import letters of credit shall be at the discretion of the Authorised Dealers.

3.A-2 Application of rates

i. For the purpose of retirement of import bills whether received under letters of credit or otherwise, the bills selling rate ruling on the date of retirement or the forward sale contract rate as the case may be shall be applied. For the purpose of crystallisation vide para 3.A-4 below, of importers liability into Rupees the bills selling rate ruling on the date of such crystallisation or the forward sale contract rate as the case may be shall be applied. ii. For the purpose of determining stamp duty on import bills, the foreign currency amount of the bills shall be converted into Rupees at the exchange rates prescribed by Government of India from time to time.

3.A-3 Application of interest

i. Bills negotiated under import letters of credit shall carry commercial rate of interest as applicable to banks domestic advances from time to time and shall be recovered from the date of debit to the Authorised Dealers Nostro account to the date of crystallisation/retirement whichever is earlier. ii. Interest remittable on interest bearing bills shall be subject to the directives of Reserve Bank of India.

4.A-1 Encashment of foreign currency travellers cheques and currency notes

Foreign currency travellers cheques/currency notes will be encashed at the Authorised Dealers option at the travellers cheques/currency note encashment rates ruling on the date of such encashment. Outward remittances shall be effected at the TT selling rate of the bank ruling on the date of such remittance or at the forward contract rate.

4.A-2 Outward remittances

4.A-3 Miscellaneous Instructions

i. Payment of foreign inward remittances

All foreign currency inward remittances up to an

equivalent of USD 5000 shall be immediately converted into Indian Rupees. Remittances in excess of equivalent of USD 5000 shall be executed in foreign currency and the beneficiary has the option of presenting the relative instrument for payment within the maximum period prescribed under FEMA, 1999. The applicable exchange rate for conversion of the foreign currency inward remittances shall be the one prevailing as on the date of conversion of foreign currency amount into Indian Rupees by the concerned Authorised Dealer.

5.A-1 Contract amounts

Exchange contracts shall be for definite amounts and periods. When a bill contract, mentions more than one rate for bills of different deliveries, the contract must state the amount and delivery against each such rate.

5.A-2 Option period of delivery

Unless date of delivery is fixed and indicated in the

contract, the option period may be specified at the discretion of the customer subject to the condition that such option period of delivery shall not extend beyond one month. If the fixed date of delivery or the last date of delivery option is a holiday/declared a holiday the delivery shall be effected/delivery option exercised on the preceding working day. Contracts permitting option of delivery must state the first and last dates of delivery.

5.A-3 Place of delivery

Date of delivery under forward contracts shall be :

i. In case of bills/documents negotiated, purchased or discounted - the date of negotiation/purchase/discount and payment of Rupees to the customer. ii. In case of export bills/documents sent for collection - date of payment of Rupees to the customer on realisation of the bills. iii. In case of retirement/crystallisation of import bills/documents - the date of retirement/crystallisation of liability whichever is earlier.

5.A-5 Option of delivery

In all forward merchant contracts, the merchant

whether a buyer or a seller will have the option of delivery.

5.A-6 Option of usance

The merchant purchase contract should state the tenor

of the bills/documents. Acceptance of delivery of bills/documents drawn for a different tenor will be at the discretion of the bank.

Currencies to be quoted against one unit of foreign currency : 1. Australian Dollar 2. Bahraini Dinar 3. Canadian Dollar 4. Danish Kroner 5. Egyptian Pound 6. Hongkong Dollar 7. Kuwaiti Dinar 8. Malaysian Ringgit 9. New Zealand Dollar

10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

Norwegian Kroner Oman Rial Qatar Riyal Saudi Riyal Singapore Dollar Sterling Pound Swedish Kroner Swiss Franc Thai Baht UAE Dirham US Dollar Euro

6.A-1 General

i. At the request of the customer, unless stated to the contrary in the provisions of FEMA, 1999, it is optional for a bank to : a. Accept or give early delivery. b. Extend the contract.

6.A-2 Early delivery

If a bank accepts or gives early delivery, the bank shall recover/pay swap difference, if any. Foreign exchange contracts either short term or long term contracts where extension is sought by the customers shall be cancelled (at appropriate Selling or Buying Rate as on the date of cancellation) and rebooked simultaneously only at current rate of exchange. The difference between the contracted rate and the rate at which the contract is cancelled shall be recovered from/paid to the customer at the time of extension.

6.A-3 Extension

6.A-5 Swap cost/gain

i. In all cases of early delivery of purchase or sale contracts, swap cost shall be recovered from customers irrespective of whether an actual swap is made or not. Such recoveries should be made either back-ended or upfront in the discretion of banks. ii. Payment of swap gain to the customer will normally be made at the end of the swap period.

6.A-6 Outlay and Inflow of funds

i. Interest at not below the prime lending rate of the

respective Authorised Dealer on outlay of funds by the Authorised Dealer for the purpose of arranging the swap shall be recovered in addition to the swap cost in case of early delivery of purchase or sale contracts. The amount of funds outlayed shall be arrived at by taking the difference between the original contract rate and the rate at which the swap could be arranged.

7.A-1 Exchange Brokers When Authorised Dealers make contracts through brokers, such contracts shall only be made through and exchange brokerage be paid only to accredited exchange brokers. No brokerage or other form of remuneration shall be paid by the Authorised Dealers to other bank employees on contracts made in respect of any foreign exchange business. Accredited exchange brokers are permitted to contract exchange business on behalf of Authorised Dealers in foreign exchange only upon the understanding that they will conform to the rates, rules and conditions laid down by this Association.