Professional Documents
Culture Documents
1.00
INTRODUCTION :
The Foreign Exchange Management Act (FEMA) was an act passed by Parliament in
1999 which replaced Foreign Exchange Regulation Act.
The most important legislation in this respect, was introduced in our country for the
purpose of facilitating external trade and payment and for promoting the orderly
development and management of foreign exchange market in India.
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2.00
Trade Finance
Exports :
Pre-shipment
Post Shipment
Advising LCs
Bills
for
collection
Imports :
Opening LCs
for
Bills
collection
Buyers Credit
Guarantee
Remittances:
Sale
&
Encashment of
FC notes
Inward
&
Outward
Remittances
Non Resident
Deposits
FX Dealings:
Forward Contracts
Cash handling like
Nostro etc.
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3.00
EXPORT TRADE :
Policies and procedures required to be followed for exports from India are
announced by the DGFT, from time to time.
Export of Goods and Services from India is allowed in terms of clause (a) of subsection (1) and sub-section (3) of Section 7 of the Foreign Exchange Management
Act 1999 (42 of 1999), read with Notification No. G.S.R. 381(E) dated May 3, 2000
viz. Foreign Exchange Management (Current Account) Rules, 2000, as amended
from time to time.
3.01
PRE-SHIPMENT FINANCE
A financial institution gives Pre Shipment Finance when the seller wants the
payment of the goods before shipment. The main objectives behind pre-shipment
finance or pre export finance is to enable exporter to:
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Types
Particulars
Packing Credit
No.
1.
Advance
against
Cheque/Drafts
received as advance
payment
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3.02
Types
Particulars
No
1.
2.
Export
bills
Advance against Export Bills can only be sent on collection basis, if the bills
Bills sent for collection drawn under LC have some discrepancies.
basis
4.
Advance Against Export Bank may choose to finance, when the goods are
on consignment basis
5.
Advance
Undrawn Balance
6.
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4.00
IMPORT TRADE
Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under
the Ministry of Commerce & Industry, Department of Commerce, Government of
India. Authorised Dealer Category I (AD Category I) banks should ensure that
the imports into India are in conformity with the Foreign Trade Policy in force and
Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed
by the Government of India vide Notification No. G.S.R.381 (E) dated May 3, 2000
and the Directions issued by Reserve Bank under Foreign Exchange Management
Act, 1999 from time to time.
Buyer
(Importer)
Seller
(Exporter)
(8)
(6)
Documents
& Claim
Documents
Presented
for Payment
(4)
Letter of
Credit
Delivered
Correspondent
Bank
A Bank may act as on arranger for Buyers credit to the local importers. Buyer's
credit is the credit availed by an importer (buyer) from overseas lenders, i.e. banks
and financial institutions for payment of his imports on due date.
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5.00
REMITTANCES
5.01
INWARD REMITTANCES
Receipt of foreign exchange in India is called Inward remittance. Apart from exports
there are other transactions, which generate inward remittance. For example Nonresident Indian staying abroad may remit foreign exchange to their relatives in India.
Inward remittances are usually in the nature of foreign currency notes, foreign
currency traveller cheques, foreign currency cheques / foreign currency demand
drafts and inward telex transfers.
5.02
OUTWARD REMITTANCES
The term "outward remittance" means sale of foreign exchange in any form and
includes not only remittances by T.Ts, M.Ts, drafts etc., but also sale of travellers
cheques, travellers letters of credit, foreign currency notes and coin etc. Outward
remittance can be made either by sale of foreign exchange or by credit to nonresident Rupee account of banks' overseas branches or correspondents.
Authorized Dealer Banks are to be guided by the Rules made by the Govt. of India
under section 5 of the foreign Exchange Management Act, 1999.
5.03
Name of Form
Particulars
1.
Form A 1
2.
Form A 2
3.
Form A 3
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6.00
Type of Deposit
Nature
Deposit
Holder
Currency in
which
account
is
denominated
FCNR Foreign Term
Currency
Deposit No
Yes
Non only
Currency
Resident
NRE
Foreign
only
Non Saving,
Resident External
No
Yes
Current,
Indian
Rupees
Recurring,
Fixed Deposit
NRO-
Non Saving,
Resident
Ordinary
Current,
Yes,
Indian
Conditionally
Rupees
No
Indian
Rupee Recurring,
A/c
RFC-
Yes
Fixed Deposit
Resident Saving,
Foreign Currency
Current,
Yes
Rupees
Recurring,
Fixed Deposit
Audited above accounts on the basis of RBI guidelines amended from time to time.
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7.00
Forward Contract is an agreement between two parties to buy or sell an asset (of
any kind) at a pre-agreed future point in time.
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8.00
8.01
Export transactions
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Check FCNR and other non-resident accounts to see whether debits and credits
are permissible under the rules
Examine extension and cancellation of forward contracts for purchased and sale
of foreign currency. Ensure that they are duly authorized and all necessary
charges recovered.
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Check foreign bill negotiated under letter of credit. Also check rates of
conversion and whether the terms of letter of credit have been adhered to.
As regards bill negotiated not under L/C also check necessary sanction has
been obtained from corporate office.
Check outward bills are promptly dispatched and documents to title are drawn
in favour of bank as consignee and not imported unless full payment is received
by the bank.
Proper ECGC cover is taken for export advances like pre and post shipment
advances or bank guarantees, unless expressly waived by Corporate Office.
Ensure drawee wise limits set by ECGC are adhered and extension is sought
when time limit exceeded.
Check FCNR and other NR accounts to ensure debits and credits are as per
rules.
Check that inward and outward remittances are properly accounted and
promptly reported to Corporate Office.
Ensure forward FX transactions are for the purpose of hedging genuine risks
and are booked properly. All charges on cancellation or early delivery are
recovered.
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Returns and forms like R return, XOS , ENC, BEF, Form A1 etc. are filed with
RBI in time.
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9.00
Sr.
Subject
Circular Reference
RBI/ 2012-13/74
DBODNo.DIR.BC.06/04.02.002/2012-
Exporters
13 July 2, 2012
No.
1.
2.
RBI/2012-13/6
4.
RBI/2012-13/8
Foreign Nationals
5.
RBI /2012-13/78
in FCNR(B) Accounts
DBOD.No.Dir.BC.8/13.03.00/2012-13
July 2, 2012
6.
RBI/2012-13/2
Account
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