FEDAI

Introduction :

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 coordination 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.

Members Of FEDAI

Public Sectors Banks :

15. Punjab National Bank 16. State Bank of Bikaner & Jaipur 17. State Bank of Hyderabad 18. State Bank of India 19. State Bank of Mysore 20. State Bank of Patiala 21. State Bank of Travancore 22. Syndicate Bank 23. UCO Bank 24. Union Bank of India 25. United Bank of India 26. Vijaya Bank

1. Allahabad Bank 2. Andhra Bank 3. Bank of Baroda 4. Bank of India 5. Bank of Maharashtra 6. Canara Bank 7. Central Bank of India 8. Corporation Bank 9. Dena Bank 10. IDBI Bank Ltd 11. Indian Bank 12. Indian Overseas Bank 13. Oriental Bank of Commerce 14. Punjab & Sind Bank

Foreign Banks :
1 AB Bank Ltd . 2. Abu Dhabi Commercial Bank 3. Antwerp Diamond Bank N.V. 4. Australia and New Zealand Banking Group Limited 20. The Hongkong and Shanghai Banking Corporation Limited 21. JP Morgan Chase Bank N.A. 22. JSC VTB Bank 23. Krung Thai Bank Public Company Limited 24. MashreqBank p.s.c 25. Mizuho Corporate Bank Limited 26. National Australia Bank 27. Oman International Bank S.A.O.G. 28. Rabobank International (Cooperatieve Centrale RaiffeisenBoerenleenbank B.A.) 29. The Royal Bank of Scotland N.V.

5. Bank of America N.A. 6. Bank of Bahrain & Kuwait B.S.C. 7. Bank of Ceylon 8. The Bank of Nova Scotia 9. The Bank of Tokyo Mitsubishi UFJ Limited

10. Barclays Bank PLC 11. BNP Paribas

12. China Trust Commercial Bank 13. Citi Bank NA 14. Commonwealth Bank of Australia 15. Credit Agricole Corporate and Investment Bank

30. SBERBANK 31. Shinhan Bank 32. Societe Generale 33. Sonali Bank Limited 34. Standard Chartered Bank 35. State Bank of Mauritius Limited 36. UBS Bank AG 37. United Overseas Bank Limited. 38. Woori Bank

16. Credit Suisse AG 17. DBS Bank Limited 18 Deutsche Bank AG 19 Firstrand Bank

Private Sector Banks/ Co-operative Banks

1. Abhyudaya Co-op. Bank Limited 2. AXIS Bank Limited 3. 4. The Bharat Co op Bank (Mumbai) Ltd Bombay Mercantile Co-operative Bank Limited 15. The Jammu & Kashmir Bank Limited 16. The Kalupur Commercial Cooperative Bank Limited 17. Karnataka Bank Limited 18. The Karur Vysya Bank Limited 19. Kotak Mahindra Bank Limited 20. The Lakshmi Vilas Bank Limited 21. The Maharashtra State Co-operative Bank Limited 22 Punjab and Maharashtra Cooperative Bank Limited 23 The Ratnakar Bank Limited 24. The Saraswat Co-operative Bank Limited 25. The Shamrao Vithal Co-operative Bank Limited 26. The South Indian Bank Limited 27. Tamilnad Mercantile Bank Limited 28. The Thane Janata Sahakari Bank Limited 29. YES Bank Limited

5. The Catholic Syrian Bank Limited 6. City Union Bank Limited The Cosmos Co-operative Bank 7. Limited 8. Development Credit Bank Limited 9. The Dhanalakshmi Bank Limited 10. The Federal Bank Limited 11. HDFC Bank Limited 12. ICICI Bank Limited 13. IndusInd Bank Limited 14. ING Vysya Bank Limited

 Financial Institutions/Others :
1. 2. 3. 4. Export-Import Bank of India IFCI Ltd Small Industries Development Bank of India Thomas Cook (India) Limited

Total Members (as of January 2012) : 97

Managing Committee Members

Managing Committee For The Year 2011 - 2012
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Allahabad Bank Andhra Bank AXIS Bank Limited Bank of America Bank of Baroda Bank of India Bank of Maharashtra BNP Paribas Canara Bank Central Bank of India Corporation Bank Citibank N. A. Deutsche Bank AG Export-Import Bank of India The Federal bank Limited HDFC Bank Limited Additional Vice Chairman ICICI Bank Limited

18 19 20 21 22 23 24 25 26 27

IndusInd Bank Limited IDBI Bank Limited Punjab National Bank Societe Generale Vice Chairman Standard Chartered Bank State Bank of India ... Chairman State Bank of Mauritius Limited Syndicate Bank Union Bank of India Vijaya Bank

Technical Committees
Technical Committees for the year 2011-2012 Trade and Remittances Forex Market Advisory Group Trade and Remittances 1. Allahabad Bank 2. Andhra Bank 3. Bank of India 4. Canara Bank 5. Citibank N.A. 6. Corporation Bank 7. Development Credit Bank Limited 8. The Federal Bank Limited 9. The Hongkong & Shanghai Banking Corporation Limited

10. ICICI Bank Limited 11. Oriental Bank of Commerce 12. The Saraswat Co-operative Bank Limited 13. Societe Generale

14. Standard Chartered Bank 15. State Bank of India 16. Syndicate Bank 17. Union Bank of India Forex Market 1. Andhra Bank 2. AXIS Bank Limited 3. Barclays Bank 4. Bank of Baroda 5. Bank of India 6. BNP Paribas 7. Canara Bank 8. Central Bank of India 9. Citibank N.A. 10. Corporation Bank 11. Deutsche Bank AG 12. HDFC Bank Limited 13. The Hongkong and Shanghai Banking Corporation Limited

14. ICICI Bank Limited 15. IDBI Bank Limited 16. JP Morgan Chase Bank N.A. 17. Standard Chartered Bank 18. State Bank of India 19. State Bank of Mauritius Limited 20. Syndicate Bank Advisory Group 1. AXIS Bank Limited 2. Bank of Baroda 3. Bank of India 4. The Bharat Co-operative Bank (Mumbai) Limited 5. BNP Paribas

6. The Federal Bank Limited 7. HDFC Bank Limited 8. The Hongkong & Shanghai Banking Corporation Limited

9. IDBI Bank Limited 10. Punjab National Bank 11. State Bank of India 12. State Bank of Mauritius Limited 13. Syndicate Bank 14. Union Bank of India

FEDAI Local Committees List of Managing Committee Members Centre Chairman Managing Committee Members
Canara Bank .. Chairman State Bank of Mysore .. Vice Chairman Bank of India .. Member Vijaya Bank UCO Bank Bank Muscat ING Vysya Bank ICICI Bank Limited State Bank of India United Bank of India .. Chairman Allahabad Bank .. Vice Chairman Hongkong & Shanghai Banking Corp.Ltd UCO Bank American Express Bank Punjab National Bank State Bank of Bikaner & Jaipur AXIS Bank Limited State Bank of India State Bank of Travancore .. Chairman Catholic Syrian Bank Limited Lord Krishna Bank Limited South Indian Bank Limited Federal Bank Limited Oman International Bank Limited AXIS Bank Limited Central Bank of India

Bangalore C/o. Canara Bank Head Office P.B. No.6648 112, J C Road Bangalore - 560 002

Kolkata

C/o. United Bank of India International Banking Division Head Office 16 Old Court House Street, 14th Floor Kolkata - 700 001 C/o. State Bank of Travancore Foreign Exchange Department P B No.3639, Ernakulam Kochi - 682 035

Kochi

Chennai

C/o. Indian Overseas Bank Post Box No.3765 762, Anna Salai Chennai - 600 002

Indian Overseas Bank .. Chairman Indian Bank .. Vice Chairman Canara Bank Central Bank of India Syndicate Bank American Express Bank Limited Karur Vysya Bank Limited Bharat Overseas Bank Limited State Bank of India Dena Bank ING Vysya Bank Limited Tamilnad Mercantile Bank Limited Andhra Bank Punjab National Bank .. Chairman Oriental Bank of Commerce .. Vice Chairman State Bank of India Bank of Baroda Standard Chartered Bank Bank of Punjab Limited Bank of India American Express Bank Limited State Bank of Bikaner and Jaipur .. Chairman State Bank of India .. Vice Chairman Punjab National Bank .. Member Bank of Baroda Indian Overseas Bank Oriental Bank of Commerce HDFC Bank Limited AXIS Bank Limited

New Delhi

C/o. Punjab National Bank Head Office 7, Bhikaiji Cama Place New Delhi - 110 066

Jaipur

C/o. State Bank of Bikaner and Jaipur Head Office Tilak Marg Jaipur - 302 005.

Roles & Respnsibility Of FEDAI

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.

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.

FEDAI RULES
RULE 1Hours of Business
The hours during which foreign exchange business will be conducted by banks at various centers in India will be normal banking hours of the banks (Authorised Dealers) at the respective centers. On Saturday, however, no commercial transactions in foreign currencies will be conducted by banks with the exception of the following: 1. transactions relating to purchase/ sale of travelers cheques and currency notes; 2. transactions in regard to which the exchange rates may have been settled by prior engagement (like delivery of export bills/ retirement of import bills under forward exchange contracts) or will be fixed by subsequent negotiations (like business handled on a provisional basis at banks own discretion);

3. transactions relating to drawings under travelers letters of credit and any remittances payable to bonafide travelers or tourists.

RULES 2-Export Transactions

1. General Bank will purchase only Approved Bill and the decision as to what is an approved bill lies solely with the purchasing bank. This includes bills tendered under forward contracts, letters of authority, orders to negotiate, orders for payment and any other type of document of similar nature. Bank will have the discretion to handle export bills on purchase/discount/negotiation or collection basis. 2. Export bills purchased/discounted/negotiated 1. Application of rates, crystallization of liabilities and recoveries 1. Foreign currency bills will be purchased/negotiated / discounted at the Authorized Dealers current bill purchase rate or at the contracted rate. Interest for the normal transit, usance and grace period where applicable shall be recovered simultaneously. 2. Exporters are liable for the repatriation of proceeds of the export bills negotiated/ purchased/ discounted or sent for collection by the Authorized Dealers. Authorized Dealers would transfer the exchange risk to the exporter by crystallizing the foreign currency liability into Rupee liability on the 30th day after the transit period in case of unpaid demand bills. In case of unpaid usance bill crystallization will take place on the 30th day from Notional due date or actual due date. Notional due date is arrived at by adding transit period, usance period and grace period if any to the date of purchase/ discount/ negotiation. In case the 30th day happens to be holiday or Saturday, the export bill will be crystallized on the next working day. For crystallization into Rupee liability the bank will apply the spot TT selling rate of exchange ruling on the date of crystallization. If the crystallized Rupee liability is less than the amount originally advance at the time of purchase/ discount/ negotiation the shortfall will be recovered from the customer. If, however, the crystallized rupee liability is higher than the amount originally advanced at the time of purchase/ discount/ negotiation banks will not pass on the surplus to the customers as bank consider the excess amount as an additional advance. Interest will also be recovered on the date of crystallization for the period from the date of expiry of normal transit period/ notional due date, as the case may be, to

the date of crystallisation at the appropriate rate of interest as directed by Reserve bank of India for overdue export bills. Export bills payable in counties with externalization problems would also be crystallised into Rupee liability like any other unpaid export bill notwithstanding receipt of advice of payment in local currency. The unpaid bill will be treated as outstanding under the sanctioned limit of the customer with the exchange risk open against him. 3. After receipt of advice of realization, the Authorised Dealerwill adjust the Rupee liability on the bill crystallised as above by applying the spot TT buying rate of exchange. Any shortfall/excess shall be recovered from/ paid to the customer. Interest for the period from the date of crystallisation to the date of realization of the bill will be recovered from the customer at the appropriate rate of interest for overdue export bills as permitted by Reserve Bank of India. 4. In case of receipt of intimation of dishonour of an export bill before the estimated crystallisation date, the bank shall recover from the customer: 1. The Rupee equivalent of the bill arrived at the current spot TT selling rate or the amount originally advanced, whichever is higher. 2. All foreign currency charges converted at the ruling spot TT selling rate. 3. Other charges, if any. 4. Interest at appropriate rate as prescribed by Reserve Bank of India from time to time. 5. In case refund of negotiation proceeds of a foreign currency bill is required to be made to the negotiating bank, the rate of exchange for conversion shall be the spot TT selling rate of the negotiating bank ruling on the date of refund. In addition, the customer shall be required to pay charges and interest at the rate as prescribed by Reserve Bank of India from the time to time for Rupee loans granted against exports. 6. In case of remittance of agency commission in foreign currency by deduction from the Rupee proceeds by the negotiating bank, the entire foreign currency amount of the bill shall be converted into Rupees at the appropriate spot buying rate, and from this amount the payment of commission remittable converted at the current spot TT selling rate shall be deducted. In case of payment of agency commission in foreign currency at the overseas center from the foreign currency proceeds of export bills such commission shall be deducted from the bill amount and the net amount so arrived at shall be converted at the spot bill purchase rate or the contract rate as the case may be. 2. Application if interest 1. This Rule is not applicable to export transactions on deferred payment basis.

2. The rate of interest applicable for all export transactions shall be as prescribed by Reserve Bank of India from time to time. 3. For the purpose of application of interest at the time of purchase/ discount/ negotiation, export bills shall be classified as: 1. Direct bills, viz. bills drawn in a currency of the country and made payable in that country (or reimbursable in that county). 1[Export bills drawn in the currency euro on drawees in EMU countries shall be termed as Direct bills Export bill drawn in existing currencies of EMU member countries (DM, FFC etc.) and payable in euro shall also be termed as Direct Bills] 2. Indirect bills, viz. bills drawn in a currency other than that of drawees country and made payable in that country (in an indirect manner). However, if reimbursement of proceeds of such bill is to be made in the country of the currency (expressed therein) they are to be treated as Direct Bills. Examples 1. A bill for a.$10,000-drawn on Melbourne (Australia) and payable in Melbourne is a Direct Bills. 2. A bill for Stg.Pd. ($) 5,000-drawn on Melbourne and payable in Melbourne is an Indirect Bills. 3. A bill for Stg.Pd. ($) 5,000-drawn on Melbourne and payable in Melbourne but reimbursement to be obtained in London is a Direct Bill. iv. The normal transit period as follows: Table-1 Normal Transit Period for Purpose of bills in Foreign Currencies Direct and Indirect Bills Transit Period No. of Days For indirect bills drawn on CurrenciesOf Countries ForDirectBills U.K.,EuropeN.America AfricaAsia Australia N.Zealand And Pacific Islands W. Indies Central &SouthAmerica UK, Europe & N. America 20 25 30 30 35 Africa, Asia 20 30 25 35 35 Australia, N.Zealand,Pacific Islands &W.Indies 20 30 35 25 30 Central and SouthAmerica 25 35 35 35 30 Note: In case of export usance bill where due dates are reckoned from date of shipment or date of bill of exchange no. Normal Transit Period will be applicable.

Table II Normal Transit Period for Purpose of Bills Drawn in Rupees 1. In the case of bills drawn under letters of credit where reimbursement is provided at the center of negotiation If reimbursement for negotiation of Rupee bills drawn under a letter of credit is obtained in the center of negotiation by debit to the nonresident account of the credit opening bank held, either with the negotiating/ bank itself or with any of its branches in the same center, interest for the transit period of 3 days as followed shall not be collected. : 3 days 2. In the case of bills drawn under letter of credit where reimbursement is provided at a center in India other than the center of negotiation 3. In the case of bills ( )Drawn under letters of ( ) Credit where reimbursement ( ) is provided by ( ) Banks situated outside ( ) India : 20 days AND Bill not under letter of credit 4. Export to Russia against letter of credit providing for reimbursement by Reserve Bank of India under State Credit arrangement ( A R 6/95 dated 14.10.95 ) Countries where Grace period is applicable: 1. Aden (see Southern Yemen) Anguilla (W.Indies) Antigua (-do-) Australia 2. Bahamas (W.Indies) Barbados Bermuda Borneo Burma British Honduras British Solomon Islands 3. Cameroon (Formerly British British South Cameroon Area only) Canada

Carriacou Cayman Island (W.Indies) 5. Ethiopia 6. Falkland Island Fiji Islands 7. Gambia Ghana Gibraltar Grenada (W.Indies) Guyana 8. Hongkong 9. India Ireland 10. Jamaica Jordan 11. Kenya Korea 13. M. Malawi Malaysia Malta Montesserrat (W.Indies) Mauritius 14. New Zealand Nevis (W.Indies) Nigeria Norfolk Island 16. Pakistan Papua & New Guinea Portugese Timor 19. Sabah Sierra Leonne Seychelles Singapore Somali Southern Yemen (Aden) Sri Lanka St. Helena St. Kitts (W.Indies)

St. Lucia (W.Indies) St. Vincent (W.Indies) Sudan Swaziland 20. Tanzania Thailand Trinidad & (British) Turk & Caricos Islands 21. Uganda 22. Virgin Island (British) 23. Western Samoa 26. Zambia TT Reimbursement under letter of credit 1. In case of bill where reimbursement is to be obtained by TT (i.e. where the reimbursing bank is other than the one where the one where the negotiating bank maintains its nostro account), the bank will recover at the time of negotiation transit period interest for 5 days and telex charges from the customer. If funds are not received by the negotiating bank in its nostro account on the 5th day, the bill will be treated as overdue and interest will be recovered from customer for the delayed period at the rate prescribed by Reserve Bank of India till the date of realisation i.e. receipt of funds into the nostro account of the bank. 2. Where the negotiating bank is authoriased to draw TT directly (i.e. where the reimbursing bank maintains the negotiating banks nostro account) no interest will be charged to the customer. However, telex charges will be recovered from the customer. In case of delay in receipt of funds, overdue interest will be recovered from the customer.]

3.

In case of bill negotiated under a letter of credit and reimbursement claimed by TT from opening bank which arranges reimbursement through another bank, interest for 5 days and telex charges shall be recovered from the days, overdue interest will be recovered from the customer from 6th day onwards till date if reimbursement. Early realisation 1. In case of early realisation of export bill proportionate interest will be refunded from the date of realisation i.e. by credit to nostro account in case of a foreign currency bill, and by debit to vostro account in case of a Rupee bill, upto the last date of normal transit period in the case of demand bill and upto the notional due date in case of usuance bill. Such a refund shall become payable only on receipt of relative credit advice/ statement of account by bank. 2. In case of early realisation of usance export bill Athorised dealer would recover or pay swap cost as in case of early deliveries under a forward contract.

Export credit interest The rates of interest for export credit will be as per directive from Reserve Bank of India, Industrial and Export Credit Department, Central Office, Bombay from time to time. 3. Application of charges

1. For each foreign currency bill purchased/ discount/ negotiated 1. (upto US $ 5000/- Rs. 100/or equivalent Minimum 2. (over US $ 5000/- Rs. 500/or equivalent) Minimum (AR 10/95 dated 20.12.95) 2. On each Rupee bill 0.25% Minimum purchased/ discount Rs.100/- per billed/negotiated on which no exchange is earned (AR 4/93 dated 5.5.93) Note 1: In case a purchase/ discount/ negotiated bill (both in foreign currency as well as in Rupees) is later converted into a collection bills shall not be charged. Note 2: In case an export bill for collection (both in foreign currency as well as in Rupees) is subsequently purchase/discounted, the bank will recover the charges as applicable to export bills purchased/discounted and will not levy the commission as applicable to collection bills. Where a bank forwards export documents on which no collection commission and/ or exchange accrues to the remitting bank a minimum charge of Rs. 100/- per bill or set of documents shall be collected from the customer. (AR 10/95 dated 20.12.95) Where reimbursement under a letter of credit is claimed by a bank in India with another Authorised Dealer in India, a reasonable reimbursement commission with a minimum of Rs. 500/- per reimbursement may be recovered by the reimbursing bank. (AR 3/96 dated 30th March 1996) Where a bank which has booked a forward contract for its customer, submits the export documents delivered thereunder to another bank for negotiation owing to the letter of credit being restricted to that bank, the bank with whom the forward contract is fixed shall recover from the customer commission at the rate of 0.20 percent. A commission of 0.25% with a minimum of Rs. 50/- shall be charged for joining in customers guarantees/ indemnities and for giving guarantees/ indemnities on behalf of customers to other banks in India in respect of discrepancies in documents negotiated under letter of credit.

3.

4.

5.

6.

7. All actual out of pocket expenses such as correspondent bank charges, postages, telegram/ cable/ telex charges including expenses incurred, to secure banks and customers interest shall be recovered from the customer. 8. Where applicable, stamp duty payable on export bills shall be recovered from the customer. 9. In case of overdue export bills purchased/ discounted/ negotiated i.e. where the proceeds are not received in India within the stipulated period of six months, additional commission not exceeding Rs. 250/- per quarter shall be charged. In case of export bills drawn on countries with externalisation problems but paid in local currency and the exporter has obtained necessary approval from Reserve Bank of India for extension, this charge shall nit be levied. This charge may not be recovered in the case of exports on deferred payment terms if the relative export proceeds are received from time to time on due dates within a reasonable time (say 10 days) or if at the time of export, the exporter has obtained the necessary approval from Reserve Bank of India for deferment of receipt of proceeds. The aforesaid charge will apply if proceeds are not received in India within such deferred periods. 10. In the case of substitution/ charge in tenor of export bill, the bank shall recover charges as mentioned below from the exporters : 1. In the case of change in the usance of a bill, concessive Interest on post-shipment credit shall be charged in accordance with apparent original tenor of instrument upto the notional due date of the export bill subject to maximum of 180 days. In addition, the bank shall also recover/ pay swap difference. Interest on outlay of funds, if any shall also be recovered from the customer at the rate not below the prime lending rate of the respective bank. (AR 1/95 dated 10.02.95) 2. It is optional for a bank to accept or agree to accept Delivery of bills under a contract made for the purchase of a clean TT. If a bank accepts such bills, the swap difference for

the relative cover (irrespective of whether an actual swap has been done or not) shall be recovered from/ paid to the merchant. Interest at the rate not below the prime lending rate of the respective bank on outlay of funds, if any shall also be recovered from the customer. (AR 1/95 dated 10.02.95) 3. It is optional for a bank to accept or agree to accept bills drawn at a usance other than agreed to be delivered under a forward contract either prior to or at the time of delivery. When a bank agrees for a change in the usance it shall recover from/pay to the customer the swap difference. Interest at the rate not below the prime lending gate of the respective bank on outlay of funds, if any, shall also be recovered from the customer. (AR 1/95 dated 10.02.95) If the currency of the bill is one of the EMU member country currencies, redenomination of theses bills, for the purposes of receipt, payment, issuance of certificate, shipping guarantee or any other related purpose, into the euro shall be permitted at the option of the bank customer. The rate of conversion of these currencies into the euro shall be at fixed conversion rate as announced by the ECB. 3. Export bill for collection 1. Application of rates 1. For disposal of the proceeds of bills sent for collection or of goods sent in consignment basis the TT buying rate ruling on the date of payment of proceeds or the forward contract rate as the case may be shall be applied and the payment will be made in India only after the foreign currency amount is credited to the nostro account of the bank. 2. In the case of payment of agency commission in foreign currency at the overseas center from the foreign currency proceeds of export bills sent for collection, such commission shall be deducted and the net amount so arrived at shall be converted at the TT buying rate prevailing on the date of appropriation of proceeds or at the forward contract rate as the case may be. 2. Application of interest On all Rupee loans granted against export bills sent on collection, interest will be charged as prescribed by Reserve Bank of India from time to time for export credit. Authorised Dealers will also pay interest for delay in payment to the exporters on

export bills sent for collection and realised. On the assumption that the customer has complied with Exchange Control and banks own requirement, the following are time limits within which the transaction should be completed by an Authorised Dealer or his Authorised Branch after the date of receipt of credit advices/ statements : Note: if transfers are not completed within seven days from the time schedule fixed for execution of the payment orders the compensation will be payable. Compensation will start from the expiary of the period for execution of payment orders.

The rate of compensation would be the minimum interest charged by the banks on export credit which is currently 13% per annum. The rate will vary with the export credit interest rates as advised by Reserve Bank of India from time to time. (AR Circular no: 2/92 dated 13.04.1992) 3. Application of charges 1. Commission on export bills for collection and export under consignment arrangement shall be recoverable as under: Note: These charges are also recoverable from the exporters where advance payment towards exports is received. 2. In case of overdue export bills sent on collection i.e. where proceed are not received in India within the stipulated period of 6 months, additional commission not exceeding Rs. 250/- per quarter shall be charged. In case of export bills drawn on countries with externalisation problems but paid in local currency and the exporter has obtained necessary extension from Reserve Bank of India this charge will not be levied for such extension. The above charge may not be recovered in the case of exports on deferred payment terms if the relative export proceeds are received from time to time on due dates or within a reasonable time (say 10 days); or if at the time of export, the exporter has obtained the necessary approval from Reserve Bank of India for deferment of receipt of proceeds. The aforesaid charge will apply if proceeds are not received in India within such deferred periods. 3. Where the proceeds of export bill sent on collection are received through a bank other than the collecting bank at the instance of the exporter/ overseas buyer, an additional charge of 0.125% shall be recovered from the exporter by the collecting bank. 4. All actual out of pocket expense such as correspondent bank charges, postage, telegram/telex/cable charges etc. shall be recovered from the exporter.

5. Where bank charges are to be recovered from the drawee but are refused by them, such charges shall be recovered from the exporter. 6. Export letters of credit Where in terms of the letter of credit, the charges are recoverable from the exporter: 0. An advising commission with a minimum of Rs. 200/- shall be recovered in respect of each letter of credit. A minimum commission of Rs. 100/- shall be recovered for advising each amendment. (AR 10/95 dated 20.12.95) 1. The charges for adding confirmation to a letter of credit shall be as under : 1. Commitment charge for the full validity of the credit @0.15% for every quarter or part thereof and 2. Usance charge according to the tenor of the bill as under: 1. 0.15% for bills upto 10 days sight. 2. 0.30% for bills over 10 days and upto 3 months sight. 3. 0.30% for the first three months plus 0.0750% per month in excess of three months for bills over 3 months sight. Notes : 26. Where the amount of a letter of credit exceeds Rs. 8 crores (or in equivalent foreign currency) banks will recover charges at their discretion subject to minimum charge recoverable on Rs.8 crores. 27. In case of extension of a letter of credit to which confirmation has been added by a bank in India, If such extension exceeds 3 months (one quarter) from the date of the letter of credit additional commitment charge will be recovered as above. 28. when the amount of a letter of credit confirmed by a bank in India is subsequently increased, both usance and commitment charge as above shall be collected on the amount so increased. 5. Transferable letters of credit When transfers are made under a transferable letter of credit (whether full or in part and whether endorsed on the credit it self or not), a minimum charge of Rs. 200/- shall be recovered for each advice of transfer, except when the name of the beneficiary of the credit is charged on instructions received directly from the opening bank. The transfer

charge shall be for the account of the original beneficiary of the credit. (AR 10/95 dated 20.12.95) 6. On all letters of credit calling for usance bills to be drawn on and accepted by banks in India, an acceptance commission shall be charged at the rate of 0.15% per month. 7. 1. Certificates A charge of Rs. 20/- per certificate shall be recovered for issue of certificates/attestations in respect of export transactions. However the banks may, in their discretion waive this charge. (AR 10/95 dated 20.12.95) 2. Registration of contracts A minimum commission of Rs. 100/- shall be recovered for registration of each export contact by a bank and Rs. 50/- for every amendment thereof. (AR 4/93 dated 5.5.93) 3. Advances against duty draw back entitlements A commission of 0.50% with a minimum of Rs. 50/- shall be recovered for advances under the Duty Draw Back Credit Scheme, 1976.

RULE 3- Import Transactions

1. General 1. Bills shall include all document/clean bills received under 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. 2. Establishment and amendment of all import letters of credit shall be at the discretion of the Authorised Dealers. 3. Commission shall be payable at the time of opening of the letter of credit or at the time of amendment thereof and no refund will be allowed under any circumstances whatsoever. 2. 1. Application of rates 1. 1. For the purpose of retirement of import bill 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. 2. For the purpose of crystallisation vide para II. C.x. 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.

2. . When local payments are required to be made out of the proceeds of foreign currency import bill the proceeds of foreign currency amount of the local payment shall be deducted from the bill amount at the time of remittance. The full amount of the bill shall be arrived at the banks appropriate bills selling rate and foreign currency amount of the local payment shall be converted into Rupees at the prevailing TT buying rate. 3. For the purpose of determining stamp duty on import bills, the foreign currency amount of the bills shall be converted into Rupee at the exchange rates prescribed by government of India from time to time. 2. Application of Interest 1. 1. Bills negotiated under import letters of credit shall carry domestic commercial rate of interest as application to advances prescribed by Reserve Bank of India from time to time and shall be recovered from the date of crystallisation/ retirement whichever is earlier 2. From the date of crystallisation upto the date of retirement the bills shall carry the penal rate of interest as specified by Reserve Bank of India from time to time. 2. Interest remittable on interest bearing bills shall be subject to the directives of Reserve Bank India. 3. Interest, if any on import bills shall be recovered in full and shall not be set off against interest, if any, payable on any margins which may be held against such bill or the relative letter of credit. 3. Application of charges 1. The following charges shall be recovered from the importers for establishing irrevocable letters of credit 1. Commitment charges for the full validity of the credit (i.e. from the date of opening of the L/C to the last date of its validity) @ 0.15% for every quarter or part thereof and 2. Usance charge according to the tenor of the bill as under : 1. 0.15% for bills upto 10 days sight. 2. 0.30% for bills 0ver 10 days and upto 3 months sight. 3. 0.30% for the first three months plus 0.0750% per month in excess of three months for bills over 3 months sight. Note 1: The above scale of charges shall be collected by banks on letters of credit, as under : 1. Where the amount of a letter of credit does not exceed Rs. 8 crores (or in equivalent foreign currency) Commission will be charged at rates as specified above. 2. Where the amount of a letter of credit does exceed Rs. 8 crores (or in equivalent foreign currency) Commission will be charged as under :

Table a. On the first Rs. 8 crores (or in equivalent foreign currency)

At fu as abo b. On the amount which is in excess of Rs. 8 crores (or in At on equivalent foreign currency) upto Rs.16 crores. in the c. On the balance amount, which is in excess of Rs. 16 crores At on (or in equivalent foreign speci 3. 1 Note 2: i. Where the letter of credit amount is less than the equivalent of Rs. 10,000/- a minimum charge of Rs. 100/- will be collected. (AR 10/95 dated 20.12.95) If any extension of the validity of the letter of credit falls within a three month period for which commitment charge has already been collected a minimum, amendment commission of Rs. 250/- shall be recovered. However, for an amendment extending the validity of the letter of credit beyond a three month period (for which commitment charge has already been collected) a fresh commitment charge at 0.15% per quarter or part there of shall be recovered subject to a minimum of Rs. 250/-. (AR 10/95 dated 20.12.95) In case of enhancement of the value of a letter of credit, both the usance and commitment charge as applicable to establishing a letter of credit, would be recovered for the additional amount. In case of amendment altering the tenor of the Bill of Exchange appropriate additional usance charge shall be collected. Any amendment to a letter of credit, other than extension of its validity or enhancement of its value, shall attract an amendment commission of minimum Rs.250/- (AR 10/95 dated 20.12.95) Any revival or reinstatement of an expired letter of credit shall be at the option of the bank but within 3 months from the date of expiry and shall be subject to recovery of usance charge and commitment charge from the date of expiry upto the validity period of the revived letter of credit. For countersigning bills of exchange drawn on importers in India commission of 0.085% per month with a minimum of 0.25% for the tenor of the bill shall be collected. In case where revolving letters of credit are establishing as per the provision of the Exchange Control regulations and for restoration of the credit to the extent of drawings honoured, the charges shall be recovered as under : 1. Commitment charge at 0.15% for every period of 3 month or part thereof : 1. On the maximum amount of drawing permitted at any one time during the period from the date of establishment of the letter of credit to the last date of its validity;

2.

3.

4. 5.

6.

7.

8.

2. On each amount reinstated from the date of reinstatement to the date of subsequent reinstatement or the last date of the validity of the letter credit. And 2. Usance charge for each drawing : 1. 0.15% for bills upto 10 days sight 2. @ 0.30% for bills over 10 days sight and upto 3 months sight 3. @ 0.30% for the 3 months plus 0.075% for each month in exceed of 3 months for bills over 3 months sight. The minimum charges (both commitment charge and usance charge added together) for reinstatement shall be Rs. 100/-. 9. Deferred imports The charges on letters of credit covering import of goods on deferred payment terms shall be as under : (AR 2/95 dated 31.3.95) 1. On letters of credit covering import of goods deferred payment terms; commission shall be charged at the rate of 0.40% per quarter or part thereof calculated on the amount of liability under such credit at the beginning of every quarter. If the credit is valid for more than two years, the amount of the commission may, at the banks discretions, be collected in instalments subject to the following: 1. the size of the instalments shall be proportionate to the amount of outstanding liability at the beginning of each year; 2. the first instalment shall be collected at the time of issuing the credit, and the subsequent instalments shall be collected thereafter annually, at the beginning of each year. The entire commission must be recovered by the commencement of the last year of validity of the credit. 3. in the event of reduction or early cancellation of the credit, there shall be no reduction of commission and the uncollected instalments shall be collected immediately. 4. the minimum commission to be charged annually will be Rs.250/-: adjustment in instalment, if any, to be done in the last instalment which could be less than this amount. 5. in the event of default in payment of instalments, interest shall be recovered at domestic commercial rate as prescribed by Reserve Bank of India from time to time from the date of default to the date of actual payment.Where a letter of credit covered under this Rule contains a definite provision for the possibility of its becoming inoperative at a particular time or date, the period upto such possible time or date may be considered as the

initial validity period for which the commission should initially be recovered. In the event the letter of credit does not become inoperative at the end of that period, the balance period may be considered as an extension of the initial period and commission would then be recovered for the balance period.However, for the purpose of considering whether commission may be collected in instalment s as above, the total commission must be taken to be that amount payable for the initial validity period only. If a letter of credit qualifies for that concession and if the concession is granted for the initial validity period the same concession may also be granted for the extended period irrespective of the total quantum of commission payable for the latter period. 6. when the amount of an import letter of credit covering import on deferred payment terms is enhanced commission at the rate of 0.40% for a period of 3 months or part thereof shall be recovered on the amount so enhanced. (AR 2/95 dated 31.3.95) 7. if the validity period of a letter of credit covering import on deferred payment terms is extended payment terms is extended, only a flat amendment commission of Rs. 400/shall be charged if the last date of extended validity falls within the three month period for which commission has already been collected. However, for any amendment extending the validity of the letter of credit beyond a three month period commission at 0.40% per quarter or part thereof shall be recovered. (AR 2/95 dated 31.3.95) 10. . Crystallisation 1. All foreign currency import bills drawn under letters of credit shall be crystallisation into Rupee liability on the 10th day from the date of receipt of documents at the letter of credit opening branch of the bank in the case of demand bills and on the due date in the case of usance bills. In case the 10th day or the due date falls on a holiday or a Saturday, the importers liability shall be crystallized into Rupee liability on the next working day. 2. if the crystallisation of the Rupee liability of an import of an import bill under the Forward Exchange Contract results in early/ late delivery, the bank shall recover swap charges and interest, if any, as per Rule 8. 3. A commission of 0.15% shall be recovered on each foreign currency import bill received under a letter of credit at the time of retirement or crystallisation whichever is earlier. 4. In case of each Rupee import bill drawn under a letter of credit commission of 0.25% shall be recovered.

5. If the Rupee import bills are not retired within 10 days from the date of receipt of documents, in the case of demand bills or on the due date in the case of usance bills a late payment commission of 0.15% shall be recovered. 6. A commission of 0.25% on the bill amount shall be recovered on foreign currency import bills received under letters of Credit on which no exchange benefit accrues to the opening bank. (Circular letter No:26/92 dated 10.7.92) 3. Commission on bills (Not under Letter of Credit) 1. On each bill drawn in foreign currency, on which the collecting bank earns exchange margin, collection commission will be charged at the rate of 0.25% with a minimum of Rs.50/-. 2. On each bill drawn in Rupee and on each bill drawn in foreign currency on which the collecting bank does not earn exchange margin, commission of 0.50% with a minimum of Rs. 50/- shall be charged by the collecting bank.In case the value of Rupee import bills received on collection basis, exceeds Rupees One crore, bank shall charge collection commission on a graded scale as under: TABLE a. On the First Rs.One crore At full rates specified in the Rule as above. b. On the amount which is in excess of Rs.One At one half of the rate specified in the Rule as crore above. 3. On bills/document covering project imports under inter- governmental aid scheme (including those financed by international agencies like World Bank, IMF, ADB etc. where no letters of credit are opened, commission shall be collected at a flat rate irrespective of the amount of each drawing at 0.03125%. 4. Banks shall collect commission at half the rates applicable for import bills received for collection at the time of effecting remittance in case of document received by importers directly from the overseas exporters. (AR 10/95 dated 20.12.95) Proceeds of collection bills If the overseas remitting bank or the exporter abroad requests for the proceeds of collection bills under III(A) above, to be remitted in a currency other than the currency of the bill, addition commission of 0.25% will be charged. [The additional charge of 0.25% for handling payment in currencies other than the currency of the bill shall not be applicable, where the import bill is received in EMU member country currency but remittance is made in Euro or vice versa]. 4. On any local payment out of the proceeds of any import bill such as payments in connection with barter business, to cases of need, etc., a minimum charge of Rs. 250/shall not be recovered in respect of genuine allowances in order to effect settlement of a dishonoured bill or in respect of commission payable to the drawee. (AR 10/95 dated 20.12.95)

5. Where applicable, Stamp Duty payable on all imports bills shall recovered from the importer. 6. All actual out of pocket expenses such as correspondent bank charges, postages,telex/telegram charges etc. shall be recovered from the importer. 7. When the value of parcel relating to an import bill exceed Rs. 1 Lac, an advalorem charge based on rental value and insurance cost will be collected on a monthly basis.

RULE 4-Merchanting trade

1. Banks will make remittances or open letter of credit in favour of the overseas suppliers provided an advance remittance for the full value or an irrevocable letter of credit for the full value has been received/ opened in favour of the merchanting trader who is not a more financial intermediary. 2. Back-to-back letter will be treated as separate transaction and commission as per Rule 3 II.C. shall be charged to the customer. 3. The banks are allowed to fix Forward Purchase Contract if so desired by the merchant for the difference period of receipt of the proceeds of the on-sale. 4. If foreign currency remittance are received in advance from the overseas buyer, the banks may at the specific request of merchanting trade customer hold the foreign currency funds in their Nostro account without converting the amount into Indian Rupee till the date of payment to the overseas supplier. Bank shall not apply buying and selling rates of exchange. Commission at 0.25% shall not pay interest on such advance remittances or grant Rupee advances against foreign currency funds thus received.

RULE 5-Clean Instruments

I. Inward remittances
1. Application of exchange and interest rates For the purpose of encashment of TTs/ payment of foreign currency Demand Drafts, Mail Transfer, etc. the application of exchange and interest rates shall be as under table Type of transaction: Exchange and interest rates applicable: 1. Encashment of TTs/ Purchase of MTs/ DDs current IT buying rate (NO exchange margin in respect of which cover has been received orinterest to be charged) in Nostro Accounts. 2. Type of transaction: Encashment of TTs/ Exchange and interest rates applicable: Purchase of MTs/ DDs where reimbursement is to be obtained in cover by drawing demand drafts on overseas branches or correspondent banks. Current TT buying rate plus exchange Margin of 0.125%. Interest to be recovered separately from the customer at the rate of 15% per annum for a transit period of 10 days. 3. Type of transaction: Encashment of customers Exchange and interest rates applicable: personal cheques, demand drafts, international money orders, bankers pay orders payable abroad. TT buying rate plus exchange margin of 0.15%. Interest to be recovered

separately for a transit period of 15 days from the customer at commercial rate of interest. Note: It shall be optional for the encashing bank in India to pay on application or await receipt of cover in respect of Demand Drafts/ Mail Transfers/ Telegraphic Transfers and pay therefore. 2. Application of charges 1. A flat charge of Rs. 25/- shall be recovered in respect of each clean payment effected under instructions from a foreign correspondent. (Bank may waive this charge at their discretion.) (AR 10/95 dated 20.12.95) Where the inward remittance has to be executed in foreign currency by issuing a demand draft/ mall transfer/ payment order/ telegraphic transfer a charge of 0.10% subject to a minimum of Rs. 10/- shall be recovered from the beneficiary. 2. Clean instruments for collection: A commission of 0.25%, subject to a minimum of Rs.10/- shall be recovered on clean instruments for collection abroad. Bank may at their discretion waive this commission if the value of the instrument does not exceed the equivalent of Rs.5000/-. (ar 3/96 dated 30.03.96) 3. All actual out of pocket expenses of the bank such as postage, telegram, telex charges, including those of the correspondent bank will be recovered from the beneficiary. 3. Certificates 1. A flat charge of Rs.25/- shall be recovered for issuing bank certificates on security paper in respect of payment of clean remittances from abroad and/ or for encashment of foreign currency notes. (Bank may waive this charge at their discretion.) (AR 10/95 dated 20.12.95) Note: Banks are authorized by Reserve Bank of India to issue the required certificates on their ordinary printed letter heads in the undernoted circumstances and they may reduce collection of the charge to Rs.20/- in such instances (Bank may waive this charge at their discretion.) (AR 10/95 dated 20.12.95) 1. Where the Rupee value of the inward remittance of foreign currency encashed does not exceed Rs.15, 000/2. Where the certificate (irrespective of amount) is required to be produced to Reserve Bank of India for approval of a remittance for refund or reconversion or for any other purpose to be made through the same bank branch which has received the inward remittance or encashed the foreign currency. 3. Where the certificate (irrespective of amount) is required to be filed with Reserve Bank of India for completion of records and no facility there against involving foreign exchange directly (i.e. refund, reconversion etc.) or indirectly (i.e. payment of passage fare freight) GR/pp waiver etc. will

be asked for. (Illustratively, where certificate are require to be submitted to Reserve Bank of India in regard to repatriation of foreign exchange against bank guarantees given to Reserve Bank of India, repatriation of dividends/ balances held in foreign currency accounts etc.) 2. Encashment of foreign currency travellers cheques and currency notes Foreign currency travellers cheques/ currency notes will be encashed at the banks option at the travellers cheques/ currency note encashment rates ruling on the date of such encashment. 3. Outward remittances 1. Outward remittances will be effected at the TT selling rate of the bank ruling on the date of such remittance or at forward contract rate. 2. A minimum commission of Rs.100/- will be levied on all foreign currency outward remittances not being proceeds of import bills. (AR 10/95 dated 20.12.95) 3. On all Rupee outward remittance, a commission at the following rates shall be charged:Upto Rs. 10,000/- @0.25% Minimum Rs.10/-Over Rs. 10,000/- @0.125% Minimum Rs. 25/4. All actual out of pocket expenses of the bank such as postage, telex charges including those, of the correspondent bank shall be recovered from the customer. 4. Issue of foreign currency travellers cheques/ currency notes 1. Foreign currency travellers cheques shall be issued at the option of the bank at the banks selling rate for the travellers cheque ruling on the date of issue. Banks will collect a commission not exceeding 1% on Rupee equivalent payable by the customer. 2. Foreign currency notes shall be issued b banks as per the exchange control regulation and at the foreign currency note selling rates. 3. Where at the request of the beneficiary other than an Indian resident, foreign currency travellers cheques are issued by a bank against foreign currency remittance received from abroad, the bank will collect in Indian Rupees a commission of 0.25%.

RULE 6-Guarantees
1. Limitations In respect of any business directly connected with import and export trade, banks shall not be parties to any of the following guarantees: 1. Any guarantee for an unlimited amount and/ or for an unlimited period with the following exceptions:

1. Where such guarantees are given to automobile associations to enable tourists to take motor cars into foreign countries for short period without payment of duty. 2. Where such guarantees involve the interest of the issuing banks either by way of bills under their letters of credit or purchased by their own overseas branches. 3. Where such guarantees, in case of collection item, are given against counter guarantees by correspondent banks unlimited as to time and/ or amount. 4. Where such guarantees are issued against cash deposit for the full invoice value of the goods received by the issuing bank from the customer or where the relative goods are pledged with the issuing bank so long the guarantees remain current. 2. 1. Guarantees to steamer companies to cover the issue of bills of lading without surrender of the relative mates receipt to the steamer company. In the event of genuine loss of the mates receipt, banks may be parties to such guarantees to procure the issue of bills of lading but such guarantees should not be for a period exceeding one year. 2. Guarantees to the Collector of Customs to cover the delivery of goods without production of the relative import licence. However, if adequate proof is produced indicating the existence of an import licence, the bank may be a party to such a guarantee. 3. Guarantees to the Collector of Customs (given on behalf of exporters) in respect of indirect shipments to a country through another country either via or in transit shipments. 4. Standing guarantees to the Collector of Custom for export covering declaration of optional destination ports in shipping bills. 5. Shipping guarantees for missing bills of lading in respect of purely barter transactions for which no document pass through any bank, except joining in the shipping guarantees given by firms and companies who received documents direct from their branches or affiliated concerns in other countries. 2. Charges The minimum charges for any guarantee shall be Rs.250/The commission for the full specified period of liability shall be collected at the time of signing a guarantee, except in respect of guarantees by item 5 above. The specified period of liability shall mean the actual validity period of the guarantee plus the additional period, if any, during which claims can be made on the bank under the guarantee. Note 1: Customer should in their own interest obtain the return of cancelled guarantees at the

earliest. Note 2: Commission for issuing bid-bonds for supplies to projects carried out abroad as well as to supplies to IBRD/IDA/UNICEF aided projects/ programmes in India which are deemed as exports by the Reserve Bank of India, shall be recovered to the extent of 25% thereof for the full period of validity of the bonds at the time of issue. If the bid materialises the balance 75% of the commission shall be recovered. However, if the bid gets frustrated there will not be refund of that part of the commission collected. Note 3: In respect of Export Performance Guarantees (including Bid-bods forearnest Money and Guarantees for Advance payments) commission may be collected in yearly instalments where the amount of commission is more than Rs.1 lac. Note 7: The currency of the bank guarantee can be the euro at the option of the applicant even though the underlying transaction is in one of the EMU member country currencies. 3. On letter of guarantee covering import of goods on deferred payment terms and letters of guarantee covering repayment of foreign currency loans extending over one year commission shall be charged at the rate of 0.40% per quarter or part thereof calculated on the amount of liability under such guarantee at the beginning of every quarter. If the guarantee is valid for more than two years, the amount of the commission may, at the banks discretion, be collected by instalments subject to the following: (AR 2/95 dated 31.3.95) 1. the size of the instalments shall be proportionate to the amount of outstanding liability at the beginning of each year; 2. the first instalment shall be collected at the time of issuing the guarantee, and the subsequent instalments shall be collected thereafter annually, at the beginning of each year. The entire commission must be recovered by the commencement of the last year of validity of the guarantee. 3. in the event of reduction of the value of the guarantee, there shall be no refund of the commission collected. 4. in the event of early redemption of deferred payment guarantee, commission for the unexpired period of guarantee may be refunded subject to the condition that the original guarantee has been received to the effect that there are no claims against the guarantee. (AR 2/95 dated 31/03/95) 5. the minimum commission to be charged annually shall Rs.400/-. Adjustment in instalment, if any, to be done in the last instalment which could be less than this amount. 6. In the event of default in payment of instalment, interest shall be recovered at the domestic commercial rate of interest, as prescribed by Reserve Bank of India from time to time from the date of default to the date of actual payment. Where a guarantee covered under this Rule contains a definite provision for its possible redemption, even though at beneficiarys option, at a particular time or

date or on completion of a certain portion of the repayment prior to the expiry of the full period of the guarantee, the period upto the possible redemption may be considered as the initial validity period for which the commission should initially be recovered. In the event the guarantee is not redeemed at the end of that period, the balance periods may be considered as an extension of the initial period and commission should then be recovered for the balance period. However for the purpose of considering whether the commission mayCollected in instalments as above, the total commission must be taken to be that amount payable for the initial validity period only. If a guarantee qualifies for that concession and if the concession granted for the initial validity period, the same concession may also be granted for the same concession may also be granted for the extended period irrespective of the total quantum of commission payable for the latter period.In the case of guarantees covered by this Rule, if they are backed by a counter guarantee of the Government of India the rate of commission shall be 0.0625% instead of 0.40% per quarter. All other conditions laid down above shall apply but the commission shall be charged at the time of (i) the execution of the guarantee, (ii) the extension of the validity period of the guarantee and (iii) the increase in the amount of the guarantee, as the case may be. (AR 2/95 dated 31.3.95).

Contract Amounts RULE 7-Exchange contracts

1. Contact amounts Exchange contracts shall be for definite amounts i.e. there shall be no provision for excess or shortfall. When a bill contract mentions more than one rate for bill of different deliveries, the contract must state the amount and delivery against each such rate. Illustration Value of the export order dated 1.1.96 for US$60,000/- expiring Delivery period 31.3.96, 30.4.96 and 30.6.96 US$20,000/- each. CONTRACT NO VALUE DELIVERY PERIOD RATE 96/1 US$20,000 1.3.96 TO 31.3.96 RS 36.6200/96/2 US$20,000 1.4.96 TO 30.4.96 RS 37,0700/96/3 US$20,000 1.6.96 TO 30.6.96 RS 37,9700/2. For the first shipment effected say on 15.3.1996 the exporter should indicate the contract No. as 96/1 and the rate as Rs. 36.6200. 3. Option period of deliver Unless date of delivery is fixed and indicated in the contract, the option period of delivery

should be specified as a calendar week (i.e. 1st to 7th, 8th to 15th, 16th to 23rd or 24th to last working day of the month) or a calendar fortnight (i.e. 1st to 15th or 16th to last working day of the month). In any case, the option of delivery shall not extend beyond one calendar month, (i.e. 1st to last working day of the 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.dy or cash merchant contract shall be deliverable on the same day. Value next day contract shall be deliverable on the day immediately succeeding the contract date. A spot contract shall be deliverable on second succeeding business day following the day when the transaction is closed. 4. Place of delivery All contracts shall be understood to read to be delivered or paid for at the bank and at the named place. 5. Date of delivery Date of delivery under forward contracts will be: 1. In case of bills/ document negotiated, purchased or discounted date of negotiated, purchased/ discount and payment of rupees to customer. 2. In case of bills/ documents sent for collection-date of payment of Rupees to customer on realization of the bills. 3. In case retirement/ crystallisation of import bills/ document- the date of retirement/ crystallisation of liability whichever is earlier. 6. Option of delivery In all forward merchant contracts, the merchant whether a buyer or a seller will have the option of delivery. 7. 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. 8. Merchant quotation In order to simplify and establish transparency, the exchange rate will be quoted in direct terms i.e. so many Rupees and Paise for 1 unit of foreign currency or 100 units of foreign currencies (with effect from 2nd August 1993). The merchant (as well as interbank) rate should be quoted upto four decimals, the last two digits being in multiples of 25 (for example US$1 = Rs. 34.3250, 1 Pound Sterling = Rs. 52.4350). The card rates of member banks should be quoted in two rates decimals. For the sake of software programming the card rates may be indicated in four decimals, provide the last two decimals are 00 (i.e. US$ = Rs. 34.9000). [The exchange rate for the euro will be quoted in direct terms i.e. so many rupees and paise for 1 unit of the euro. The merchant (as well as interbank) rates for the euro shall be

quoted upto four decimal, the last two digits being in multiples of 25. The card rates of member banks shall be quoted in two decimals. For the sake of software programming the card rate may be indicated in four decimals provided the last two decimal are 00.] A list of common currencies and the unit of rate quotations are as detailed below: Currencies to be quoted against one unit of foreign currency: 1. Australian Dollar 2. Austrian Schilling 3. Bahraini Dinar 4. Canadian Dollar 5. Danish Kroner 6. Deutsche Mark 7. Dutch Guilder 8. Egyptian pound 9. European Currency Unit (E.C.U.) 10. Finnish Mark 11. French Franc 12. Hongkong Dollar 13. Irish Punt 14. Kuwaiti Dinar 15. Malaysian Ringgit 16. New Zealand Dollar 17. Norweigian Kroner 18. Omani Rial 19. Qatar Rial 20. Saudi Riyal 21. Singapore Dollar 22. Sterling Pound 23. Swedish Kronor 24. Swiss Franc 25. Thai Bhat 26. UAE Dirham 27. US Dollar 28. EURO2

Currencies to be quoted against 100 unit of foreign currencies: 29. Belgian Franc 30. Indonesian Rupiah 31. Italian Lira 32. Japanese yen 33. Kenyan Schilling 34. Spanish Peseta

Asian Clearing Union currencies to be quotes against 100 units of foreign currencies: 35. Bangladesh Taka 36. Burmese Kyat 37. Iranian Rial 38. Pakistan Rupee 39. Sri Lanka Rupee

(Note: With effects from 01.01.96 the settlement procedure has been revised to ACU Dollar) 9. Rounding off Rupee equivalent of the foreign currency at the agreed merchant rate Settlement of all merchant transactions shall be effected on the principle of rounding off the Rupees amounts to the nearest whole Rupee i.e. without paise. Note: In terms of the above Rule amount upto 49 paise of the Rupee shall be ignored and amount from 50 to 99 paise of the Rupee equivalent shall be rounded off to the next Rupee. 10. Charges On each forward sale or purchase contract booked, a minimum commission of Rs. 250/shall be recovered from the customer. (AR 10/95 dated 20.12.95) 11. Contract amount Any excess amount over the amount stated in a contract, or shortfall therein, shall be bought or sold, as the case may be, at the banks current spot rate of the day and the amount of the excess in the contract shall be cancelled as per Rule 8 IV. Please see Clarification at the end of this chapter Rule 7 Exchange contracts

RULE 8-Early Delivery, Extension and Cancellation of Forward

Exchange contracts
1. General 1. At the request of the customer, unless stated to the contrary in the provisions of the Exchange Control Manual, it is optional for a bank to 1. Accept or give early delivery; 2. Extend the contract;

2. It is the responsibility of the customer to effect delivery or to request the bank for extension/ cancellation as the case may be on or before the maturity date of the contract. 3. Banks will levy a minimum charge of Rs. 100/- for every request from a cancellation of a contract. 4. Merchant Foreign Exchange Contracts booked prior to 31st December, 1998 and delivery of which is effected after 1st January, 1999 wherein one of the currencies is EMU member country currency- the delivery of the said currency can be in the euro or in the currency of contract, at the option of the bank customer. 2. Early delivery If a bank accept or gives early delivery, the bank shall recover/ pay swap difference, if any. 3. Extension Forward contract, either short term or long term contracts where extension is sought by the customers (or are rolled over) shall be cancelled (at T.T. Selling or Buying Rate as on the date of cancellation) and rebooked only at current rate of exchange. The difference between the contracted rate and the rate at which the contract is cancelled should be recovered from/ paid to the customer at the time of extension. Such request for extension should be made on or before the maturity date of the contract. 4. Cancellation 1. In the case of cancellation of a contract at the request of the customer, the bank shall recover/ pay, as the case may be, the difference between the contacted rate and the rate at which the cancellation is effected. 2. Rate at which cancellation is to be effected: 1. Purchase contracts shall be cancelled at the contracting banks spot T.T. selling rate current on the date of cancellation. 2. Sale contracts shall be cancelled at the contracting banks spot T.T. buying rate current on the date of cancellation. 3. Where the contract is cancelled before maturity, the appropriate forward T.T. rate shall be applied. 3. Exchange difference not exceeding Rs. 50/- shall be ignored by the contracting bank. 4. In case a purchase contract becomes overdue, due to the banks inability to accept the bills tendered as approved bills and the exporter takes up the contract by tendering other approved bills or cancels the contract within a reasonable time, such cancellations shall be governed by IV (a), (b) and (c) above. 5. Notwithstanding the fact that the exchange contract between the customer and the bank becomes impossible of performance, for whatever reason, including Government prohibitory order, the exchange contract shall not be deemed to have become void and the customer shall forthwith apply to the bank for cancellation subject to provisions of paras IV (a), (b) and (c) above. 6. 1. In the absence of any instructions from the customer, vide para a(b) contracts which have matured shall on the 15th day from the date of maturity be automatically cancelled. In case the 15th day falls on a Saturday or holiday, the contract will be cancelled on the next succeeding working day. Note:

The customer cannot effect delivery extend or cancel the contract after the maturity date and the procedure for automatic cancellation on the 15th day from maturity date should be adhered to in all cases of default by the customer. 2. Swap cost, if any, shall be recovered from the customer under advice to him. 3. In case, the contract is ultimately cancelled, the customer will not be entitled to the exchange difference, if any, in his favour, since the contract is cancelled on account of his default. 4. In case of delivery subsequent to automatic cancellation the approapriate current rate prevailing on such delivery date shall be applied. 5. Swap cost 1. Swap cost to be recovered from customers. 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 frontended in the discretion of banks. 2. Swap Gain Payment of swap gain to the customer will normally be made at the end of the swap period. 6. Outlay and inflow of funds 1. Interest at not below the prime lending rate of the respective bank on outlay of funds by the bank 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 and early realization of export bills negotiated. The amounts 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. 2. If such a swap leads to inflow of funds, the amount shall be arrived at as above and interest shall be paid in the discretion of banks to the customer at the appropriate rate applicable for term deposits for the period for which the funds remained with the bankdeposits for 180 days (presently 8% per

Rule 9- Schedule of Charges

1. Exports Type of Transaction 1. Bills purchased/ discounted/ negotiated 1. Processing charges for each foreign currency export bill 2. Processing charges for each Rupee export bill 3. For forwarding export documents on which no collection commission or exchange accrues to the bank (i.e. from one bank to the other in India). Charges Minimum Rs.100/(for bill upto US$ 5000/- or equivalent) Minimum Rs.500/(for bill over US$ 5000/- or equivalent) 0.25% minimum Rs.100/- per bill

4. Reimbursement charges under Letter of Credit. 5. Forwarding export documents to another bank for negotiation to whom L/C is restricted by the bank which has Booked the forward contract. 6. For joining customers guarantees and giving guarantees on behalf of customers in respect of discrepant documents 7. In case of overdue export bill purchased/ discounted/ negotiated where proceeds are not received within the stipulated period of 6 months. 1. Applicable also in case of deferred exports if the relative export proceeds are not received within the stipulated period. 2. Not applicable in case of bills drawn on countries with externalisation problems but paid in local currency and the exporter has obtained necessary approval from Reserve Bank of India. 2. Collection Bills 1. (Both foreign currency and rupees export bills) 1. Equivalent of uptoRs.50,000 2. Equivalent of Rs.50,000 and above but unto Rs.2,00,000. 3. Equivalent of Rs.2,00,000 and above 2. Overdue export bill sent for collection Rs.250/- per quarter where proceeds are not received within 6 months. 1. Applicable also in case of deferred exports if the relative proceeds are not received within the stipulated period. 2. Not applicable in case of bills drawn on countries with externalization problems but paid in local currency and the exporter has obtained necessary approval from Reserve Bank of India. 3. Where proceeds of bills are received through a bank other than the collecting bank at the instance of exporter/ overseas buyer additional charge. 3. Certificates Issuance of certificated/ attestations in respect of export transactions. 4. Registration of export contracts.

Minimum Rs.100/-

Minimum Rs.500/0.20%

0.25% minimum Rs.50/Rs.250/- per quarter

0.25% minimum Rs.25/0.125% minimum Rs.125/0.0625% minimum Rs.250/Rs.250/- per quarter

5. For advance against duty drawback Entitlements. 6. Export Letter of Credit 1. Advising letter of credit 2. Advising amendment 3. Confirmation charges 1. Commitment charges 2. Usance charge Note: Where the amount of a L/C exceeds Rs.8 crores (or in equivalent foreign currency) banks will recover charges at their discretion subject to minimum charge recoverable on Rs.8 crores. 4. Transfer of letter of credit of transfer. 5. Acceptance commission for accepting usance drafts to be drawn on and accepted by banks in India.

0.125%

Rs. 20/- flat. (Banks may waive this Charge in their discretion) Minimum Rs.100/per registration & Minimum Rs.50/- for every amendment. 0.50% with a minimum of Rs50/-.

Minimum Rs.200/per letter of credit. Minimum Rs.100/per amendment 0.15% for every quarter or part thereof 0.15% for bills upto 10 days sight. 0.30% for bills over 10 days and upto 3 months sight. 0.30% for the first 3 months plus 0.0750% for every months in excess of three months, for bills over 3 months sight.

Minimum Rs.200/for each advice 0.15% per month 2. Imports Types of Transaction 1. 1. Opening of Import Letters of Credit 1. Commitment charge 2. Usance charge Charges 0.15% for every quarter or part thereof. 0.15% for bills upto 10 days sight. 0.30% for bills over 10 days and upto 3 months sight 0.30% for the first 3 months plus 0.0750% per month in excess of 3 months for bills over 3 months sight. Note: Where the L/C amount exceeds Rs.8 crores Normal rate as above. One-half of the above rates. One-fourth of the normal rates. Minimum Rs.100/-

On the first Rs.8 crores On the next Rs.8 crores On the balance 2. Where the L/C amount is less than Rs.10,000/2. Amendments to L/C 1. Extension of validity of L/C within 3 months period (for which commitment charge has been collected) 2. Where extension of validity of credit goes beyond 3 months (for which commitment charge has been collected upto 3 months). 3. In case of enhancement of value of credit

be collected as stated under 1.A. (a & b) above. 4. In case of amendment extending the tenor of the Bill of Exchange. 5. Amendment other than extension of validity or enhancement of tenor of the Bill of Exchange. 6. For revival of expired L/Cs within 3 months from date of expiry. 3. Countersigning bills of exchange drawn on importers under L/Cs 4. Revolving Letters of Credit 1. Commitment charge on the maximum amount of drawings permitted at any one time during the period from date of establishment of L/C to the last date of validity. (2) On each amount reinstated from the date of reinstatement to the date of subsequent reinstatement or the last date of validity of L/C. (Minimum charge for reinstatement Rs. 100/-). 2. Usance charge (2) 0.30% for the bills over 10 days sight and upto 3 months sight. (3) 0.30% for the first 3 months plus 0.0750% for each month in excess of 3 months for bills over 3 months sight. 5. For establishing L/Cs/ Guarantees on Deferred payment terms covering import of goods. Note: If the Deferred Payment Guarantee is backed by a counter guarantee of the Government of India the commission recoverable will be at 0.0625% instead of 0.40% per quarter. 6. Amendments 1. Extending validity period within Commitment and usance charge from the Date of expiry to the validity date of the Minimum Rs.250/-

Fresh commitment charge of 0.15% per quarter or part thereof, minimum Rs.250/-

Both commitment and usance charge will

Appropriate additional usance charge.

Minimum Rs.250/-

3 months (for which commission has already been collected). 2. Where validity period is extended beyond 3 months period part thereof. 7. Commission on import bills (under L/C) 1. Foreign currency bills at the time of crystallization or retirement whichever is earlier. 2. Import bills received under Letter of Credit on which no exchange benefit Accrues to opening bank. 3. 1. Rupees bills at the time of retirement. 2. If bills are not retired within 10 days from date of receipt of bills in case of demand bills and on the due date in case of usance bills. 8. Commission on import bills (not under L/C) 1. Where exchange margin is earned on a foreign currency bill. 2. On each bill drawn in Rupees and on each bill drawn in foreign currency on which no exchange margin accrues. 3. On Rupee import bills received on collection basis exceeding Rs. 1 crore banks shall charge commission as under: 1. On the first Rs. 1 crore 2. On the amount which is in excess of Rs. 1 crore. 4. On bills/ documents covering project imports under inter-government aid scheme (including those financed by international agencies like World Bank IMF, ADB, etc.) where no letters of credit are opened, commission shall be collected at a flat rate irrespective of the amount of each drawing at 0.03125%. 5. In case of documents received by

0.085% per month with a minimum of 0.25% for the tenor of the bill in addition to usance and commitment charges as above.

(1) 0.15% for every quarter or part thereof

(1) 0.15% for bills upto 10 days sight

0.40% per quarter or part thereof.

Minimum Rs. 400/-

importers directly from overseas exporters, commission at half the rates applicable for import bills for collection should be recovered at the time of effecting the remittance. 9. If the overseas remitting bank or the exporter abroad requests proceeds of collection bills to be remitted in a currency other than the currency of the bill. 10. Local Payments Local payments out of proceeds of import bill such as payments in connection with barter business or payments to cases of need etc. 11. Parcels When the value of the parcel exceeds Rs. 1 lac and advalorem charge based on Rental value and insurance cost will be Collected on a monthly basis.

Further commission at 0.40% per quarter or

0.15%

0.25%

Additional 0.15%

0.25% Minimum Rs. 50/-

0.50% Minimum Rs. 50/-

At full rates as specified above At one-half of the rate specified above.

Additional commission of 0.25%

Minimum Rs. 250/3. Inward Remittances 1. Type of Transaction Exchange and Interest rates applicable 1. Encashment of TTs/ Purchase of MTs/ DDs in respect of which cover has been Received in Nostro Accounts. 2. Encashment of TTs/ Purchase of MTs/ DDs where reimbursement is to be obtained in cover by drawing demand drafts on overseas branches or correspondent banks. 10 days. 3. Encashment of customers personal cheques, demand drafts, international money orders, bankers pay orders, payable abroad. Customer at domestic commercial rate of interest. 2. Clean Payments 1. Effected under instructions from foreign correspondents. 2. Where the inward remittance has to be be paid in foreign currency by way of a demand draft/ mail transfer/ payment order/ telegraphic tansfer. 3. Certificates 1. For issuing bank certificates on security paper in respect of clean remittances

Current TT buying rate (noexchange margin or interest to be charged).

Current TT buying rate plus exchange margin of 0.125%. Interest to be recovered separately from the customer at the rate of 15% per annum for a transit period of

TT buying rate plus exchange margin of 0.15%. Interest to be recovered separately for a transit period of 15 days from the

from abroad and/ or for encahment of foreign currency travelers cheques/ foreign currency notes. 2. Banks own letter head (where Rupee value of inward remittance does not exceed Rs. 5,000/-)

Rs. 25/- (Banks may waive this charge in Their discretion)

0.10% Minimum Rs. 10/-

Rs. 25/- per certificate. (Banks may waive this charge in their discretion)

Rs. 20/- per certificate. (Banks may waive this charge in their discretion) Charge 4. Outward Remittances Type of Transaction 1. On all foreign currency outward remittances not being proceeds of import bills. 2. Rupee remittances 1. Upto s. 10,000/2. Over Rs. 10,000/Exchange and Interest rates applicable Minimum Rs. 100/-

0.25% minimum Rs. 10/0.125% minimum Rs. 25/-

5. Clean Instruments for collection Type of Transaction On all clean instruments sent abroad Exchange and Interest rates applicable 0.25% minimum Rs. 10/- (Banks in their Discretion may waive the commission for Charge

Type of Transaction

6. Merchanting Trade- (If foreign currency remittances are received in advance by the export from the overseas buyer and the funds are held in nostro account at the specific request of the exporter) Commission a. On import bills received under back- to-back L/C. b. On export bills drawn by merchant exporters. 7. Forward Contracts For booking sale and purchase contracts For each request for early delivery, extension or cancellation. 8. Foreign currency travelers cheques Sale of foreign currency travelers cheques 1. Commission on Rupee equivalent value of travelers cheques sold to Indian residents 2. Commission on foreign currency travelers cheques issued against foreign currency remittance at the request of the beneficiary. Minimum Rs. 250/- per contract Minimum Rs. 100/- + swap cost and Cancellation charges where applicable.

0.25% 0.25%

Not exceeding 1%

0.25%

9. Guarantees 1. Guarantees to public authorities except item b below. 0.15% per month with a minimum of 0.25% for the specified period of liability plus an additional six months. If the guarantee is redeemed (i.e. returned duly cancelled) before the expiry of the additional six months, the additional charge may be refunded proportionately.

2. Guarantees given to public authorities for export of goods ex-bonded 0.15% per month with a minimum of 0.25% warehouses for the specified period of liability. without payment of excise duty. 3. For countersigning of Llyods General Average Bond and Guarantee 0.15% per month with a minimum of 0.25% on the amount which would be required as a 4. Guarantee in favour of

shipping companies/ agencies for clearance of goods pending production of bill of lading relating to imports under L/Cs opened by the guarantor bank. 5. Guarantees covering missing bills of lading relating to imports not covered by d above. 6. Export performance guarantees for projects exports which

Cash deposit. Minimum Rs.200/- per guarantee

0.25% at the time of issue of the guarantee. If the guarantee remains current beyond three months additional commission of 0.15% per month or part thereof as long as the guarantee remains current thereafter. 10. In the case of guarantees covered by projects exports which include ECGC counter guarantees, banks shall collect commission as well as ECGC premium at the under-noted rates and remit the collected premium to the ECGC. ECGC Counter guarantees Per annum 75% cover Upto Rs.1 crore 0.80% 90% crore Upto Rs.1 crore Excess over Rs.1 crore ECGC Premium w.e.f. 1.1.82 Bank Commission w.e.f. 13.7.81 Total Cost to exporters

1. Bid-bonds 2. Bonds for earnest money 3. Guarantees for advance payment made by foreign buyers to Indian exporters/ contractors

0.55% 0.30% 0.95% 0.95%

1.35% 1.10% 0.45% 0.25%

Excess over Rs 1 crore

1.40% 1.20%

11. 12. In case of guarantees issued against 100% counter-guarantees issued by Government of India, bank commi-

7. Export performance guarantees, Bid bonds etc. (other than for Project Exports) 8. Export performance guarantees covering export obligations in terms of Import Trade Control Regulations.

ssion shall be as under: Upto RS. 1 crore: 0.45% p.a. Excess over Rs.1 crore: 0.25% p.a. 13. In case of guarantees issued against cash deposit to the extent of banks liabilities commission shall be charged at the rate of 0.50% per annum 14. In case of guarantees which are not covered by cash deposits or ECGC/ Government of India counter guarantees, commission shall be charged at the rate of 1% per annum. 15. In case of bid bonds 25% of comm.ission collected at the time of issue. If the bid materia-lises the balance 75% commission shall be collected. If the bid gets frustrated there will be no refund to commission collected. 0.085% per month with a minimum 0.25%

9. All other guarantees 0.085% per month with a minimum 0.25% for the specific period of Liability. In case of early redemption of the guarantee a minimum of 50% of the commission for the unexpired period i.e. from the date of redemption to the expiry date may be refunded. 0.15% per month with a minimum of 0.25% for the specified period of liability. Rs.250/10. Out of pocket expenses such as telex/ cable/ correspondent banks charges. Actuals will be recovered 11. Stamp Duty Will be recovered at the rates prescribed by Government from time to time.

Minimum charge for any guarantee

Note 1: In addition to the above schedule of charges, interest wherever applicable is payable as mentioned in the various Rules. Note 2: the charges included in the above schedule of charges shall be collected irrespective of whether a margin is obtained or not and shall not refunded or remitted in any event except a genuine mistake in collecting them on the part of the bank, or specially permitted in the Rule itself.

Rule 10: Business through Exchange Brokers (Old Rule 3 reproduced)

1. Exchange brokers When banks make contracts through brokers, such contracts 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 banks to Munshis or 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. Direct dealings between banks, who are Authorised Dealers in foreign exchange, are permitted in centers which are serviced by recognized borkers associations, provided that the minimum lots for such direct deals shall be Pond Sterling 250,000 or US Dollar 500,000 or equivalent in other currencies. (AR 1.85 of 2.1.1985). In centers which are not serviced by recognized brokers associations, banks, who are Authorised Dealers in foreign exchange, are permitted to deal directly without any stipulation as to a minimum amount. Any accredited broker who knowingly concludes any exchange business contrary to the rules of this Association or to the intent of those rules may have his recognition withdrawn in consultation with the recognized brokers association in that center and no Authorised Dealer shall transact business with him thereafter. It shall be the duty of each Authorised Dealer and of a recognized brokers association to report to the Associations committee for the center concerned the name of any broker who suggests or proposes any business which is contrary to the rules of this association. (see code of conduct for brokers/ bankers) 2. Exchange Brokers Association

In Bombay, Calcutta and Madras accredited brokers must be members of Exchange Brokers Associations which are recognized by this Association or must be brokers specially recognized by the Managing Committee in the case of Bombay and by the respective local committees in the case of Calcutta and Madras and must have made the required deposit of Rs. 10,000/- if in Bombay or Calcutta or Rs. 5,000/- if in Madras, in cash or in Government Securities, of equivalent market value with recognized Exchange Brokers Association or with the Association in the case of specially accredited brokers. Should an accredited broker wish to tender a fixed deposit receipt in lieu of cash or Government Securities required, a fixed deposit receipt, together with a suitable letter of lien may be accepted provided that the fixed deposit has been issued by an Authorised Dealer in foreign exchange and that the term of the fixed deposit is less than two years. The recognized Exchange Borkers Associations must approve and notify to this Associations local committee at the center concerned all changes in their membership, in the composition of their member firms, and in the persons authorized to call on banks. Such advices must emanate from the recognized Brokers Association address either this Association or any of its Members on these matters direct. Disputes which may arise within the membership of any recognized Brokers Association must be settled by that Association among themselves. Such disputes may not be referred to this Association nor to any of its Members for arbitration or conciliation. 3. Recognition of brokers: (This authority withdrawn vide Circular No. Mg. Com 27184 dated 9th October 1984.) Detailed arrangements for the recognition of the Exchange Brokers Association, or individual brokers where no such association has been formed, or where individual brokers are specially recognized, shall, at each center, be decided upon by the Committee at that centre. 4. Exchange brokers contracts All contracts must bear the clause: Subject to the Rules and Regulations of the Foreign Exchange Dealers Association of India. No exchange contract shall be made with a broker as a principal or in a name known to be used by the broker for the purpose of jobbing. A bank must refuse to give delivery to or take delivery from any party other than the declared principal or a bank. 5. Exchange brokerage payable by banks: [AR 1/89 dated 30.6.89] [ECS. 690/86 (Spl.)-88/89 dated 4.4.89] Type of Business Rate of brokerage (payable both by selling and buying banks) (I) Spot & outright forward business against the Rupee: All Currencies 0.007% i.e. 7 paise per Rs. 1000/- (II) Swap transactions in foreign curr- encies against the Rupee: i. Short swaps i.e. where the delivery of the farther leg is due within the sport date: Rs. 500/- per US Dollar one million or equivalent for each leg of the transaction. ii. Long swaps (i.e. other than Short swaps): All Currencies 0.0105% i.e. 10.50 paise per Rs. 1000/- (III) Switches (i.e.

sales of foreign currencies against foreign currencies spot or outright forward). Rs. 650/per US Dollar one million or equivalent. (IV) Swaps in foreign currencies against foreign currencies (irrespective of period). Rs. 250/- per US Dollar one million or equivalent.

Rule 11- Inter-bank TT-Settlement of Inter-bank TTs and Despatch Preamble (Old RULE 5 reproduced)
In view of the importance of this Rule to toning up accounting accuracy and nostro reconciliation systems in banks, Reserve Bank of India have, whilst giving approval to the amended version of FEDAI Rule 5 made the following observations:1. Dealing in the interbank market is generally for large value items and it is in the interest of the banking system that claims are made promptly, if funds are not received in time, and settlements effected. International banking situation is presently not in good shape and every care must be taken by member banks to keep their monitoring system for execution of contracts and for watching receipts of countervalue funds in top gear. It is therefore absolutely necessary for banks to reconcile all dealing items and other large value items within a period of 24/48 hours by demanding cable/ telex confirmation regarding receipt of expected credits in nostro accounts from the correspondents maintaining those accounts but in any event not later than a maximum period of 15 days. In this context you would observe from amendment proposed to Rule 5(III) (D) that FEDAI itself has recognized 5 calendar days as adequate period for identifying and settling interest claims. Banks should not lose sight of the credit risk aspects emphasized in para 3.1.3 of the Confidential booklet Guidelines for Internal Control over Foreign Exchange Business. The requisite monitoring system therefore applies for not only dealings with overseas banks but also to banks in India whose correspondent banking arrangements are varied. 2. As regards Rule 5(III) (B) & (C) it is very necessary that discrepant/ default items should be quickly identified and effectively settled between member banks within a reasonable time. This is considered necessary also for toning up the reconciliation system in member banks. Notices of non-receipt of funds in the nostro account must be followed up by cable or telex with their correspondents. Banks should not wait for receipt of statements of nostro accounts for reconciliation of such items because in that event corrective action will take a much longer time. Reconciliation may be treated as a final cross check and not a primary investigation step. 3. As opposed to virtually compulsory settlement of interest claims by the method of back valuation the buyer bank has been given the option of acceptance of back valued credits vide Rule 5 (III) (D). 4. All kinds of defaults in the delivery of countervalue currencies in cross currency deals i.e. dealing in a foreign currency against another foreign currency between Authorised

Dealers in India, fall within the ambit of the provisions of Rule 5, thus, making redundant a separate sub-rule for that purpose. 5. As regards Rule 5 (VI) the emphasis shall be that bank is should make proper enquiries into their books before meeting interest claims thereby resulting in the toning up of general efficiency in banks. 6. The attention of Authorised Dealers is invited in this connection to Reserve Bank of India Circular No. ECS 113/(Gen)-83/84 dated 25th July 1983 issued to the Chairmen/ Chief Executives of Authorised Dealers earlier.

Rule 12 Inter- bank TT- Settlement of Inter-bank TTs and Despatch (Old RULE 5 reproduced)
1. GENERAL 1. Authorised Dealers should ensure smooth settlement of their inter-bank transactions. The buyer-bank shall arrange payment of the Rupee equivalent on the settlement day (i.e. date of delivery) and the seller-bank shall lay down foreign currency funds simultaneously on the same day. Rupee payment shall be arranged by delivery of cheques drawn on the Reserve Bank of India unless otherwise specifically agreed to between the banks in advance. Seller-bank shall arrange delivery of the foreign currency funds at the contracted foreign centre by telex, cable or other expenditious means of communication without any additional cost to the buyer-bank and the buyer-bank shall advise their Head Offices/Branches/Correspondents to receive the concerned amounts on their account on the contracted dates. In their own interest banks shall mention in their telexes or cables the Value-dates for receipt/ delivery of the foreign currency funds in terms of their TT Sale/Purchase contracts. 2. In case the seller-bank is unable to substantiate to the buyer-bank that it had intended to effect proper delivery on the settlement day, thereby amounting to deliberate non-delivery of funds, the seller-bank shall pay to the buyer-bank a penalty as decided finally by the Managing Committee of the FEDAI or any other Sub-Committee specially appointed for the purpose by the Managing Committee. The penalty as stated above shall be in addition to the interbank claim of the buyer-bank. 3. In case claims are not settled within 2 months from the date of lodgement of claim, the matter shall be referred to the FEDAI for a final decision which shall be binding upon the banks concerned. 4. Use of incorrectly paid funds (undue enrichment) In line with the international custom, a bank which has received foreign currency funds, not intended for its accounts, shall be liable to compensate the bank which has been out of funds by either : i. Returning the funds with proper value OR ii. Paying interest at the overdraft rate to the bank out of funds. 5. In case the seller-bank delivers foreign currency funds to the nostro account other than the notified account of the buyer-bank, that bank shall on request in

writing, from the seller-bank accept adjustment of funds between the accounts subject to levy of interest and miscellaneous expenses, if any. 6. In case the seller-bank delivers foreign currency funds to a correspondent bank for account of a branch of the bank other than the one intended, the buyer-bank shall adjust the foreign currency funds subject to recovery of any miscellaneous expenses. The seller-bank shall not be liable for interest after the date of delivery of funds. 2. TIMINGS 1. Written instructions of buyer-banks, regarding their take-up of interbank TT transactions in the permitted foreign currencies must be in the permitted foreign currencies must be in the hands of the seller-banks not later than one hour before the close of the general banking hours of the latter. Seller-banks have the option of refusing to deal with applications for TT sales or applications for take-up of the forward fixed date sale contracts received after such banking hours. ( Refer to Circular Letter No. 17/86 dated 17th March 1986). 2. In the case of interbank forward contracts which specifically allow option of delivery, the buyer bank shall take-up such forward contracts after giving 2 clear days notice to the seller-bank and shall deliver Reserve Bank of India cheques on the date of take-up as stated in the advance notice to ensure that the Rupee as well as the foreign currency funds get transferred on the same day. Banks shall take effective steps to avoid cash transactions in their interbank dealings and establish the practice of dealing among themselves on spot, value next day or forward basis. On Saturdays, no interbank TT shall be dispatched. Delivery under a spot, value next day or forward contract shall be effected on the stated delivery date. In case the stated delivery date is later declared a holiday at the overseas centre, the delivery shall be effected on the next business day. 3. Known holiday If at the time of conclusion of a forward contract, the fixed date of delivery or the last date of option is a Saturday or a known holiday either at the centre in India where the Rupee funds are to be settled or at the centre where the foreign exchange funds are to be delivered, the contract shall be deliverable on the day immediately preceding the Saturday or the holiday provided that day is open for business at both the centers. 4. Subsequently declared holiday In case the fixed date of delivery happens to be declared later a holiday either at the centre in India where the Rupee funds are to be settled or at the centre where the foreign exchange funds are to be delivered, the contract shall be deliverable on the next working day when both the centers are open for business. The same principle shall apply in the case of contracts which allow option of delivery if the last date of option of delivery is declared a holiday after the date of contract. 3. Settlement of interest claims on the delayed delivery of Foreign Currency Funds

1. In the event of late delivery of foreign currency amount of an interbank TT at the stated overseas centre, interest for the number of days of the delay, REGARDLESS OF THE CAUSE OF THE DELAY, shall be payable by the seller bank as per Sub-Rules (B), (C) and (D) below, as the case may be. 2. In the event of late delivery in London, interest for all overdue period is to be paid by the seller-bank in India at 2 % over the Barclays Banks Base Rate ruling on the day the remittance should have been received in London in the buyer-banks nastro account provided the buyer-bank lodges the interest claim within 30 days from the day on which the amount should have been received at the overseas centre. In case the buyer-bank lodges the claims after expiry of the said period of 30 days, interest at the applicable rate shall be paid for a maximum period whichever is less. 3. In the event of late delivery at centers other than London, shall be paid in India at TWO PERCENT over the PRIME RATE of the banks specified below at the respective centers, ruling on the day the delivery should have been made PROVIDED the buyer-bank lodges the claim for interest within 30 days from the day the delivery should have been received abroad:Countries Specified Banks U.S.A. Citibank N.A. France Credit Lyonnais Canada Bank of Montreal Federal Republic Of Germany Deutsche Bank Japan Bank of Tokyo Belgium Societe General de Banque Banque Holland Amsterdam Rotterdam Bank Switzerland Swiss Bank Corporation In case of transactions in currencies of countries not mentioned above, the sellerbank shall pay interest at 2% over the notional overdraft rate payable to the buyerbank. In case the buyer-bank lodges the claim for interest after expiry of the aforesaid period of 30 days, interest at the applicable rate should be paid for a maximum period of 60 days only or the actual overdue period, whichever is less. 4. Option of acceptance of back valued credits by buyer-bank in the event of late payment. In case where the seller-bank has delayed payment and is willing to rectify the situation by offering to deliver funds on a value dated basis, the buyer bank shall have option to accept such funds on a value dated basis provided that such funds are delivered within 5 calendar days from maturity of the contract. The buyer bank shall have no right to claim interest in India in terms of (B) and (C) if it accepts back valued credits. For funds which are delivered to the buyer-bank beyond 5 calendar days from

maturity of the contract, the buyer-bank can still exercise its option to accept eithera. Value dated funds OR b. i. Claim interest as per (B) and (C) above ii. Claim interest in India, at 2% over the ceiling rate of interest in the inter-bank money market as directed by I.B.A., on the Rupee equivalent of the foreign currency amount at the Exchange Rate stated in the contract, whichever is higher. 4. Non- delivery of Foreign Currency In the case of non-delivery of foreign currency funds, the seller-bank shall not seek protection under clause III above and shall deliver foreign currency funds within 48 hours of the receipt of the notification from the buyer-bank. Such notification should be sent by the buyer-bank not later than 15 days, from the contracted date of delivery. The seller-bank in such a case shall be liable to pay interest for the full period of delay. In case the foreign currency funds are delivered after a delay of 45 days, from date of demand, the seller-bank shall also become subject to the provisions of Clause I.B. as above. 5. Delay in payment of Rupee equivalent of inter-bank TTs in foreign currencies. In the event of late payment of the equivalent Rupee funds by the buyer-bank, in respect of inter-bank TT transactions in foreign currencies, the buyer-bank shall pay interest for the relative period of delay at the minimum lending rate of interest Reserve prescribed by Banks of India from time to time. Interest shall be paid for the period from the date the Rupee funds should have been paid by the buyer-bank to the date the amount was actually paid, PROVIDED the seller-bank lodges the relative interest claim with the buyer-bank within 15 days from the date the Rupee amount should have been paid to the seller-bank. In case the seller-bank fails to lodge the claim within the said period of 15 days, the seller-bank shall be entitled to receive interest for the maximum period of 30 days only notwithstanding the fact that the actual delay period might have been much higher than the said 30 days. 6. Period for settlement of interest claims in Rupees When a bank is served with the notice of interest claim, it must settle the claim within 21 days of receipt thereof by making proper enquiry into its books and investigating its records. Payments of interest claim cannot be withheld for more than 21 days on the plea that enquiries are being made in the matter of the interest claim. 7. The principle of set-off in respect of the settlement of inter-bank foreign currency transactions. Set-off of interbank transactions in foreign currencies without actual transfer of foreign currency/Rupee funds and settlement of the transactions merely by transfer of the

exchange difference between the two opposite foreign exchange transactions is prohibited. Set-off of dealings with Overseas Branches/Head Offices/ Correspondents, however, are also prohibited. Note: The following sections of the Rule as approved by the Reserve Bank of India require further clarifications. Until it is received by FEDAI and circulated among member banks those sections are held in abeyance:Note Rule 5(1) (D) [undue enrichment] Rule 5(III) (D) Option being permitted in case the delay in delivery of foreign currency funds is within 5 days from the date of maturity of the contract.

Rules-13, Abolition of Sterling Rates Schedule

Abolition of sterling Rates Schedule, Delinking of Interest Element from Exchange Rates and Accounting Procedures for Import and Export Transactions (AR Circular No. 3/86 dated 7th June 1986) 1. Introduction In implementation of the instructions issued by the Reserve Bank of India for abolition of Sterling Rates. Schedule etc., vide A.D. (M.A.Series) Circular No. 21 of 1st November 1983, FEDAI has issued these Guidelines to member banks. Instructions relating to maximum spread between TT purchase and sale rates for merchant transactions in Pound Sterling will be issued by the Reserve Bank at the appropriate time i.e. before 1st January 1984 and member banks are, therefore, requested to read the instructions contained herein in conjuction with future directives of the Reserve Bank. As already emphasized in the aforesaid circular of Reserve Bank , member banks should ensure, that the Guidelines prepared by the FEDAI are strictly followed by the branches of member banks while handling merchant transactions. Few examples have been worked out and given in Annexures IV and V to the Guidelines not included) in order to assist members banks to train their staff in adopting the new system of exchange rate quotations that will come into operation with effect from 1st January 1984. The examples given are not necessarily exhaustive. Member banks are, therefore, requested to conduct trial exercises themselves in order to prepare their internal procedures for implementation of the new system. The Guidelines comprise of 3 parts: 1. Basis for calculation of merchant rates for all currencies.

2. Segregation of interest element from exchange rates for bill purchase transactions and calculation of interest on export bills,etc. 3. Accounting procedures for import and export bill transactions including delinking of the relative foreign currency amounts from currency positions. PART I 2. Basis for calculation of merchant rates for all currencies : 2.1 The merchant rate quotations will be derived by each Authorised Dealer from the BASE RATES BASE RATES to be applied for arriving at Merchant purchase and sale rates shall be derived from the ongoing Spot Market Rates for each of the currencies. In arriving at Merchant spot TT sale and purchase rates derived from the BASE RATES, each Authorised Dealer shall ensure that the maximum spread between the two TT rates shall be within the range prescribed by the RBI from time to time. The Base Rate may be worked out daily by individual banks Name of currency U.K.Pound Sterling U.S. Doller Deutsche Marks Japanese Yen French Francs Swiss Francs Dutch Guilders Australian Dollars Other currencies Maximum spreads between customer rates for ready Clean TT business from the mean TT rate (taking Both sides together) Current Revised Max Spreads Max Spreads 0.75% 1.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.00% 1.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

No limit for No limit the present, for The but Ads present, shall keep but Ads the rate shall keep spreads the Rate to the spreads minimum, to the

3. Authorised Dealers will, however, be free to quote rates to customers which are better than those warranted by the spread limits. 2.2 Exchange margins have been made flexible and Authorised Dealers may offer rates to customers depending upon the business, etc. The following exchange margins on the base rates have been prescribed :Transaction Exchange Margin

1. TT purchase 0.025% to 0.080% 2. Bills purchase 0.125% to 0.150% 3. TT sale 0.125% to 0.150% 4. Bills sale over the Merchant TT rate 0.175% to 0.200% 4. Transaction Exchange Margin 1. TT purchase 0.025% to 0.080% 2. Bills purchase 0.125% to 0.150% 3. TT sale 0.125% to 0.150% 4. Bills sale over the 0.175% to 0.200% Merchant TT rate 5. For calculation of merchant rates Authorised Dealers shall apply the following procedure : PURCHASE 3.1 Merchant Spot T.T. Purchase Rate i. Arrive at the BASE RATE ii. To the above BASE RATE add the appropriate exchange margin. 3.2 Merchant Spot Bill Buying Rate i. Arrive at the BASE RATE ii. To the above BASE RATE add the appropriate exchange margin. a. Add/deduct on-going forward discount/premium depending upon the transit period of the bill such as sight, usance and grace period, etc. b. Add appropriate exchange margin. 3.3 Merchant Forward T.T. Buying Rate i. Arrived at the BASE RATE ii. To the above BASE RATE a. Add/deduct on-going forward discount/premium depending upon the delivery period of the bill. b. Add appropriate exchange margin. 3.4 Merchant Forward Bill Buying Rate i. Arrive at the BASE RATE ii. To the above BASE RATE a. Add/deduct on-going forward discount/premium depending upon the delivery period of the bill, transit period, tenor of the bill such as sight, usance and grace period, etc. 3.5 The Merchant Purchase Rates so arrived shall not be worse than those derived from the RBI buying rates in respect of currencies in which the RBI provides spot and forward cover. 3.6 Recovery of interest on bill transactions at the time of purchase :

The Rupee equivalent of the foreign currency bill amount shall be payable to the customer on the basis of the Rate arrived at as above. Simultaneously, interest shall be recovered on the Rupee amount, from the customer by applying the appropriate interest factor as stated in the table attached vide Annexure 1. (Annexure not attached since factor varies as and when rates of interest are changed by Reserve Bank of India). 3.7 Purchase of Rupee Bills In the case of Rupee bill purchases the entire bill amount shall be first payable to the customer. Simultaneously interest shall be recovered on the Rupee amount from the customer by applying the appropriate interest factor. 6. SALE 4.1 Merchant Spot TT Sale Rate : i. Arrive at the BASE RATE ii. From the above BASE RATE deduct appropriate exchange margin. 4.2 Merchant Spot Bill Sale Rate From the merchant TT Sale rate as determined above, deduct appropriate exchange margin. 4.3 Spot Merchant Sale Rates for TT and Bill Transactions shall not be worse for the customer than those derived from RBIs Spot Selling Rate for Pound Sterling as the basis. 4.4 Merchant Forward Sale Rate For quoting Merchant Forward Sale Rates for import TT/Bill transactions, Authorised Dealers shall base their quotations on the appropriate cover rate from which appropriate exchange margins for TT and /or Bills as mentioned above shall be deducted. PART II 7. Delinking of Interest Element from the Exchange Rates for Bill Purchase Transations 5.1 To fall in line with the international practice, Authorised Dealers shall effective from 1st January, 1984, quote rates for export bills on the basis of on-going market rates . The exchange margins are to be loaded in the rate, quoted to the customer. Interest for the entire notional transit period, usance, grace period (where applicable) shall be recovered simultaneously at the time of purchasing, discounting or negotiating the bill by applying the appropriate interest factor on the Rupee amount of the bill. The procedure to be followed shall be as under :1. Arrive at the Rupee equivalent of the foreign currency amount at the appropriate buying rate. 2. Credit the Rupee amount to the customers account. 3. Simultaneously recover the interest amount and credit it to Interest on Export Bills Account. 4. Overdue interest, where applicable, shall be recovered separately.

Note : In case of payment to a party, not being a customer of the payee bank, only the net amount shall be payable. Full details of the interest and other deductions shall be Advised. 8. General 6.1 The spreads between Spot T.T. Sale and Spot T.T. Purchase rates for all currencies shall be in compliance with RBI directives issued from time to time. 6.2 Rounding off the rates will be as per FEDAI Rule 4 (III) (d) vide Annexure III. (Since amended as per our Circular AR No.1/88 dated 21st November 1988). 6.3 All Authorised Dealers shall keep a record of :a. The BASE RATES for the purpose of arriving at the merchant rates, and b. Any changes made in the BASE RATES during the day. Such record shall be made available for audit. 6.4 The time of executing all merchant transactions shall be recorded so as to establish the application of the correct prevalent rates. 6.5 All Authorised Dealers shall correctly apply the forward/usance margins and exchange margins before quoting merchant rates,etc. 6.6 In case of forward contracts for export bills, the contract rate shall be worked out without loading interest factor and interest for the period (transit,usance,grace)shall be recovered at the time of negotiation/purchase/discount. The recovery of interest at the time of purchase/discount/negotiation shall not be lost sight of. 9. Accounting Procedures for Import and Export Bill Transactions 7.1 To bring uniformity in the handling of import bills under letters of credit and export bills purchased/negotiated/discounted, Authorised Dealers shall follow the procedure given below:7.2 Import Bills i. Sight Import Bills received under letters of credit and conforming to credit terms, may be held in foreign currency for a maximum period of 10 days from the date of receipt of document by the bank. ii. In case of non-payment by the drawee within 10 days as above, the importers liability on the foreign currency bill shall be crystallized by converting the foreign currency amount into Rupees at the B.C. Selling Rate prevailing on the 10th day or the Forward Exchange Contract Rate where applicable. iii. Authorised Dealers shall keep a proper record of the date of receipt of documents. 7.3 The Authorised Dealers shall keep a proper changes in their L/C agreement/ applications to give effect to the above.

7.4 In case the 10th day is a holiday or a Saturday, the importers liability in Rupees shall crystallise on the next following working day. 7.5 Authorised Dealers shall carry swap costs upto the 10th day on their own account and shall not recover such costs from the customer. 7.6 Authorised Dealers shall charge interest at the rate as prescribed by RBI for advances to non-priority sectors from time to time one Rupee advances made against the import bills pending retirement by the customer. Such interest shall be recovered from the date of negotiation to the date of crystallization of the Rupee liability and thereafter penal interest shall be recovered. (Applicable rates of interest amended as per our Circular Misc No. 11/90 dated 21st May 1990). 7.7 If the date when the Rupee liability on an import bill is crystallized at the Forward Exchange Contract Rate results in early/late delivery under a Forward Exchange Contract, the charges as per FEDAI Rule 9 (Refer to revised Rule 8) shall be levied. 7.8 Authorised Dealers shall charge commission/handling charges at the rate of 0.15% on the bill amount at the time of converting foreign currency into Indian Rupees irrespective of the fact whether the bill is retired within 10 days or later. (Also refer to para x.c. of the revised Rules) 7.9 All import bills under Letters of Credit shall be reported as SALES when the Rupee liability is crystallized. 10. Export Bills Purchased/Negotiated/Discounted 8.1 Foreign currency bills when purchased/negotiated/discounted shall be at the Authorised Dealers bill buying rate on that day or at the contracted rate. Interest for the transit,usance,grace period where applicable shall be recovered simultaneously. (Also refer to our Special Circulars No. 2643/NTP/SPL-18/86 dated 27th May 1988). 8.2 For bills remaining unpaid for a period of 30 days after the transit period in case of demand bills and the due date in case of usance bills, the foreign currency amount shall be reversed from the export bills purchased portfolio on the 30th day by the Authorised Dealer. In case 30th day happens to be holiday, or Saturday, it shall be reversed on the next following working day. The rate applicable to such reversal shall be the ready TT selling rate of exchange on that day and shall be reported as Notional Sale of foreign currency. The Rupee equivalent of the foreign currency thus reversed, shall be held in the advances portfolio of the bank under the head Advances against overdue export bills realizable account. The unpaid bill shall be treated as outstanding under the sanctioned limit of the customer in a separate folio with the exchange risk open against the customer. Interest for the overdue period shall be recovered at the appropriate rate upto the date of realization of the bill. Appropriate rate of interest shall mean the maximum rate of interest permissible by Reserve Bank of India for overdue export bills or (Since amended as per our Circular

Misc. No. 11/90 dated 21st May 1990) the penal rate if the bill amount was recovered in Rupees from the customer due to dishonour thereof by the drawee. 8.3 As and when the bill is realized and advice of realization either by cable or by mail is received, the Authorised Dealers shall apply the TT buying rate on that day and adjust the advances created in their books against the bill as explained above. Any shortfall/excess shall be recovered from/paid to the customer. Authorised Dealers shall report the PURCHASE of foreign currency. 8.4 Authorised Dealers shall not charge or pay any swap cost for the period of 30 days i.e. the period between the relevant due date and the transfer of the item to advance portfolio as explained in 8.2 above. 8.5 In the case of highly volatile currencies, it is up to the Authorised Dealer to negotiate the bill at the risk and responsibility of the customer. 8.6 For the purpose of reporting the reversals of bills purchased earlier (paragraph 8.2) in the relative R-Returns, Authorised Dealers may be guided by the instructions issued by the Reserve Bank of India from time to time.

Rules-14, Clarification Explanatory Notes Certain Other Important Information

Clarification, explanatory Notes and Certain other Important Information Preamble : While effort has been made in this Chapter to incorporate the clarifications/amplifications relating to the FEDAI Rules, as much as possible, member banks would be advised to make a reference to the circulars issued by the Association earlier and from time to time in regard to various types of foreign exchange transactions and be guided by the instructions contained therein. Clarification, explanatory notes and certain other important information (Rule 1) Hours of Business In terms of paragraph 8.2 of Reserve Bank of India Guidelines for internal Control over Foreign Exchange Business appended below authorized on behalf of the bank during extended hours subject to the condition that the management in each bank lay down the working hours of the dealers. 8.2 Dealing Hours The dealing hours will be ordinarily the recognized working hours of the banks at the respective

centers. But the conditions of the exchange markets and time zone differences may require the dealers to work longer hours. In such an event, dealers would also undertake operations of purchase, sale etc. of foreign currencies on behalf of the bank during extended hours. It is essential that the Management in each bank should lay down the working hours of the dealers. In the circumstances it is our considered view that FEDAI Rule 1 should be read in conjuction with the provision of paragraph 8.2 referred to above. (Refer our Special Circular no: 2314/Dlg.Hrs/SPL-73/95 dated 22nd June 1995)

Rule 2 Export Transactions 1. Letter of credit restricted to a particular bank but forward contract for the relative export fixed through another bank A commission of 0.35% shall be charged by the negotiating bank for negotiating bills/documents under letters of credit restricted to themselves against issue of foreign currency drafts/TTs in favour of the bank with whom the forward exchange is fixed in payment of such negotiations. The bank with whom the contract is fixed shall pay this charge of the negotiating bank and shall recover from the exporters to the extent of 0.20% and absorb the balance of 0.15% of the said charges. (AR Circular No. 4/86 dated 26th August 1986). 2. Export letters of credit 1. Letters of credit include letters of credit, letters of guarantee, letters of authority, orders to negotiate, orders for payment and all types of documents of similar nature. 2. The Uniform Customers and Practice for Documentary Credits in force will not apply to: Letter of credit issued by banks in countries which do not subscribe to the said Uniform Customs and advices to the beneficiaries of such letters of credit should indicate that the credit is not subject to the Uniform Customs unless the issuing bank to apply it. (Old Rule 10 II C). 3. Advising letter of credit/amendments 1. Letters of credit/amendments may be advised through the intermediary of a bank. The advising bank reserves its right to negotiate or not documents under the credit. It must however verify the authenticity of the letter of credit advised to the beneficiary. If an exporter receives a letter of credit direct, the negotiating bank should have the genuineness of the instrument verified before negotiating/purchasing/discounting documents thereunder. 2. The advising banks should not on their own restrict negotiations to their counters merely because the credit has been advised through them. 3. Forwarding the credit/amendment by V.P.Post is prohibited.

4. Recovery of charges for transfer of proceeds of export bills negotiated under restricted letters of credit to outside the centre of negotiation Bank which has negotiated letters of credit documents received from another bank outside the centre of negotiation under restricted letters of credit and transferred the proceeds to that bank is entitled to charge commission applicable to inland remittances. (Circular Letter No.48/90 dated 20th December 1990). 5. Bills of Lading Banks will not accept bills of lading made out received for shipment or containing any other similar objectionable clause, unless such a clause is permitted in a letter of credit or similar authority under which the purchasing bank is protected. Also banks will accept only those bills of lading the signature on which has been manually inscribed. Short form bills of lading as defined in Article 23(v) in Uniform Customs and Practice for Documentary Credits ICC Brochure 500 should be acceptable under letter of credit. 6. Insurance Unless otherwise stipulated in the credit, or unless it appears from the insurance document(s) that the cover is effective at the latest from the date of loading on board or dispatch or taking in charge of the goods, banks will refuse insurance documents presented which bear a date later than the date of loading on board or dispatch or taking in charge of the goods as indicated by the transport document(s). {Article 34(e) of UCP 500} The Marine Insurance clause should therefore read as under: Marine Insurance Policies/Certificates (dated as above) unto order and blank endorsed for 10% over invoice value covering institute Cargo Clause A Institute War Clause (Cargo) and Institute Strikes Clause (Cargo) with claims payable in India. (Circular Letter 17th December 1985). 7. Clean TTs 1. Clean TT purchase contracts can be substituted for underlying TT purchase contracts in respect of export bills, provided swap difference, where applicable, shall be recovered from/paid to the merchant, as the case may be. 2. Clean TT rate shall be conceded for the purchase of the proceeds of bills sent for collection or of goods sent on consignment basis provided payment is made in India only after the foreign currency amounts are credited to the nostro account of the bank concerned. 8. Rates of exchange applicable for issuance of bank certificates to exporters The following rates of exchange should be applied for issuance of bank certificates as per Import-Export Policy: The FOB value should be arrived at from the rupee equivalent of the foreign currency amount actually credited to the exporters account at the time negotiation of bills or upon realization of bills sent for collection.

Member banks should take into account 100% of the FOB value of the relative bill/invoice including the rupee equivalent of the portion of the foreign currency amount to be kept in EEFC account irrespective of whether the customer was granted 100% advance or not. The applicable rate for the purpose of conversion in this case would be the market rate applied for the relative bill. (Circular letter No: 19/92 dated 1.6.92, Circular letter no: 29/92 dated 15.7.92) 9. Crystallisation of Export Bills It is clarified that the customers liability to the bank after crystallization would be either the rupee equivalent of the bill negotiated or the rupee equivalent of the bill crystallized, whichever is higher. (Mg.Com. 6/96 dated 30.03.96) Rule 3 Imports Sharing of Commission 1. Letter of credit opened by an Authorised Dealer against the undertaking of another bank who is not an Authorised Dealer In case where an Authorised Dealer opens a letter of credit against the undertaking of another bank who is not an Authorised Dealer, to honour the commitments thereunder, the L/C commission with that bank to the extent of 50% of such commission, provided the said bank undertakes that no portion of such commission will be passed on to the opener of the L/C. (AR Circular No.117/83 dated 18th November 1983). 2. Letter of credit issued by one Authorised Dealer against counter-indemnity of another Authorised Dealer On any letter of credit issued by an authorized Dealer in foreign exchange against the counter-indemnity of another Authorised Dealer, commission collected shall be shared between them equally. 3. Letters of credit issued by one Authorised Dealer against the counter-indemnities of more than one Authorised Dealer In case where more than one Authorised Dealer participate in the issue of a letter of credit commission shall be shared in proportion to the risk assumed by each Authorised Dealers. (AR Circular No. 5/87 dated 11th November 1987) Where the bank issuing the letter of credit is not a member of the consortium the consortium banks will be treated as a single unit vis--vis the issuing bank for the above purpose. (Special Circular No. 410/RULE-SPL-12/89 dated 2nd March 1989). 4. Insurance Unless otherwise stipulated in the credit, or unless it appears from the insurance document(s)that the cover is effective at the latest from the date of loading on board or dispatch or taking in charge of the goods, banks will refuse insurance documents presented which bear a date later than the date of loading on board or dispatch or taking in charge of the goods as indicated by the transport document L(s). (Article 34(e) of UCP 500)

The Marine Insurance clause should therefore read as under : Marine Insurance Policies/Certificate (dated as above) unto order and blank endorsed for 10% over invoice value covering Institute Cargo Clause A Institute War Clause (Cargo) and Institute Strikes Clause (Cargo) with Claims payable in India. (Circular Letter No. 74/85 dated 17th December 1985). 5. Bank Guarantee covering import of goods into India under various AID loans 1. Where the guarantee to be issued is to be followed by issue of letter of credit. 1. On the L/C to be established in due course L/C opening commission should be collected at the time of opening the L/C. 2. On that part of the amount of the guarantee which is in excess of authorisation applied for commission for the full period of guarantee should be collected at the time of issuing the guarantee. 2. Where the guarantee does not result in a letter of credit and import bills are received by guarantor bank on collection basis. 1. Initially commission should be recovered on the full amount for a period of 3 months @ 0.25% 2. Commission should be reckoned from the time guarantee is issued till the relative bills received on collection basis are paid by the customer and shortfall if any to be recovered. 3. For that part of the guarantee which is in excess of the bill amount the usual guarantee commission for the full period of the guarantee should be recovered. (Circular letter No.40/90 dated 27th November 1990). 6. Booking of forward sale contract in respect of import bills drawn under letter of credit opened by another bank Where an importer has arranged for fixation of a forward contract with a bank other than the one through whom the letter of credit has been opened, the customer would be liable to pay L/C opening bank 0.25% commission in lieu of exchange in addition to swap cost and proceeds in the banks nostro account. (Managing Committee Circular No.27/87 dated 8th December 1987). 7. Recovery of commission on import bills under L/C payments of which are settled out of foreign currency loans arranged abroad Banks are entitled to collect 0.15% commission as per FEDAI Rules and 0.25% commission in lieu of exchange in respect of letters of credit opened by Authorised Dealers, payments of which are settled out of foreign currency loans arranged abroad. In case of bills not covered L/Cs appropriate bill commission should be recovered together with 0.25% commission in lieu of exchange (Managing Committee Circular No. 13/89 dated 9th September 1989.) 8. Definition of a collecting bank Collecting bank is the bank which receives a bill from abroad and the bank through whom the receiving bank is instructed to present it.

9. Import bills for collection In respect of foreign currency collection bills the collecting bank shall be entitled to exchange and commission. 1. If for any reason the collecting bank is required to present the bill through another bank, the former (the collecting bank) shall be entitled to commission and the latter (the presenting bank) shall the payment in the currency of the draft/bill. Where the presenting bank is unable to effect a remittance in the currency of the draft/bill, the presenting bank shall arrange to obtain a demand draft/effect remittance in the foreign currency of the draft/bill. 2. In respect of bills drawn in Rupees the commission shall always be earned by the collecting bank. If for any reason the collecting bank is required to present the bill through another bank the latter may charge a commission as on any other inland collection. Rule 5 Clean Instruments 1. Payment of a foreign currency draft by the drawee bank by issuing their own draft In the same currency in favour of the beneficiary bank of the former draft with whom the relative foreign currency amount is to be deposited in a FCNR account. The drawee bank of a foreign currency draft shall pay such draft at the request of the beneficiary bank in case the draft is received for depositing the foreign currency amount with the beneficiary bank in a FCNR account, by issuing their own draft in the same currency in favour of the said beneficiary bank and may levy a service charge for the issue of their own draft at the rate of 0.10% with a minimum of Rs.50/- and a minimum of Rs.10/-. The said drawee bank may also collect any ouit-of-p0ocket expenses incurred by them for issuing their own draft. The said beneficiary bank shall absorb this charge of the said drawee bank and shall not recover it to the debit of the relative FCNR account. (AR Circular No.5/76 dated 15th April 1976). 2. Payment of foreign inward remittances All foreign currency inward remittance upto an equivalent of Rs. 100,000/- shall be immediately converted into Indian Rupee. Remittance in excess of equivalent of Rs.100.000/- shall be executed in foreign currency and the beneficiary has the option of presenting the relative instrument for payment to the executing bank within the maximum period prescribed under the Exchange Control Regulations. In this connection, we further clarify as under. 1. Any request from the beneficiary of the remittance for subsequent reconversion to foreign currency, including request for opening Exchange Earners Foreign Currency (EEFC) accounts should be done at market rate. 2. FIRPS instruments should continue to be issued only for personal remittances, upto an equivalent of Rs. 1 Lakh. (AR 2/93 dated 1.3.93 & AR 11/95 dated 20.12.95). 3. Where inward remittances are in respect of export transactions covered under forward exchange contracts the relative forward contract rate shall be applied. 4. Clean Rupee remittances

On clean Rupee remittances (not being proceeds of import bill) which are covered by crediting non-resident bank accounts maintained in India, commission shall be charged by the bank originating payment instruction to the foreign bank. The bank with whom the relative non-resident account is maintained shall not be entitled to any commission but shall receive from the originating bank out-of-pocket expenses and telegram or postage charges actually incurred in advising the receipt of cover to the non-resident bank. 5. Collection of clean instruments for non-Authorised Dealers In case where an Authorised Dealer undertakes collection of foreign currency clean instruments tendered by a bank who is not an Authorised Dealer received from their nonresident account holders of Indian nationally or origin and also handles remittances from India for such account holders (request routed through their banker) the member banks may share the commission with that bank, not more than 50% to be charge as prescribed in FEDAI Rules provided that no portion of such commission will be passed on to the customer.(AR Circular No.7/86 dated 30th December 1986). 6. Sharing of Commission on sale of foreign currency travelers cheques by Authorised Dealers Member banks are not permitted to share the commission on sale of travellers cheques with travel agents/others. (Circular Letter No.28/88 dated 5th October 1988). Calculation of exchange rate for foreign currency travelers cheques and charging of commission (effective from 1st April 1991) T.C.Buying Rate T.C.Selling Rate 1. Take Reserve Bank one month i. Take the clean TT Selling rate forward buying rate for the in accordance with the guidelines foreign currency as the base rate. prescribed by FEDAI 2. If the foreign currency is one ii Convert the clean TT selling rate which is not purchased by in Rupees equal to one unit of Reserve Bank the base rate foreign currency to get the base should be the on-going first rate (in the case of Jap. Yen and month forward buying rate quoted Italian Lira, the unit of foreign currency in the exchange market in India will be 100) or abroad. 3. Convert the base rate in Rupees iii Add a margin of 0.5% equal to one unit of foreign (at the option of the Authorised currency (in the case of Japanese Dealer). Yen and Italian Lira,the unit of foreign currency will be 100). iv. Deduct an all-inclusive margin iv. A commission not exceeding not exceeding 1% from the 1% may be charged (at the option above rate to arrive at the amount of the Authorised Dealer) on the in Rupees to be paid for every unit Rupee equivalent of value of of foreign currency. the foreign currency travelers cheques sold at the above rate. The result rates may be rounded off to the nearest 5 paise on the buying as well as selling (Special Circular No. 50/FCTC/SPL-8/91 dated 14th March 1991.) Rule 6 Guarantees

1. Where guarantees are issued on behalf of Central and State Governments and Corporations or Companies wholly owned by them the scale of charges prescribed may be levied on a reduced scale at the discretion of the banks. This discretion is not applicable for deferred payment guarantees. (Circular Letter No: 1/93 dated 5.1.93) 2. Banks should, in their own interest, continue their efforts to obtain an early return of cancelled guarantees. They should also ensure that all guarantees include a specific clause stating the exact period within which claims must be made under a guarantee after its validity has expired. 3. If the commission on guarantee issued by a member bank on behalf of a branch/foreign correspondent is subjected to tax in the country of the branch/foreign correspondent, member bank may increase the amount of commission in such a manner that the amount of commission net of such tax will comform to the rate laid down under this Rule. 4. Sharing of Commission Letter of guarantee issued by one Authorised Dealer against counter-indemnity of another Authorised Dealer On any letter of guarantee issued by an Authorised Dealer in foreign exchange against the counter-indemnity of another Authorised Dealer commission shall be shared between them equally. 5. Guarantee issued by one Authorised Dealer against the counter-indemnities of more than one Authorised Dealer In case where more than one Authorised Dealer participate in the issue of guarantee,commission shall be shared in proportion to the risk assumed by each Authorised Dealer. (AR Circular No. 5/87 dated 11th November 1987). Where the bank issuing the guarantee is not a member of the consortium the consortium banks will be treated as a single unit vis--vis the issuing bank, for the above purpose. (Special Circular No.410/Rule-15SPL-12/89 dated 2nd March 1989). F. Advance Payment/Performance Guarantee/Bid Bonds for Projects in India in respect of which Global Tenders are invited. Commission on all advance payment/performance guarantees/bid bonds for all projects in India in respect of which global tenders are invited will be collected at a rate to be determined by the Authorised Dealers themselves. (AR 3/94 dated 28th November 1994) Rule 8 Forward Contracts 1. Extension of all purchase or sale contracts including contracts relating to import/export on deferred payment basis shall be governed by the Exchange Control Regulations. 2. Contracts may be extended at any time during their currency or within a period of 7 days from the date of maturity, provided that if they are extending after the last delivery date, interest and swap cost will be collected. When contracts are extended both during their currency or within a period of 7 days from the date of their maturity interest at 15% per annum on outlay of funds by the bank for the purpose of arranging the swap shall be recovered in addition to the exchange difference if any. (Circular Letter No.70/85 dated 6th November 1985).

Seven days time has been allowed as lead time for pipeline transactions from designated branches to reach position maintaining office and to enable inter-branch accounting adjustments. This is not meant for customers who must give instructions regarding utilization or otherwise of the contract on or before maturity date. (SPL 15/94 dated 6.4.94) Rule 17 (old) Deferred Payment Guarantees covering import of ships. This Rule has since been withdrawn. Rule 6 would apply for DPGs in connection with import of ships.(AR No.3/96 dated 30.3.96)