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FOREIGN EXCHANGE MARKETS:

Features of Foreign Exchange Market:
1.

Location: Foreign Exchange market is described as OTC (Over The Counter)

market as there is no physical place where the participants meet to execute the
deals. It is an informal arrangement among the banks and brokers operating in a
financial centre purchasing and selling currencies, connected to each other by telecommunications like telex, telephone, internet, satellite communications, etc. In
other foreign exchange market is a system rather than place of dealing in currencies.
The leading foreign exchange market in India is Mumbai, Kolkatta, Chennai and Delhi.
Cochin, Banglore, Ahmedabad and Goa are new emerging centers.

2.

3.

Segments: Foreign Exchange dealings are divided into two segments viz,
Wholesale segment (referred as foreign exchange market) where the
dealings take place among the banks, and
Retail Segment where dealing takes place between the banks and their
customers. Retail segment is treated as counters of foreign exchange market.

Size of Market: Foreign exchange market is the largest financial market with a
daily turnover of over USD 2 trillion. The turnover of about three days in foreign
exchange market is equivalent to the magnitude of world trade in goods and services.
The largest foreign exchange market is London, followed by New York, Zurich and
Frankfurt.
The daily turnover of foreign exchange market of India is about USD 2 billion. US
dollar (USD), pound-sterling (GBP), Euro (EUR), Japanese Yen (JPY) and Swiss Franc
(CHF) being the actively traded currencies in Indian foreign exchange market.
The code for Indian rupees is INR.

4.

24 Hours market: The markets are active in different geographical time zones
of the globe in such a way that when one market is closing the other is beginning its
operations. Thus any point of time one market or the other is open. Therefore it is
said that foreign exchange market is a 24 hours market.
In India, the market is open for the time the banks are open for their regular banking
business. No transactions take place on Saturdays and Sundays.

5.

Physical markets: In few centers like Paris and Brussels, foreign exchange
business takes place at a fixed place where the banks meet and in the presence of
the representative of the Central Bank and on the basis of bargains fixes rates for a
number of major currencies. This practice is called FIXING.

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Participants of Foreign Exchange (Forex) Markets:

The participants of forex markets comprises of,

Corporates

Commercial Banks

Exchange Brokers

Central Banks
Corporates: The business houses, international investors and multinational corporations
may operate in the market to meet their genuine trade or investment requirements.
They may also speculate in foreign currencies to the extent permitted by exchange
control regulations.
Commercial Banks: They are the major player in the forex market. They buy and sell
currencies for their clients. They may also operate on their own. When a bank enters a
market to correct excess sale or purchase position in a foreign currency arising from its
various deals with its customers, it is said to do a cover operation. Such transactions
constitutes around 5% of the total transaction done by large banks. A major portion of
the volume is accounted by trading done by large banks to gain from forex movements.
The foreign exchange dealings of Commercial Banks in India are subjected to rules,
regulations and guidelines of Reserve Bank of India (RBI) and Foreign Exchange Dealers
Association Of India, popularly known as FEDAI.
Exchange Brokers: Large transactions are done by banks directly amongst themselves.
For smaller transactions intermediation of forex broker may be sought. Exchange
brokers facilitates deals between banks. In the absence of the broker banks will have to
obtain quotes form all the banks, if say, there are 100 banks then quotes from 99 banks
shall have to be obtained. Instead Exchange broker may be contacted who ensures that
the most favourable quotation is obtained and at low cost in terms of time and money.
The bank may specify to the broker the limit upto which the bank is willing to buy / sell
foreign currency. The broker matches the requirements of the buying and the selling
bank. The identity of the buying and the selling bank is revealed to each other by the
exchange broker, only when the deal becomes acceptable to both the banks.
In India, banks may deal directly or through recognized exchange brokers authorized by
RBI to carry out foreign exchange broking business. The exchange brokers are subjected
to rules and regulations of FEDAI.
Central Banks: Central banks participates in the foreign exchange markets primarily for
the following two purposes.
1.
To arrest volatility in the foreign exchange rates resulting from private supplies
and demand, popularly known as intervention, by transacting on its own.
2.
To transact in the market on behalf of the Government.

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RBI does not intervene in the ordinary course. It intervenes only when speculative forces
dominates the market and rates becomes detrimental for the economy, trade and
commerce.
Settlement of Foreign Exchange Transactions:
Foreign exchange markets uses latest developments in telecommunications for
transmitting as well as settling foreign exchange transactions. The most popular
settlement systems are as under,

SWIFT

CHIPS

CHAPS

Fedwire
SWIFT: Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a cooperative society owned by about 250 banks in Europe and North America and
registered as a co-operative society in Brussels, Belgium. It is a communication network
for international financial market transactions linking more than 25000 financial
institutions worldwide, who have been allotted bank identifier codes.
The messages are transmitted from country to country via central interconnected
operating centers located in Brussels, Amsterdam and Culpeper, Virginia. The member
countries are connected to the centers through regional processors in each country. The
regional processor in India is situated in Mumbai.
The local bank in each country reaches the regional processors through the national
networks.
The SWIFT system enables the member banks to transact amongst themselves quickly,

International payments

Statements

Other messages
The transmission of messages is within seconds thus it saves time and is economical.
Advantages of SWIFT:
1.
Reliable and time tested method of sending and receiving messages due to in
built authentication facilities.
2.
Messages relay instantly enabling counterparty to respond immediately, except
in case of time zone differences.
3.
Access available across the globe to launch new cross border initiatives.
CHIPS: Clearing House Inter-bank Payment System (CHIPS) is an electronic payment
system owned by 12 private commercial banks constituting the New York Clearing House
Association. CHIPS started operating from 1971 and grown into worlds largest payment
system. Foreign Exchange and Euro-Dollar transactions are routed through CHIPS.

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The functioning of CHIPS is illustrated with the help of following transaction. Bank Of
India (BOI) maintaining a dollar account with AMEX Bank, New York, sells USD 1 million
to Canara Bank, maintaining USD with CitiBank.

Bank Of
India

Canara
Bank

S
W

AMEX
Bank

C
H

CitiBank

F
E
D
W
IR
E

AMEX
Bank

CitiBank

It may be noted that the settlement of the transactions in the New York Foreign
Exchange market takes place in two stages. First, clearance at CHIPS and arriving at the
net position of each bank. Second, transfer of FedFunds for the net position. The real
balances are held by banks only with Federal Reserve Bank (FedFunds), central bank of
US and the transaction is complete only when FedFunds are transferred. CHIPS helps in
expediting the reconciliation and reducing the number of entries that pass through
Fedwire.
CHAPS: Clearing House Automated Payment System (CHAPS) is similar to CHIPS
existing in London.
FEDWIRE: Fedwire is a communication network that links the computers of about 7000
banks to the computers of Federal Reserve Banks. The transactions in New York Foreign
Exchange market ultimately get settled through Fedwire. Fedwire funds transfer system
are used primarily for domestic payments, bank to bank and third party transfers such
as interbank overnight funds sales and purchases and settlement transactions.
Corporate to corporate payments can also be made, but they should be routed through
banks. Fed guarantees settlement of all payments sent to receivers even if sender fails.

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FOREIGN EXCHANGE TRANSACTIONS:

The Foreign exchange transactions can be broadly classified into two types as under,
1.

Interbank Transactions: The foreign exchange dealings between banks

themselves is known as interbank transactions and the exchange rate at which such
transaction takes place is known as Interbank Rate or simply Market Rate.

2.

Merchant Transactions: The foreign exchange dealings of bank with its

customers is known as Merchant Business or Merchant Transactions and the
exchange rate at which such transaction takes place is known as Merchant Rate.

FOREIGN EXCHANGE QUOTATIONS:

Purchase and Sale of Foreign Currency:
Foreign currency is considered as a commodity in the foreign exchange dealings. Any
trading has two aspects i.e. purchase and sale. The banks in India are authorized to deal
in foreign exchange. Banks buys and sells its commodity i.e. foreign currency.
While discussing about foreign exchange two points should be borne in mind viz.
1.
2.

The transaction is always considered from banks point of view, and

The commodity referred to is foreign currency.

Therefore,

Therefore,

when we say a purchase, we imply that

The bank has purchased, and
It has purchased foreign currency
when we say a sale, we imply that
The bank has sold, and
It has purchased foreign currency

In a purchase transaction the bank acquires foreign currency and parts with home
currency. And in case of sale transaction the bank parts with foreign currency and
acquires home currency.
Exchange Rate: Exchange Rate is the price of one countrys currency expressed in
terms of the currency of another country.
Exchange Quotations:
Types of Quotes:
Exchange Rate may be quoted in either of two ways as under,

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DR. S. P. DAS

1.

Direct Quote: The quotation in which exchange rate is expressed as the price
per unit of foreign currency in terms of home currency. For e.g. in case of India, US
dollar shall be quoted as USD = Rs. 48.
In other words the variable unit is home currency, while the unit of foreign currency
is held constant. It is also known as Home Currency Quote

2.

Indirect Quote: The quotation in which unit of home currency is kept constant
and the exchange is expressed as so many units of foreign currency. For e.g. in case
of India, Re = USD 0.02083.
The variable unit is foreign currency, while home currency is held constant. It is also
known as Foreign Currency Quote or simply Currency Quote.

The direct and indirect quotes are reciprocal of each other.

Indirect Quote = 1 / Direct Quote = 1 / 48 = USD 0.02083, and
Direct Quote = 1 / Indirect Quote = 1 / 0.02083 = Rs. 48.00
Banks in India follow direct quotes. In our discussion too we shall follow direct quote.
Wherever indirect quotes are available, they shall be first converted into direct quote
and then proceeded with.
Forms of Quotes:
In foreign exchange dealings two way quotes are quoted by the foreign exchange
dealers, one for buying the foreign currency called bid rate and another for selling
foreign currency called ask rate or offer rate.
For e.g. USD = Rs. 48.1525 / 1650 i.e. Bid / Ask Rate
More often, the rate would be quoted as 1525 / 1650 since the players in the market are
expected to know the big number i.e. Rs. 48. In the given example bid rate is Rs.
48.1525 and the ask rate is Rs. 48.1650 per USD.
Some times quotes may be available in the form of mid rate. Mid Rate is the average
of bid and ask rate.
Since dealer expects to make profit in foreign exchange operations, two prices / rates
quoted shall not be same. The dealers bid rate shall be lower than his ask rate. The
difference between the ask rate and bid rate is known as Spread. In percentage terms
spread can be expressed as under.
Spread % = [(Ask Price Bid Price) / Ask Price] x 100, in terms of ask price
or
Spread % = [(Ask Price Bid Price) / Bid Price] x 100, in terms of Bid price

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The spread is affected by a number of factors. The currency involved, the volume of the
business and the market sentiments about the currency are the major factors according
to the dealers that affects the spread.
American Terms Quote: When quote for foreign currency is expressed as number of
USD per unit of another foreign currency then it is called American terms. For e.g. USD
0.9826 / Euro or USD 0.02083 / INR.
European Terms Quote: When foreign exchange rates are expressed as number of
units of another currency per USD then it is called European Terms. For e.g. INR 48.00 /
USD or CHF 1.3500 / USD.
Following are the worlds important currencies.
Sr. No.
Country
Currency
Code
1
America
Dollar
USD or US$
2
Canada
Dollar
CND or Can$
3
United Kingdom
Pound-Sterling
GBP or UK
4
Switzerland
Francs
SFR or CHF
5
Japan
Yen
JPY or
6
Australia
Dollar
AUD or AS$
7
Belgium
Francs
BeF
8
Europe*
Euro

Germany
Deutsche Mark
DM
Holland
Dutch Guilder
DG
France
French Franc
FFR
Spain
Spanish Peseta
PTE
Italy
Italian Lira
ITL
Denmark
Danish Kroner
Dkr
* The currency of above six countries are out of circulation and is being
replaced by Euro, a single currency for European Countries.
CROSS RATE: When exchange rate for a pair of currency is directly not available in the
foreign exchange market then the exchange rate for such pair of currency is derived
with the help exchange rate between USD and the currencies involved in the pair which
is termed as Cross Rate.
Since USD is used to compute cross rate it is termed as vehicle currency. USD is most
widely used currency and the exchange rate between USD and other currencies are
available in the international foreign exchange markets.
Note: Vehicle currency is one which is used to compute cross rate between a pair of
currencies whose exchange rates are directly not available.

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For example an Indian importer has to pay New Zealand exporter in NZ$ and quote
between INR & NZ$ is not available. The following quotes are available in the
international market.
NZ$ / USD : 1.7908 1.8510
INR / USD : 48.0465 48.2111
The determination of INR / NZ$ exchange rate shall involve following steps.
1.
The Indian importer shall buy USD @ INR 48.2111.
2.
The Indian importer shall sell USD to buy NZ$. In other words the Indian
importer gets NZ$ 1.7908 by selling 1 USD.
3.
In sum the Indian importer gets NZ$ 1.7908 in exchange for INR 48.2111.
Therefore, the INR / NZ$ exchange rate shall be,
INR / NZ$ = Rs. 48.2111 / 1.7908 = INR 26.9215 / NZ$
The cross rate for bid and ask can be computed as under
NZ$ / USD : 1.7908 1.8510
INR / USD : 48.0465 48.2111
INR / NZ$ : 25.9571 26.9215
INTERBANK TRANSACTIONS:
Before we discuss the types of transactions in foreign exchange market it is imperative
to understand the definition of following terms,

Contract date: The date on which the two parties to the foreign exchange
transaction agrees to exchange currencies.

Settlement Date or Value date: The day on which actual transfer of two
currencies takes place at a previously agreed price on the contract date.

The transactions in foreign exchange markets are classified with respect to settlement
dates as under,
1.
2.
3.
4.

Cash Contracts i.e. Cash / Ready Transaction

Spot Contracts i.e. Spot Transaction
Forward Contracts i.e. Forward Transaction
Swap Contracts i.e. Swap Transaction

Cash / Ready Transaction: Where the agreement to buy and sell is agreed upon and
executed on the same date, the transaction is known as Cash or Ready transaction. It is
also known as Value Today.

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Spot Contract: The contract under which the exchange of currencies takes place two
days after the contract date is known as spot contract. Under this value date termed as
spot date is two days after the contract date.
Forward Contract: The contract under which the exchange of specified quantity of
currency takes place at a specified future date, subsequent to spot date, at exchange
rate agreed upon on contract date, is known as forward contract.
The forward contract can be for a delivery after one month, two months or three months
from spot date, these are called standard forward contracts, which are for whole
months.
Banks may offer forward contracts for maturities which are not whole months such as 45
days, 53 days, etc. Such contracts are called as broken date or odd date contracts.
The difference between the spot rate and the forward rate is called as Swap rate or
Swap Points or Forward Margin. The annualized percentage difference between the
spot rate and the forward rate is called Forward Premium or Discount. If the
difference is positive, it is called forward premium and if the difference is negative,
forward discount. In other words, if forward rates are higher than spot rate, than it
indicates forward premium and if forward rates are lower than spot rate, it indicates
forward discount.

Forward Premium / Discount =

Forward Rate Spot Rate X 365 x 100

Spot Rate
n

n = No. of days for delivery from the spot date i.e. forward contract period.
Banks do not quote forward rate, rather they quote spot rate and forward margin. In
case of direct quotation, premium is added to spot rate and discount is deducted
from spot rate to arrive at forward rate for both purchase and sale transactions.
For instance, USD is quoted as under in the interbank market on 25 th January as under.
Spot
USD 1
=
INR 48.4000 / 4200
February
2000 / 2100
March
3500 / 3400
The above quotation should be understood as under.

First rate is spot rate, where 48.4000 is buying rate and 48.4200 selling rate.

Second and third statements are forward margins for February and March
respectively.

Where the forward margin is given in ascending order, February in this case, it
indicates that the foreign currency is at premium. The forward rate shall be computed

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by adding margin to the spot rate. Thus, the February forward rate shall be INR
48.6000 / 6300.
Where the forward margin is given in descending order, March in this case, it
indicates that the foreign currency is at a discount. The forward rate shall be
computed by deducting margin from the spot rate. Thus, the March forward rate shall
be INR 48.0500 / 0800.

Swap Contracts: Simultaneous purchase and sale of identical quantity of a currency at

different value dates is known as Swap Contract.
For instance, one bank enters into an agreement with another bank to buy JPY 1 million
for USD in the spot market and also simultaneously agrees with the same bank to sell
JPY 1 million for USD two months forward. The exchange rate, for both the transactions
are agreed at the time of contract. This is a swap contract.
ARBITRAGE:
The term arbitrage refers to a process of buying currency in one market at lower prices
and selling it in another at higher prices. Thus, difference in exchange rates in different
markets provides an opportunity to the operators / arbitrageurs in the market to earn
profit without risk.
Arbitrage in Spot Market:
In spot markets two types of arbitrages are possible viz,
1.
2.

Geographical Arbitrage
Triangular Arbitrage

Geographical Arbitrage: Geographical arbitrage consists of buying currency from a

forex market, say Singapore, where it is cheaper and sell in another forex market, say
France where it is costly.
For example at two forex centers, the following INR / USD rates are quoted
Singapore : INR 47.5730 47.6100
Tokyo :
INR 47.6350 47.6675
In the above example arbitrageur shall buy USD in Singapore market @ 47.6100 and
sell in the Tokyo market @ 47.6350. The arbitrage profit shall be 47.6350 47.6100 =
Re. 0.025 per USD.
The arbitrage opportunity exists when the bid rate in one market is higher than the ask
rate in another market.

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The arbitrage opportunity may be traced by plotting simple two-line graphs as under

Singapore

47.5730

Tokyo

47.6100

47.6350

47.6675

If these lines do not overlap, then it means Ask Rate of one bank is lower than Bid rate
of another bank and hence there is arbitrage opportunity.
Triangular Arbitrage: Triangular arbitrage takes place when there are three currencies
involving three markets. This is also known as a three-point arbitrage. In other
words, it is a process of buying and selling foreign exchange between three different
currencies in order to profit from discrepancy in cross rates.
For example following quotes are available in three forex markets
GBP / USD: 0.6405 in Mumbai
NZ$ / GBP: 2.8606 in New Zealand
NZ$ / USD: 1.8402 in New York
The cross rate between NZ$ and USD can be quoted as under
NZ$ / USD = (NZ$ / GBP) x (GBP / USD) = NZ$ x USD = 2.8606 x 0.6405 = 1.8322
The given quote is 1.8402. Since there is a difference arbitrage gains are possible.
Arbitrage in Forward Market:
In spot market, the mismatch between cross rates (triangular) and quoted rates
(geographical) provides an arbitrage opportunity. Similar arbitrage gain is possible in
forward market also. Arbitrage gain shall exist when interest rate differentials of two
currencies is not equal to the premium or discount on their exchange rate. Since the
comparison is to be made with interest rate differential, this kind of arbitrage is referred
to as Covered interest arbitrage
Illustration:
Determine the arbitrage gain where, spot rate of INR / GBP is Rs. 78.10, 3 month
forward rate is Rs. 78.60, three months interest rates are Rs. 5% and 9%. Assume Rs.
10 million borrowings or 2,00,000 (as the case may be) to explain arbitrage.
Premium (%) = [(FR SR) / SR] x 12/3 x 100 = [(78.60-78.10) / 78.10] x 12/3 x 100
= 2.56%
Interest Rate Differential = 9% - 5% = 4%

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Since interest rate differential do not match with premium percentage, there are
arbitrage gain possible as under,
1.
2.
3.
4.
5.
6.

Borrow Rs. 10 million for 3 months @ 5% p.a. The amount to be repaid after 3
months is Rs. 10 million + interest = Rs. 10 million + Rs. 125,000 = Rs.
1,01,25,000/-.
Convert borrowing of Rs. 10 million into GBP @ 78.10 spot i.e GBP 1,28,040.9731
today.
Invest GBP 1,28,040.9731 for 3 months in US market @ 9% p.a.
GBP available after 3 months is GBP 1,28,040.9731 + Interest = GBP
1,28,040.9731 + GBP 2880.9219 = GBP 1,30,921.8950
Sell 3 months forward today GBP 1,30,921.8950 @ 78.60 today. Thus, amount
available after 3 months = GBP 1,30,921.8950 x Rs. 78.60 = Rs. 1,02,90,460.95
Arbitrage gain = Amount Available after 3 months Amount Payable after 3
months
= 1,02,90,461 1,01,25,000 = Rs. 1,65,461/-

At what forward rate there shall be no arbitrage opportunity?:

Since interest rate differential is 4%, the forward premium differential should also be 4%
so that no arbitrage gain exists. The desired forward rate should be.
Particulars
Spot Rate
Add: 4% premium for 3 months (78.10 x 4% x 3/12)
Forward Rate
Spot Rate
Forward Rate

Rs. 78.100
Rs. 00.781
-----------Rs. 78.881

Rs.
78.100
00.781
78.881

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MERCHANT TRANSACTIONS
The foreign exchange dealings of bank with its customers is known as Merchant
Business or Merchant Transactions and the exchange rate at which such transaction
takes place is known as Merchant Rate.
Base Rate
A bank buys foreign exchange from, and sells foreign exchange to, its customers as part
of its routine business activity. When a bank buys foreign exchange (purchase
transaction) from its clients it must sell the same to another (generally market i.e. interbank) at a rate better than purchase rate if it is to earn profit. Similarly, if the bank is to
sell foreign exchange to its clients (sale transaction) it must buy foreign exchange from
inter-bank market at a rate lower than that at which bank would eventually sell the
same to its clients. Thus inter-bank buying rate and selling rate forms the basis for
quoting buy rate and sell rate by the bank to its clients. Such inter-bank rate are
referred to as base rate.
Exchange Margin
If the bank quotes the base rate to its client, it makes no profit. There are administrative
costs involved. The deal first take place between client and bank, only after selling or
acquiring the foreign exchange from / to client the bank goes to inter-bank market to
cover the transaction. There is a time gap between merchant transaction and inter-bank
transaction during this time gap there may be fluctuation in the exchange rate.
Therefore, sufficient margin is built into the rate to cover administrative costs, rate
fluctuation risk and profit margin this is referred to as Exchange Margin.
FEDAI prescribes exchange margin which were mandatory up to 1995, thereafter it is o
ptional for banks to follow FEDAI prescribe exchange margin. Now, banks are free to
decide their own Exchange Margin.
Fineness of Quotation (Rule 7 of FEDAI)
While computing merchant rates the calculations can be made up to 5 places of decimals
and finally rounded off to the nearest multiple of 0.0025 both for buy and sell
transactions.
The rupee amount to be paid to or received from client on account of merchant
transactions should be rounded off to the nearest rupee, i.e. up to 49 paisa to be
ignored and 50 to 99 paisa to be rounded off to the higher rupee.
Type of Merchant Transactions
Telegraphic Transfers (TT)
Bill Purchase

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Buying Rates
In a purchase transaction bank acquires foreign exchange from clients and pays him in
home currency (Indian Rupees). Some of the purchase transaction results in bank
immediately acquiring foreign exchange such as Foreign Currency Demand Draft. On the
other hand, if the bank purchases on demand / at sight bill from its client, bank has to
first send the bill to correspondent bank for collection. The correspondent bank will
present the bill to drawee. Foreign exchange shall be acquired when the drawee makes
payment. This time period is referred to as transit period (25 days as per FEDAI). Thus
depending upon the time of realization of foreign exchange by the bank the two types of
buying rates quoted in India are,

TT Buying Rate, and (0.025% to 0.080%) FEDAI Exchange Margin

Bill Buying Rate

(0.125% to 0.150%) FEDAI Exchange Margin
Bills are of two types as under,

On demand / sight bill where realization period is transit period (25 days as per
FEDAI).

Usance Bill where realization period is usance period + transit period.

Recovery of Interest rate on Bills Purchased
When bank buys a bill from client, bank immediately pays him Indian Rupees. The bank
is entitled to claim interest from client for the period of realization of bill. On the rupee
value of the bill purchased, on the date of purchase itself, bank shall recover the interest
and shall make net payment to the client.
Selling Rates
When bank sells foreign exchange it receives Home Currency (Indian Rupees) from
client and parts with foreign currency. The sale is affected by issuing a payment
instrument on correspondent bank. Immediately on sale bank buys the requisite foreign
exchange from inter-bank market. Depending on work involved there are two types of
selling rates as under,

TT Selling Rates
(0.125% to 0.150%) FEDAI Exchange Margin

Bill Selling Rates

(0.175% to 0.200%, over TT selling rate)
Computation of Merchant Rates
TT Rates Spot Transactions
Spot TT Buying Rate
HC
Spot TT Selling Rate
Base Rate (Spot IB Buy Rate)
48.5500 Base Rate (Spot IB Sell Rate)
Less:
Exchange
Margin
0.0380 Add:
Exchange
Margin
(0.025%-0.080%)
(0.125%-0.150%)
Spot TT Buying Rate
48.5120 Spot TT Selling Rate
R/o to nearest multiple
48.512 R/o to nearest multiple
5

HC
48.7000
0.0731
48.7731
48.7725

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Bill Rates Spot Transactions

Bill Buying Rate
HC
Bill Selling Rate
Base Rate (Spot IB Buy Rate)
xx Base Rate (Spot IB Sell Rate)
Add: Forward Premium
Add: Exchange Margin for TT
(for forward period, transit period
selling (0.125%-0.150%)
and usance period: round of to
lower month)
xx
Or
TT Selling Rate
Less: Forward Discount
Add: Exchange Margin for Bill
(for forward period, transit period
selling (0.175%-0.200%)
and usance period: round of to
higher month)
(xx)
xx
Bill Selling Rate
Less: Exchange Margin for Bill
R/o to nearest multiple
Buying (0.125%-0.150%)
Xx
Bill Buying Rate
Xx Rupee value (Rate x units of FC)
R/o to nearest multiple
Xx Add: Recovery of any exp
Rupee value (Rate x units of FC) Xxxx
Less: Interest to be recovered
Xx
Less: Recovery of any other exp
Xx
Net Amount Payable to client Xxxx
TT and Bill Rates Forward Transaction
TT and Bill Buying Rate
HC
TT and Bill Selling Rate
Base Rate (Spot IB Buy Rate)
Xx Base Rate (Spot IB Sell Rate)
Add: Forward Premium
Add: Forward Premium
(for forward period, transit period
(for forward period, transit period
and usance period: round of to
and usance period: round of to
lower month)
Xx lower month)
Or
Or
Less: Forward Discount
Less: Forward Discount
(for forward period, transit period
(for forward period, transit period
and usance period: round of to
and usance period: round of to
higher month)
(xx) higher month)
Xx
Less: Exchange Margin
Add: Exchange Margin for TT
For TT
- (0.025%-0.080%)
selling (0.125%-0.150%)
and
For Bill - (0.125%-0.150%)
Xx
TT / Bill Buying Rate
Xx
Forward TT Selling Rate
R/o to nearest multiple
Xx
R/o to nearest multiple
Rupee value (Rate x units of FC) Xxxx Add: Exchange Margin for Bill

HC
xx

xx
xx

xx
xx

HC
xx

xx

xx
xx

xx
Xx
Xx
Xx

Page 16 of 16

FOREIGN EXCHANGE

DR. S. P. DAS

selling (0.175%-0.200%)
Less: Interest to be recovered
Less: Recovery of any other exp
Net Amount Payable to client

Xx
Xx
Xxxx

Forward Bill Selling Rate

R/o to nearest multiple

Xx
xx