Foreign Exchange Market

Introduction EXCHANGE RATE is the rate which one currency may be converted into another. The exchange rate is used when simply converting one currency to another (such as for the purposes of travel to another country), or for engaging in speculation or trading in the foreign exchange market. There are a wide variety of factors which influence the exchange rate, such as interest rates, inflation, and the state of politics and the economy in each country also called rate of exchange or foreign exchange rate or currency exchange rate.

Foreign exchange is a mechanism for exchanging one currency for others. Foreign exchange market is a means to reduce exposure to the risks of fluctuating exchange rates .It is by far the largest market in the world in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions The foreign exchange market assists international trade and investment by enabling currency conversion For example, it permits a business in the United States to import goods from the Indian union member states and pay INR, even though its income is in United States. It also supports direct speculation in the value of currencies, and carries speculation based on the interest rate differential between two currencies. Most International transactions, such as the international trade of goods and tourist services or international investment activities, involve the exchange of one currency for another. The most noteworthy, and rather recent, exception to this rule is the international exchange between the countries of Europes Euro area (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain), which have decided to introduce one common currency on 1 January 1999: the euro. The trade of different currencies takes place on the foreign exchange markets, at prices called exchange rates. This rarely involves the exchange of bank notes between citizens, except in the case of tourism or illegal (drugs) trade. Instead, most foreign exchange involves the trade of foreign-currencydenominated deposits between large commercial banks in international financial centres, such as London, New York, and Tokyo. There are different types of exchange rates and instruments, such as spot rates, forward rates, swaps, and options.

IFEMA is a standardized agreement between two parties for the exchange of currency. The agreement covers all facets of the transaction, providing detailed practices on the creation and settlement for a forex contract. In addition to the terms of a contract, IFEMA explains the consequences of default, force majeure or other unforeseen circumstances. The international currency market Forex is unique among the worlds financial markets. Due to its size (turnover up to 2-4 trillion USD a day), high liquidity and profitability, the market is one of the most attractive markets for investors. Placement of funds in the currency market Forex is one of the most promising areas of modern business and investment in this market could potentially bring big dividends. FOREX market is not a market in the conventional sense. The work is not in a building and at certain times. The market has a distributed nature. All the participants are connected with each other through various information systems and have the opportunity to trade around the clock in the evening and on Sunday until Friday evening... Ability to work in the financial markets in Asia, America and Europe became available because of their association in one global communication network. Clock access to the forex market allows you to open and close positions at the most opportune time, and at the best price. One of the most striking indicators of the globalization of markets is their daily volume of exchange transactions. The foreign exchange market is a unique market because of Its trading volume The extreme liquidity of the market The large no. of ,and variety of traders in the market Its geographical dispersion Its long trading hours Functions of foreign exchange market Transfer of purchasing power Financing of inventory in transit Hedging facilities Currency conversions Reducing foreign exchange risks

Indian foreign exchange market

An economy is linked to the world economy through two broad channels: trade and finance. The changes in both trade and the financial sector have been slow giving the economy time to adjust. Despite restrictions, the trade channel between India and the rest of the world was far more open than financial markets.

The nineties saw a twin development in financial markets - prices was allowed to be determined by the market, and the domestic financial market was integrating with international financial markets. At the same time, India moved from a fixed to a floating exchange rate. However, the Economy continued to have features of the closed economy and fixed exchange rate Regime that had prevailed for a long period, even after rates were supposed to be market Determined. Capital controls continue. While current account convertibility for both inflows And outflows by residents and non-residents was established as early as August 1994, Controls continue on the ability of resident individuals and corporate to send capital abroad. Foreign Exchange Market in India works under the central government in India and executes wide powers to control transactions in foreign exchange. The Foreign Exchange Management Act, 1999 or FEMA regulates the whole foreign exchange market in India. Before this act was introduced, the foreign exchange market in India was regulated by the reserve bank of India through the Exchange Control Department, by the FERA or Foreign Exchange Regulation Act, 1947. After independence, FERA was introduced as a temporary measure to regulate the inflow of the foreign capital. But with the economic and industrial development, the need for conservation of foreign currency was urgently felt and on the recommendation of the Public Accounts Committee, the Indian government passed the Foreign Exchange Regulation Act, 1973 and gradually, this act became famous as FEMA.

RECENT TRENDS

The movement towards market determined exchange rates in India began with the official Devaluation of the rupee in July 1991. In March 1992 a dual exchange rate system was Introduced in the form of the Liberalized Exchange Rate Management System (LERMS). Under this system all foreign exchange receipts on current account transactions were required to be submitted to the Authorized dealers of foreign exchange in full, who in turn would surrender to RBI 40% of their purchases of foreign currencies at the official exchange rate announced by RBI. The balance 60% could be retained for sale in the free market. The LERMS as a system in transition performed well in terms of creating the conditions for transferring an augmented volume of foreign exchange transactions onto the market consequently, in March 1993, India moved from the earlier dual exchange rate regime to a single, market determined exchange rate system. The Sodhani Committee (1995) made recommendations to develop, deepen and widen the forex market. A number of its recommendations regarding introduction of various products and removal of restrictions in foreign exchange markets to improve efficiency and increase integration of domestic foreign exchange markets with foreign markets have been implemented.

1947 to1977: During 1947 to 1971, India exchange rate system followed the par value System. RBI fixed rupees external par value at 4.15 grains of fine gold. 15.432grains of gold is equivalent to 1 gram of gold. RBI allowed the par value to fluctuate within the permitted margin of 1 percent. With the breakdown of the Bretton Woods System in 1971 and the floatation of major currencies, the rupee was linked with Pound-Sterling. Since Pound-Sterling was fixed in terms of US dollar under the Smithsonian Agreement of 1971, the rupee also remained stable against dollar. 1978-1992: During this period, exchange rate of the rupee was officially determined in terms of a weighted basket of currencies of Indias major trading partners. During this period, RBI set the rate by daily announcing the buying and selling rates to authorized dealers. In other words, RBI instructed authorized dealers to buy and sell foreign currency at the rate given by the RBI on daily basis. Indias perennial trade deficit widened during this period. By the beginning of 1991 Indian foreign exchange reserve had dwindled down to such a level that it could be barely be sufficient for three weeks worth of imports 1992 onwards: 1992 marked a watershed in Indias economic condition. During this period, it was felt that India needs to have an integrated policy combining various aspects of trade,

industry, foreign investment, exchange rate, public finance and the financial sector to create a market-oriented environment. Many policy changes were brought in covering different aspects of import-export, FDI, Foreign Portfolio Investment etc. Hawala market An alternative remittance channel that exists outside of traditional banking systems. Hawala is a method of transferring money without any actual movement. Hawala is "money transfer without money movement." Transactions between Hawala brokers are done without promissory notes because the system is heavily based on trust. Hawaladars, or Hawala dealers, arrange money transfers that are often backed only by trust, family connections or regional relationships. ORGANISATIONAL STRUCTURE OF THE FOREIGN EXCHANGE MARKET

The foreign exchange market in India comprises customers, authorized dealers (ADs) and the Reserve Bank. With the transition to a market determined exchange rate system in March 1993 and the subsequent gradual but significant liberalization of restrictions on various external transactions, the forex market in India has acquired more depth.

The foreign exchange market consists of two tiers:

The interbank or wholesale market (multiples of $1M US or equivalent in transaction size), and The client or retail market (specific, smaller amounts). Five broad categories of participants operate within these two tiers: bank and non-bank foreign exchange dealers, individuals and firms, speculators and arbitragers, central banks and treasuries, and foreign exchange brokers. Banks and a few non-bank foreign exchange dealers operate in both the interbank and client markets. They profit from buying foreign exchange at a bid price and reselling it at a slightly higher offer or ask price. Dealers in the foreign exchange department of large international banks often function as market makers. These dealers stand willing at all times to buy and sell those currencies in which they specialize and thus maintain an inventory position in those currencies Individuals (such as tourists) and firms (such as importers, exporters and MNEs) conduct commercial and investment transactions in the foreign exchange market. Their use of the foreign exchange market is necessary but nevertheless incidental to their underlying commercial or investment purpose. Some of the participants use the market to hedge their foreign exchange risk Speculators and arbitragers seek to profit from trading in the market itself. They operate in their own interest, without a need or obligation to serve clients or ensure a continuous market. While dealers seek the bid/ask spread, speculators seek all the profit from exchange rate changes and arbitragers try to profit from simultaneous exchange rate differences in different markets. Central banks and treasuries use the market to acquire or spend their countrys foreign exchange reserves as well as to influence the price at which their own currency is traded. They may act to support the value of their own currency because of policies adopted at the national level or because of commitments entered into through membership in joint agreements such as the European Monetary System. The motive is not to earn a profit as such, but rather to influence the foreign exchange value of their currency in a manner that will benefit the interests of their citizens. As willing loss takers, central banks and treasuries differ in motive from all other market participants TYPES OF EXCHANGE RATE Types of Exchange Rate

 Floating Rate A completely floating exchange rate is one whose level is determined exclusively by underlying balance of supply and demand for the currencies involved with no outside intervention Fixed Rate A fixed exchange rate is one in which case the government guarantees a stable price for foreign currency. This achieved through interventions by central bank whenever exchange rate varies from a stated % from fixed rate Managed Float It is a system where the authorities manipulate the exchange rate to suit their own objectives, sometimes intervening to fix the rate sometimes staying on the sidelines. This type of compromise is known as a Managed or Dirty float is known as a Managed or Dirty float i.e. Chinese Yuan, Indian Rupee F.E.D.A.I Foreign Exchange Dealers Association of India (FEDAI) was set up in 1958 as an Association of banks dealing in foreign exchange in India Its major activities include framing of rules governing the conduct of interbank foreign exchange business among foreign exchange business among banks vis--vis public and liaison with RBI for reforms and development of Forex market. FUNCTIONS OF F.E.D.A.I Guidelines and rules for the forex business Training of bank personnel in the areas of Forex business Accreditation of brokers of brokers Advising / assisting member banks in settling issues / assisting member banks in settling issues, matters in their dealings Represent member banks on Govt, R.B.I. and other bodies Announcement of daily and periodical rates to member banks Prescribing margin for calculating exchange rates for various merchant transactions Formulating code of conduct for dealers working in banks exchange brokers for dealing between each other . MEMBERS OF F.E.D.A.I Public and private sector banks Foreign banks Co-operative banks Financial institutions such as EXIM bank, I.D.B.I., I.F.C.I. and S I D B I and others such as Thomas Cook (I) Ltd S.I.D.B.I. and others such as Thomas Cook (I) Ltd. As on May 2008 F.E.D.A.I. has 89 members

Hedger, Speculators and Arbitrageurs: Traders buying and selling foreign exchange can take the role of hedgers or speculators or arbitrageurs Speculation An activity that leaves one open to exchange rate fluctuations where one aims to make a profit. Hedging Allows the firm to transfer exchange rate risk inherent in foreign currency transactions or positions. Arbitrage Take advantage of inconsistent prices to make risk-free profits. These profits are unlikely to last long.

Forex trading The exchange of currencies between two or more countries on a recognized market. Forex trading is a popular type of investing because it provides investors with the ability to make quick profits due to small changes in one country's currency. Due to the time differences around the world, forex trading takes place continuously because as one market closes another one opens. Forex terms SWIFT-Society for worldwide Interbank Financial Telecommunication. It replaces paper by electronic fund transfer by secure SWIFT Codes, thereby reduces transaction costs. It is supported by 6500 professional organizations throughout the world CHIPS-Clearing House for Interbank Payment system is a US Based electronic payment system CHAPS-Clearing House for Automated payment system is a UK based electronic payment system

SWIFT Codes USD United States Dollar INR Indian Rupee JPY Japanese Yen GBP Great Britain Pound CHF Swiss Franc Foreign Investment in India Foreign investments in the country can take the form of investments in listed companies (i.e., FII investments), investments in listed/unlisted companies other than through stock exchanges (i.e., through the foreign direct investment or private Equity/foreign venture capital investment route), investments through American Depository Receipts/Global Depository Receipts (ADR/GDR), or investments by non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) in various forms

Until the 1980s, Indias development strategy was focused on self-reliance and importsubstitution. Current account decits were nanced largely through debt ows and official development assistance. There was a general disinclination towards foreign investment or private commercial ows. Since the initiation of the reform process in the early 1990s, however, Indias policy stance has changed substantially, with a focus on harnessing the growing global foreign direct investment (FDI) and portfolio ows. After the launch of the reforms in the early 1990s, there was a gradual shift towards capital account convertibility. From September 14, 1992, FIIs and overseas corporate bodies (OCBs) were permitted to invest in nancial instruments, with suitable restrictions. The policy framework for permitting FII investment was provided under the Government of Indias guidelines and is summarized below POLICY CHANGES September 1992 FIIs allowed investing by the government guidelines in all securities in primary and secondary Markets as well as in schemes oated by mutual funds. Single FIIs to invest 5 percent and all FIIs allowed investing 24 percent of a companys issued capital. Broad-based funds to have 50 Investors with no one holding more than 5 percent. The objective was to have reputed foreign investors, such as pension funds, mutual funds, or Investment trusts and other broad-based institutional investors in the capital market. April 1997 Aggregated limit for all FIIs increased to 30 percent, subject to special procedure and resolution. The objective was to increase the participation by FIIs. April 1998 FIIs permitted to invest in dated government securities subject to a ceiling. Consistent with the government policy to limit the short-term debt, a ceiling of US $ 1 billion was assigned, which was increased to US $ 1.75 billion in 2004. June 1998 Aggregate portfolio investment limit of FIIs and NRIs/PIOs/OCBs enhanced from 5 percent to 10 percent and the ceilings made mutually exclusive. Common ceilings would have negated The permission granted to FIIs. Therefore, separate ceilings were prescribed. June 1998 Forward cover allowed in equity. An OCB is a company, partnership firm, society, or any other corporate body that is owned directly or indirectly to the extent of at least 60 percent by NRIs, and includes an overseas trust in which not less than 60 percent beneficial interest is held by NRIs either directly or indirectly, but Foreign rms and high net worth individuals permitted to invest as sub-accounts of FIIs. Domestic portfolio manager allowed to be registered as FIIs to manage the funds of subaccounts. The objective was to allow operational exibility, and also to give access to domestic Asset management capability. March 2001 FII ceiling under special procedure enhanced to 49 percent. The objective was to increase FII Participation. September 2001 FII ceiling under special procedure rose to sectoral cap.

 December 2003 The FII dual approval process of the SEBI and the RBI changed to a single approval process of the SEBI. The objective was to streamline the registration process and reduce the time taken for registration. November 2004 Outstanding corporate debt limit of US $ 0.5 billion prescribed. The objective was to limit Short-term debt ows. April 2006 Outstanding corporate debt limit increased to US $ 1.5 billion. The limit on investment in government securities was enhanced to US $ 2 billion. This was Announced in the Budget of 20062007. November, 2006 FII investment up to 23percent permitted in market infrastructure institutions in the securities Markets, such as stock exchanges, depositories, and clearing corporations. This was a decision Taken by the government following the mandating of demutualization and corporatization of Stock exchanges. January and October, 2007 FIIs allowed to invest US $ 3.2 billion in government securities (limits were raised from US $ 2 billion in two phases of US $ 0.6 billion each in January and October). June, 2008 While reviewing the External Commercial Borrowing policy, the government increased the Cumulative debt investment limits from US $ 3.2 billion to US $ 5 billion and from US $ 1.5 billion To US $ 3 billion for FII investments in government securities and corporate debt, Respectively. October 2008 While reviewing the External Commercial Borrowing policy, the government increased the Cumulative debt investment limits from US $ 3 billion to US $ 6 billion for FII investments in Corporate debt. October 2008 Removal of regulation for FIIs pertaining to the restriction of a 70:30 ratio of investment in Equity and debt, respectively. October 2008 Removal of restrictions on Overseas Derivatives Instruments (ODIs). March 2009 Disapproval of FIIs lending shares abroad. E-bids platform for FIIs. August 2009 FIIs allowed participating in interest rate futures. April 2010 FIIs allowed offering domestic government securities and foreign sovereign securities with AAA rating as collateral (in addition to cash) to recognized stock exchanges in India for their Transactions in the cash segment of the market.

 November 2010 Investment cap for FIIs increased by US $ 5 billion each in government securities and corporate Bonds to US $ 10 billion and US $ 20 billion, respectively. March 2011 The limit of US $ 5 billion in corporate bonds issued by companies in the infrastructure sector With a residual maturity of over ve years increased by an additional limit of US $ 20 billion, taking the total limit to US $ 25 billion As is evident from the above summary, the evolution of the FII policy in India has displayed a steady and cautious approach to the liberalization of a system of quantitative restrictions (QRs). FORMS OF FOREIGN INVESTMENT ADR/GDRS Foreign investment under portfolio investment scheme Purchase of other securities by NRIS Indian depository receipts(IDRs) Purchase of other securities by FIIs Investments by multilateral development banks Foreign investments in tier I and tier II issued by banks in India Investments in partnership or proprietary concern Fund raising by Indian companies Indian companies are allowed to raise funds from the following sources a) External commercial borrowing (ECBs)

These refer to commercial loans in the form of bank loans, buyers' credit, suppliers' credit; securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares) availed from non-resident lenders with a minimum average maturity of 3 years. b) Foreign currency convertible bonds (FCCBs)

These are bonds issued by an Indian company expressed in foreign currency, with the principal and interest payment in dollars. These bonds need to be subscribed by a non-resident in foreign currency and convertible into ordinary Shares of the issuing company c) Preference shares

Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a company bankruptcy, preferred stock shareholders have a right to be paid company assets first. Preference shares typically pay a fixed dividend, whereas common stocks do not. And unlike common shareholders, preference share shareholders usually do not have voting rights. d) Foreign currency exchangeable bonds

These are bonds expressed in foreign currency, with the principal and interest payable in foreign currency issued by a company and subscribed by a person resident outside India in foreign currency and exchangeable into equity share of another company.

Increasing turnover of Indian foreign exchange market The Indian forex market has grown manifold over the last decade in line with the various measures of liberalizing adopted by the Reserve Bank of India The share of the Indian forex market though still minuscule rose from 0.10% in 1998 to 0.90% in 2007, before declining to 0.50% in 2010

Clearing and settlement mechanism of forex market Recognizing the need for upgrading the countrys nancial infrastructure in respect of Clearing and Settlement of debt instruments and forex transactions, Reserve Bank of India initiated the move to set up The Clearing Corporation of India Ltd. (CCIL). CCIL is the countrys rst clearing house for Government Securities, Repos, Forex and other related market segments. The primary objective222 The Clearing Corporation of India in setting up CCIL has been to provide a safe institutional structure for the Clearing and settlement of trades in the Government Securities, Forex (FX), and Money and Debt Markets,

Membership to the forex segment of CCIL is currently restricted to the Authorized Dealers (ADs) in Foreign Exchange. Both Spot and Forward forex transactions are covered. Initially, CCIL settles spot and forward inter-bank US Dollar-INR forex trades .Since the RBIs INFINET network forms the communication back bone for the operations, connectivity to the network will be a pre-requisite for members availing of CCILs services. Members will be provided with the software necessary for linking up their existing back-office systems at the designated offices with CCILs systems. CCIL also intends to launch its own trading platform for inter-bank forex transactions. Trades concluded over the trading platform will form a direct input to CCILs settlement systems and no separate conrmation need be sent by the banks for such trades. CCIL will not normally accept any deal which violates the members NDC/Exposure limit for settlement, unless such excess is fully pre-funded. All deals which thus the exposure check are netted. While the rupee funds will be settled through the members current accounts with RBI, the US$ funds will be settled through CCILs account maintained with the Settlement Bank at New York In the currency market, delivery of currencies involved does not typically happen at the same time due to time-zone differences. By becoming a central counterparty and guaranteeing settlement of such trades after effecting multilateral netting, CCIL has eliminated the risks due

to non-delivery by setting up a robust risk control mechanism with exposure limits for the market entities and also putting in place a sound loss allocation mechanism Continuous Linked Settlement (CLS)

SETTLEMENT RISK has historically been a problem in foreign exchange markets because each currency must be delivered in its home country. Due to time zone differences, several hours might elapse between a payment being made in one currency and the offsetting payment being made in another currency. Continuous Linked Settlement (CLS) is a settlement system for foreign exchange trades that eliminates this problem. The system is run by the CLS Bank International, which is a special purpose bank dedicated to settling foreign exchange trades. All transactions settle through the CLS Bank during a single 5-hour window each business day. The CLS Bank is based in New York but maintains accounts in the various countries whose currencies it settles trades for.

Type of transactions A Spot transaction in the interbank market is the purchase of foreign exchange, with delivery and payment between banks to take place, normally, on the second following business day. The date of settlement is referred to as the value date. An outright forward transaction (usually called just forward) requires delivery at a future value date of a specified amount of one currency for a specified amount of another currency. The exchange rate is established at the time of the agreement, but payment and delivery are not required until maturity. Forward exchange rates are usually quoted for value dates of one, two, three, six and twelve months. Buying Forward and Selling Forward describe the same transaction (the only difference is the order in which currencies are referenced A swap transaction in the interbank market is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. Both purchase and sale are conducted with the same counterparty. Some different types of swaps are: spot against forward, forward-forward non-deliverable forwards

Derivatives market and spot market The Indian foreign exchange market is a decentralized multiple dealership market comprising two segments The spot and the derivatives market. In the spot market, currencies are traded at the Prevailing rates and the settlement or value date is two business days ahead. The two-day period gives adequate time for the parties to send instructions to debit and credit the appropriate bank accounts at Home and abroad. The derivatives market encompasses forwards, swaps and options. Though forward contracts exist for maturities up to one year, Majority of forward contracts are for one month, three Months, or six months. A Swap transaction in the foreign exchange market is a Combination of a spot and a forward in the opposite Direction. As in the case of other EMEs, the spot Market is the dominant segment of the Indian foreign Exchange market. The derivative segment of the Foreign exchange market is assuming significance and the activity in this segment is gradually rising. Trading Platforms In India, spot forex trading takes place on four platforms, viz., FX-CLEAR of the CCIL set up in August 2003, FX Direct launched by IBS Forex (P) Ltd. in 2002 in collaboration with Financial Technologies Ltd., and two other platforms by the Reuters - D2 platform and the Reuters Market Data System (RMDS) trading platform. The FX-CLEAR dealing platform offers two modes of dealing- Negotiation and Order Matching. Together, they offer the facility of obtaining quotes, in real time, from banks, posting two-way quotes on the screen for order matching. It is STP (Straight-Through-Processing) enabled to facilitate an integrated solution from dealing to settlement.

Foreign exchange rates and quotes A foreign exchange rate is the price of one currency expressed in terms of another currency. A foreign exchange quotation (or quote) is a statement of willingness to buy or sell at an announced rate. Bid and ask quotes Foreign currency dealers provide two quotes: Bid Price: Price at which the dealer is willing to buy foreign currency from you. Ask Price: Price at which the dealer is willing to sell foreign currency to you. It is always the case that the Ask Price > Bid Price. The difference is the Bid-Ask spread. The less traded and more volatile a currency, the greater is the spread. Forward quotes Forward rates can be quoted as either as an outright quote, points or as an annualised % forward premium or discount A forward quotation expressed in points is not a foreign exchange rate as such. It is the difference between the forward rate and the spot rate. When the Bid Points > Ask Points, you subtract the points from the spot rate to get the outright forward quote. If the Bid Points < Ask Points, you add the points to the spot rate to get the outright forward quote Cross rates Many currency pairs are inactively traded, so their exchange rate is determined through their relationship to a widely traded third currency. For example, an Australian importer needs Danish currency to pay for purchases in Copenhagen. The Australian dollar (symbol A$) is not widely quoted against the Danish kroner (symbol DKr). However, both currencies are quoted against the U.S. dollar. Depreciation, Appreciation not equal

In general, the percentage appreciation in one currency is not equal to the percentage depreciation in the other currency THEORIES OF FOREIGN EXCHANGE 1) PURCHASING POWER PARITY

A commodity will have the same price in terms of common currency in every country In the absence of frictions (e.g. shipping costs, tariffs,) Example LET p be the price of wheat in India and p* be the price of the same commodity i.e. wheat in US .THE LAW OF ONE PRICE HOLDS THAT: P = P*E Where E is the exchange rate between the two countries When law of one price does not hold, supply and demand forces help restore the equality 2) INTEREST RATE PARITY Main idea: There is no fundamental advantage to borrowing or lending in one currency over another This establishes a relation between interest rates, spot exchange rates, and forward exchange rates Forward market: Transaction occurs at some point in future BUY: Agree to purchase the underlying currency at a predetermined exchange rate at a specific time in the future SELL: Agree to deliver the underlying currency at a predetermined exchange rate at a specific time in the future

3) THE FISHER CONDITION

Main idea: Market forces tend to allocate resources to their most productive uses So all countries should have equal real rates of interest Relation between real and nominal interest rates: (1 + rNominal) = (1 + rReal) (1 + i) (1 + rReal) = (1 + rNominal) / (1 + i)

4) EXPECTATIONS THEORY OF FORWARD RATES Main idea: The forward rate equals expected spot exchange rate f/$ = E(s/$) Expectations theory of forward rates: f/$ / s/$ = E(s/$)/ s/$

POPULAR ARTICLES ABOUT FOREIGN EXCHANGE MARKET Rupee strengthened by 4.4% against US dollar in February: Namo Narain Meena PTI Mar 13, 2012, 04.10PM IST

NEW DELHI: The government today said RBI's initiative to arrest the declining value of rupee has yielded results and the value of the Indian currency has appreciated by 4.4 per cent vis-a-vis US dollar during February. "RBI has taken a number of steps to augment supply of foreign exchange and curb the speculation in the market to stem rupee decline. So the rupee has stabilized in the recent months," Minister of State for Finance Namo Narain Meena said in a written reply in the Rajya Sabha.

Eurozone crisis has impacted Indian economy: Finance Minister Pranab Mukherjee PTI May 22, 2012, 04.15PM IST NEW DELHI: The Government today said the global slow down due to the eurozone has impacted the Indian economy and steps are being taken to tackle the situation.

"Global slowdown due to unfolding of eurozone sovereign debt crisis has, inter-alia, impacted the Indian economy through deceleration in exports, widening of trade and current account deficit, decline in capital flows, fall in the value of Indian Rupee, stock market decline and lower economic growth," Finance Minister Pranab Mukherjee said in a written reply to the Rajya Sabha. Eurozone crisis has impacted Indian economy: Finance Minister Pranab Mukherjee PTI May 22, 2012, 04.15PM IST NEW DELHI: The Government today said the global slow down due to the eurozone crisis has impacted the Indian economy and steps are being taken to tackle the situation. "Global slowdown due to unfolding of eurozone sovereign debt crisis has, inter-alia, impacted the Indian economy through deceleration in exports, widening of trade and current account deficit, decline in capital flows, fall in the value of Indian Rupee, stock market decline and lower economic growth," Finance Minister Pranab Mukherjee said in a written reply to the Rajya Sabha.

Rupee: RBI intervention when necessary, says Pranab PTI May 22, 2012, 04.52PM IST NEW DELHI: With rupee falling to record low against dollar, Finance Minister Pranab Mukherjee today said the government is taking steps to arrest volatility in the foreign exchange market and the Reserve Bank of India (RBI) will intervene when necessary. "The government is taking a series of steps. However, managing rupee is market-related.... There is a lot of volatility," he told reporters here.

Rupee hits all-time low of 54.85 per dollar PTI May 18, 2012, 12.23PM IST MUMBAI: The rupee hit another all-time low of 54.85 per dollar in late morning trade today, losing 38 paisa on fresh demand for the American currency from banks and importers. The rupee resumed lower at 54.60/61 per dollar in the Interbank Foreign Exchange market against its previous closing of 54.47/48 and dropped to 54.82/83, before trading at fresh all-time low to 54.85/86 at 1100 hrs.
DEALING/TRADING PRACTICES IN FOREIGN EXCHANGE MARKET FOREX, the term for the Foreign Exchange market, is an international exchange market where currencies from many different countries are bought and sold. Both long-term hedge investors and shortterm investors that seek quick profits use FOREX. Trade reaches between 1 and 1.5 trillion US dollars per day. Needless to say, FOREX is a very lucrative market. Many wonder how to gain the most profits by trading with FOREX. There are a few simple trade practices that can help any trader make significant profit from FOREX. The best traders firstly understand the intricacies of FOREX trading. In order to be successful, one must understand how FOREX works. FOREX transactions are not centered in an exchange, unlike the stock market. Many transactions can take place at different times all over the world. This is important to note if one is going to invest in FOREX. In order to trade, one must simply find a trader (there are many around the world, some can even be found online), decide the currency to purchase, sell currency, and make profit. In reality, most people have to gamble with FOREX because no currency is completely stable, and there is always the risk for losing money.

Dealing Practice A firm's dealing practices and the execution on your trades is one of the most important things to consider when choosing a broker. Just like anything else, all brokers differ when it comes to execution and you need to make sure that the execution and dealing practices of the broker match to your trading style. Some of the smaller bucket shops (fraudulent business) will not execute your trades as quickly as the bigger companies. In a market like Forex, fast execution is very important. Since Forex is a fast moving market you need to be sure that your trades are placed when you want them to be, and at the price you're looking for. There are essentially two types of dealing models; a dealing desk and STP/ECN. With dealing desk whenever you place a trade the broker actually takes the other side of the trade. On the other hand, with an STP/ECN broker, your trades are placed right into the open market. There are positives to both dealing models. One reason some traders like STP brokers is because it allows them to trade anonymously. Since the trades are placed right into the open market, no one will know what trades are yours. On the other hand though, if something were to go wrong with one of your trades at an STP broker, you may run into issues getting this resolved. Since all the trades are anonymous, the broker may not be able to fix the problem. With a market maker you always know who the counterparty of your trades is. This way if any issues arise, you know exactly who to call. The bottom line is that all of the brokers that we work with are very well capitalized leaders in the industry. Due to their large size, they've got great liquidity. For you this means fast and fair execution on all of your trades. Marginal trading short term practice one of the best FOREX practices, but also the most potential hazardous is marginal trading. Marginal trading is when an investor speculates on currency prices by getting a credit line. This can lead to a vast gain, as well as a potential loss. Because FOREX can be traded without real money, trading with borrowed capital (marginal trading) can be very appealing. Using these techniques, an investor can invest more money without having to deal with as many money transfer costs. Marginal trading also allows bigger positions to be opened with a smaller amount of actual capital. This trading practice is certainly for the short-term investor. Technical analysis and fundamental analysis-long term practice The best long-term practices with FOREX are Technical Analysis and Fundamental Analysis. It is a good idea for small and medium sized investors to invest in technical analysis. Technical Analysis assumes that all information about the market and future fluctuations of a currency can be found in the price chain. In other words, technical analysis involves looking at the past events in the market and assuming that these trends will continue. This is a very good strategy because, quite simply, history has a habit of repeating itself. This is also safer because it entails less guesswork than marginal trading, since the investor assumes that history will continue and therefore makes a safe investment in a strong currency that seems likely to continue a positive trend. Fundamental Analysis is the process of considering the current situation of the country of the currency. Elements such as a countries economy, political situation, and future must all be taken into account in Fundamental Analysis. Investors then make investments based upon this knowledge. The best investors not only analyze a countries current situation, but the rest of the worlds interpretation of that country. Like any stock market, the value of the commodity is not merely based on exact numbers, but on perceptions of that commodity. If a country is believed to be on a positive path economically, then its currency will do well in FOREX.

FOREX can be a potentially lucrative investment. However, the success of FOREX trading depends on the practices and knowledge of the investor. It is important for any investor to analyze the market and determine what exactly he or she wants to achieve in investing. Long-term gains and short-term gains require different strategies. The best investors are always well informed about the market, the world economy and have the best traders available. If one follows these practices, FOREX will certainly prove to be a very rewarding investment.

Types of transactions Forex can be incredibly confusing when we explain to people that how investors buy, sell, and trade currencies. They may be even more confused to hear that the exchange rates for these currencies rely on the forex market and the way that investors view the currencies around the world. Those who begin to get into forex trading and investing may find that it can be even more confusing to determine what kind of investment to go with. There are multiple ways to have a transaction in the forex world. Some people may not understand the pros and cons between each, and why they may want to go with a certain forex transaction type over another. Depending on how they have developed in the currency markets they are awarded different types of currency transactions. On the interbank market are concluded mainly cash spot, term forward and combined swap deals. Foreign exchange transactions are exchanges of fixedterm contracts, which are basically two types - futures and options. Spot transactions The term spot exchange refers to the class of foreign exchange transaction which requires the immediate delivery or exchange of currencies on the spot. In practice the settlement takes place within two days in most markets. The rate of exchange effective for the spot transaction is known as the spot rate and the market for such transactions is known as the spot market. The spot transaction is the quickest and fastest way to actually exchange your currency. There is an exchange of two currencies over a two day period on the forex exchange, meaning that no contracts are signed. This allows the transaction to happen at a faster pace. A spot transaction requires almost immediate delivery of foreign exchange. In the interbank market, a spot transaction involves the purchase of foreign exchange with delivery and payment between banks to take place, normally, on the second following business day. The date of settlement is referred to as the "value date."Spot transactions are the most important single type of transaction (43 % of all transactions). In addition to immediate delivery, finance institutions offer to their customers and transactions in which the currency is delivered and paid after an agreed period. These are the so-called forward transactions. The main purpose of the conclusion of such transactions by clients is ensuring the future purchase or sale of foreign currency in advance a clear and specified exchange rate.

Forward Market:

The forward transactions is an agreement between two parties, requiring the delivery at some specified future date of a specified amount of foreign currency by one of the parties, against payment in domestic currency be the other party, at the price agreed upon in the contract. The rate of exchange applicable to the forward contract is called the forward exchange rate and the market for forward transactions is known as the forward market. The foreign exchange regulations of various countries generally regulate the forward exchange transactions with a view to curbing speculation in the foreign exchanges market. In India, for example, commercial banks are permitted to offer forward cover only with respect to genuine export and import transactions. Forward exchange facilities, obviously, are of immense help to exporters and importers as they can cover the risks arising out of exchange rate fluctuations be entering into an appropriate forward exchange contract. With reference to its relationship with spot rate, the forward rate may be at par, discount or premium. If the forward exchange rate quoted is exact equivalent to the spot rate at the time of making the contract the forward exchange rate is said to be at par. The forward rate for a currency, say the dollar, is said to be at premium with respect to the spot rate when one dollar buys more units of another currency, say rupee, in the forward than in the spot rate on a per annum basis. The forward rate for a currency, say the dollar, is said to be at discount with respect to the spot rate when one dollar buys fewer rupees in the forward than in the spot market. The discount is also usually expressed as a percentage deviation from the spot rate on a per annum basis. The forward exchange rate is determined mostly be the demand for and supply of forward exchange. Naturally when the demand for forward exchange exceeds its supply, the forward rate will be quoted at a premium and conversely, when the supply of forward exchange exceeds the demand for it, the rate will be quoted at discount. When the supply is equivalent to the demand for forward exchange, the forward rate will tend to be at par.

A forward transaction is a transaction that is made for the future; this means that the money does not actually come into play until a future date. The buyer and seller agree on a specific, stuck exchange rate for that certain date in the future. Because of the fixed date, the rate is stuck to the choice on that day. The actual market numbers on the day of the transaction do not matter, as the fixed rate cannot be changed. There is no limit on the extent of a future forward transaction, as it is dependent on the buyer and seller alone. Forward exchange rates are normally quoted for value dates of one, two, three, six, and twelve months. Actual contracts can be arranged for other lengths. Outright forward transactions only account for about 9 % of all foreign exchange transactions. Swap

The combination of cash foreign exchange forward and reverse operation is the third type of financial transactions that banks offer to their customers and they conclude each other in the world currency market. Swap these currency transactions represent the purchase of one currency and the simultaneous sale and the forward sale or vice versa "spot" with simultaneous forward purchase. In a broader sense, the swap technique applies to all transactions, bringing to the exchange of financial assets with different maturity dates. Commercial banks who conduct forward exchange business may resort to a swap operation to adjust their fund position. The term swap means simultaneous sale of spot currency for the forward purchase of the same currency or the purchase of spot for the forward sale of the same currency. The spot is swapped against forward. Operations consisting of a simultaneous sale or purchase of spot currency accompanies by a purchase or sale, respectively of the same currency for forward delivery are technically known as swaps or double deals as the spot currency is swapped against forward.

Swap transactions are easily the most normal and common of the multiple ways to do transactions on the forex market. Swap transactions are also forward transactions, but they do not happen as a trade through the forex market itself. A swap transaction can be confusing at first; two investors agree to change currencies for a certain amount of time. A later date is set for the two investors to change currencies back. A swap transaction involves the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. The most common type of swap is a spot against forward, where the dealer buys a currency in the spot market and simultaneously sells the same amount back to the same back in the forward market. Since this agreement is executed as a single transaction, the dealer incurs no unexpected foreign exchange risk. Swap transactions account for about 48 % of all foreign exchange transactions Futures In recent years, emerged and developed world currency exchanges on which transactions are buying and selling of certain standardized amounts - "lots" of certain important "major" currencies with delivery of pre-set dates in the future. Futures contract is the first major appearance currency exchange transaction. These are foreign currency transactions, in which buys or sells the option / right / to make buying a currency a fixed date in the future as agreed in the transaction rate. Like all markets, and currency futures markets fully functioning secondary market, where has bought futures contracts can be sold back to the seller or other market players. While a focus contract is similar to a forward contract, there are several differences between them. While a forward contract is tailor made for the client be his international bank, a future contract has standardized features the contract size and maturity dates are standardized.

Futures cab traded only on an organized exchange and they are traded competitively. Margins are not required in respect of a forward contract but margins are required of all participants in the futures market an initial margin must be deposited into a collateral account to establish a futures position. These transactions are also forward transactions, and deal with contracts much like the normal forward transactions. The contracts usually deal with a certain amount by a certain date, rather than on a certain date. The contract lasts for the time specified, and are major on the forex market Options contract Another type of stock exchange transactions is the purchase or selling an option contract. It also refers to a group of term foreign exchange but unlike futures contracts or forward transaction under which creates an obligation to buy or sell the agreed currency option transactions / contracts / give the buyer the right to choose whether to apply or to give up on its implementation. / Right option /. For this right the buyer an option contract pays a premium to the seller in the transaction. In the event that choose not to fulfill the contract, the buyer loses a premium seller wins. Option contracts can be buy / call / or sell / put /. Buy contract / call / / gives the buyer the right to choose whether to buy or not buy a pre-determined amount of currency at the expiry of the contract optional. Sale buyer when the contract has the right either to sell or not. The right choice is for the buyer of the contract. Seller is obliged to execute the transaction on the terms of the contract, provided that purchaser decides, but he cannot refuse, that the seller takes upon himself the risk of changing exchange rate, which receives a premium.

Option transactions in the forex market are common. The foreign exchange options give an investor the right (or option) to exchange money on the forex market. This option has a fixed exchange rate and a specific date. The option transaction is the most prominent in the forex market because of the high traffic and amount of money that is sunk into the currency forex market daily. While the forward or futures contract protects the purchaser of the contract from the adverse exchange rate movements, it eliminates the possibility of gaining a windfall profit from favorable exchange rate movement. An option is a contract or financial instrument that gives holder the right, but not the obligation, to sell or buy a given quantity of an asset as a specified price at a specified future date. An option to buy the underlying asset is known as a call option and an option to sell the underlying asset is known as a put option. Buying or selling the underlying asset via the option is known as exercising the option. The stated price paid (or received) is known as the exercise or striking price. The buyer of an option is known as the long and the seller of an option is known as the writer of the option, or the short. The price for the option is known as premium. Types of options: With reference to their exercise characteristics, there are two types of options, American and European. A European option cab is exercised only at the maturity or expiration date of the contract, whereas an American option can be exercised at any time during the contract. Arbitrage Arbitrage is the simultaneous buying and selling of foreign currencies with intention of making profits from the difference between the exchange rate prevailing at the same time in different markets

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC Bank is also one of the 10 main principal agents of Western Union HDFC offers a number of products and services which are Accounts and deposits Loans Cards Investments Insurance Forex Premium banking Private banking

In this section we will talk about forex services offered by HDFC i.e. Travel solutions Remittance products Other forex services Forex help

All the services above are offered through all the HDFC branches and at competitive rates and charges While travelling, every person needs different solutions and help .HDFC offers these solutions which are as below-

HDFC BANK RETAIL FOREIGN EXCHANGE SERVICES

Banks generally buy or sell foreign currency. The main dealers of foreign currency are banks, fullfledged money changers (FFMC), and restricted money changers who can only buy foreign exchange

Banks always quote 2 ways forex rate: Buy Sell

These buy and sell rates are always through banks perspective

HDFC bank buys from customer in the following forms: Telegraphic Transfer (T.T.) Buying - Rate at which a Foreign Inward Remittance received by Telegraphic Transfer is converted into rupees. Bills Buying - Rate at which realization of Export Bill Collection is converted into rupees Travelers cheques (T.C.) Buying - Rate at which Foreign Currency Travelers' cheques deposited by the customer is converted into rupees. Cash Buying - Rate at which Foreign Currency Cash deposited by the customer is converted into rupees. Cash Offload to FES - Rate at which Branch offloads cash to FES

Whereas, Selling is done through:

Telegraphic Transfer (T.T.) Selling - Rate applicable when a customer sends an outward remittance through Telegraphic Transfer. Bills Selling - Rate applicable on import bill payment Demand Draft (D.D.) Issuance- Rate applicable for the Demand Drafts issued by the Bank in favor of the overseas counterparty. Travelers cheques (T.C.) Selling - Rate applicable when a customer buys Foreign Currency Travelers cheques from the bank. Cash Selling - Rate applicable when a customer buys Foreign Currency Cash from the bank. Cash Purchase from FES - Rate at which Branch purchases FCY cash from FES

Nostro and vostro accounts Nostro and vostro (ours' and 'yours') are accounting terms used to distinguish an account held for another entity from an account another entity holds. The entities in question are almost always, but need not be, banks. Nostro: Our Banks Account with our correspondent bank held overseas in foreign currency Vostro: Another banks account held with us in our currency in India Nostro and Vostro Accounts are required for:

Effecting remittances payments Realization of Trade Payments Collection of Cheques Issuance of Demand Drafts

Products offered by HDFC bank

FOREIGN CURRENCY (FCY) SALE TRANSACTIONS

Foreign currency cash sale to customers

Foreign Currency Cash is a convenient way of meeting personal expenses. This currency can be issued for Business / Leisure Travel In RBI parlance it is called as cash for Basic Travel Quota (BTQ), which can be given in form of FCY Cash BTQ is given where the person is traveling for Business or under Leisure HDFC Bank offers FCY Cash in 18 Currencies

Outward remittances Using Outward Remittance Facility, funds can be transferred to overseas bank account from India. Outward Remittances are affected using Correspondent Bank Arrangement of our Bank. The transfer generally takes place in 24 to 72 hours from the time HDFC Bank sends instructions for remittance.HDFC Bank offers Outward remittance in 16 different currencies. Outward Remittances are transmitted electronically through system called S.W.I.F.T. (Society for Worldwide Interbank Financial Telecommunication)

Foreign currency demand draft issuance

FCY Demand Drafts are pre-paid instruments payable at overseas locations and drawn on our correspondent banks (with whom we have tie-up) Using FCY DDs customer may take for various purposes like payment towards, education fees, immigration, medical, gift, family maintenance, payment of application fees for various exams like TOEFL, GMAT etc. HDFC Bank offers FCY DD payable in 10 different currencies

Travelers cheque A traveler's check is a preprinted, fixed-amount cheque designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege. They were generally used by people on vacation instead of cash as many businesses used to accept travelers cheques as currency. If a traveler's check is lost or stolen, it can be replaced by the issuing financial institution. HDFC bank issues Amex (American express) TCs only HDFC Bank offers American Express Travelers Cheques which are widely accepted at Merchant Establishments and Financial Institutions across more than 200 countries. American Express Travelers Cheque is a very safe and convenient way to carry money abroad. It can be encashed only when we need to, and only against our signature, unlike cash which can be stolen and misused by anybody, immediately. Loss of Travelers Cheque can be reported anywhere in the world by making a single phone and the pre-fixed amount on the cheques are made refundable. Travelers Cheques are offered in 6 major currencies like USD, GBP, EURO, CAD, AUD and JPY.

FOREIGN CURRENCY (FCY) PURCHASES TRANSACTIONS

Foreign Currency Cash Purchase from Customers Inward Remittance FCY Cheques/DD/TC for Collection/Purchase Lock Box Facility

Foreign currency cash purchases from customers All Foreign Currency (FCY) Deposits are classified as FCY Cash Purchase Transactions Customer may deposit FCY Cash for credit to his/her: Savings Bank A/C NRE A/C RFC A/C Booking of FCNR deposits EEFC Account for re-credit of unspent foreign currency (which was earlier withdrawn from the EEFC account)

Inward remittances

Inward (I/w) Remittance is amount received from overseas bank accounts for credit in to customer account held with HDFC Bank I/w Remittance is received by way of S.W.I.F.T. message in HDFC Bank Nostro Account held with Correspondent Bank All I/w Remittance Details are populated by Centralized Processing Unit-Trade (CPUT) As a Process, every I/w Remittance requires to have confirmation from BRANCH before credit is passed on to the Customer Account.

COLLECTION OF FCY CHEQUES, DDS AND TCS

Customer who receive payments by way of Foreign Currency Cheques, Demand Drafts and Travelers Cheques, need to send these instruments for collection overseas, for realization of payment At HDFC Bank there are convenient modes for getting these instruments collected on customers behalf

Lock box

Lockbox Facility is an arrangement; where by HDFC Bank Customers can deposit Overseas Payable Cheques in their HDFC Bank Account at Overseas Location itself. It is a low-cost remitting facility to any HDFC Bank customer, as it saves on Transit time for Cheque to travel to India.HDFC Bank has Lockbox Facility at Wells Fargo Bank Philadelphia, USA (for USD Cheques) and ABN Amro Bank Frankfurt, Germany (for EURO Cheques).Cheques drawn in US and Europe may be dropped along with the deposit slips in the lockbox. Their

correspondent banks in US and Europe collect these cheques daily and send them for local clearing on the following working day. Once Deposited Image of the cheque & Deposit Slip is scanned & upload on HDFC Bank Inbox by our correspondent bank,HDFC Bank upon getting the credit advice shall credit the beneficiary's account

IMPORT AND EXPORT SERVICES Overseas supplier may require importer to make advance payment for the import before exporting. For this purpose, HDFC Bank will make advance payment in foreign currency to the supplier. o o o o o o o o Import Bill Collections The overseas supplier exports the goods to the importer. The overseas supplier / suppliers bank sends the documents to HDFC Bank on collection. Bank then intimates the importer about the receipt of the documents. The importer authorizes to debit his account and send the remittance to the suppliers bank. o o o o o o o Request letter Bill of Entry declaration IE code (One time requirement) OGL cum FEMA declaration Acceptance letter with Debit Authority for Usance bill Form A1 KYC report Request letter with debit authority IE code (One time requirement) OGL cum FEMA declaration Bill of Entry declaration with commercial Invoice Purchase order / Performa invoice with advance payment term. BG from exporters bank if advance amount is > $ 5 Lac or equivalent Form A1 KYC report

Export against Advance Payment The exporter might require the buyer overseas to make advance payment for the imports before exporting. The exporter can ask the importer to send the payment to any of HDFCs vast network of branches and the payment will be credited to the exporters account. Later bank will require following documents: o o o o o o o o Request Letter & FEMA declaration IE code (One time requirement) & KYC report SDF / GR form / PP form / Softex form Original transport documents - Bill of Lading or Airway Bill Invoice of Export & Insurance copy Original FIRC Clarification letter for delay in submission of docs beyond 21 days from date of shipment. Any other documents as per terms and conditions between Exporter and Importer

Export Bill Collection When the exporter exports the goods overseas, HDFC bank will ensure faster collection process for the entire exporters export bills through the vast network of correspondent banks, provided all the necessary documents are in place. o o o o o o o o o Request Letter & FEMA declaration IE code (One time requirement) & KYC report SDF / GR form / PP form / Softex form Invoice of Export & Insurance copy Original transport documents - Bill of Lading or Airway Bill Bill of Exchange Original L/C in case of L/C Bill and relevant docs as per LC clauses Clarification letter for delay in submission of documents beyond 21 days from date of shipment. Any other documents as per terms and conditions between Exporter & Importer

BANK GUARANTEES Guarantee is an undertaking given by a Surety banker - (HDFC Bank Ltd) to a Promisee (Beneficiary) on behalf of a Promisor (Applicant customer)

These banks Guarantees in local and foreign currency on customers behalf under business contract for approved purposes and within regulations and help fulfill customers business requirements INWARD AND OUTWARD REMITTANCES Outward payments towards education, immigration, and medical treatment abroad, maintenance of close relatives, repayment of loan, interest payment, royalty payment, professional services, gift & donation, etc will be carried out seamlessly. The customer simply needs to instruct the bank abroad with the details of the correspondent banks and about his account and ask them to remit the funds to HDFC. HDFC will credit the customers account or open a Rupee or a foreign currency fixed deposit as required by the customer in a timely and efficient manner. The customer can provide this information whenever he / she instruct his / her bank abroad for transfer of funds.

FOREIGN CURRENCY CASH Foreign currency cash helps us take ready cash to make payment towards our immediate expenses like airport tax, local shopping, taxi fare etc in 19 leading currencies. The unspent foreign currency can also be reconverted into Indian Rupee at HDFC Bank branches at competitive rates. Individual travelling abroad either for leisure or business is allowed to carry Foreign Currency Cash up to USD 3000 or equivalent. Balance amount can be taken in form of Forexplus card and/ or Travelers Cheque. Exceptions: Travelers proceeding to Iraq or Libya can draw Foreign Exchange in the form of Foreign Currency notes and coins up to USD 5,000 or its equivalent.

Travelers proceeding to the Islamic Republic of Iran, Russian Federation and other Republics of Commonwealth of Independent States can draw entire foreign exchange quota in the form of Foreign Currency Cash.

Forexplus card

HDFC Bank ForexPlus Card helps us to avoid the hassles of chasing moneychangers or paying transaction charges for shopping abroad. The ForexPlus card is ideal for travelers since it can be hotlisted if stolen & reloaded. The ForexPlus Card is accepted at all Visa/ MasterCard Merchant outlets worldwide. It can be used to withdraw cash at all VISA / MASTERCARD ATMs worldwide. The ForexPlus Card comes with a Personal Accident Insurance Cover of Rs 2 Lakhs and a lot more! The HDFC Bank ForexPlus card works just like a Credit Card, but the transaction amount is debited directly from the HDFC Bank ForexPlus card balance. HDFC Bank ForexPlus card is accepted at all Merchant Establishments displaying the Visa / MasterCard symbol, worldwide.

Features

Backup card facility available - The primary card can be hot listed in case of loss, and the balance transferred to the issued Backup card.

Online usage allowed(E-com transactions)

The card can also be used for online purchases / transactions e.g. To pay bills, buy air tickets, do purchases when abroad etc
Protection against Foreign Exchange fluctuation

the basic denomination of this card is in AUD / AED / CAD/ CHF/ Euro / GBP / JPY / SGD and US Dollars
Safer and more secure

this card is accepted at all Visa/ MasterCard Merchant outlets and 24 hour VISA/ MasterCard ATMs worldwide. So no more carrying the bulk of cash or travelers cheques. This Card is protected against misuse at ATMs with a PIN. In case our card gets lost or stolen, all you have to do is call HDFC Bank

Phone Banking immediately and report the loss of your card. This facility is available 24 hrs on all days...

Reloadable at all HDFC Bank branches, even when the cardholder is abroad HDFC Forexplus card is valid up to the last day of the month indicated on your card. Within this period it can be used as often as we like... Available in Australian Dollar, AED (Dirhams), Canadian Dollar, Euro, Japanese Yen, Singapore Dollar, Sterling Pound, Swiss Franc, Swedish Krona (SEK) and US Dollar Currencies. Each of these currencies is accepted worldwide and can be changed into the currency of the country that we are in. Ease of tracking

We can access our card online .check our balance, track our spending and a lot more Forex card is chosen over other cards because there are 1) 2) 3) No more money changers No more overseas shopping transaction charges Fast support for stolen or lost cards

ForexPlus chip card

This card is same as the forex plus card .the main difference is that this card has an embedded chip which stores encrypted and confidential information, offering a greater level of security against counterfeiting and skimming card frauds as compared to magnetic strip cards. Other benefits which give this card an edge over other cards are 1) 2) 3) Excellent security Worldwide access Easy reloads

ForexPlus platinum card

HDFC Bank ForexPlus Card is exclusively designed for elite customers with an added features such as enhanced insurance coverage, Access to Visa's Global Customer Assistance Service, Airport Lounge Access, Matrix Card worth Rs 350/- & 0.5% Cash back on all POS transactions Forex Plus platinum card is currently available in three currencies

Some of the exclusive features and benefits of this card are

24 x7 Global Customer Assistance Services are available to serve the customer anytime and anywhere in the world. Back-up card option we are issued a back-up card as a part of the Kit. The same card can be used as a Replacement Card in case you lose your card. Available in three currencies viz. US Dollar, GB Pound & Euro Currently the ForexPlus Platinum Card is available in US Dollars, GB Pounds and Euros, which are accepted worldwide. Additional Insurance Coverage we are offered insurance covers with your card, i.e. Personal Accident Insurance (Death cover only) of Rs. 5 Lakhs, loss of checked baggage cover up to Rs.50,000 and passport reconstruction cover (actual cost of passport reconstruction only). Security and Safety: The card has an embedded chip which stores encrypted and confidential information, offering a greater level of security against counterfeiting and skimming card frauds, as compared to magnetic strip cards. Online usage allowed (E-com transactions) the card can also be used for online purchases e.g. to pay bills, buy air tickets and make purchases when abroad, etc. Reloadable anytime, anyplace The HDFC Bank ForexPlus Platinum Card is valid up to the last day of the month indicated on your Card. Within this period, it can be used as often as you like. In case w exhausts your balance, you can reload your card even while you are in the middle of our journey. Ease of tracking: We can access our card online .check our balance, track our spending and a lot more