FEDAI rules and operations

8/13/2019 FEDAI rules and operations

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Public Sector Banks

Foreign Banks

Private Sector Banks/Co-operatives

Financial Institutions/Others

Total Membership=94


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1.The directives issued by the Reserve Bank of Indiain respect of Interest rates on Export & ImportFinance shall be adhered to by the Authorised

Dealers. 2.The member banks are totally free to determine

their own charges for various types of forextransactions, keeping in view the advice of RBI that

such charges are not out of line with the averagecost of providing services.


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3.Authorised Dealers shall ordinarily not be partiesto any guarantees for an unlimited amount and/or

an unlimited period. Authorised Dealers shallensure to include a specific clause in all the

guarantees stating the exact period within whichclaims 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 openstandby letters of credit on behalf of their importer

constituents for importing goods into Indiapermissible under Foreign Trade Policy.


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


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1.A-1Each Authorised Dealer will establish itsbusiness hours for various types of foreign exchangetransactions at each centre where its branchesundertake forex business.

1.A-2It is upto the management of each AuthorisedDealer to decide whether they would like to haveuniform hours of business for all categories or differentbusiness hours for different categories of forexbusiness.

1.A-3Heads of International Divisions/Forex

Departments of Authorised Dealers shall advise theirdesignated branches regarding the establishment ofbusiness hours for various types of foreign exchangetransactions.


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2.A-1 General Authorised Dealers will purchase only

Approved Bills and the decision as to what isan approved bill lies solely with Authorised

Dealers. This includes bills tendered underforward contracts, letters of credit, letters ofguarantee, letters of authority, orders tonegotiate, orders for payment and any othertype of document of similar nature. AuthorisedDealers will have the discretion to handleexport bills on purchase/discount/negotiationor collection basis.


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[2.A-2 Export Billspurchased/discounted/negotiated

i.Application of rates Foreign currency bills will be

purchased/negotiated/discounted at the AuthorisedDealers current bill buying rate or at the contracted

rate. Interest for the normal transit period, and usanceperiod shall be recovered simultaneously.

ii. Crystallisation and Recovery

Exporters are liable for the repatriation of proceeds ofthe export bills sent for collection by the AuthorisedDealers.


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2.A-3 Application of interest i. The rates of interest applicable for all export trans-

actions shall be as prescribed by Reserve Bank ofIndia from time to time.

ii. Concept of Normal Transit Period and NotionalDue Date

Concessional rate of interest on export bills is linked tothe concept of normal transit period and notional duedate. Normal transit period comprises the averageperiod normally involved from the date ofnegotiation/purchase/discount till the receipt of bill

proceeds in the Nostro account of the bank.


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2.A-5 Fixed Due Date In case of export usance bills (foreign currency and

rupee bills) where due dates are reckoned from dateof shipment or date of bill of exchange etc. noNormal Transit Period shall be applicable, since theactual due date is known.

2.A-7 Overdue Interest Overdue interest in all cases shall be recovered from

the customer in case payment is not received on orbefore the expiry date of Normal Transit Period incase of demand bills


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3.A-2 Application of rates i. For the purpose of retirement of import bills

whether received under letters of credit orotherwise, the bills selling rate ruling on the date ofretirement or the forward sale contract rate as thecase may be shall be applied.

For the purpose of crystallisation videpara 3.A-4

below, of importers liability into Rupees the billsselling rate ruling on the date of such crystallisationor the forward sale contract rate as the case may beshall be applied.

ii. For the purpose of determining stamp duty on

import bills, the foreign currency amount of the billsshall be converted into Rupees at the exchange ratesprescribed by Government of India from time totime.


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3.A-3 Application of interest i. Bills negotiated under import letters of credit

shall carry commercial rate of interest as applicableto banks domestic advances from time to time andshall be recovered from the date of debit to theAuthorised 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.


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

Foreign currency travellers cheques/currency notes

will be encashed at the Authorised Dealers option atthe travellers cheques/currency note encashmentrates ruling on the date of such encashment.

4.A-2 Outward remittances

Outward remittances shall be effected at the TTselling rate of the bank ruling on the date of suchremittance or at the forward contract rate.


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4.A-3 Miscellaneous Instructions i. Payment of foreign inward remittances

All foreign currency inward remittances up to anequivalent of USD 5000 shall be immediately convertedinto Indian Rupees. Remittances in excess of equivalentof USD 5000 shall be executed in foreign currency andthe beneficiary has the option of presenting the relative

instrument for payment within the maximum periodprescribed under FEMA, 1999.

The applicable exchange rate for conversion of theforeign currency inward remittances shall be the oneprevailing as on the date of conversion of foreigncurrency amount into Indian Rupees by the concernedAuthorised Dealer.


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5.A-1 Contract amounts

Exchange contracts shall be for definite amounts andperiods.

When a bill contract, mentions more than one ratefor bills of different deliveries, the contract muststate the amount and delivery against each such rate.


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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 thediscretion of the customer subject to the condition thatsuch option period of delivery shall not extend beyondone month. If the fixed date of delivery or the last dateof delivery option is a holiday/declared a holiday the

delivery shall be effected/delivery option exercised onthe preceding working day. Contracts permittingoption of delivery must state the first and last dates ofdelivery.


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5.A-5 Option of delivery In all forward merchant contracts, the merchant

whether a buyer or a seller will have the option ofdelivery.

5.A-6 Option of usance The merchant purchase contract should state the tenor

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


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Currencies to be quotedagainst one unit of foreigncurrency :

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. Norwegian Kroner

11. Oman Rial

12. Qatar Riyal

13. Saudi Riyal 14. Singapore Dollar

15. Sterling Pound

16. Swedish Kroner

17. Swiss Franc

18. Thai Baht 19. UAE Dirham

20. US Dollar

21. Euro


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6.A-1 General

i. At the request of the customer, unless stated tothe contrary in the provisions of FEMA, 1999, it isoptional for a bank to :

a. Accept or give early delivery.

b. Extend the contract.


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6.A-2 Early delivery

If a bank accepts or gives early delivery, the bank

shall recover/pay swap difference, if any. 6.A-3 Extension

Foreign exchange contracts either short term or longterm contracts where extension is sought by the

customers shall be cancelled (at appropriate Sellingor Buying Rate as on the date of cancellation) andrebooked simultaneously only at current rate ofexchange. The difference between the contracted rate

and the rate at which the contract is cancelled shallbe recovered from/paid to the customer at the timeof extension.


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6.A-5 Swap cost/gain i. In all cases of early delivery of purchase or sale

contracts, swap cost shall be recovered from customersirrespective of whether an actual swap is made or not.Such recoveries should be made either back-ended orupfront in the discretion of banks.

ii. Payment of swap gain to the customer will normally

be made at the end of the swap period.


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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 theAuthorised Dealer for the purpose of arranging theswap shall be recovered in addition to the swap cost incase of early delivery of purchase or sale contracts. Theamount of funds outlayed shall be arrived at by takingthe difference between the original contract rate and therate at which the swap could be arranged.


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7.A-1 Exchange Brokers When Authorised Dealers make contracts through

brokers, such contracts shall only be made through andexchange brokerage be paid only to accreditedexchange brokers.

No brokerage or other form of remuneration shall bepaid by the Authorised Dealers to other bankemployees on contracts made in respect of any foreignexchange business.

Accredited exchange brokers are permitted to contractexchange business on behalf of Authorised Dealers inforeign exchange only upon the understanding thatthey will conform to the rates, rules and conditions laiddown by this Association.

FEDAI rules and operations

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