Foreign exchange market in india

FOREIGN EXCHANGE MARKET IN INDIA

GUIDE : PROF. (DR.) HARKIRAT SINGH, IIFT, DELHI(INDIA)

NAVNEET ,ROLL

NO. 80, MBA(IB),

2011-14

IIFT,DELHI(INDIA)

WITH SPECIAL FOCUS ON FOREX DEALER NRR FINANCE LTD.

1 | P a g e F O R E I G N E X C H A N G E M A R K E T I N I N D I A

NAVNEET, ROLL NO. 80, MBA (IB), IIFT –DELHI 2011-14

EXECUTIVE SUMMARY

The Foreign Exchange market, also referred to as the "Forex" or "FX” market is The

largest financial market in the world, with a daily average turnover of US$1.9 trillion

-- 30 times larger than the combined volume of all U.S. equity Markets. "Foreign

Exchange" is the simultaneous buying of one currency and selling of another.

Currencies are traded in pairs, for Example Euro/US Dollar (EUR/USD) or US

Dollar/Japanese Yen (USD/JPY).

There are two reasons to buy and sell currencies. About 5% of daily turnover is from

companies and governments that buys or sells products and services in a foreign

country or must convert Profits made in foreign currencies into their domestic

currency. The other 95% is trading for profit, or speculation. For speculators, the best

trading opportunities are with the most commonly traded (and therefore most liquid)

currencies, called "the Majors." Today, more than 85% of all daily transactions

involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro,

British Pound, Swiss Franc, and Canadian Dollar and Australian Dollar.

A true 24-hour market, Forex trading begins each day in Sydney, and moves around

the globe as the business day begins in each financial center, first to Tokyo, London,

and New York. Unlike any other financial market, investors can respond to currency

fluctuations caused by economic, social and political Events at the time they occur -

day or night. The FX market is considered an Over the Counter (OTC) or ‘Interbank’

market, due to the fact that transactions are conducted between two counterparts over

the telephone or via an electronic network. Trading is not centralized on an exchange,

as with the stock and futures markets.

If you are interested in trading currencies online, you will find that the Forex Market

offers several advantages over equities trading. 24-Hour Trading Forex is a true 24-

hour market, which offers a major advantage over equities trading. Whether it's 6pm

or 6am, somewhere in the world there are always Buyers and sellers actively trading

foreign currencies. Traders can always respond to breaking news immediately, and

P&L is not affected by after hours Earning reports or analyst conference calls. After

hours trading for U.S. equities brings with it several limitations. ECN’s (Electronic

Communication Networks), Also called matching systems, exist to bring together

buyers and sellers - when Possible.

However, there is no guarantee that every trade will be executed, nor at a fair market

price. Quite frequently, traders must wait until the market opens the following day in

order to receive a tighter spread.

Superior Liquidity With a daily trading volume that is 50 xs larger than the New York

Stock Exchange, there are always broker/dealers willing to buy or sell currencies in

the FX markets. The liquidity of this market, especially that of the major Currencies,



helps ensure price stability. Traders can almost always open or Close a position at a

fair market price. Because of the lower trade volume, investors in the stock market are

more vulnerable to liquidity risk, which results in a wider dealing spread or larger

price movements in response to any relatively large transaction.

The foreign exchange market in India

The foreign exchange market in India started in earnest less than three decades

ago when in 1978 the government allowed banks to trade foreign exchange with one

another. Today over 70% of the trading in foreign exchange continues to take place in

the inter-bank market. The market consists of over 90 Authorized Dealers (mostly

banks) who transact currency among themselves and come out “square” or without

exposure at the end of the trading day. Trading is regulated by the Foreign Exchange

Dealers Association of India (FEDAI), a self-regulatory association of dealers. Since

2001, clearing and settlement functions in the foreign exchange market are largely

carried out by the Clearing Corporation of India Limited (CCIL) that handles

transactions of approximately 3.5 billion US dollars a day, about 80% of the total

transactions.

The liberalization process has significantly boosted the foreign exchange market

in the country by allowing both banks and corporations greater flexibility in holding

and trading foreign currencies. The Sodhani Committee set up in 1994 recommended

greater freedom to participating banks, allowing them to fix their own trading limits,

interest rates on FCNR deposits and the use of derivative products.

The growth of the foreign exchange market in the last few years has been nothing

less than momentous. In the last 5 years, from 2000-01 to 2005-06, trading volume in

the foreign exchange market (including swaps, forwards and forward cancellations)

has more 3 than tripled, growing at a compounded annual rate exceeding 25%. Figure

1 shows the growth of foreign exchange trading in India between 1999 and 2006. The

inter-bank forex trading volume has continued to account for the dominant share (over

77%) of total trading over this period, though there is an unmistakable downward

trend in that proportion. (Part of this dominance, though, results from double-counting

since purchase and sales are added separately, and a single inter-bank transaction

leads to a purchase as well as a sales entry.) This is in keeping with global patterns.

In March 2006, about half (48%) of the transactions were spot trades, while swap

transactions (essentially repurchase agreements with a one-way transaction – spot or

forward – combined with a longer-horizon forward transaction in the reverse direction)

accounted for 34% and forwards and forward cancellations made up 11% and 7%

respectively. About two-thirds of all transactions had the rupee on one side. In 2004,

according to the triennial central bank survey of foreign exchange and derivative

markets

conducted by the Bank for International Settlements (BIS (2005a)) the Indian Rupee

featured in the 20th position among all currencies in terms of being on one side of all

foreign transactions around the globe and its share had tripled since 1998. As a host of

foreign exchange trading activity, India ranked 23rd among all countries covered by

the BIS survey in 2004 accounting for 0.3% of the world turnover. Trading is

relatively moderately concentrated in India with 11 banks accounting for over 75% of

the trades covered by the BIS 2004 survey.



Liberalization has transformed India’s external sector and a direct beneficiary of

this has been the foreign exchange market in India. From a foreign exchange-starved,

control-ridden economy, India has moved on to a position of $150 billion plus in

international reserves with a confident rupee and drastically reduced foreign exchange

control. As foreign trade and cross-border capital flows continue to grow, and the

country moves towards capital account convertibility, the foreign exchange market is

poised to play an even greater role in the economy, but is unlikely to be completely

free of RBI interventions any time soon.

INTR

ODUCTION TO FOREIGN EXCHANGE MARKET

Executive Summery 1

GLOBAL FOREIGN EXCHANGE MARKET 3

DOMESTIC FOREIGN EXCHANGE MARKET 6

GLOBAL FOREIGN EXCHANGE MARKET

HISTORY OF THE GLOBAL FOREX MARKET

The Foreign Exchange market, also referred to as the "Forex" or "FX” market

is The largest financial market in the world, with a daily average turnover of

US$1.9 trillion -- 30 times larger than the combined volume of all U.S. equity

Markets. "Foreign Exchange" is the simultaneous buying of one currency and

selling of another. Currencies are traded in pairs, for Example Euro/US Dollar

(EUR/USD) or US Dollar/Japanese Yen (USD/JPY).There are two reasons to

buy and sell currencies. About 5% of daily turnover is from companies and

governments that buys or sells products and services in a foreign country or



must convert Profits made in foreign currencies into their domestic currency.

The other 95% is trading for profit, or speculation. For speculators, the best

trading opportunities are with the most commonly traded (and therefore most

liquid) currencies, called "the Majors." Today, more than 85% of all daily

transactions involve trading of the Majors, which include the US Dollar,

Japanese Yen, Euro, British Pound, Swiss Franc, and Canadian Dollar and

Australian Dollar.

A true 24-hour market, Forex trading begins each day in Sydney, and moves

around the globe as the business day begins in each financial center, first to

Tokyo, London, and New York. Unlike any other financial market, investors

can respond to currency fluctuations caused by economic, social and political

Events at the time they occur - day or night. The FX market is considered an

Over the Counter (OTC) or ‘Interbank’ market, due to the fact that

transactions are conducted between two counterparts over the telephone or via

an electronic network. Trading is not centralized on an exchange, as with the

stock and futures markets.

If you are interested in trading currencies online, you will find that the Forex

Market offers several advantages over equities trading. 24-Hour Trading

Forex is a true 24-hour market, which offers a major advantage over equities

trading. Whether it's 6pm or 6am, somewhere in the world there are always

Buyers and sellers actively trading foreign currencies. Traders can always

respond to breaking news immediately, and P&L is not affected by after hours

Earning reports or analyst conference calls. After hours trading for U.S.

equities brings with it several limitations. ECN’s (Electronic Communication

Networks), Also called matching systems, exist to bring together buyers and

sellers - when Possible. However, there is no guarantee that every trade will

be executed, nor at a fair market price. Quite frequently, traders must wait

until the market opens the following day in order to receive a tighter spread.

Superior Liquidity



With a daily trading volume that is 50 xs larger than the New York Stock

Exchange, there are always broker/dealers willing to buy or sell currencies in

the FX markets. The liquidity of this market, especially that of the major

Currencies, helps ensure price stability. Traders can almost always open or

Close a position at a fair market price. Because of the lower trade volume,

investors in the stock market are more vulnerable to liquidity risk, which

results in a wider dealing spread or larger price movements in response to any

relatively large transaction.

100:1 Leverage

100:1 leverage is commonly available from online FX dealers, which

substantially exceeds the common 2:1 margin offered by equity brokers. At

100:1, traders post $1000 margin for a $100,000 position, or 1%.While

certainly not for everyone, the substantial leverage available from online

currency trading firms is a powerful, moneymaking tool. Rather than merely

loading up on risk as many people incorrectly assume, leverage is essential in

the Forex market. This is because the average daily percentage move of a

major currency is less than 1%, whereas a stock can easily have a 10% price

move on any given day. The most effective way to manage the risk associated

with margined trading is to diligently follow a disciplined trading style that

consistently utilizes stop and limit orders. Devise and adhere to a system where

your controls kick in when emotion might otherwise take over.

Lower Transaction Costs

It is much more cost-efficient to trade Forex in terms of both commissions and

Transaction fees. FOREX.com charges NO commissions or fees whatsoever,

while still offering traders access to all relevant market information and

trading Tools. In contrast, commissions for stock trades range from $7.95-

$29.95 per Trade with online discount brokers up to $100 or more per trade

with full Service brokers.



Another important point to consider is the width of the bid/ask spread.

Regardless of deal size, forex dealing spreads are normally 3-4 pips (a pip

is .0001 US cents) in the major currencies. In general, the width of the spread

in a Forex transaction is less than 1/10 that of a stock transaction, which could

Include a .125 (1/8) wide spread. Profit Potential in both Rising and Falling

Markets

DOMESTIC FOREIGN EXCHANGE MARKET

INDIAN ECONOMY

Emerging and growing

The financial landscape has changed forever. There are now new rules of the

game. Change is the only constant. Technology has made the effects of change

manifest quicker.

Forex business seeks new and better ways to address the challenges and

opportunities in this new market economy. At the centre of all activities is the

client around whom the full market revolves, the companies constantly

innovate and refine wealth management practice to create a better product and

service. Nowadays we find forex market is more Professional, the money

changer with their ability builds long term relationships with their client and

understand their problems and provides a unique solution which adds to their

business objectives.

As India, steps out post liberalization by plugging into the global economy

many Indian corporate entities are thinking globally. There is no reason why

Indian investors in India and abroad be left behind and not take advantage of

this new investment climate. Ability to see the bigger picture enables. Various

Investment Company do guide investors, for their investments. They actively



meet various industry leaders to understand their vision, thinking, and long

term plans. Also they find new regulatory environment that offers greater

transparency and innovation. This companies draw rich experience and

expertise to advise clients so they are either able to take advantage of the

opportunities or weather the adverse business environments

GUJARAT MARKET

Gujarat Foreign Exchange market is highly potential market. As per the study

done it was found out that due to high industrial investment in Gujarat it is

predicted that Foreign Exchange market will rise in near future.

As per the 15 sample taken from FFMCs and 2 A.D.s it was found that Gujarat

market is growing specially Saurashtra region and Kutch. The reason is

because a big investment is going to be their in near future as a result money

changer finds a very good corporate business out their in this region.

As far as the main land of Gujarat is concern it was found that more and more

people are going abroad for either study or for immigration. Specially kheda

district which is highest potential for doing foreign exchange business.



MAJOR FOREIGN EXCHANGE TERM

FOREIGN EXCHANGE TERM

FX = Foreign Exchange

RBI = Reserve Bank Of India

AD = Authorized Dealers

FFMC = Full Fledge Money Changer

RAD = Restricted Authorized Dealer

AP = Authorized Person

LERMS = Business Travel Quota

MC = Money Changer

AMC = Authorized Money Changer

MLRO = Money Laundering Reporting Officer

FIU = Financial Intelligence Unit

OBU = Offshore Banking Unit

RRB = Regional Rural Banks

AML = Anti Money Laundering

KYC = Know Your Customer

BTQ = Basic Travel Quota

CDF = Currency Declaration Form

TC = Travelers Cheque

IRS = Interest Rate Swaps

FR = Forward Rates

CR = Cross Rates

NCD = National Currency

ECU = European Currency Unit.

FCY = Foreign Currency

BOP = Balance of Payments

ECN = Electronic Communication Network



SWIFT = Society for world wide international financial

telecommunication.

CHIPS = Clearing house Interbanks payment system

LIBOR = London Interbanks online /offered rate

CURRENCY

MAJOR

USD = US DOLLAR

GBP = STERLING POUND

AUD = AUSTRALIAN DOLLAR

CAD = CANADIAN DOLLAR

EUR = EURO

JPY = JAPANESE YEN/100

CHF = SWISS FRANC

OTHERS

BHD = BAHRAIN DINAR

CYN = CHINESE YUAN

DKR = DANISH KRONER

EGP = EGYPTIAN POUND

HKD = HONG KONG DOLLAR

KD = KUWAIT DINAR

MYR = MALAYSIAN RINGGIT

NZD = NEW ZEALAND DOLLAR

NKR = NORWEGIAN KRONER

OMR = OMANI RIYAL

QTR = QATAR RIYAL

SAR = SAUDI RIYAL

SGD = SINGAPORE DOLLAR

ZAR = SOUTH AFRICAN RAND

SKR = SWEDISH KRONER



SYP = SYRIAN POUND

THB = THAI BHAT

AED = UAE DIRHAMS

BASICS OF FOREIGN EXCHANGE

WHAT IS FOREIGN EXCHANGE? 11

WHAT IS FUNDAMENTAL ANALYSIS? 12

WHAT IS TECHNICAL ANALYSIS? 13

WHAT IS FOREX RISK MANAGEMENT 15

EMERGING PRODUCTS 16

WHY DOES IT EXIST? 23

HOW ARE FX MARKETS ORGANIZED? 24

WHO ARE THE PLAYERS? 25

THE MECHANICS OF FOREIGN EXCHANGE – RATE

QUOTATION 27

EURO WHAT IS THE CURRENCY 30

THE MECHANICS OF FOREIGN EXCHANGE – CROSS

RATES 31

THE MECHANICS OF FOREIGN EXCHANGE –

FORWARD RATES 32

THE DRIVERS OF FOREIGN EXCHANGE 35

CENTRAL BANK POLICY 40

FOREX VS. EQUITY 41

FOREX VS. FUTURES 44



WHAT IS FOREIGN EXCHANGE?

Foreign Exchange is essentially the area where a nation’s currency is

exchanged for that of another. The foreign exchange market is the largest

financial market in the world, with over $ 1.7 trillion being traded on a daily

basis with only 25% of this amount being in actual merchant position. The rest

of the amount denotes trading or speculation that is the principal reason why

currency markets are extremely volatile, being at least ten times faster than

stock markets in any country.

Unlike other markets, Forex markets have no physical location or central

exchanges and operate through an electronic network of banks and

corporations. It is for this reason that Forex markets operate on a 24-hour basis,

spanning from one zone to another across major financial centers. It is for this

reason that constant monitoring across time zones are required so as to negate

adverse movements or book extra-ordinary profits.



WHAT IS FUNDAMENTAL ANALYSIS?

It is one of the two main approaches of analyzing and forecasting currencies

and basically comprises of financial situations, economic theories and political

developments. Thus the health of a currency of a particular country would be

dependent upon growth rates of GDP, interest rates, inflation, unemployment,

money supply and foreign exchange reserves. While stock markets, bonds and

real estate prices would affect the state of a currency, the state of a

government and natural calamities if any would also be major influences.

Government Policies of a particular country also have impact on their

currency. Currencies may be pegged to a particular major currency or it may

be partially or fully convertible which would dictate the extent to which a

currency would be open to outside influence. Also, Central Banks of a country

intervene either singly or in conjunction with another Central Bank to move or

strengthen/weaken it’s currency by either intervening directly or by moving

interest rates which should be taken into consideration while evaluating the

health of that particular currency.



WHAT IS TECHNICAL ANALYSIS?

Technical analysis is a method of forecasting price movements by looking at

purely market-generated data. It is basically different methods of charting and

mathematical tools to analyze movements of price. Price itself has been

defined in many ways but to grasp technical analysis, we must be able to

understand the meaning of price. Price would best be defined as a figure,

which moves between panic, fear and pessimism of the crowd in one hand and

confidence, excessive optimism and greed on the other.

Thus Technical Analysis is a method of predicting future price movements by

examining the past pattern of movements in those prices. These movements

are depicted in Charts and Diagrams, which are analyzed to point our major

and minor trends so as to pinpoint points of entry into and exist from markets.

TREND

One of the first things to learn is that the market is supreme and thus at no

point should one try to over-rule the underlying trend of a market. The Trend

is the Biggest Friend and it is always wise to catch that signal. One should

only enter the market after identifying the long term and them the intermediate

and short-term trend of the market. As regards patterns of currency

movements remember that ‘a currency always goes UP by the LADDER BUT

comes DOWN by a LIFT’.

RELATIVE STRENGTH INDEX (RSI)

RSI reflects the overbought or oversold position of a market. For this

calculation, to compute support the RSI figure should be taken at 70 and for

the purpose of Resistance, RSI should be taken at 30. However, this



methodshould ideally be used in a consolidating market and would best be

avoided in a trending market.

BOLLINGER BANDS

This tool carries the advantages of other tools and tried to nullify their

disadvantages and is calculated at 1.95/2.00 Standard Deviation of the Moving

Average (usually 20 day period) which results in an envelope within which

majority of the prices move. The bands of this envelope act as support and

resistance so it is easy to buy at the lower end of the band and sell at the upper

end. Entry and exit should best be done when a price has closed outside the

band and is definitely a leading indicator.

ELLIOT WAVE ANALYSIS

This is done by classifying prices into patterned waves that can indicate future

targets and reversals. Waves moving with the trend are called impulse waves

and waves moving against the trend are called corrective waves. These

Impulse and Corrective waves are broken down into five primary and three

secondary movements respectively which forms a complete wave cycle and

these can be further subdivided. These wave patterns needs to be identified so

as to predict accurately and is best used in conjunction with the Fibonacci

theory.



WHAT IS FOREX RISK MANAGEMENT?

Forex Risk Management refers to scientific study of currencies and devising

various hedging techniques based of predictions of such currencies. The

expected movements might be either in favor or against the underlying

exposure of a particular organization, and as such the hedging mechanisms

should be geared to extract the maximum profit of / reduce potential losses

arising from such trends.

Though the studies of currencies are based on fundamental and technical

analysis, expected trends are also greatly influenced by the sentiments of the

market which can best be assessed from an inter-bank dealing room where

inter-bank trades takes place. Eforexindia is equipped with professional

dealers and state of the art technology and is backed by the dealing room of its

parent concern M/s S.C.Dutta & Co. The various studies and risk management

strategies, which are done to estimate risk arising from the forex exposures of

an organization, are:

Exposure Analysis Currency and Market Forecasts.

Risk Appraisal and Evolving a Foreign Exchange Risk Management Policy.

Setting up Risk Management Goals.

Formulating Hedging Strategies Designed to meet such Goals.

Implementing such strategies with the assistance of our highly equipped

Dealing Room.

Structured Review / Analysis.

Daily Currency Updation with Weekly and Special Forex Reports.



EMERGING PRODUCTS

A. INTEREST RATE SWAPS

An IRS can be defined as a contract between two parties (called Counter

Parties) to exchange, on a particular date in the future, one series of Cash

Flows ( fixed interest) for another series of Cash Flows (variable or Floating

Interest) in the same currency on the same principal amount (called Notional

Principal) for an agreed period of time. The two payment streams are called

the legs or sides of a swap. The exchange of Cash Flows need not occur on the

same date. This means payment may be different for each side of the swap. So

the variable rate may be paid monthly and the fixed quarterly, in which case

the pricing of the swap can allow for discounted timing cost.

Swaps, unlike FRA’s, generally do not net settle the difference between the

agreed fixed interest rate and the Variable interest rate. Netting of payments is

however allowable. The Floating rate of interest is referenced to a short-term

interest rate like the LIBOR in the international market or the MIBOR in the

Rupee market. The Floating Rate used as benchmark or index is RMIBOR

(Reuters Mumbai Inter Bank Offered Rate) or N-MIBOR (NSE Mumbai Inter

Bank Offered Rate).

The reset frequency for the floating rate index is the term for the interest rate

index itself. However, the reset frequency for the floating rate does not

necessarily match the timetable of the floating rate index. Therefore the

floating rate may be set daily, weekly, month, quarterly while settlement dates

may fall monthly, quarterly, semi-annually etc. If the reset date and the

settlement date do not coincide, the swap is said to be “paid in arrears set in

advance”.



QUOTING OF SWAP POINTS

The pricing of swaps is against the fixed interest rate. At the start of a

swap, the expected NPV is zero for both counterparties. Theoretically, the

floating leg’s worth is the same as those of a fixed rate leg and thus swaps

are a zero sum game at the inception. In case at the inception the NPV’s

are not exactly equal, one party pays higher to compensate the price.

Generally, swaps have been quoted in a number of ways, but the most

commonly used is setting the floating rate equal to a short term index

(such as a given maturity of MIBOR) with no margin or plus/minus a

given margin, which are payable in the money market by the

counterparties.

When no margin is added to a floating rate, such rate is said to be quoted

'Flat'. The price of a Fixed /Floating swap is quoted in two parts : a fixed

interest rate and a short term index upon which the floating rate is based.

The convention is to quote All-In-Cost (AIC) which means the fixed

interest rate is quoted relative to the floating rate index without any margin.

After having set the floating rate, the fixed rate is set appropriate to it.

Each bank quotes its own swap rate to exchange fixed cash flows interest

for floating in each maturity. Further one should take care of different day

count conventions to calculate interest that is 30 days month means 360

days a year or actual number of days elapsed since the previous settlement

is due based on a 360 days year.

EFFECT OF RATE CHANGES ON AN IRS

Floating Rate payers will gain if interest rate falls, as they will have to pay

lesser interest whereas fixed rate payer will loose as they are locked in fixed

rate. In case the Interest rate rises, The Floating payer will loose and the Fixed



rate will gain.

UNWINDING SWAPS

The party who wishes to unwind a swap has the following three alternatives:

Swap Buy-Back / Closeout/ Termination/ Cancellation.

Swap Reversal with new swap equaling the remaining period of

original swap with Same Reference Rate and Same Notional Principal.

Swap Sale or Assignment

THE MECHANISM OF IRS

It is a known fact that investors willing to invest in fixed rate instruments are

more sensitive to credit rating of the issuer than credit rate lenders. To

compensate for this a higher premium is demanded from the issuer of lower

credit quality in the fixed rate debt market than floating rate market. The

counterparties obtain an arbitrage by drawing down funds where they have

greater relative cost advantage, subsequently by entering into an IRS to cover

the cost of funds so raised from a fixed rate to a floating rate ad vice-versa.

Here it is a win-win situation. Therefore two companies can come together to

an agreement such that both can reduce their cost of borrowings. The fact that

such opportunities exist is due to imperfection in the money market that is the

difference in risk-premium in fixed and floating market. An example will

illustrate the point:

Suppose that there are two parties to the swap viz. X and Y and a dealer

arranges a swap taking a margin (spread). The deal is for Rs. Hundred Million

in One Year. The other related data are hereunder.

X Y Quality Spread

Credit Rating AAA BBB



Fixed Rate Cost 8% 10% 2%

Floating Rate Cost (FR) FR+100bp FR+150bp 50bp

Quality Spread Differential 1.5%

It is clear from the above that each of the parties have a comparative

advantage in either the floating or fixed rate market. The company X can

borrow more cheaply than Y both fixed and floating loans, but its comparative

advantage is in fixed rate market whereas Y has an advantage in the floating

market.

But X wants to be a floating rate payer and Y a fixed rate payer. One way

which will divide the gain equally is for X to actually borrow at fixed rate and

service floating rate in the swap and Y to borrow in floating and service fixed.

But there are other methods of reaching the same goal and is generally done

through an intermediary who takes credit risk on each counterparty. Suppose

the swap dealer quotes 7.50/100 for the swap:

In the swap, X, the floating payer

Pays floating to the swap bank at the prevailing rate.

Receives fixed rate 7.5%

Pays fixed rate 8%

Receives floating rate from the swap bank at the prevailing rate.

The net cost of funds and savings to X and Y using the swap arrangement can

be worked out clearly. With swap X makes a payment of Floating rate to bank

at 8% and receives 7.5% from swap bank. Thus his cost is floating rate + 50

bp. Without swap on the other hand his cost would be Floating rate +100bp.

For Y with swap will involve a payment of Floating rate +150bp to swap bank

and receive 8% from swap bank. His borrowing cost would be Floating Rate +

150bp + 8% - Floating Rate. Thus we can observe that X and Y are not only

better by 50bp but also the swap bank has made a margin of 50bp (8%-7.5%).



Thus the gain has been shared out between the swap parties and the bank is

150bp that are equal to the Quality Spread Differential in two markets.

USAGE OF SWAPS

Interest Rate Swaps are used to achieve one of the following:

To lower the cost of borrowings as compared to those otherwise available in

the market or from bank.

To hedge against, or speculate upon Interest Rate Movements.

To obtain fixed rate financing when it is impossible to access the market

directly.

B. FORWARD RATE AGREEMENT (FRA)

A FRA is an agreement between two counter-parties to pay or receive the

difference (called settlement money) between

an agreed fixed rate (the FRA rate)

the interest rate prevailing an a stipulated future date (Fixing Date),

Based on a notional amount for an agreed period.

In short, in a FRA interest rate is fixed now for a future period. The special

feature of FRA is that the only payment is the difference between the FRA rate

and the Reference rate and hence is single settlement contracts. As in IRS, the

principal amount is not exchanged.

The settlement sum is calculated on the fixing date by discounting the

difference between the previously contracted FRA rate and the then prevailing

Reference rate. Money changes hand only on the settlement day and not on the

transaction day or the maturity date. So if an investor wants to lock in



reinvestment rate of January 3rd 2000 for 90 days and is quoted a FRA of 7 /

7.5% , it means he can lock-in an interest rate of 7% if he wishes to protect

himself from a falling interest rate or 7.5% if he is concerned that interest rate

will go up. The settlement date will be two days before the value/maturity date.

FRA’s are expressed in terms of giving or receiving the fixed rate Vs short

term interest rate index and are quoted numerically like

3 months rate starting in 3 months time is 3/6



Two-way quotes are available in the market and levels can be found on the

Reuters (MIBORO2). The lower rate is the bid at which the bank is ready to

pay fixed and the higher rate will be the offer rate at which the bank will be

ready to receive fixed.

We take the case of a borrower who has obtained a one-year credit amounting

to Rs.10 lakhs on September 5th 1999. The interest rate is based on 6 months

MIBOR. For the first six months MIBOR has already been fixed. Now he is

not confident about the second six months, as he is not confident about what

he has to pay and apprehends rates to rise. To protect himself he can buy a

FRA for the next 6 months with a matching notional principal. Suppose a bank

quotes him for 6X12 FRA 9.10 / 90 on September 3rd itself. He can lock in at

9.90% by buying 6X12 FRA on Sept 3rd itself for the period Sept 5th `99 to

Sept 4th `2000. On 3rd March 2000 the 6 months MIBOR will be known (we

assume 10%) and on that date the 6m MIBOR rate is compared with the FRA

rate and the settlement amount is computed by discounting back to the

beginning of the contract period using the formula below:

SA = ((SR – FRA) X NP X CP) / 360 + ( SR X CP )

Where SA is Settlement Amount, SR is Settlement Rate, NP is Notional

Principal and CP is Contract period. Using the data in our example we get :



(.10 - .099) X 10, 00,000 X 182 / 360 + (.10 X 182) = Rs. 481.23 Thus the

borrower would receive Rs.481.23 and this amount will be used to pay the

extra 10bp (10% -9.9%). It is clear from the calculation that the net cost to the

borrower will be the same as agreed under the FRA contract in both the cases.

It should be remembered that the counter-party of a customer is always a bank

as there is no secondary market and an FRA price should be analyzed

/calculated by always keeping the corporate’s point of view and not that of the

market maker or the bank.

There is no restriction on the Notional Principal of FRA/IRS and any domestic

money market or debt market can be used as benchmark to enter into

FRA/IRS once the basis is computing is acceptable to both the parties. There

is various Exposure and Capital Adequacy Norms that are laid down by the

apex bank to whom all such deals have to be reported on a fortnightly basis.

However the derivative market in India is at a nascent stage with an

underdeveloped MIBOR market, absence of big public sector banks, uniform

pricing mechanism and of course a shaky approach which is more

psychological than lack of knowledge of the product and thus care should be

taken in the initial stages by engaging professional consultants to avoid

untoward losses by either not using the instrument available or using it in an

erroneous manner.



WHY DOES IT EXIST?

Foreign Exchange (FX) is the buying and selling of foreign currencies. A FX

Rate expresses the relationship between two national monies. It is the price of

one currency in relation to another. The FX Market is similar to any other

financial market except that the commodity being bought and sold is foreign

currencies.

Traditionally, FX was used primarily for international trade. This includes

payment for imports and receipts for exports. With technological advancement

and increase in cross-border investments, the service sector began to make

increasing demand on the FX Market. Uses include payment for transportation,

interest and dividend payments and foreign travel. Today, financial markets

and increased foreign direct investments have substantially added to the need

for FX. These include money and capital movements for fixed assets, stocks /

bonds and currency deposits



HOW ARE FX MARKETS ORGANIZED?

The FX market is organized into two broad categories: the bank note market

and the Interbanks market. Bank note transactions, the most common of which

are for obtaining foreign currencies for travel purposes, occur at commercial

banks and FX currency changers. The Interbanks has no central geographical

location for FX trading. Transactions are conducted entirely through

telecommunications systems such as wire transfers.

WHO ARE THE PLAYERS?

There are various players in the market. They include businesses, central

banks, individuals, and commercial banks. There are two sides to the FX

market: the wholesale and the retail side. The wholesale side consists of

commercial banks. This is the interbank market which is made-up of a group

of market makers; i.e. their trading levels set indicative rates for the rest of the

market. The other players represent the retail side as each player, or market-

taker, interacts with a commercial bank.

Central banks can influence interbank trading rates and volume through both policy

measures and buying and selling in the FX market. Examples include Federal Reserve

Bank of the US, Bundesbank of Germany, and the Bank of Japan. Some of their

objectives are to manage the value of domestic currency vis-à-vis foreign currencies,

intervene in support of economic policy objectives, and manage foreign currency

reserves.

Commercial banks are the Interbanks players. Examples include Citibank, and the

Hong Kong Shanghai Banking Corporation (HSBC). Some of their objectives are to



meet customers FX needs, manage the bank’s overall FX position, and produce profit

for the bank.

Businesses can be broadly categorized into two categories: financial firms and non-

financial firms. Financial firms (e.g. Morgan Stanley and Fidelity Investment) help

individuals, institutions, and other non-financial firms (e.g., Coca-Cola, Honda) to

meet their FX needs. Their activities include trade finance, hedging, equity/mutual

funds/unit trust investments, interest/dividend remittances, and speculation. On the

other hand, non-financial firm’s activities include international trade, foreign direct

investments and hedging. International investing by businesses has had an enormous

impact on the FX market by increasing demand for currencies and changing

investment practices and methods.

Individuals have varied and sometimes very specific FX needs. For this reason, it is

imperative that Relationship Managers (RMs) are knowledgeable about the objectives

of their customers. Their activities include foreign currency transactions for

obligations or remittances, foreign currency investments, portfolio diversification, and

speculation in the FX market. Individuals form the target market for Global Consumer

Bank (GCB)’s FX products.

INTERBANKS MARKET RATES AND TRANSACTIONS

Interbanks market rates and retail customer rates will differ. This is because

the customer rates will include the bank’s markup or markdown. Take for

example the buying and selling of US dollars (USD) and Japanese Yen (JPY):

Say the Interbanks market was quoting:

Bank buys USD 1 for JPY 110.00

Bank sells USD 1 for JPY 110.10

Given these Interbanks market rates, the bank may quote the following to the

retail customer:

Bank buys USD 1 for JPY 110.00 - 0.10 = JPY 109.90 (markdown)

Bank sells USD 1 for JPY 110.10 + 0.05 = JPY 110.15 (markup)



This is just an example to illustrate the point. As you progress through this

Unit, you will find the markup and markdown will depend on how the

currency pairs are expressed. This will be covered in the Mechanics of FX

section

Interbank market transactions involve several components: Banks and brokers

transact via telephone, telex, Reuters, and electronic brokering. Settlement is

handled through correspondent accounts using transfer and clearance systems.

SWIFT (Society for Worldwide International Financial Telecommunications)

is a system for transferring funds. CHIPS (Clearinghouse Interbank Payment

Systems) is a system for clearing funds. The actual transaction process varies

by country depending on the size of the bank and level of sophistication of its

systems as well as that of the country.

THE MECHANICS OF FOREIGN EXCHANGE – RATE

QUOTATION

COMMODITY CURRENCY AND TERM CURRENCY

There are two currencies in every FX quote. Here is an example: If a customer

wants to buy USD for YEN from a bank, the bank may quote the customer: �

USD/JPY = 110.00 what this means it that the customer has to pay the bank

JPY 110.00 in exchange for US$1.00. In this example, the USD is what is

called the base currency or the commodity currency. It is the unit currency and

the currency being priced. It is always represented first in a quote. In this

example, the JPY is what is called the term currency. It is the non-one-unit

currency. It is the price of the commodity currency. It is always represented

second in a quote. The Oblique symbol (e.g. USD/FCY) does not mean USD

divide by FCY or USD per FCY. It means the number Foreign Currency

(FCY) per one dollar.



FX Rate Quotation Terms – Direct and Indirect Terms

There are two different ways FX rates are quoted. One method is refereed to

as the American (Direct) System; the other is the European (Indirect)

System.

European (Indirect) Term is the number of foreign currency per unit of US

dollar. For example:

USD/JPY

USD/CHF

American (Direct) Term is the number of US dollars per unit of base currency.

For example:

EUR/USD

AUD/USD

Choosing a system depends on the terms of reference one requires. Both terms

express the same relationship but from different perspectives.

FX RATE QUOTATIONS

American = Direct Quotes apply to the following currencies:

Sterling Pound (Cable)

Australian $ (Aussie)

New Zealand $ (Kiwi)

Euro (EUR)

European = Indirect Quotes apply to the following currencies:

Japanese Yen (Yen)

Swiss Franc (Swissy)

Canadian $ (Candy)

BID AND OFFER – HOW TO READ AN FX QUOTE



A FX quote is made when two parties enter into a transaction for the exchange

of two currencies. One party is buying currency A and selling currency B. The

second party is selling currency A and buying currency B.

The bid rate is the quoting party’s buying price of the commodity currency,

and the offer rate is the quoting party’s selling price of the commodity

currency.

Example: Say the Interbank rates were: USD/JPY 105.40(bid)/44(offer). The

bank, based on its interbank trades will markup or markdown the interbank

rates and quotes a bid/offer rate to the customer

The bank will quote bid or offer rates depending on whether the customer

buys or sells. Usually, the larger the customer’s request, the better the quote

will be.

For example: “USD 1 = CAD$ 1.3720/25.

The bank sells (offer) USD 1 for CAD$ 1.3725 (=1.3700+0.0025)

The bank buys (bid) USD 1 for CAD$1.3720

The lower number represents the bid, i.e. the rate at which the bank will buy

(bid) USD and sell CAD. The higher number represents the offer, i.e. the rate

at which the bank will sell (offer) USD and buy CAD. The figure 25 is 0.0025.

Thus the offer is 1.3700+0.0025 = 1.3725. Often, a bid/offer quote is also

written with an oblique (/), i.e.1.3720/25. Please note that in the case of

1.3798/03, the offer is NOT 1.3700+0.0003. It is 1.3800+0.0003.

The quality of a bid and offer quote or “a quote” can be judged upon several

criteria. A fast reply usually indicates a high volume, experienced commercial

bank that is able to be a market maker. A narrow spread implies a more stable



currency. Reasonable or large amounts tend to receive better quotes because

the trade volume is high.

THE EURO – WHAT IS THIS CURRENCY?

In the earlier section, reference was made to a currency called the euro. The

following is a brief description of this currency and its mechanics. On January

1, 1999, this currency was introduced as a single European currency. The

economic rationale is that the euro may strengthen the single European

market.

From January 1, 1999 to January 1, 2002, no one is forced to use the euro or

prohibited from using it. Customer’s account balance in European Currency

Unit (ECU) has been replaced by euro on a 1:1 basis on January 1, 1999. By

January 1, 2002, national currencies (NCD) such as Deutschmark, French

Franc, etc. were migrated to a euro account.

WHICH CURRENCIES ARE INVOLVED?

There are 11 participating Member States. They are:

1. German Deutschmark (DEM)

2. Austrian Schilling (ATS)

3. Netherlands Guilder (NLG)

4. French Franc (FRF)

5. Italian Lira (ILT)

6. Spanish Peseta (ESP)

7. Belgium Franc (BEF)

8. Finnish Marka (FIM)

9. Luxembourg Franc (LUF)

10. Irish Punt (IEP)

11. Portuguese Escudo (PTE)

12. Swedish Mark



THE MECHANICS OF FOREIGN EXCHANGE – CROSS RATES

CROSS RATES

A Cross rate is a FX rate of two currencies derived via a third currency.

Usually the intermediate currency is the USD. Cross rates depend on the

perspective of the currency holder and his/her desire trade. Cross rate between

two currencies can differ depending on which currency is being bought and

which is being sold. Cross Rate tables are often published on a daily basis. An

example of which can be found in The Asian Wall Street Journal.

The commodity or base currency is the one unit of currency; the term currency

is the non-unit currency. An example is AUD/JPY 65.49. The AUD 1 is the

commodity or base currency; the JPY 65.49 is the term currency. The most

important part is to determine which bid rate and which offer rate to use. Here

is an example using the AUD/JPY example.

How was the AUD/JPY derived? The AUD/JPY quote can be split into two

quotes: AUD/USD and USD/JPY First, sell AUD to buy USD and then sell

USD to buy JPY. Here, AUD is the base currency and is traded to buy USD,

the correct quote to use is the offer rate. Then the bid rate is used because the

USD is traded to buy the term currency of JPY. Hence, in determining which

bid and offer to use, you must bear in mind whether the currencies use the

direct or indirect quote. For example, when calculating CHF/JPY, the quote

can be split into: USD/CHF and USD/JPY You will see this more clearly in

the examples in the Chain Rule section. The Chain Rule is a standard formula

used to derive any cross rate.



THE MECHANICS OF FOREIGN EXCHANGE – FORWARD

RATES

SPREADS: BUSINESS SPREADS AND BID/OFFER SPREADS

Note that there are two different spreads. It is important to understand the

distinction between them in order to calculate the correct profit margin from a

transaction.

Market bid/offer spread is the difference between the bid and offer rate as

quoted in the interbank market. The business spread is the markup or

markdown which the bank charges the customer. It is the profit margin made

from a FX transaction.

DETERMINING BID/OFFER SPREAD

Wide spreads usually signify risk because they result from trading in soft

currencies whose markets tend to be volatile and illiquid. A wide spread may

also be due to a small degree of market competition.

On the other hand, narrow spreads represent relatively stable currencies,

whose markets tend to be liquid. The greater the market competition, the

narrower the spread. Size and experience of the commercial bank greatly

influence the spread.

TOTAL RETURN CONCEPT



Currency time deposits are the most common form of FX investment. From

which the bank will earn a FCY deposit spread. This is the difference

between the interest rate assumed by the bank and the interest rate charged by

the bank to the customer.

So if a customer makes a foreign currency time deposit, what is the return for

the bank and the customer? From the customer and the bank’s standpoint, their

total return is as follows:

Customer Standpoint:

Total Return = Currency Appreciation/Depreciation + FCY Deposit Interest

Return

Bank Standpoint:

Total Spread = FX Spread (Markup / Markdown) + FCY Deposit Spread

TIME ELEMENT IN FX QUOTES

A SPOT transaction is a transaction which settles in two business days. This

accounts for two-thirds of all FX transactions. A Forward transaction contract

is for a FX transaction at a future date at a rate determined at the time the

contract is entered. Settlement can range from the spot date up to five years.

Various forward rates exist depending on the time frame (i.e., 30-day, 90-day,

180-day). The forward transaction can be used to lock in FX gains, protect

against future adverse FX movements, and eliminate exchange rate

uncertainty.

FORWARD RATES

The forward price for a unit of foreign currency may be at par with the spot

price (the same), but usually it is either at a premium (higher than the spot

rate) or at a discount (lower than the spot rate). The exchange differential

reflects whether the forward rate is at a premium or at a discount, and what the



price difference is for delivery on a specified future date. This differential is

called the SWAP rate or SWAP points.

If the SWAP bid appears to be higher than the SWAP offer, the commodity

currency trades at a discount against the term currency. To find the forward

Bid and offer, subtract the SWAP bid from the SPOT bid and the SWAP offer

from the SPOT offer. The reverse is true if the SWAP bid is lower than the

SWAP offer. Hence, you will add the SWAP bid and offer to the SPOT bid

and offer.

INTEREST DIFFERENTIAL

Interest rate differential and the length of time between the Spot and forward

transaction are the main two factors which determine the SWAP rate.



THE DRIVERS OF FOREIGN EXCHANGE

FACTORS AFFECTING EXCHANGE RATES

The FX market is one of the more volatile financial markets. Understanding

and predicting the factors that affect FX rate is a valuable but difficult skill to

obtain. The key is in understanding the fundamental forces that drive these

factors in today’s world.

FX SUPPLY AND DEMAND

The forces that drive FX rate fluctuations are the changes in the supply and

demand of currencies. Moving away from the equilibrium FX rate creates

pressure on the currency to return to that rate. This pressure results in an

appreciation or a depreciation of a currency. Supply of FCY comes from

exports and capital inflow. Demand of FCY comes from imports and

capital outflow. Supply and demand of a nation’s currency are captured in a

national account called the balance of payments (BOP). The BOP consists

of the current account and the capital account. The current account covers the

imports and exports of goods and services while the capital account covers

the movement of investments or capital inflows and outflows. The capital

account refers to both short-term and long-term capital flows and foreign

direct investments.

The components in the current account (i.e. imports and exports, imports)

and the capital account (i.e. investments) are the dynamic forces which drive

FX rate movement. In addition, market expectations and central bank

initiatives are also key determinants of FX supply and demand.



BALANCE OF PAYMENTS (BOP)

The Balance of Payment consists of the Current Account and the Capital

Account.

BOP = Current Account + Capital Account

Current Account = Exports – Imports of Goods & Services

Capital Account = Foreign Domestic Investment – Domestic Investment

Abroad.

BALANCE OF PAYMENTS: CURRENT ACCOUNT

A current account surplus signals that a country’s exports are greater

than its imports. A surplus results in excess demand for domestic

currency. Other things being equal, the domestic currency will most likely

undergo an appreciation.

A current account deficit signals that a country’s exports are less than its

imports. A deficit results in excess supply for domestic currency.

Other things being equal, the domestic currency will most likely undergo

depreciation.

Remember that all factors must be seen from a relative perspective because it

is the performance of one country compared with the performance of another.

Consider the scenario where there is relatively more income growth in

country A than B. An increase in Country A’s growth rate means residents of

Country A may purchase more imports from Country B. If more imports are

needed by Country A, then its current account will decrease, and Currency B



will be demanded by Country A to pay for the imports. As a result, Country

A’s currency can depreciate relative to Country B’s currency.

MARKET EXPECTATIONS

Expectations can change rapidly depending on market psychology. Analyzing

the effect of expectations requires a “feel” for the market. Expectations

capture the unpredictability of the FX market because there can be more than

one possible outcome for a single expectation.

MARKET SENTIMENT

Market sentiment can run the gamut from being bearish to neutral to bullish.

Below are examples:

Consol dative: Market pauses normally after a big move before expecting

further movement.

Neutral: Lack of direction; lack of interest or view on part of players

Volatile: Violent movements in market prices

Range Trading: Market trades within a band; whenever there is no significant

news or interest.

Bullish: Market expects prices to rise.

Bearish: Market expects prices to fall.

CENTRAL BANK INTERVENTION

There are various reasons for central bank interventions including currency

stabilization (reduced fluctuations), maintaining FX rate policies, and to meet

economic policy objectives. Each central bank has a distinct character, i.e.,



policy orientation. To understand a central bank you must be knowledgeable

about the macroeconomic environment in which it exists. Central bank actions

and policies are based on the performance of key economic indicators

DIRECT CENTRAL BANK INTERVENTION

Central banks can directly intervene in the FX market by buying and selling

currencies in order to manage a rate. This will lead to an appreciation or

depreciation of FX rate. The impact that central banks can have over a

sustained period is limited with direct intervention.

INDIRECT CENTRAL BANK INTERVENTION

Central banks play a key role in affecting short-term interest rates which in

turn affect the FX rate. The central bank is then making an indirect

intervention to affect FX rates. For example, Open-market operations are

activities carried out by the Federal Reserve Bank based upon instructions

from the Federal Open Market Committee (FOMC) of New York. These

activities are designed to regulate the money supply. The operations are

important tools because they affect the federal funds rate. Short-term interest

rates are priced off the federal funds rates. Short-term interest rates affect the

FX rate because they affect investment decisions and forward rates.

FLOATING FX RATE SYSTEM

This is when market forces determine the FX rates. The advantages and

disadvantages of this include the following:

ADVANTAGES DISADVANTAGES

1. Automatic adjustment if there is a 1. Speculation leading to market

destabilization. trade deficit



2. Flexible to use other policy measures 2. Uncertain exchange rates may

discourage international trade

3. Creates liquidity

FIXED FX RATE SYSTEM

This is where the FX rates are determined by government decisions, not

market conditions. The central bank maintains the external value of the

currency by buying or selling.

ADVANTAGES DISADVANTAGES

1. Currency certainty 1. Delays in adjustment process

2. Adjustments may be more costly

than the floating system



CENTRAL BANK POLICY

The central bank seeks to impact their currencies primarily by three ways:

Controlling the money supply

Controlling interest rates

Intervening directly in the market

Tightening money supply, increasing short-term interest rates and actively

intervening to support the currency causes the currency to gain strength. Loose

monetary policy, cutting short-term interest rates and active intervention to

devalue a currency causes the currency to weaken.

The first two ways are indirect attempts to influence the exchange rate. The

third (direct intervention) has both a direct and indirect effect.

Buying or selling a currency directly affects the supply and demand of

the currency.

Indirectly the central bank’s actions send a message to the market

about the intentions of the central bank to support or devalue a

currency.

POLITICAL NEWS

Political news can have an equally big impact on the strength or weakness of a

currency. Two types of political news influence exchange rate fluctuations:

Confidence in political leadership

Stability of the region



Increase in confidence in political leadership and more stable regional

situations can lead to strengthening of the domestic currency. Whereas loss of

confidence in the political leadership and destabilized regional situation can

cause the domestic currency to weaken.

FOREX VS. EQUITY

If you are interested in trading currencies online, you will find that the Forex

market offers several advantages over equities trading.

24-HOUR TRADING

Forex is a true 24-hour market, which offers a major advantage over equities

trading. Whether it's 6pm or 6am, somewhere in the world there are always

buyers and sellers actively trading foreign currencies. Traders can always

respond to breaking news immediately, and P&L is not affected by after hours

earning reports or analyst conference calls.

After hours trading for U.S. equities brings with it several limitations. ECN's

(Electronic Communication Networks), also called matching systems, exist to

bring together buyers and sellers - when possible. However, there is no

guarantee that every trade will be executed, nor at a fair market price. Quite

frequently, traders must wait until the market opens the following day in order

to receive a tighter spread.

SUPERIOR LIQUIDITY

With a daily trading volume that is 50x larger than the New York Stock

Exchange, there are always broker/dealers willing to buy or sell currencies in

the FX markets. The liquidity of this market, especially that of the major



currencies, helps ensure price stability. Traders can almost always open or

close a position at a fair market price.

Because of the lower trade volume, investors in the stock market are more

vulnerable to liquidity risk, which results in a wider dealing spread or larger

price movements in response to any relatively large transaction.

100:1 LEVERAGE

100:1 leverage is commonly available from online FX dealers, which

substantially exceeds the common 2:1 margin offered by equity brokers. At

100:1, traders post $1000 margin for a $100,000 position, or 1%.

While certainly not for everyone, the substantial leverage available from

online currency trading firms is a powerful, moneymaking tool. Rather than

merely loading up on risk as many people incorrectly assume, leverage is

essential in the Forex market. This is because the average daily percentage

move of a major currency is less than 1%, whereas a stock can easily have a

10% price move on any given day.

The most effective way to manage the risk associated with margined trading is

to diligently follow a disciplined trading style that consistently utilizes stop

and limit orders. Devise and adhere to a system where your controls kick in

when emotion might otherwise take over.

LOWER TRANSACTION COSTS

It is much more cost-efficient to trade Forex in terms of both commissions and

transaction fees. FOREX.com charges NO commissions or fees whatsoever,

while still offering traders access to all relevant market information and

trading tools. In contrast, commissions for stock trades range from $7.95-

$29.95 per trade with online discount brokers up to $100 or more per trade

with full service brokers.



Another important point to consider is the width of the bid/ask spread.

Regardless of deal size, forex dealing spreads are normally 3-4 pips (a pip is

.0001 US cents) in the major currencies. In general, the width of the spread in

a forex transaction is less than 1/10 that of a stock transaction, which could

include a .125 (1/8) wide spread.

PROFIT POTENTIAL IN BOTH RISING AND FALLING MARKETS

In every open FX position, an investor is long in one currency and shorts the

other. A short position is one in which the trader sells a currency in

anticipation that it will depreciate. This means that potential exists in a rising

as well as a falling market.

The ability to sell currencies without any limitations is another distinct

advantage over equity trading. In the US equity markets, it is much more

difficult to establish a short position due to the Zero Up tick rule, which

prevents investors from shorting a stock unless the immediately preceding

trade was equal to or lower than the price of the short sale.



FOREX VS. FUTURES

The global foreign exchange market is the largest, most active market in the

world. Trading in the forex markets takes place nearly round the clock with

$1.9 trillion changing hands every day. It is the main event.

The benefits of forex over currency futures trading are considerable. The

dissimilarities between the two instruments range from philosophical realities

such as the history of each, their target audience, and their relevance in the

modern forex markets, to more tangible issues such as transactions fees,

margin requirements, access to liquidity, ease of use and the technical and

educational support offered by providers of each service. These differences are

outlined below:

More Volume = Better Liquidity. Daily currency futures volume on

the CME is just over 2% of the volume seen every day in the forex

markets. Incomparable liquidity is one of many advantages that forex

markets hold over currency futures. Truth be told, this is old news.

Any currency professional can tell you that cash has been king since

the dawn of the modern currency markets in the early 1970's. The real

news is that individual traders from every risk profile now have full

access to the opportunities available in the forex markets.

Forex markets offer tighter bid to offer spreads than currency

futures markets. By inverting the futures price to compare it to cash,

you can readily see that in the USD/CHF example above, inverting the

futures dealing price of .5894 - .5897 results in a cash price of 1.6958 -

1.6966, 8 pips vs. the 5-pip spread available in the cash markets.

Forex markets offer higher leverage and lower margin rates than

those found in currency futures trading. When trading currency



futures, traders have one margin rate for "day" trades and another for

"overnight" positions. These margin rates can vary depending on

transaction size. When trading cash markets, you have access to the

same margin rates day and night.

Forex markets utilize easily understood and universally used terms

and price quotes. Currency futures quotes are inversions of the cash

price. For example, if the cash price for USD/CHF is 1.7100/1.7105,

the futures equivalent is .5894/ .5897; a methodology followed only in

the confines of futures trading.

Currency futures prices have the added complication of including a

forward forex component that takes into account a time factor, interest

rates and the interest differentials between various currencies. The

forex markets require no such adjustments, mathematical manipulation

or consideration for the interest rate component of futures contracts.

Forex trades executed through FOREX.com are commission free.

Currency futures have the added baggage of trading commissions,

exchange fees and clearing fees. These fees can add up quickly and

seriously eat into a trader's profits.

In contrast, currency futures are a small part of a much larger market; one that

has undergone historical changes over the last decade.

Currency futures contracts (called IMM contracts or international

monetary market futures) were created at the Chicago Mercantile

Exchange in 1972.

These contracts were created for the market professionals, who at that

time, accounted for 99% of the volume generated in the currency

markets.

While some intrepid individuals did speculate in currency futures,

highly trained specialists dominated the pits.

Rather than becoming a hub for global currency transactions, currency

futures became more of a sideshow (relative to the cash markets) for



hedgers and arbitragers on the prowl for small, momentary anomalies

between cash and futures currency prices.

In what appears to be a permanent rather than cyclical change, fewer

and fewer of these arbitrage windows are opening these days. And,

when they do, they are immediately slammed shut by a swarm of

professional dealers.

These changes have significantly reduced the number of currency futures

professionals, closed the window further on forex vs. futures arbitrage

opportunities and so far, have paved the way to more orderly markets. And

while a more level playing field is poison to the P&L of a currency futures

trader, it's been the pathway out of the maze for individuals trading in the

forex markets.



TYPES OF FOREIGN EXCHANGE MARKET

AUTHORIZED DEALERS 47

FULL FLEDGE MONEY CHANGERS 47

RESTRICTED AUTHORIZED DEALERS 52

TYPES OF FOREX MARKET

INDIAN FOREX MARKET

RESERVE BANK OF INDIA

Authorized Full Fledged Restricted Restricted

Dealers Money Money Authorized

Changers Changers Dealers

Authorized to sell foreign exchange to:

1. Exporters 1. Travelers Discontinued Recently introduce

2. Importers 2. Foreign Tourists after 31st License yet to be

3. Non-residents 3. Business Travelers December issued by RBI

4. NRIs (Purchase & Sale) 2012



AUTHORIZED DEALER

There are 84 Commercial Banks and 1 State Co-operative Bank and 2 Urban

Co-operative this all are permissible current and capital account transaction.

Authorized Dealers major activities are to buy and sell foreign exchanges

apart from this they are given rights to issue demand draft which FFMCs are

not getting.

The company which fulfill the below criteria get eligibility for Authorized

Dealers.

Sl.

No.

Category of

license (Number)

Entities Eligibility Major

Activities

1 Authorized

Dealers

Commercial Banks,

State Co-op Bank,

Urban Co-op Banks

No Change

1) License to conduct

Banking business in

India.

2) Report from the

concerned regulatory

department of RBI.

All current

and capital

account

transactions

according to

RBI directions

issued from

time-to-time.

FULL FLEDGE MONEY CHANGER (FFMCs).

Payment for Foreign Exchange sold to public exceeding Rs.50, 000/- should

be received by crossed Cheque only.



FFMC should not hold huge idle balances in Foreign Currency.

All transactions with other FFMCs / Ads should be settled in account payee

Cheque only.

If written off any foreign currency exceeding US $ 2000 in calendar year RBI

permission must require.



RBI GUDELINES ON FOREX BUSINESS

Memorandum instructions (FLM) issued to FFMC (Full Fledge Money

Changers) by RBI under Section 73(3) of Foreign Exchange Regulations Act,

1973 (46 of 1973).

As per the FLM, FFMCs are required to maintain following forms.

FLM 1 (daily summary and Balance Book)

FLM 2 (daily currency wise summary and Balance Book)

FLM 3 (register of FOREX purchased from public)

FLM 4 (register of FOREX purchased from Ads/Authorized money

changers)

FLM 5 (register of sales of FOREX to public)

FLM 6 (register of sales of FOREX to Ads/ Authorized

Moneychangers)

FLM 7 (Register of TCs surrendered to Ads/Authorized

Moneychangers)

FLM 8 (summary statement of purchases and sales of foreign

currency notes during the month)-TO BE SUBMITTED TO RBI

EVERY MONTH.

FLM-8:

Monthly consolidates statements for all its offices in form FLM-8 so as to

reach Reserve Bank not later than 10th

of the succeeding/next month.

FFMC, should submit to the Reserve Bank a monthly statement including

details of Receipt/Purchase of US $ 10,000/- or equivalent and above per

transactions within 10 days of the close of the previous month. FFMCs should

include transactions of their franchisees in the statement.



CONCURRENT AUDIT REPORT

MONTHLY AUDIT:

Single Branch FFMCs having turn over of more than US $ 1, 00,000 or

equivalent and multiple Branch FFMCs.

QUARTERLY AUDIT:

Single Branch having turnover of less than US $ 1 lac or equivalent.

FFMCs should submit a statement certifying that the Concurrent Audit and the

Internal Control Systems are working satisfactorily.

Specimen signature of Authorized officials every year.

Written off statement:

Written off any currency up to US $ 2000 in a calendar year should be

submitted to Reserve Bank in April every year.

DOCUMENTS FOR RENEWAL OF FFMC LICENCE

FFMC – LICENCE RENEWAL DOCUMENTS:

1. A copy of the latest audited balance sheet with a Chartered Accountant’s

certificate for net owned Funds as on date….)

2. C.R. Form Bankers in a sealed cover.

3. A declaration to the effect that no proceedings have initiated by the ED/DRI

and no criminal cases are pending against the agency.

4. List of Authorized Signatories.



5. Original License issued earlier.

6. Certificate issued under Shops & Establishment Act.

7. Provisional Balance Sheet as on date……..

N.B.: All documents should be submitted before one month.

FFMC – DOCUMENTS FOR BRANCH / ADDITIONAL

LOCATION

1. Net owned Funds – Rs.50 lakhs.

2. A copy of the latest audited balance sheet with a Chartered Accountant’s

certificate for net owned Funds as on date…)

3. C.R. Form Bankers in a sealed cover.

4. A declaration to the effect that no proceedings have initiated by the ED / DRI

and no criminal cases are pending against the agency.

5. List of Authorized Signatories.

6. Original License issued earlier.

7. Certificate issued under Shops & Establishment Act.

8. Provisional Balance Sheet as on date….

DOCUMENTS REQUIRED FOR FRANCHISEESHIP BY FFMC

1. Form RMC – F.

2. Franchisee agreement between both the parties.

3. Application by franchisee on their letterhead for their willingness to work as

franchisee under the name of FFMC.

4. Copy of Certificate issued under Shops & Establishment Act in the name of

Franchisee.

5. Undertaking by the directors of FFMC to take due diligence while selecting

franchisee.



6. Undertaking by the directors of FFMC to comply with all the provisions of the

Franchising Agreement / Prevailing RBI regulations regarding money

changing.

7. Undertaking by the franchisee for reporting of transactions on monthly basis

to their franchisor and for inspection once in a year. This condition also

include in “ Franchisee ship Agreement “

8. Undertaking for surrender of foreign exchange to the FFMC by the proposed

franchisee within 7 days from the date of its purpose.

Note:

(1) Franchisee can be given only for RMC business.

(2) FFMC cannot be appointed as franchisee under other FFMC.

Validity of the Agreement should not exceed the validity of the FFMC Licensee.

RESTRICTED AUTHORIZED DEALERS (RAD)

NEW CASES OF RESTRICTED AD

RBI is considering liberalizing in licensing policy

Well functioning FFMCs with strong financials that demonstrate good

governance with minimum net owned funds of Rs. 10 crores may be

considered for Restricted AD’s license.

The Following Current Account Transactions & Prohibits

Schedule-I Remittance out of Lottery

[Rule.3] Example: Winning



Schedule-II Require Prior Approval of Ministry, Govt. of India

[Rule.4] Example: Cultural Tours.

Schedule-III Require Prior Approval of RBI

[Rule.5] Example: Private Visits

-

Exceeding US $ 10,000

Some of the Ceilings Pertaining to Miscellaneous Remittances:

US Dollars

1. Travel Quota 10,000

2. Business Travel 25,000

3. Donations 5,000

4. Gifts 5,000

5. Employments 1,00,000

6. Emigration 1,00,000

7. Maintenance of Close

Relative 1,00,000



RBI GUIDELINES

CURRENT RBI GUIDELINES 54

LATEST RBI GUIDELINES 56

(A) CURRENT RBI GUIDELINES

RBI GUIDELINES ON FOREX BUSINESS – BUYING OF

FOREIGN CURRENCY

RBI GUIDELINES ON FOREX BUSINESS – SELLING

OF FOREIGN CURRENCY

RBI GUIDELINES OF FOREX BUSINESS – CASH

MEMO

RBI GUIDELINES ON FOREX BUSINESS - BUYING

Buying of Foreign Currency from public

As per FLM instructions Ads/FFMCs can freely purchase foreign currently

up to USD10000 and beyond that CDF (currency declaration form) should

be verified.

On purchase of FOREX from any person, FFMC is required to issue

ENCASHMENT CERTIFICATE in prescribed format.

As per rule 6DD (m) of I.T. Act, cash transaction cap of Rs.20000/- dose

not apply to FOREX purchase transaction by any AD/FFMC.



FFMCs can freely purchase FOREX from any other AD/FFMC but

payment of the same should be made only by way of crossed Cheque/draft.

RBI GUIDELINES ON FOREX BUSINESS - SELLING

Selling of Foreign Exchange

AD/FFMC can sell FOREX to general public as per following limits:

Sale against Basic Travel Quota (BTQ)

Travelers proceeding to Bangladesh, Bhutan & NEPAL-not exceeding

USD50.

Travelers proceeding to other countries- (maximum

USD10000( currency maximum USD2000 balance compulsorily

by way of TC)

Sale against Business Visits (LERMS)

FOREX can be released against business visits sponsored by

firms/organizations/companies maximum USD25000 per trip

(currency maximum USD2000 balance compulsorily by way of TC)

HOWEVER, ENTIRE FOREX LIMIT CAN BE AVAILED BY WAY OF

TRAVELLERS CHEQUE FOR ANY TYPE OF ABROAD VISIT

Documents required for release of FOREX

Valid Passport, Visa and confirmed Air Ticket- for BTQ release

LERMS Letter of Co.’s letter head as per prescribed format.

RBI GUIDELINES OF FOREX BUSINESS – CASH MEMO

CASH MEMO



Money changers are required issue a Cash Memo on their letter head

against each sale of FOREX. Each cash memo should be serially

numbered and prepared in duplicate.

Rates of exchange are to be displayed at a prominent place at the business

place of AD/FFMC.

Inspection of transaction by RBI

Any office authorized by RBI can any time inspect books of

accounts of AD/FFMC.

Renewal of License

FFMC should apply for renewal of license at least 3 months

in advance of the expiry of current license.

Submission of statement to RBI

Money changers should submit their FLM 8 to the office of

RBI not later than 10th

of succeeding month along with

supporting documents.

(B) LATEST RBI GUIDELINES

ANTI-MONEY LAUNDERING GUIDELINES FOR

AUTHORIZED MONEY CHANGER

LICENSING POLICY FOR AUTHORIZED PERSONS:

LIBERALIZATIONS

ANTI-MONEY LAUNDERING GUIDELINES FOR

AUTHORIZED MONEY CHANGER



1. MONEY LAUNDERING

The offence of money laundering has been defined in section 3 of the

Prevention of money laundering Act, 2002 (PMLA) as “whosoever directly or

indirectly attempts to indulge of knowingly assists or knowingly is a party or

is actually involved in any process or activity connected with the proceeds of

crime and projecting it as untainted property shall be guilty of offence of

money-laundering”.

In common man’s language, money laundering can be called a process by

which money or other assets obtained as proceeds of crime are exchanged for

“clean money” or other assets with no obvious link to their criminal origins.

2. ANTI-MONEY LAUNDERING GUIDELINES

The purpose of prescribing Anti-Money Laundering Guidelines is to prevent

the system of Authorized Money Changers (AMCs) engaged in the purchase

and / or sale of foreign currency notes/Travelers cheques from being used for

money laundering. Therefore, Anti-Money Laundering (AML) measures

should include.

a. Identification of Customer according to “Know Your Customer” norms,

b. Recognition, handling and disclosure of suspicious transactions,

c. Appointment of Money Laundering Reporting Officer (MLRO),

d. Staff Training,

e. Maintenance of records,

f. Audit of transactions.

The following paragraphs contain broad guidelines to enable AMCs to

formulate and put in place a proper policy framework for AML measures.



3. KNOW YOUR CUSTOMER (KYC) – IDENTIFICATION OF

CUSTOMERS

All transactions should be undertaken only after proper identification of the

customer. Photocopies of proof of identification should invariably be

retained by the AMC after verifying the document in original. Full details

of the and address as well as the details of the identity document provided

should also be kept on record.

If a transaction is being undertaken on behalf of another person, identification

evidence of all the persons concerned should be obtained and kept on record.

4. PURCHASE OF FOREIGN EXCHANGE

a) For encashment of foreign currency notes and/or Travelers Cheques up to

USD 500 or its equivalent, production of passport need not be insisted upon

and any other suitable document of identification like ration card, driving

license etc. can also be accepted.

b) For verification of the identity of customer for encashment in excess of USD

500 or its equivalent, a photo identity document such as passport, driving

license, PAN card, voter identity card issued by the Election Commission, etc.

should be obtained.

c) Requests for payment of sale proceeds in cash may be acceded to the extent of

USD 1000 or its equivalent per transaction. All encashment within one month

may be treated as single transaction for the purpose. In all other cases AMCs

should make payment by way of ‘Account Payee’ cheque / demand draft only.

d) Where the amount of forex tendered for encashment by a non-resident or a

person returning from abroad exceeds the limits prescribed for Currency

Declaration Form (CDF), the AMC should invariably insist for production of

declaration in CDF.

5. IN ALL CASES OF SALE OF FOREIGN EXCHANGE,

IRRESPECTIVE OF THE AMOUNT INVOLVED,



For identification purpose the passport of the customer should be insisted upon.

The sale of forex should be made only on personal application and

identification. Payment in excess of Rs.50, 000/- towards sale of foreign

exchange should be received only by account payee cheque / demand draft.

All purchases by a person within one month may be treated as single

transaction for the purpose. Encashment Certificate, wherever required, should

also be insisted upon.

6. ESTABLISHMENT OF BUSINESS RELATIONSHIP

Relationship with a business entity like a company / firm should be established

only after obtaining and verifying suitable documents in support of name,

address and business activity such as certificate of incorporation under the

Companies Act, 1956, MOA and AOA, registration certificate of a firm (if

registered), partnership deed, etc.

A list of employees who would be authorized to transact on behalf of the

company / firm and documents of their identification together with their

signatures, should also be called for.

Copies of all documents called for verification should be kept on record.

7. SUSPICIOUS TRANSACTIONS

The AMC must ensure that its staff is vigilant against money laundering

transactions at all times. An important part of the AML measures is

determining whether a transaction is suspicious or not. A transaction may be

of suspicious nature irrespective of the amount involved.

Some possible suspicious activity indicators are given below.



Customer is reluctant to provide details/documents on frivolous

grounds.

The transactions is undertaken by one or more intermediaries to protect

the identity of the beneficiary or hidden their involvement.

Large cash transactions.

Size and frequency of transactions is high considering the normal

business of the customer.

Change in the pattern of business transacted.

The above list is only indicative and non exhaustive.

8. APPOINTMENT OF MONEY LAUNDERING REPORTING OFFICER

(MLRO)

An MLRO may be appointed by every AMC for monitoring transactions

and ensuring compliance with the AML Guidelines issued by the Reserve

Bank from time to time. The MLRO will also be responsible or reporting

of suspicious transaction/s to the Financial Intelligence Unit (FIU). Any

suspicious transaction/s, if undertaken, should have prior approval of

MLRO.

The MLRO shall have reasonable access to all the necessary information/

documents, which would help him in effective discharge of his

responsibilities.

The responsibility of the MLRO may include:

Putting in place necessary controls for detection of suspicious

transactions.

Receiving disclosures related to suspicious transactions from

the staff or otherwise.

Deciding whether a transaction should be reported to the

appropriate authorities.



Training of staff and preparing detailed guidelines/handbook

for detection of suspicious transactions.

Preparing annual reports on the adequacy or otherwise of systems and

procedures in place to prevent money laundering and submit it to the Top

Management within 3 months of the end of the financial year.

9. REPORTING OF SUSPICIOUS ACTIVITY

To the extent possible, all suspicious transactions should be reported to the

MLRO before they are undertaken.

Full details of all suspicious transactions, whether put through or not, should

be reported, in writing, to the MLRO.

Any transaction which seems suspicious may be undertaken only with prior

approval of MLRO.

If the MLRO is reasonably satisfied that the suspicious transaction has/may

have resulted in money laundering he should make a report to the appropriate

authority viz. the FIU.

10. STAFF TRAINING

All the managers and staff of the AMC must be trained to be aware of the

policies and procedures relating to prevention of money laundering, provisions

of the PMLA and the need to monitor all transactions to ensure that no

suspicious activity is being undertaken under the guise of money changing.

The steps to be taken when the staff come across any suspicious transactions

(such as asking questions about the source of funds, checking the

identification documents carefully, reporting immediately to the MLRO, etc)

should be carefully formulated by the AMC and suitable procedure laid down.



The AMCs should have an ongoing training programmed for consistent

implementation of the AML measure.

11. AUDIT/COMPLIANCE

The concurrent auditor should check all transaction to verify that they have

been done in compliance with the anti-money laundering guidelines and have

been reported as required. Compliance on the lapses, if any, recorded by the

concurrent auditor should be put up to the Board.

A certificate from the Statutory Auditor on the compliance with AML

guidelines should be obtained at the time of preparation of the Annual Report

and kept on record.

12. MAINTENANCE OF RECORDS

The following documents should be preserved for a minimum period of five

years.

Records including identification obtained in respect of all transactions.

Statements/Registers prescribed by the Reserve Bank from time to

time.

All Inspection/Audit/Concurrent Audit Reports.

Annual reports of the MLRO submitted to the Top Management in

terms of paragraph 8 above.

Details of all suspicious transactions reported in writing or otherwise to

the MLRO.

Details of all transactions involving purchase of foreign exchange

against payment in cash exceeding Indian Rupees 10,00,000 from

inter-related persons during one month.

All correspondence/reports with the appropriate authority in

connection with suspicious transactions.

References from Law Enforcement Authorities, including FIU, should

be preserved until the cases are adjudicated and closed.



LICENSING POLICY FOR AUTHORIZED PERSONS:

LIBERALIZATIONS

Foreign Exchange Management Act (FEMA) stipulates that all foreign

exchange transactions are required to be routed only through the entities that

are licensed by the Reserve Bank to undertake such transactions. Such entities

are defined as Authorized persons in Section 10 of the Act. Under current

dispensation, such authorized person may be:

a. A Commercial bank (AD), or

b. A Money changer (FFMC), or

c. Any financial institution authorized for limited kind of transactions, depending on

their activity, or

d. Any other entity authorized by the Reserve Bank.

ENHANCED ACCESS TO COMMON PERSON

With the progressive liberalization in foreign exchange related transactions

common person can now undertake variety of current account transactions

without approaching the Reserve Bank. A large segment of population is

increasingly getting connected with forex transactions of an expanding nature

on individual accounts. Taking into account the day-today needs of (a)

common persons for undertaking various transactions, (b) tourists for better

encashment services and (c) requests received from existing FFMCs there is a

felt need for widening and rationalizing the intermediate tier of authorized

persons which is licensed to undertake foreign exchange transactions to meet

the day-to-day needs. These would cater to tourists for encashment and

common persons for release of foreign exchange for medical treatment,

education, employment, travel related transactions and in general a large

variety of current account transactions that are not trade transactions

Therefore, with a view to liberalizing and rationalizing the scope of activities

currently undertaken by the authorized persons an internal Group consisting of



Shri H. Bhattacharya, CGM-I-C, DEIO, Shri G. Padmanabhan, CGM-I-C, DIT

and Shri Vinay Baijal, CGM, FED was constituted to study the related issues

and make recommendations keeping in view the need for enhanced as well as

wider access and accompanying safeguards, especially reporting requirements.

The observations and recommendations of the Group are detailed in following

paragraphs.

LEGAL FRAME WORK

Section 10 (1) of FEMA enables Reserve Bank to authorized any person to be

known as Authorized Person (AP), to deal in foreign exchange or foreign

securities, as an Authorized Dealer (AD), Money Changer (MC) or Offshore

Banking Unit (OBU) or in any other manner as it deems fit. The Bank has

therefore wide discretion to authorize a person as AD or MC or OBU or in any

other manner, and all such persons would be known as 'authorized person.'

Within the broad categories of AD or MC or OBU, it may be permissible to

have sub-categories. There should however be clear eligibility norms for the

classification and the norms should have nexus with the object of

classification.

The authorization is subject to the conditions laid down therein. The

conditions may be for the purpose of ensuring continued eligibility for

conducting the authorized business, and/or relatable to the conduct of

business. While there may be standard conditions uniformly applicable to all

APs or applicable to APs in a category/sub-category, there may also be special

conditions applicable in a particular case on the facts thereof.



EXISTING ARRANGEMENT

The Reserve Bank has currently authorized 976 entities as authorized persons

in following categories:

Category of license (

Number)

Entities Major Activities

Authorized Dealers

(87)

Commercial Banks - 84;

State Co-operative Bank - 1;

Urban Co-operative Bank - 2.

All permissible current and

capital account transactions

Financial Institutions

(9)

Financial Institutions “ 4

(EXIM, IFCI, SIDBI ,CCIL)

Factoring Agencies “ 5

Activities related to financing

of international trade

undertaken by these institutions

Full Fledged Money

Changers

(879)

Department of Post

Urban Cooperative Bank “ 9

Other FFMCs “ 869

Sale/Purchase of foreign

exchange for private and

business visits abroad

Others

(1)

Thomas Cook India Ltd. Specified non trade related

current account transactions

Total (976)

Details of the various activities that each of these categories can undertake are

given in Annex-1

Authorized

Dealers

(87)

FFMCs

(879)

Financial Institutions

(9)

Others

(1)

All

permissible

Sale/Purchase

of foreign

SIDBI, EXIM and IFCI 1. Sale/purchase of foreign




current and

capital

account

transactions

exchange for

private and

business

travel

1. Transactions relating to

foreign currency borrowing/

lending debt servicing and

trade finance (both fund and

non-fund based) which are

incidental to the normal

functions.

2. Maintaining foreign

currency accounts with

banks, correspondents

abroad.

3. Investing surplus foreign

currency balances in

accordance with RBI/GoI

guidelines in force.

4. Buying/selling foreign

exchange in the domestic as

well as international

markets in cover of

transactions which are

incidental to permitted

foreign exchange

transactions.

5. Entering into forward

contracts and other risk

management products on

behalf of clients as also for

own balance sheet

management.

business travel, including

for medical treatment,

participation in

conferences/exhibitions/fair,

competitions, training,

education abroad,

membership of International

Organizations etc..

2. Remittances by tour

operators / travel agents to

overseas agents / principals

/ hotels, Film shooting,

3. Reimbursement of travel

expenses of foreign

nationals on business visits

to India, / temporarily

engaged by organizations in

India., Payment of crew

wages, Remittance towards

cultural tour where prior

approval has been obtained

from the Ministry of Human

Resource Development,

Remuneration for visiting

professionals who are on a

short-term assignment in

India.

4. Remittance for

educational tie up

arrangements with

universities abroad,



6. Maintaining open

exchange/gap positions

arising on account of the

above transactions up to the

limits approved

7. Offering long dated

foreign currency-rupee

swaps to clients/non-clients

8. Availing temporary

overdrafts from the

correspondent banks for

activities related to

negotiation of payment

under the letter of credit,

other payments etc.

9. Undertaking foreign

currency rupee sell/buy

swaps

10. Extending pre and post-

shipment credit facility.

(only SIDBI)

Clearing Corporation of

India Ltd. (CCIL)

1. Maintaining foreign

currency accounts with a

settlement bank outside

India.

2. Accept foreign currency

examination fees etc.

5. Visa/Emigration/

Emigration Consultancy

Fees, assessment fees for

overseas job applications

etc.

6. Maintenance of close

relatives abroad.



deposits from Authorised

Persons who are members

of CCIL

3. Invest the foreign

currency funds placed as

deposits by the clearing

members in US $ Treasury

Bills/Notes or other US

Government Securities.

4. Avail one or more Lines

of Credit from the

settlement bank outside

India to facilitate the

clearing operations.

5. Access the domestic

forex markets, either

directly or through an

Authorised Dealer, in case

of default by any of the

clearing members or for

making remittances

incidental to forex clearing

and settlement operations.

Factoring agencies

a. Provide import factoring,

assuming all the relevant

obligations enjoined on

Authorised Dealers in

respect of import



transactions as per extant

exchange control

regulations.

b. Handling of all

Import/Export documents

relating to factoring services

and forfeiting transactions.

c. Acceptance and release of

GR Forms.

d. Maintenance of Nostro

Account balances

commensurate with the

business needs.

e. Undertaking forex cover

operations purely to hedge

exposures occasioned by

factoring/forfeiting.

f. Make payments towards

various charges incidental

to factoring/ forfeiting to

overseas

associates/forfeiting

agencies.

g. Export factoring to be

provided on 'with recourse

basis' and forfeiting on

'without recourse basis'.

h. In cases where exporters



have availed of pre-

shipment finance,

funds/discounted value of

forfeiting bills should be

transferred direct to the

concerned bank in foreign

currency/ rupee as the case

may be.

i. Permitted to consider the

requests (i) for reduction in

invoice value, (ii) payment

of agency commission and

(iii) write off of export

proceeds from your exporter

clients under extant rules

and regulations as

applicable to authorized

dealer in foreign exchange.

REVIEW

The Reserve Bank has been receiving representations from existing Full

Fledged Money Changers (FFMCs) requesting to expand the scope of the

foreign exchange transactions that they are permitted to undertake. These

requests were revisited by the Group in the light of on going liberalization in

foreign exchange transactions, convenience of the tourists, improved

technology and with an object to rationalize the institutional structure and

expand the number of entities eligible to undertake foreign exchange

transactions, while ensuring appropriate safeguards against misuse.

In the light of the above, the Group had detailed discussions on the

transactions that various entities are permitted to undertake and also the

growing need of the common person and tourist for foreign exchange



transactions in the light of progressive liberalization over the last 15 years as

well as globalization of the Indian economy. The Group feels that there is a

distinct growing demand to undertake current account foreign exchange

transactions that are not related to trade but are required to meet miscellaneous

needs of common person like fees and maintenance expenses of students,

foreign exchange for medical treatment etc.

RECOMMENDATIONS

With a view to providing adequate foreign exchange facilities to common

persons the Group, observes that for efficient customer service through

competition there is a need to widen the scope of activities which the

Authorized persons are eligible to undertake and also to increase the number

of entities that are eligible to sell foreign exchange to public for their day-to-

day current account transactions. The Group, therefore, recommends that

Reserve Bank may consider granting licenses to certain entities to undertake

some more transactions, in addition to what FFMCs are currently permitted,

by authorizing them to undertake certain non-trade related current account

transactions. Such entities may be called Restricted Authorized Dealers

(Restricted ADs).

Proposed Classification of Entities

Sl.

No.

Category of license

(Number)

Entities Major Activities

1 Authorized Dealers Commercial Banks ,

State Co-op Bank ,

Urban Co-op Bank ,

All current and capital

account transactions

according to RBI directions

issued from time-to-time.

( No Change)



2. Restricted

Authorized Dealers

(RADs)

i) Category-I Financial Institutions

EXIM, IFCI, SIDBI

,CCIL and

Factoring Agencies

Activities incidental to

financing of international

trade related activities

undertaken by these

institutions. (No Change)

ii) Category-II 1. Upgraded FFMCs

2. Select UCBs

3. Select RRBs

4. Thomas Cook

India Ltd.

Specified non-trade related

current account transactions

as at Para. 6.3 of the Report

3 Full Fledged Money

Changers (FFMCs)

Department of Post

Urban Coop Bank

Other FFMCs

Sale/Purchase of foreign


business visits Abroad.

(No Change)

The Group recommends that RADs-Category II may be permitted to release

foreign exchange for the following transactions:

Private Visits,

Remittance by tour operators / travel agents to overseas agents /

principals / hotels,

Business Travel,

Fee for participation in global conferences and specialized training

Remittance for participation in international events / competitions

(towards training, sponsorship and prize money).

Film shooting,

Medical Treatment abroad,

Disbursement of crew wages,

Overseas Education,



Remittance under educational tie up arrangements with universities

abroad,

Remittance towards fees for examinations held in India and abroad and

additional score sheets for GRE, TOEFL etc.,

Employment and processing, assessment fees for overseas job

applications,

Emigration and Emigration Consultancy Fees,

Skills / credential assessment fees for intending migrants,

Visa fees,

Processing fees for registration of documents as required by the

Portuguese / other Governments,

Registration / Subscription / Membership fees to International

Organizations,

It will be observed that the recommendations imply that the entities proposed

to be licensed as RAD-Category II may be permitted to undertake the

transactions that involve conversion of one currency into other on the basis of

a simple declaration from the applicant and/or on production of appropriate

document. Such transactions may not necessarily require opening and

maintaining foreign currency denominated (NOSTRO) account with a bank

outside India. However, the Group recommends that to facilitate issuance of

foreign currency draft etc. for such transactions the RAD-Category II may be

allowed enter into an arrangement with banks authorized to deal in foreign

exchange in India.

ELIGIBILITY CRITERIA FOR GRANT OF RESTRICTED AD (RAD-

CATEGORY II) LICENSE

The Group has deliberated in detail the current dispensation available to

various categories of authorized persons and in the light of regulatory

framework under which each category of institutions is functioning the issue

of granting them license as a Restricted AD has been considered. The

eligibility criteria should primarily depend on strong financials, good



governance, regulatory / prudential comfort and adequate control mechanism.

The Group recommends that the following category of institutions could be

considered for the purpose.

Existing Full-fledged Money Changers as RADs Category II

Currently, a company with minimum capital of Rs.25 lakhs for a single branch

and Rs.50 lakhs for multi-branch is eligible to apply for a license of FFMC for

consideration by the Reserve Bank. The Group recommends that the Reserve

Bank may consider granting RAD-Category II license to the existing, well

functioning FFMCs, with strong financials, that demonstrate good governance

while providing regulatory/ prudential comfort. Illustratively, the criteria for

up gradation of existing FFMC to RAD-Category II may include net owned

funds Rs 10 crores; satisfactory functioning as FFMC for at least two years

and credit report from their bankers.

Urban Co-operative Banks (UCBs)

No new Authorized Dealer/FFMC license is being currently granted to any

Cooperative Bank. Although, fresh FFMC licenses are not being issued to

UCBs, the existing licenses are being renewed under the same conditions.

The Group observes that with the adoption of the road map as outlined in the

'vision document' for Cooperative sector many of the supervisory concerns of

the sector are being addressed. Therefore, the Group recommends that the

Urban Cooperative banks with strong financials, good governance and

providing regulatory/prudential comfort may be considered, on case by case

basis, for licensing as RAD-Category II.

The Group would like to emphasize that the license to deal in foreign

exchange in capacity other than Authorized Dealers is different insofar as

these entities are not permitted to undertake any open position risk. The

activities permitted under these licenses only allow conversion from one



currency to other currency. Therefore, a beginning can be made by granting

them license as RAD-Category II.

REGIONAL RURAL BANKS

The Group observes that the Regional Rural Banks (RRBs) are jointly

promoted by public sector banks, the Central Government and the State

Government. As on date there are 177 RRBs (196 - as on March, 2013).

Further, currently the RRBs are undergoing financial restructuring and

amalgamation. The Group also notes that in terms of ownership the RRBs

satisfy the criteria of 'fit and proper'. The sponsor banks have rich experience

in foreign exchange transactions and the RRBs can draw upon the sponsor

banks for training and skill up gradation, if needed.

Therefore, in view of the wide branch network of RRBs and with a view to

providing foreign exchange services at the doorstep of the common person the

Group recommends that the Reserve Bank may also consider RRBs with

strong financials, good governance and providing regulatory/prudential

comfort for granting licenses as RAD-Category II.

To ensure active involvement of the sponsor banks the Group recommends

that the Reserve Bank may consider requests provided it is recommended by

the sponsor bank to grant RAD Category â€“II license to RRBs on case by

case basis. Since the supervision of the RRBs is entrusted to NABARD the

Reserve Bank may consider taking into account the recommendations of the

NABARD also before taking a decision on the application for grant of RAD-

Category II license.

Before granting license, the Bank may also consider obtaining an undertaking

from the sponsor bank of the RRB that it would impart training to the staff of

the RRB to ensure that they are able to discharge their responsibility as RAD-

Category II.

PROPOSED STRUCTURE



Proposed structure of the authorized persons would be as follows:

Sl.

No.

Category of

license

(Number)

Entities Eligibility Major Activities

1 Authorized

Dealers

Commercial Banks,

State Co-op Bank,

Urban Co-op Banks

No Change

1) License to

conduct Banking

business in India.

2) Report from the

concerned

regulatory

department of

RBI.

All current and

capital account

transactions

according to RBI

directions issued

from time-to-time.

2. Restricted

Authorised

Dealers

(RADs)

i) Category-I Financial

Institutions ;

EXIM, IFCI, SIDBI

,CCIL and

Factoring Agencies

No Change

(On case to case

basis to facilitate

the core activity

of the

institutions.)

Activities incidental

to financing of

international trade

related activities

undertaken by these

institutions.

ii) Category-II 1. Upgraded

FFMCs

2. Select UCBs

3. Select RRBs

4. Thomas

Cook India

Strong financials,

good governance

and regulatory/

prudential comfort

and adequate

control

Specified non-trade

related current

account transactions

as at paragraph 6.3 of

the Report



Ltd. mechanism as in

paragraph 7 of the

Report.

3 Full Fledged

Money

Changers

(FFMCs)

Department of Post

Urban Coop Bank ,

Other FFMCs,

No Change

1) Registered

under Indian

Companies Act.

2) Minimum

capital of Rs. 25

lakhs for single

branch Rs. 50

lakhs for multi-

branch,

3) Satisfactory

report from

bankers.

Sale/Purchase of

foreign exchange for

private and business

visits Abroad

TRANSITIONAL ARRANGEMENTS

The Group notes that in adopting the proposed structure it is unlikely that it

may result in limiting the present activities of any of the licensed entities.

However, in the event that there is any entity which considers the proposed

structure restrictive as compared to the current dispensation, the Group

recommends that such entity may be granted special dispensation, on case by

case basis, with a view to continuing their present status, as appropriate.

However, Group is of the view that all such special permission may be granted

subject to annual review.

REPORTING REQUIREMENT



In case of Authorized Dealers, RADs-Category I and FFMCs the existing

reporting requirements may continue.

It is recommended that the RADs-Category II may be required to submit a

monthly statement of all transactions (category wise) where the amount

exceeds a prescribed cut-off value, say USD 5,000 per transaction initially, so

that a review could be made of the threshold in six months and a firmer

threshold may arrived at.

INSPECTION / AUDIT

The existing arrangement of inspection/audit of Authorized Dealers and

RADs-Category I will continue.

As regards the FFMCs as has been decided that an auditor certificate

confirming the compliance with the Rules/Regulations/ Directions will be

adequate. However, the Reserve Bank may reserve the right to inspect when

considered necessary.

For RADs-Category II also the prescription as provided for FFMCs (Para.

12.2) may be made applicable. However, the Group recommends that the

Reserve Bank may require a special audit of the RADs-Category II depending

on the nature of the transactions by an auditor from the approved list of the

RBI/ICAI.

KYC AND ANTI MONEY LAUNDERING NORMS

The existing arrangement of KYC and Anti Money Laundering norms for

Authorized Dealers may continue.

KYC and Anti Money Laundering norms are being prescribed separately for

FFMCs. These may be made applicable to RADs-Category II also.

MISCELLANEOUS



The Group recommends that to begin with all RAD-Category II licenses may

be issued only for ONE year subject to renewal.

Sd/= Sd/= Sd./=

(H. Bhattacharya) (G. Padmanabhan) (Vinay Baijal)

November 29, 2013

Mumbai.

LIMITS OF FOREIGN EXCHANGE

LIMITS FOR FOREIGN CURRECNY / NOTES / COINS

1. Travelers proceeding to countries other than not exceeding US

$ 2000

Iraq, Libya, Islamic Requblic of Iran, Russian or its equivalent.

Federation & other Republics of Commonwealth

Of Independent States.

2. Travellers proceeding to Iraq or Libya Not exceeding US

$ 5000

Its equivalent.

3. Travellers proceeding to Islamic Republic of Full Exchange may be

Iran, Russian Federation & Other Republics of released.

Commonwealth of Independent States.



AD may accept payment in cash up-to Rs.50,000/- against sale of foreign

exchange for travel abroad (for private visit of any purpose.)

Above Rs.50,000/- payment must be received only by:

1. Crossed cheque drawn on applicant’s Bank’s Account.

2. Crossed cheque drawn on Bank account of the first applicant

sponsoring for visit of the applicant for

3. Banker’s cheque / Payment Order / Demand draft scheme for

Authorized Dealers & Full Fledged Money Changers appointing

Agents/ Franchisees for undertaking Restricted Money changing.

OBJECTIVE:

To provide easier conversion facilities for tourists, NRIs by enlarging the

network of Money changing facilities in the country.

SCHEME:

Reserve Bank freely permits ADs & FFMCs to enter into franchising

agreement.

FRANCHISE:

A franchise can be any entity who has a place of business and whose bonafide

are acceptable to AD/FFMC. These franchises would undertake any restricted

money changing business.

PROCEDURE OF APPLICATION:

1. The franchiser i.e. AD or an FFMC would need to apply to Reserve Bank in

Form RMC-F.

2. A declaration by AD or FFMC that while selecting the franchisee adequate

due diligence has been carried out and that such entities have undertaken to



comply with agreement/prevailing Reserve Bank of India regulations

regarding money changing.

3. Approval by Reserve Bank on a one time basis. Thereafter as and when new

franchise agreements are entered into these would have to be reported on a

post facto basis along with similar declaration as indicated above.

Franchisers are free to decide on the tenor of the agreement.

Franchisee agreement should include the following silent features:

1. The display of exchange rates. Exchange rate of foreign currency in to rupees

should be the same or close to the daily exchange rate charged by

ADs/FFMCs as its branches.

2. Surrender of collection to the franchiser or other ADs within 7 days.

3. Maintenance of proper records of transaction by the franchisee.

4. On site inspection of premises and records by the franchise at least once in a

year.

COMPANY PROFILE OF NPR FINANCE LIMITED

HISTORY 82

PRESENT STATUS OF THE FIRM 83

BUSINESS POLICY 84

CORE COMPETENCE 85

UNIQUENESS 85

RISK AND REWARDS 85

BRANCHES 86



HISTORY

NPR FINANCE LIMITED is a part of NPR Group which has various

businesses such as Hire purchase finance and leasing, Foreign Exchange,

Paper manufacturing, automobile dealership, Transportation of heavy goods

and Real estate property development along with civil construction. The total

turnover of NPR Group is Rs. 800 Crores. (Three Hundred Crores) annually.

Head office is located at 19, R.N.Mukherjee Road, Main Building, 1st Floor,

Kolkata-700 001. There are total of four offices in Kolkata, a paper mill at

Chakdah, workshops at Kolkata, Asansol, Kharagpur and Burdwan and eight

branch offices in the cities of New Delhi, Mumbai, Chennai, Ahmedabad,

Kochi, Bhubaneswar, Jaipur & Agra. NPR Group operates from a total of

eighteen locations all over the country and controls various business activities.

Mr. N.L.Todi is heading the NPR Group. The NPR Group’s roots can be

traced back to the year 1860 when Mr. N.L.Todi’s grandfather started trading

in Narayanganj (now in Bangladesh) after having moved from Rajasthan.

They began with trading of commodities and diversified into manufacturing

by setting up their own Glass Factory (Hardeo Glass Works) in the year 1927

at Dhaka. Soon after, they began manufacturing of Aluminium, ceramic and

Silicate Enamel wares. They also have had vast and varied experience in

trading and wholesale dealing of food grains, cotton textiles and jute bailing.

In fact, Dinajpur Industries Ltd. set up by Mr. N.L.Todi and was one of the

foremost Jute Bailing presses in North Bengal and exported Jute to Japan,

Russia and many parts of Europe. Once all the properties of Mr. N.L.Todi

were declared as Enemy property by the Pakistani Government he had to flee

East Pakistan (now Bangladesh) and had to come to Kolkata, India.

Mr. N.L.Todi all by himself started business in Kolkata, India in the year 1959

and successfully implemented many ventures in the field of Engineering,

Printing and Packaging, Real Estate & Property Development, Paper

Manufacturing, Automobile Dealership & Workshops, Transportation of

heavy goods and Hire Purchases and Leasing



PRESENT STATUS OF THE FIRM

Presently, the Group is headed by Mr. N.L.Todi, who is a dynamic

entrepreneur and bye his imagination and restless effort, the group has been

successful in setting up many industrial & business units, His recipe for

success has always been unmatched quality at affordable prices and customer

satisfaction. He is aided by his two sons

Mr. Pawan Kumar Todi, Mr. Raj Kumar Todi and his grandsons Mr. Rishi

Todi and Mr. Varun Todi

At present, the Group is involved in the following activities:

Paper Manufacturing.

Automobile Dealership with Workshop.

Hire Purchase finance and leasing.

Foreign Exchange

Transportation of heavy goods.

Real Estates, Property Development along with Civil Constructions.

Granite Mining (first of its kind in West Bengal)



BUSINESS POLICY

MISSION AND VISION STATEMENT

GROWTH WITH CUSTOMER SATISFACTION.

UNLESS YOU SATISFY YOUR CUSTOMES YOU CAN’T GROW.

“NPR FINANCE” Ahmedabad Stands For

N – Newly Started in 1997

P – Providing Non-banking finance services

R – Refinance is the beginning of our branch

F – Finance and Foreign Exchange Facility

I – Insurance inspiration to the customers

N - Negotiations with customers with positive attitude

A – Approach establishes long term association

N – New expansion with planning & efficiency

C – Customers satisfaction with commitment

E – Excellent office Environment

BUSINESS POLICY

NPR Finance Ltd. Doesn’t encourage credit sale.

NPR planning to expand franchises base in rural potential areas.

To increase man power.

By expanding branch network NPR will focus on large corporate plants who

wants Forex at different location.

NPR sticks to minimum margin policy and opt to loose any transaction if that

margin is not covered.



CORE COMPETENCE

Excellent customer services.

Utmost satisfaction of the customers.

Good team work.

UNIQUENESS

Fair and transparent dealings.

RISK AND REWARDS

Forex market is highly risk oriented business despite that margins are very low.



BRANCHES

COMPANY ADDRESS TELEPHONE FAX

NPR FINANCE LTD. KOLKATA (003)2248 4788 (033)2243 0151

HEAD OFFICE 19, R.N.Mukherjee Road, (033)2248 9902

Main Building, 1st Floor (033)2248 8824

Kolkata - 700 001

NEW DELHI (011)2581 2585 (011)2575 0672

2nd Floor (011)2571 1461

8C/6, W.E.A. Abdul Aziz Road (011)2574 8542

BRANCH OFFICE Karol Bagh

(Opp. Shastri Park)

New Delhi - 110 005

MUMBAI (022)2380 1507 (022)2380 2715

2nd Floor, Room No. 218 (022)2380 1508

Majestic Shopping Centre (022)2380 1509

BRANCH OFFICE 144 Jagnnath Shankar Seth

Road

Girgaum

Mumbai - 400 004

CHENNAI (044)2829 5754 (044)2829 5746

BRANCH OFFICE No. 35/36 Greams Rd,2nd Floor (044)2829 5746

Chennai - 600 006

AHMEDABAD (079)640 1482 (079)640 5655

106-107 "Samedh" (079)640 1483

BRANCH OFFICE Above O.B.C.

Panchvati

C.G.Road,

Ahmedabad - 380 006



KOCHI (0484)236 7927 (0484)235 1589

BRANCH OFFICE 41/1787, Chittor Road (0484)236 6490

Opp. Sree sudheendra Hospital

Kochi 682 018

BHUBANESWAR (0674)254 5561 (0674)254 5583

BRANCH OFFICE A/173 Sahidnagar

Bhubaneswar - 751 007

JAIPUR (0141)2369 371

301,2nd Floor (0141)2374 273

BRANCH OFFICE Shalimar Complex (0141)3109 408

Church Road,

Off Mirza Isamail Road

Jaipur - 302 001

AGRA (0562)2234 053

18/163/B/5 (0562)2234 054

BRANCH OFFICE Fatherhabad Road

Opp. Hanuman Temple

Near Taj View Hotel

Agra



REASONS FOR NPR FINANCE DIVERSIFY INTO

FOREX BUSINESS



REASONS FOR NPR FINANCE DIVERSIFY INTO FOREX

BUSINESS

It gives boost reputation and to create larger customer base which will help in

building volumes for both the forex and finance dept.

Diversification policy of company.

The profit margin gain from the Forex fulfills all expenses of the Finance dept.

To increase wealth maximization.

To gain the benefit of vastly developing Forex business.

To expand the business as the whole.



MANAGEMENT BACKGROUND AND

ORGANIZATIONAL STRUCTURE



MANAGEMENT BACKGROUND

NPR FINANCE LIMITED

GANESHNARAYAN BRIJLAL LIMITED

The group made their foray into the financial world with the incorporation of

GANESH-NARAYAN BRIJLAL LIMITED (GNB LIMITED) in 1959 at

Calcutta, the group’s first Company in Eastern India providing financing

facilities for Commercial Vehicles (CVs).

NPR FINANCE LIMITED, a company promoted by the reputed TODI group

of Calcutta, began operations in 1989. The Company is engaged in the

activities of leasing and hiring purchase of Commercial Vehicles, Cars, Plant

& Machinery, Office equipment etc. It went to Public in February, 1995 and

the response was very satisfactory. Due to the untiring efforts of its chairman

Sri Nand Lal Todi and Directors, the Company has been expanding operation

and today has offices at Mumbai, Ahmedabad, New Delhi, Chennai, cochin

and Asansol, catering to the financial needs of various clients at a national

level.

The company has also benefited from the experience of Shri P. K. Todi,

present Managing Director, and is today one of the leading Hire

Purchase/Leasing companies in Eastern India.



PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2003

Schedule For the year For the year

ended 31.03.2003 ended 31.03.2002

Rs. Rs.

INCOME

Income from Money changing operation M 65,78,131 34,35,829

Income from financing operation N 13,75,65,161 9,76,99,277

Income from franchise operation 0 11,26,749

Sale:

Shares & Securities 19,52,25,793 9,46,53,909

Closing Stock:

Shares & Securities O 9,94,05,608 10,23,91,219

Other Income 68,17,574 85,68,980

44,55,92,267 30,78,75,963

EXPENDITURE

Opening Stock (Shares & Securities) 10,23,91,219 2,00,21,369

Purchase of Shares & Securities 21,13,46,837 17,87,84,997

Establishment Charges P 55,79,434 49,87,145

Other expenses Q 1,81,30,462 1,18,86,563

Financial expenses R 1,38,50,685 1,52,80,935

Preliminary/Issue expenses written off 3,03,824 3,03,824

Bad Debts 6,79,69,071 4,89,87,447

41,95,71,532 28,02,52,280

Profit before depreciation, Lease Equalisation A/c

and Tax 2,60,20,735 2,76,23,683

Depreciation (2,54,58,996) (3,76,90,229)

Add/(Less) : Lease equalisation Account 86,98,359 1,10,73,230

PROFIT BEFORE TAX 92,60,098 10,06,684

Provision for Income Tax

Current (40,00,000) (9,70,000)

Deferred 51,66,624 -33,360

PROFIT AFTER TAX 1,04,26,722 3,324

Balance brought forward 66,52,896 4,97,50,451

Opening unadjusted Deferred Tax Liability 0 (4,28,11,168)

PROFIT AVAILABLE FOR APPROPRIATION 1,70,79,618 69,42,607

Transfer to statutory reserve for earlier years 0 2,89,046

Transfer to statutory reserve 20,85,344 665

Surplus balance carried to Balance Sheet 1,49,94,274 66,52,896

TOTAL 1,70,79,618 69,42,607

Notes on Accounts S

Balance Sheet abstract & companies

general business profile T





ended 31.03.2012 ended 31.03.2003

Rs. Rs.

INCOME

Income from Money changing operation L 1,05,99,412 65,78,131

Income from financing operation M 8,45,75,692 13,75,65,161

Sales 36,09,65,763 19,52,25,793

Closing Stock 9,90,90,542 9,94,05,608

Other Income N 1,77,16,795 68,17,574

57,29,48,204 44,55,92,267

EXPENDITURE



Opening Stock 9,94,05,608 10,23,91,219

Purchases 37,21,09,148 21,13,46,837

Establishment Charges O 82,99,619 55,79,434

Other expenses P 2,33,01,536 1,81,30,462

Financial expenses Q 1,14,37,086 1,38,50,685

Preliminary/Issure expenses written off 3,03,824 3,03,824

Bad Debts 1,39,40,007 6,79,69,071

52,87,96,828 41,95,71,532

Profit before depreciation, Lease Equalisation A/c

and Tax 4,41,51,376 2,60,20,735

Depreciation (1,64,30,622) (2,54,58,996)

Add/(Less) : Lease equalisation Account 1,12,49,228 86,98,359

PROFIT BEFORE TAX 3,89,69,982 92,60,098


Current (72,50,000) (40,00,000)

Deferred 1,28,27,030 51,66,624

PROFIT AFTER TAX 4,45,47,012 1,04,26,722

Income Tax Adj. of earlier years (2,87,580) 0

Excess Deferred Tax Liability written back 92,27,550 0

Balance brought forward 1,49,94,274 66,52,896

PROFIT AVAILABLE FOR APPROPRIATION 6,84,81,256 1,70,79,618

Transfer to statutory reserve 89,10,000 20,85,344

Surplus balance carried to Balance Sheet 5,95,71,256 1,49,94,274

TOTAL 6,84,81,256 1,70,79,618

Notes on Accounts R


general business profile S

BALANCE SHEET AS AT 31ST MARCH,2012

Schedule As at As at

31.03.2012 31.03.2003

Rs. Rs.

SOURCES OF FUNDS

Shareholder's Funds



a) Share Capital A 5,99,66,000 5,99,66,000

b) Reserves and Surplus B 15,05,76,797 9,70,89,815

Loan Funds

a) Secured Loans C 3,68,85,181 4,60,23,249

b) Unsecured Loans D 7,63,12,041 7,23, 27,025

TOTAL 32,37,40,019 27,54,06,089

APPLICATION OF FUNDS

Fixed Assets E

a) Gross Block 17,31,24,350 26,77,42,498

b) Less: Accumulated Depreciation (8,99,64,376) 17,08,12,626

8,31,59,974 9,69,29,872

c) Add/(Less): Lease Adjusment Account (50,38,785) (53,56,382)

d) Less: Loss on valuation of Non (8,87,802) (9,35,013)

performing lease assets

Net Fixed Assets 7,72,33,387 9,06,38,477

Current Assets, Loans and Advances

a) Inventories F 10,35,26,020 10,17,94,031

b) Sundary Debtors G 60,14,052 66,56,604

c) Cash & Bank Balances H 2,92,67,955 2,35,12,933

e) Loans and advances I 28,51,41,982 34,11,56,114

42,39,50,009 47,31,19,682

Less: Current Liabilities & Provisions

a) Current Liabilities J 16,05,69,921 25,01,12,688

b) Provisions K 1,71,77,280 3,88,47,030

17,77,47,201 28,89,59,718

Net Current Assets 24,62,02,808 18,41,59,964

Miscellaneous expenditure 3,03,824 6,07,648

(to the extent not written off or adjusted)

TOTAL 32,37,40,019 27,54,06,089

Notes on Accounts R


general business profile S





ended 31.03.2013 ended 31.03.2012

Rs. Rs.

INCOME

Income from Monaey changing operation L 1,32,24,398 1,05,99,412

Income from financing operations M 8,05,90,573 8,45,75,692

Sales 45,59,63,822 36,09,65,763

Closing Stock 7,06,20,062 9,90,90,542

Other income N 1,19,25,819 1,77,16,795

63,23,24,674 57,29,48,204

EXPENDITURE

Opening Stock 9,90,90,542 9,94,05,608

Purchases 43,63,52,584 37,21,09,148

Establishment Charges O 1,12,43,603 82,99,619

Other expenses P 2,33,04,517 2,33,01,536

Financial expenses Q 1,01,35,420 1,14,37,086

Preliminary/Issue expenses written off 3,03,824 3,03,824

Bad Debts 41,37,906 1,39,40,007

58,45,68,396 52,87,96,828

Profit before depreciation, Lease Equalization A/c and Tax 4,77,56,278 4,41,51,376

Depreciation (1,12,62,882) (1,64,30,622)

Add/(Less) : Lease Equalization Account 35,50,547 1,12,49,228

PROFIT BEFORE TAX 4,00,43,943 3,89,69,982


Current (1,47,85,029) (72,50,000)

Deferred 22,44,402 1,28,27,030

PROFIT AFTER TAX 2,75,03,316 4,45,47,012



Income Tad Adj. of earlier years - (2,87,580)

Excess Deferred Tax Liability written back - 92,27,550

Balance brought forward 5,95,71,256 1,49,94,274

PROFIT AVAILABLE FOR APPROPRIATION 8,70,74,572 6,84,81,256

Transfer to statutory reserve 55,00,670 89,10,000

Proposed Dividend 59,89,600 -

Dividend Distribution Tax 8,40,042 -

Surplus balance carried to Balance Sheet 7,47,44,260 5,95,71,256

TOTAL 8,70,74,572 6,84,81,256

Notes on Accounts R

Balance Sheet Abstract & Companies

General Business Profile S

\

BALANCE SHEET AS AT 31ST MARCH,2013

Schedule As at As at

31.03.2013 31.03.2012

Rs. Rs.



SOURCES OF FUNDS

Shareholders Funds

a) Share Capital A 5,99,66,000 5,99,66,000

b) Reserves and Surplus B 17,12,50,471 15,05,76,797

Loan Funds

a) Secured Loans C 5,90,43,186 3.68,85,181

b) Unsecured Loans B 8,79,66,474 7,63,12,041

TOTAL 37,82,26,131 32,37,40,019

APPLICATION OF FUNDS

Fixed Assets E

a) Gross Block 9,96,12,742 17,31,24,350

b) Less : Accumulated Depreciation (3,67,19,879) (8,99,64,376)

6,28,92,863 8,31,59,974

c) Add/Less : Lease adjustment account (45,87,109) (50,38,785)

d) Less : Loss on valuation of Non performing lease assets (4,20,316) (8,87,802)


Current Assets, Loans and Advances

a) Inventories F 7,55,43,158 10,35,26,018

b) Sundry Debtors G 1,55,76,887 2,95,47,636

c) Cash & Bank Balances H 3,65,92,734 2,92,67,955

d) Loans and advances I 36,84,93,469 26,16,08,400

49,62,06,248 42,39,50,009

Less : Current Liabilities & Provisions

a) Current Liabilities J 15,40,15,973 16,08,98,326

b) Provisions K 2,18,49,582 1,68,48,875

17,58,65,555 17,77,47,201


Miscellaneous expenditure - 3,03,824

(to the extent not written off or adjusted)

TOTAL 37,82,26,131 32,37,40,019



Notes on Accounts R

Balance Sheet Abstract & Companies

General Business Profile S



SWOT ANALYSIS OF NPR FINANCE LTD.

STRENGTHS 102

WEAKNESS 102

OPPORTUNITY 103

THREATS 103



STRENGTHS

Committed Staff.

Excellent Teamwork.

Excellent relationship with client

Attachment with clients as human being.

Healthy environment for work and family like atmosphere.

Sweet relations with customers.

Parallel in other business also.

Huge database.

Very strong retail presence.

Excellent infrastructure and good ambience of office premises.

WEAKNESS

Lack of man power in Forex department.

Limited number of branches.

For getting maximum retail customers Forex department should be at prime

location

Lack of aggressiveness.

No designation for Branch Manager and there for problem of power and

authority arises.

Due to lack of sales staff it becomes difficult to give quick service to

customers.

At times due to healthy competition in the market company needs to do certain

transaction even at a loss when competition arises. So, that company can be

more aggressive.



OPPORTUNITIES

Creating new corporate base.

Expanding branch network

New branches soon at Faridabad, Bhopal, and Udaipur.

THREATS

Very thin Profit Margins.

New license issued by RBI which will increase present competition.

Gray market operations increase.

Limited branch network.

New Modus-operandi for frauds.

Expansion of banks (AD), branches which ultimately harm the business of

FFMC.

Unethical practices followed by Authorized Persons.

Small players coming in the market and operate with low margins and without

any specific policy.

Unethical practices by employees so, integrity of employees is very important.

Business through Travel Agents which will lead more commission to them.

More demand of services by customers.



METHODOLOGY

RELEVANCE OF THE STUDY 105

RESEARCH PROBLEMS 105

OBJECTIVE 105

HYPOTHESIS 105

SCOPE OF THE STUDY 105

DATA COLLECTION 106

LIMITATION OF THE STUDY 106



RELEVANCE OF THE STUDY

Finding out Market study and Market potential of Foreign Exchange market of

India

RESEARCH PROBLEMS

To find out Foreign Exchange Market in India.

OBJECTIVE OF THE STUDY

The objective of the study is to identify the Market potential and Market study

of Foreign Exchange Market in India and study the perception of Authorized

Dealers and Authorized Money Changer regarding foreign exchange market in

India.

HYPOTHESIS

Descriptive research

SCOPE OF THE STUDY

Identify the Market Potential and Market Study of Foreign Exchange Market

in India

Different Market share’s of Money Changer in Ahmedabad.

Studying the Problem faced by FFMCs.

Identify the perception of Money Changer.

Studying the effect of foreign exchange market if U.K. accepts EURO.

Identify the effect on Indian Economy if U.K. accepts EURO.

Identify the month wise forex demand in India.

Identifying where the company is going wrong.



TOOLS FOR DATA COLLECTION

Primary

1. Sample design

Non-probability

Sampling unit – Geographical area – City – Ahmedabad.

Sample size – (16)

Authorized Dealers (2)

FFMCs (Full Fledge Money Changers) (14)

2. Instrument

Questionnaires

3. Mode of collection of data

Personalize

4. Tools for Data Analysis

Weighted Mean Scores

LIMITATIONS OF THE STUDY

The study has been done for Ahmedabad city only.

The study was done of only 14 Major FFMCs.

The study has ignored study of Authorized Dealers.

Inter bank study was ignored.

Overseas foreign market was ignored.

DATA ANALYSIS

MAJOR FOREIGN EXCHANGE PLAYERS



Major Foreign Exchange Players

7%

15%

4%

2%

31%4%

2%

9%

18%

4%

2%

2%

NPR Finance

Wall Street Forex

Weizmann Forex

VKC Credit & Forex Services

Thomas Cook

UAE Exchange & Financial

Services Ltd.Trade-w ings Ltd.

Bank Of Punjab

LKP Forex Limited

Centrumdirect Limited

Green Channel Travel

ServicesChoksi Forex Pvt Ltd.

As Per the survey done among 15 FFMC and 2 AD. It was founded that

Thomas Cook was the Major Foreign Exchange player among AD. This was

followed by Bank of Punjab (Centurion Bank). The major source through

which Thomas Cook’s business is sourced is Travel Agents, Retail Customers

and Corporate. It covers 31% of the total market share. There Strong

Marketing strategy and companies goodwill has made them No.1.

And among FFMC it was LKP forex who is leading Among FFMCs the

players who followed LKP were Wall Street Forex and NPR Finance which

holds 2nd

and 3rd

Position holding the market share of 16% and 7%

respectively. LKPs aggressiveness has made them No.1 in FFMCs.



SUITABILITY OF RBI GUIDELINES

Suitability of RBI Guidelines

Yes 75%

No 25%

Yes

No

As per the survey done from 16 FFMC regarding the suitability of RBI

Guidelines. I found some of FFMCs were not satisfied with the RBI

Guidelines while some of them were happy with the guidelines. Among all it

was found 75% of them were happy with RBI Guidelines and 25% were not.

The persons who were not happy with RBI guidelines said that there are

several reasons why RBI guidelines are not suitable. Some of them are as

under.

Even For small encashment, Customers need to give their Identity

Proof which is not practically feasible.

Some of them said that even though they are not satisfied with RBI

guidelines they have to follow it but as per their opinion guidelines are

not practically applicable.

As per RBI guidelines no person can get full amount in cash if the cash

exceeds Rs.50, 000/- . But when the foreigner comes they don’t have

their bank a/c. in India so its very difficult for them to get the

conversion money in cash. .

Remaining other 75% of them was favoring RBI guidelines. As per their

opinion RBIguidelines and RBI rules and regulation are very much important

as the economy is growing the scope of foreign exchange is going to become



wide so it is very much necessary for RBI to frame strict policy so that illegal

transactions are reduced.

PROBLEMS FACED BY FFMC AGAINST CUSTOMERS

Problems faced by FFMC against Customers

012345678

Documentation Convincing of

Customers

Bargaining for

rates

Customer

Prefer Currency

rather than

Cheque

No Problem

Types of problems

Va

lue

As per survey done there are some problems faced by these FFMC against

Customers.

Among these problems the major one is Documentation and second is

bargaining for rates with customers. As per new RBI guidelines for the

encasements of single USD, customers need to give their identity proof. So

sometimes customers are not ready to disclose their identity which is the major

problem faced by FFMC.

The second is bargaining for rates, because of competition customers always

bargain in rates. And so money changers have to work on thin margins.

Apart from them other problems was of convincing customers. It was found

that it was very difficult for money changers to convince their customers

specially for rates and for documentations as customers are not willing to

disclose their identity.

Moreover, customers mostly prefer currency rather than Cheque but as per

RBI guidelines cash cannot be given if the transaction amount exceeds Rs.50,

000



REACTION OF FOREIGN EXCHANGE MARKET IF U.K.

ACCEPTS EURO

Reaction of Foreign Exchange Market if U.K.

accepts Euro

48%

20%

20%

12%

Currency rate of USD

will decrease and Euro

will increase

Pound rate will decrease

Chances of becoming

EURO becoming

international currency.

No effect in Forex

Market.

When the study was made regarding the reaction of foreign exchange market

if U.K. accepts Euro as its common currency it was found that 48% out of the

total sample said that currency rate of USD will decrease and Euro will

Increase. 20% said that pound rate will decrease and chances of becoming

EURO as international currency will increase.

From the above graph we can study that if U.K. will accept EURO as common

currency than there are all chance that EURO currency rate will increase the

reason is that demand of EURO will increase and as we know that EURO is

already scarce in present days so the rate of EURO will increase.

There are all chances that pound rate will also decrease the reason is that the

demand of pound will be decreased and supply will increase, so pound will be

easily available and so there are all chances of pounds price decreasing.



DEGREE OF CHANGE IN INDIAN FOREIGN EXCHANGE

MARKET IF U.K. ACCEPTS EURO

Degree of Change in Indian Foreign Exchange

Market if U.K. accepts Euro

31%

69%

Yes

No

When the research had done for what would be the reaction of Indian foreign

exchange market if U.K. accepts Euro was done it was found that 31% of the

total population said that it would actually effect Indian foreign Exchange

market while 69% said it would not.

The reason was found for not affecting Indian Foreign Exchange Market was

Indian Economy is growing and it is showing positive sign in future also as a

result it was found that people were optimistic about the same and so as per

there saying it was found that there would be no reaction in Indian Foreign

Exchange market.

As per the 31% of the population it was found that there would be some

reaction on Indian Foreign Exchange market as per there saying it was found

that Indian Rupee would become stronger against USD and POUND while it

will become weak against Euro.



MONTH VISE FOREX DEMANG IN INDIA

Month vise forex demand in India

32%

24%8%

36% Jan-Mar

Apr-June

July-Sept.

Oct.-Dec.

The above graph shows Month wise forex demand in India. It was found that

36% of the business was done from October to December mainly encashment

was done more the reason is because foreigner use to come to India during this

season and so encashment was done by them.

It was even found that 32% of the business was done from January to March

during this seasons generally student going to abroad for studying was found

and so business form Placement consultant was found.

24% of the business was found during April to June as during summer

vacation it was found that more and more people do visit abroad for vacations.

Generally during this season it was found that mostly selling of currency took

place. Travel agents use to do good foreign exchange business during this

season.



SOURCES FORM WHICH FOREIGN EXCHANGE BUSINESS IS

SOURCED

Sources From which Foreign Exchange business

is Sourced

24%

21%

28%

6%

12%

9%

Corporate

Retail customers

Travel agents

Franchises

Consultant

Banks

The main sources form which foreign exchange business is sourced is

Corporate, Retail Customers, and Travel agents, Franchises, Consultants and

Banks. From the researched done it was found that 28% of the total foreign

exchange business is sourced from Travel agents and so it was found that the

money changers had got a very good tie-ups with travel agents.

The second major source through which foreign exchange business is sourced

is corporate. The total share in the foreign exchange business is 24%. The

businessman going abroad needs foreign exchange and so they need to buy it

from money changer. Even it was found that money changer use to provide

special services to these corporate clients.

The third major source through which foreign exchange business is sourced is

Retail Customers as its total share is 21% of total foreign exchange business. It

was found that a good location of money changer helps to attract the retail

customers.

The share of consultant, banks and franchises was found as 12%, 9%, and 6%

respectively in total foreign exchange business.



MOST POTENTIAL CITY IN INDIA

Most Potential City of India

22%

29%

10%

24%

5%

5% 5%Delhi

Mumbai

Calcutta

Ahmedabad

Chennai

Hyderabad

Pune

The research for most potential city of India for foreign exchange business

was done and it was found that Mumbai was found No.1 with total share of

29% than second was Ahmedabad with 24% and Delhi stood No.3 with 22%

share.

Ahmedabad was preferable to do the foreign exchange business the reason

was that because here, less number of fraud is been done and so money

changer are safe irrespective of thin margin and so most money changer were

happy to expand their branches in Saurashtra region and in proper

Ahmedabad.

Out of the full research 10% of the population was interested to do business in

Calcutta, 5% in Pune, Chennai and Hyderabad. It was found that in Hyderabad

maximum illegal transaction is been done in foreign exchange business.



COMPANY WHICH HAS GOT MAJOR MARKET SHARE IN

TRAVELLERS CHEQUE

Company which has got Major Market Share in

Travelers Cheque

61%

9%

17%

9%4%

American Express

Visa

Thomas cook

City Bank

Master Card

Travelers Cheque is one of the important instruments which are widely used

nowadays instead of currency as they are safe and convenient to carry. As per

the study done to find out company which has got major market share in

travelers Cheque it was found that American Express was leading with total

market share of 61% following Thomas Cook with 17% was second followed

by other players like Visa, City bank and Master card.

The reason why American Express has got major share was American express

travelers Cheque are accepted world wide and has got a very good channel

liked to it. It was found that almost all money changer had got American

express and they prefer to sell that brand the most.



FACTORS WHICH DECIDES VALUE OF CURRENCY

Domestic Factors

9%

22%

17%26%

13%

13%

RBI Interbanks

Equity & Commodity

Market

Political Situation

Local Economy

Demand & Supply of

Currency

Export & Import

The very Important thing to be noted in the foreign exchange is the factor

which decides the value of currency basically it has got two factor i.e.

Domestic and International factor.

The domestic factor which affects most is Local Economy. As per the research

done it was found that due to local economy currency rate to fluctuate. Than

comes equity and commodity market, this market is directly related to forex

market specially gold and silver in commodity market. Political situation also

affects the currency rate along with it Demand & Supply, Export and Import

and RBI guidelines.

The demand and supply affects the market most as per some of the experts, the

demand and supply balances the value of the currency.



International Factors

42%

29%

5%

19%

5% Price of Crude

Terrorism & War

Value of other Currency

International Equity &

Commodity Market

Political Situtation

The Major International Factor which affects is Price of Crude. As per the

survey 42% of them had said price of crude is the major factor which is

affecting the value of the currency. The other factor which affects are

Terrorism & war as we have seen that as soon as war is declared the prices of

the currency starts fluctuating.

Other International factor which affects the value of currency is International

Equity and Commodity Market, political situation and value of other currency

this factors are the main factors which affects the value of currency.



SUGGESTION

The guidelines issued by RBI are not followed strictly by some of the Money

changers and A.Ds.

Customers are not aware about the RBI guidelines and so customers do face

many problems.

Regarding the day to day rates of Indian rupee RBI hold should be there so

that monitoring of the currency is done effectively.

RBI Strong hold should be there on different Money Changers and should

strictly punish the culprit.

Due to healthy competition margins are becoming thin and at times even some

money changer does the transaction in loss, there should be some restriction

on this strategy which harms the money changer as the whole.

All the Money Changers should make Association so that a minimum profit

percentage is fixed.



APPENDICES

QUESTIONNAIRE 119

RESPONSE SHEETS 125

QUESTIONNAIRE

Foreign Exchange Market in India

Name of Organization: _________________________________________________

Address:

_____________________________________________________________________

_____________________________________________________________________

Name of Person:_______________________________________________________



Designation:__________________________________________________________

1. Which according to you is the major foreign Exchange Player in India?

A. NPR

B. LKP

C. Thomas cook

D. Wall Street Mart

E. Centrum

F. Weizemann

G. UAE Exchange

F. Bank of Punjab

2. Who are your Main Competitors?

A. NPR

B. LKP

C. Thomas cook

D. Wall Street Mart

E. Centrum

F. Weizemann

3. Does R.B.I. Foreign Exchange guidelines suitable for Present Indian working

condition?

A. Yes

B. No

4. What are the Problems that you are facing against the customer?

A. Documentation

B. Convincing Customers



C. Bargaining for Rates

D. No Problems

E. Customers Prefer currency rather than Cheque.

5. What are the Problems that you are facing with present the R.B.I. Guidelines?

A. Customers not aware about the RBI guidelines

B. More Documentation needed

C. Limit of encashment

D. No Problems

6. What would be the reaction on foreign exchange market if U.K. would accept

the Euro?

A. Currency rate of USD will decrease and Euro will increase

B. Pound rate will decrease

C. Chances of becoming EURO becoming international currency.

D. No effect in Forex Market.

7. Would accepting Euro as a common currency / International currency, affect

the Indian Foreign Exchange Market?

A. Yes

B. No

8. How it would affect the valuation of INR (Indian rupee)?

A. INR will increase against USD

B. INR will decrease against USD

C. No effect

9. In which month Foreign Exchange Business is highest?



A. Jan-Mar

B. April-June

C. July-Sept.

D. Oct-Dec.

10. Does a good location helps to generate Forex business?

A. Yes

B. No

11. What are the factors which decide value of a currency?

a). Domestic Factors

A. RBI Interbanks

B. Equity Market & Commodity

C. Political Situation

D. Local economy

E. Demand and Supply of currency

F. Export Import

b). International Factors

A. Crude Prices

B. Terrorism

C. Value of other currency

D. International Equity & Commodity market

E. Political Situation

12. Which are major sources through which your business is sourced?

A. Corporate

B. Retail customers

C. Travel agents

D. Franchises



E. Consultant

F. Banks

13. Do travel agent helps you to increase your business?

A. Yes

B. No

14. Are there any KYC norms applicable in Forex market as similar to banking

sector?

A. Yes

B. No

15. Is there any recent guideline which has changed the Forex market?

A. Yes

B. No

16. What are limits for buying of the Forex when a person is visiting abroad?

A. 5,000 USD

B. 10,000 USD

C. 15,000 USD

D. 20,000 USD

17. As per your opinion are the present limits sufficient for foreign travelers?

A. Yes

B. No

18. Do you recommend a person to start retail outlet of Forex?



A. Yes

B. No

19. Which city has got largest foreign exchange business in India?

A. Delhi

B. Bombay

C. Calcutta

D. Ahmedabad

E. Chennai

F. Hyderabad

G. Pune

20. Is there any regulation or intervention by RBI for pricing of day to day Forex

transactions?

A. Yes

B. No

21. What is the time limit of a license issued by RBI?

A. 1 Year

B. 3 Year

C. 6 Year

D. 9 Year

22. Do you stock travelers Cheque?

A. Yes

B. No

23. Which company has got the major market share in Travelers Cheque?



A. American Express

B. Visa

C. Thomas Cook

D. City Bank

E. Master Card

RESPONSE SHEET

Company name 1 2 3 4 5 6 7 8 9 10 11(A)

NPR Finance b,d,f b,d,f a a a c a b b A c,d

Wall Street Forex C,d c a a - a b c a,d A -

Weizemann Forex b,f b b b d a a a c A -

Paul Merchant b,c,h b,c a c d a b c a,d B f

VKC Credit & Forex Services a,b,f b,f a c d a b a b A d,e

Centrum direct Limited b,c,d,e b,c b a b a b a - A e

Cox & Kings (I) Pvt Ltd b,c,d,e b,c,d b a - a b a b,c B f

Bhavani Forex Pvt. Ltd a,b,d,h a,b,d a c c d - - a,b,d A d

Pheroze Framroze & company b,c,d b,c,d a a d c b c a A c,d,e,f

UAE Exchange & Financial Services Ltd. c,g c b a d a b c a,d A -

Anmol Finsec Ltd. a,c,d,g a,b,d,e a d d a a a a,b,d A a

Trade-wings Ltd. B,c,h b,c a d d b,c b a a,d A a,d

Choksi Forex Pvt Ltd. B,c,d b,c,d a d d a,c b a d A b

LKP Forex Limited A c a c d a a c a A b,c

Thomas Cook A - a a d a b a a,b A c

Green Channel Travel Services b,c,h b,c a e e d b c b,d A b,d

Company name 11(B) 12 13 14 15 16 17 18 19 20 21 22 23

NPR Finance a,b b,c,d a a a - a b a,c,d b A a a



Wall Street Forex b,d b a a a b a b b,c,d b A a b

Weizemann Forex b a,d,e a a a b a a b,d,g b A a a

Paul Merchant a a,b,f a a a b a - a,b b A a a

VKC Credit & Forex Services a,b a,c,e a b a b a a b,f b a,b,c,d a a

Centrum direct Limited a c a a a b a b - b A a

a,

c

Cox & Kings (I) Pvt Ltd d a a b a b a b a,b,d,e b a,b,c,d a a

Bhawani Forex Pvt. Ltd b b b a a b a a - a a,b b

a,

b,

d

Pheroze Framroze & company a,b,d b,c,e,f a a a b a b a,b b A a a

UAE Exchange & Financial

Services Ltd. - a,b a a a b b b a,d,f a A a

a,

e

Anmol Finsec Ltd. a,c,d c a b a b a b d b A a

a,

c,

d

Trade-wings Ltd. - a,b,c a b a b a a a,b,d,e b a,b a a

Choksi Forex Pvt Ltd. a a,c a b a b a b a,b,d b a,b a a

LKP Forex Limited a,e c a a a b a - d b A a

a,

c

Thomas Cook a c a a a b a a a,b,d b A a c

Green Channel Travel Services - a,c,e,f - a a b a b b,g a - a a



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