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FOREIGN EXCHANGE

FOREIGN EXCHANGE. Letter of Credit, NRI Deposit schemes, EEFC, PC. Non Resident Indian. Indian citizens who stay abroad for employment or for carrying on a business or vocation or for any other purpose in circumstances indicating an indefinite period of stay outside India.

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FOREIGN EXCHANGE

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  1. FOREIGN EXCHANGE Letter of Credit, NRI Deposit schemes, EEFC, PC.

  2. Non Resident Indian • Indian citizens who stay abroad for employment or for carrying on a business or vocation or for any other purpose in circumstances indicating an indefinite period of stay outside India. • Indian citizen working abroad on assignment with Foreign Government, Government Agencies or International / regional agencies like United Nations Organization (UNO) and its affiliates IMF, IBRD, etc. • Government officials (both central and state) and other officials of public sector undertakings deputed abroad on assignment or posted abroad (including diplomatic missions). • Indian citizens who have settled abroad on immigration • Students gone abroad for studies.

  3. Non-Resident Deposit Accounts • Non Resident External (NRE) Accounts. • Savings , Current and Term Deposit Rupee Accounts. • Only reparable funds can be credited to the Account. • Non Resident Ordinary (NRO) Accounts • Savings , Current and Term Deposit Rupee Accounts. • Foreign Nationals can also open the Account • Joint a/c s with residents permitted. • When a resident becomes NRI. His a/c is to be designated as NRO a/c. • Credit - Remittance from abroad, legitimate dues in India of the NRI • Repatriation upto of US Dollar 1 million per calendar year for all bonafide purposes to the satisfaction of the Bank. • Interest earned in the Account is taxable (tds) • Foreign Currency Non Resident(FCNR) Accounts • in US D, GBP, Euro, AUD, CAD, only Term deposits • Interest is also earned in Foreign currency

  4. Foreign currency Deposits of Residents • Resident Foreign currency (RFC) Account. • Returning NRIs can open with FC/ FCTCbroght to India. • SB, Current and Term Deposit – No cheque book facility • Convert Non resident a/cs as RFC a/c • Local Payments in Indian currency • Funds can be repatriated for all Capital and current a/c transactions. • RFC ( domestic ) Accounts • Can be opened by Residents • Foreign exchange received by way of gift, honorarium etc. • Non interest earning Current Account only. • Funds can be used for any legitimate purpose/ outward remittance • Exchange Earners Foreign currency Account.(EEFC) • Upto 100 % of Foreign Exchange earnings of Exporters, Professionals • Can be used for making all bonafide payments in foreign exchange connected with their trade and business related transactions

  5. Export Finance • Pre-shipment credit • for purchase, processing or packing of goods meant for exports. • Post Shipment Credit • Financial assistance extended after the shipment of exports • Concessions include: • Cheap credit to exporters. • ECGC guarantee for export credits • No margin requirements for advance against export receivables. • Flexible approach to export lending and norms of lending. • Issue of Gold Card to exporters with good track record.

  6. Packing credit As loan or cash credit against pledge or hypothecation. Verification of Exporter-Importer Code No issued by DGFT. Party should not be in the RBI Caution list or ECGC Special Approval List. Export is not to a listed country Verify order/LC OPL on the buyer Up-to date knowledge of export policy Commodity should not be in the negative list. Commodity should have a good market Terms of contract No FEMA violation Borrower should be credit worthy

  7. Export Credit Guarantee Corporation of India Ltd. (ECGC) • Set up in 1957, for the promotion of exports • To protect the exporters from any financial loss. • Primary goal of ECGC : To support & strengthen the export promotion drive in India by providing a range of credit risk insurance covers to exporters against loss in export of goods and service also by offering guarantee covers to banks and financial institutions to enable exporters to obtain better facilities from them.

  8. ECGC • Credit Guarantee cover • WTPCG- in f/o banks • WTPSG- in f/o banks • POLICIES- in f/o exporters • Status Report on overseas buyers

  9. Assessment of Limits Appraised in the same manner as local cash credits. However certain relaxations can be considered in the inventory holdings depending upon the nature of contract and margin requirements. Guiding principle is “need based” finance. Limit is to be determined based on past performance and future projections. Turnover method. MPBF Cash Budget method

  10. Quantum of finance FOB value of goods minus profit and credit margin Cost of production less margin (can be more if the domestic cost is more than the FOB value and the difference is accounted as incentives like duty draw-back etc. subject to export production finance guarantee of ECGC). In the case of exports on CIF value basis PC can be granted towards insurance and freight also. Margin: depending upon the trade (10% to 25%) Period of finance to coincide with the date for shipment and normally upto 180 days.

  11. Clean Packing Credit Granted to credit worthy parties where advance payment is required to be made to the supplier. Quantum determined based on the likely purchase pattern of the exporter with their suppliers. Period of CPC is determined based on the facts of each case (but not later than the period of contract/LC). A higher margin is stipulated CPC should be converted as PC or Bills.

  12. PC in Foreign Currency PCFC be granted against any confirmed order/irrevocable LC Export order/LC should be denominated in convertible currency Proceeds should be realizable in convertible currency Exports in ACU currency also eligible. Currency of the account USD, GBP, EURO.(can be granted in a currency other than the currency of export after obtaining a risk letter).

  13. An arrangement at the request and on instructions of a customer To make payment / authorise other bank to pay or negotiate Against stipulated documents Provided terms and conditions are complied with Documentary Credits 13

  14. Triangular Contractual Arrangement SALE CONTRACT DEFINING TERMS IMPORTER EXPORTER L/C APPLICATION ADVICE OF OPENING LETTER OF CREDIT ISSUING BANK ADVISING BANK ISSUANCE OF THE LETTER OF CREDIT 14

  15. Applicant (Opener / Importer) Issuing Bank Beneficiary (Exporter) Advising Bank Confirming Bank Negotiating Bank Reimbursing Bank Parties to a Letter of Credit 15

  16. Revocable / Irrevocable Confirmed Restricted / Unrestricted Transferable Back-to-back Revolving Deferred Red Clause / Green Clause Standby Types of Letter of Credit 16

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