Name: Nikhil P. Palan Roll no.

: 24 Div: A Subject: International Finance Topic: Foreign Exchange Dealer's Association of India Submitted to: prof. Sujata Pal

FEDAI (Foreign Exchange Dealer's Association of India ) 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 Authorized Dealers - ADs) as a self-regulatory body and is incorporated under Section 25 of The Companies Act, 1956. It's major activities include framing of rules governing the conduct of inter-bank foreign exchange business among banks vis--vis public and liaison with RBI for reforms and development of forex market. Presently some of the functions are as follows: 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.

Due to continuing integration of the global financial markets and increased pace of de-regulation, the role of self-regulatory organizations like FEDAI has also transformed. In such an environment, FEDAI plays a catalytic role for smooth functioning of the markets through closer co-ordination with the RBI, other organizations like FIMMDA, the Forex Association of India and various market participants. FEDAI also maximizes the benefits derived from synergies of member banks through innovation in areas like new customized products, bench marking against international standards on accounting, market practices, risk management systems, etc. An association of banks specializing in the foreign exchange activities in India. The Foreign Exchange Dealers Association of India, which was created in 1958, regulates the governing rules and determines the commissions and charges associated with the interbank foreign exchange business.

Investopedia explains 'Foreign Exchange Dealers Association Of India - FEDAI' FEDAI determines many of the rules that overlook the day-to-day forex transactions in India. In addition to rule setting, FEDAI assists member banks by acting as an advisor and assists with the training of personnel. The association is responsible for accrediting India's foreign exchange brokers and announcing the exchange rates to its member banks.

Foreign Exchange business in India was confined to few foreign banks only till the period 1959. The said group banks were known as Exchange Banks. They had formed an Association, which was known as the "Exchange Banks' Association". It was mainly covering the areas of activities within Bombay (now Mumbai), Calcutta (now Kolkata), Madras (now Chennai), Delhi and Amristsar. On introduction of the exchange control in India during 1939, the said Association was functioning within rules framed by RBI. The rules and regulations - introduced and practiced were also covered by RBI approval. On account of expansion in the foreign trade, and business, RBI allowed schedule commercial banks also to undertake foreign exchange transactions. Those banks which were allowed and permitted by RBI to deal in foreign exchange transactions. The banks are known as AD - Authorized Dealers. The FEDAI - Foreign Exchange Dealers' Association of India was formed with approval of RBI during August 1958. It was under ECM-RBI directives under reference ECS / 298 / 86 / 58-Gen.20 dated 16th August, 1958, whereupon, Ads, i.e. authorized banks were granted with open permission to handle foreign exchange business. The body, known as EXCHANGE BANKS ASSOCIATION, was changed to be known as FOREIGN EXCHANGE DEALERS ASSOCIATION OF INDIA. All Public sector banks, foreign banks, private sector and co-operative banks and certain Financial institutions are the members of FEDAI. FEDAI is a non-profit making Association and relative expenses are shared by all its member banks. FEDAI acts as a facilitating body and in consultation with Reserve Bank of India, frames rules / regulations for ADs in India for conduct of the foreign exchange business related transactions. FEDAI is the Association of the member Banks. Naturally, the guidelines and rules prepared were of interest of the member Banks. However, on account of liberalization and reforms introduced during 1991 to boost the foreign trade to and fro India, it becomes imperative by FEDAI to review Rules and Guidelines. FEDAI has also taken due care of the interest of both Importers and Exporters while revising rules and guidelines. The present revised rules are effective 1st September, 2004. [amendments are periodically being made to suit both, banks and EXIM communities, also reading with RBI directives whenever changed] The Objective: The main objective of the Association as defined in its Memorandum is to further the interests and regulate the dealings of and between Ads in Foreign Exchange both inter se, and with the public, forex brokers, the Reserve Bank of India and other bodies. Although the Memorandum specifies further incidental or ancillary offshoots therefrom, the main objective as above encapsulates the fundamental role.

THE MANAGEMENT : The Association has : A/ Chairman; B/ Vice Chairman; C/ Additional Vice Chairman, and D/ Managing Committee, all of whom are member banks of the Association. The FEDAI Rules : The fourth edition which has come into effect from 1st September 2004, is the result of the due care taken into account by FEDAI both in the interest of banking industry and business communities. In the revised FEDAI guidelines, various Rules are made mandatory. Though no deviation is made permissible, the specific discretion is vested in the relevant rule itself with member banks.

The revised general guidelines / instructions on recovery of charges have been framed prescribed in such a manner to suit both banking and business and trade. The flexibility accounted as also mandatory rule prescribed under head "charges", offers benefits to both banking and business community. Besides, the FEDAI also carry periodical reviews / amendments to the Rules.

Reading with few of the directives of Expert Group on Forex Market in India (Sodhani Committee), FEDAI has undertaken few of the projects, viz., : Training: Undertaking various sessions / workshops / seminars with the help of the regional prime banks, on all India basis, with the main objective to educate the Exporters in their dayto-day operations with the Banks. Introduction : New systems like derivative, exchange formalities, exchange rate mechanism system, etc., for ultimate benefits to Exporters; The 4th Edition of FEDAI Rules is now in force effective 1st September 2004. Removal of chapter : "Charges" : This issue was discussed with various authorities like RBI, IBA (Indian Banks Association) and FEDAI, which was reviewed by the RRA (Regulations Review Authority) which had emphasized that the practice of fixing charges by such self regulatory bodies was not much needed in the present context of liberalization and that

the fixing of any charges should be totally dispenses with and banks will have complete freedom to decide on their own. The act of mandatory of fixing charges for forex transactions, is now eliminated - though it should be kept in mind that FEDAI still playing important role in steering it along other route as mentioned above in most of the pro-active role. Following are the Rules covered in FEDAI 01. Hours of Business 02. Export Transaction 03. Import Transaction 04. Clean Instruments 05. Foreign Exchange Contracts 06. Early Delivery, Extension and Cancellation of Foreign exchange contracts. 07. Business Through Exchange Brokers. 08. Interbank TT settlement- settlement of Interbank TTs and Dispatch.

The role and responsibilities of FEDAI are as follows:

Formulations of FEDAI guidelines and FEDAI 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 and other bodies. Rules of FEDAI also include announcement of daily and periodical rates to its member banks.

The Association has been holding periodic Managing Committee andTechnical SubCommittee meetings both on policy and on operational matters. The number of meetings held during the year is as under: Technical Sub-Committees a. Forex Markets b. Trade & other transactions c. Advisory Committee d. Guidance Committee e. Renovation Committee f. Special Committee The foreign exchange market (forex, FX, or currency market) is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies. The primary purpose of the foreign exchange market is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies, and which (it has been claimed) may lead to loss of competitiveness in some countries.

FEDAI Local Committee Meetings FEDAI Local Committee, Chennai. The Annual General Meeting of FEDAI Local Committee at Chennai was held on Saturday the 14th February 2009. Chief Executive attended the meeting and discussed the current development in the market. The Chief

Executive had also conducted the election of the FEDAI Local Committee, Chennai for the year 2008-2009. The following is the outcome of the unanimous election: Indian Overseas Bank Indian Bank State Bank of India Central Bank of India UCO Bank Punjab National Bank HDFC Bank Limited Standard Chartered Bank FEDAI continues to receive valuable inputs and suggestions from the. Local Committees on various guidelines of Reserve Bank of India and other agencies, duly discussed at the Local Committee meetings. FEDAI guidelines play an important role in the functioning of the markets and work in close coordination with Reserve Bank of India (RBI), other organizations like Fixed Income Money Market and Derivatives Association (FIMMDA), the Forex Association of India and various other market participants.