Professional Documents
Culture Documents
Foreign Exchange
- Means Foreign Currency and includes Deposits,
credits and balances payable in any Foreign currency.
3) AD category – III:
- Comprises of Select financial and other institutions.
- Specified non-trade related current account
transactions.
4) Full Fledged Money Changers (FFMCs)
- Comprises department of posts, urban co-op banks and
other institutions authorized by RBI.
Functions of Authorized Dealers
• Authorized Dealer can handle all kinds of Foreign Exchange
transaction. Following are the main function of an Authorized Dealer.
i. Exchange of Foreign Currencies.
ii. To make arrangement with Foreign Correspondent.
iii. Buying and Selling foreign Currencies
iv. Handling of Inward and Outward Remittance
v. Opening of L/C and Settlement of Payment
vi. Investment in Foreign Trade
vii. Opening & maintenance of Accounts with Foreign Banks.
viii. Export Documents handling.
Type of Transactions
(1) Current Account Transactions
- The transactions which are not capital
transactions.
- Mainly relate to Import and Export of goods and
services
- Current account transactions are of following
categories:
..Current Account Transactions……….categories
a) Schedule I (prohibited category)
Transactions with Nepal & Bhutan.
Remittance of earnings from lottery/racing etc.
b) Schedule II
Transactions requiring Govt. approval
c) Schedule III
Transactions where ADs can freely allow remittances up to prescribed limits.
A person who has gone out of India or who stays outside India, in
either case-
- for or an taking up employment outside India or
- for carrying on outside India a business or
- vocation outside India or
- for any other purpose, in such circumstances as
- would indicate to stay outside India for an uncertain period;
Resident Indian
- any person or body Corporate registered or
incorporated in India,
- an office, branch or agency in India owned
or controlled by a person resident outside
India
- an office, branch or agency outside India
owned or controlled by a person resident in
India.
Non Resident & Non- Resident
Indian
As per FEMA, a person who is not a resident, called Non-
resident.
NON RESIDENT INDIAN (NRI)
A person holding Indian Passport, who has gone abroad
for:
- Gainful employment or
- Business or vocation or
- Any other purpose indicating and indefinite stay outside
India or
- Working abroad on temporary foreign assignment
- Indian students pursuing studies abroad.
Person of Indian Origin (PIO)
Is a person:
- Who at any time held an Indian Passport
- A foreigner (except citizen of Pakistan,
Bangladesh, Sri Lanka, Afghanistan, China,
Nepal, Bhutan, Iran) whose parents or
grand parents were the citizen of India.
- Foreigner spouse of Indian citizen.
Overseas Corporate Body (OCB)
Issuing Bank Buyers/Importer’s bank, who opens LC and undertakes to pay seller or
his banker, if all conditions of LC are complied.
Advising Bank Issuing bank’s branch (or correspondent in exporter’s country) to whom
the LC is sent for onward transmission to the seller/seller’s bank.
Advising bank dose not assume any responsibility but to check apparent
authenticity of the LC.
Beneficiary The party to whom the credit is addressed i.e. the seller or exporter.
Negotiating Bank Seller’s bank to whom the seller presents his documents for payment,
negotiation or acceptance under the credit.
Reimbursing Bank The third bank which pays seller or funds the negotiating bank on behalf
of issuing bank.
Confirming Bank The Bank adding confirmation to the credit. It undertakes the
responsibility of payment by issuing bank and on his failure, to pay.
Article 9(b) of UCPDC provided that Confirming bank, in addition to
issuing bank, undertakes to make payment provided that the stipulated
documents are presented to the confirming bank or to any other
nominated bank and the terms of LC are complied with.
TYPES OF LETTERS OF CREDIT
Revocable & The LC can be modified without consent of beneficiary. If it cannot be, it is
Irrevocable Credit called irrevocable LC. In terms of UCP-600 only Irrevocable LCs can be
issued.
DP Letter of Credit Where the payment is made against documents on presentation.
DA (usance) Letter Where the payment is to be made on the maturity date in terms of the credit.
of Credit The documents of title to goods are delivered to the applicant merely on
acceptance for payment.
With or Without Where the beneficiary holds himself liable to the holder of the bill if
recourse dishonoured, is With recourse. Where he does not, is without recourse. As
per RBI directives dt.23 January 2003, banks should not open LCs and
purchase/discount/negotiate bills bearing ‘without recourse’ clause.
Restricted LC Where a specified bank is designated to pay, accept or negotiate.
Confirmed LCs A credit to which the advising bank or other bank, at the request of the issuing
bank, adds confirmation that the payment will be made. By such additions the
confirming bank steps into the shoes of issuing bank.
Transferable LC Benefit be made available to one or more other parties in whole or in part, if
specifically provided in LC. This could be done only Once. Transferable LC
can be retransferred in the name of 1st beneficiary.
Back to Back LC When the exporter gets another LC issued in favor of his local suppliers on
the strength of the LC issued in his favor. The term of such credit would be
identical except that the prices may be lower and validity earlier.
Types of LCs Contd……..
Green Clause LC permits the advance for storage of goods in a warehouse in addition to
pre-shipment advance.
Revolving LC Provides that, after drawings are made, the credit reverts to its original
position and made available to the beneficiary again and again during the
currency of LC. RBI prohibits revolving LCs for import into India.
Installment Credit The LC is for full value but allows for part shipment. In case any
installment is not shipped the entire credit extinguishes, unless LC permits
the same
Deferred Credit Where full or part amount is payable at some future date
Important provisions of UCP600
- Banks deal in documents and not in goods, services of performance to which
the documents may relate (Article 5)
- A presentation of documents on behalf of beneficiary must be made not later
than 21 calendar days after shipment (but before expiry date of LC).
- A nominated bank and issuing bank shall each have a 5 banking days
following the day of presentation to determine if the documents are in order.
- If there is no indication of insurance coverage requirement in the LC, the
amount of insurance coverage must be at least 110% of CIF or CIP value.
(Article 28)
- If the expiry date of a Credit or the last day for presentation falls on a day
when bank is closed (for reasons other than Force Majeure), the expiry
/presentation day shall be extended to next Banking day. But the last day of
shipment shall not be extended as a result of this (Article 29)
- Force Majeure: A bank assumes no responsibility for consequences arising out
of the interruption of its business by act of God, riots, civil commotions , war,
strike of lockout or caused beyond its control. (Article 36)
BANK GUARANTEES