NAGINDAS KHANDWALA COLLEGE

CLASS – TYBBI

SUBJECT – INTERNATIONAL BANKING AND FINANCE

TOPIC – FUNCTIONAL OVERVIEW OF INTERNATIONAL BANKING

SUBMITTED TO – PROF. NIKESH SHETH

FOREIGN EXCHANGE MARKET

Market generally indicates a geographical location preferred for trading which facilitates trade by providing means of settlement and resolution of disputes.

It may be defined as meetings or systematic communication by telephone , telex or other electronic means between foreign exchange dealers , brokers and banks for the purpose of transacting foreign exchanges.i.e foreign currencies.

STRUCTURE OF FOREIGN EXCHANGE MARKET

It may be classified into two layers: Wholesale market Retail market

Wholesale market is again divided into two i.e Giant Transactions Layer Other Transactions Layer

As majority of the deals in wholesale market is between the banks, it is called as Interbank market.

Retail Market: Retail market is the market in which the travelers and tourists exchange one currency for another in the form of currency notes or travelers cheques. Total turnover and transactions size is very small.

STRUCTURE OF FOREIGN EXCHANGE MARKET IN INDIA

It may be broadly said to have three segments or layers.

First Layer

Second Layer

Third Layer

In retail market in addition to ADs there are moneychanges who are allowed to deal in foreign currencies. Full-fledged money changers are allowed to buy and sell foreign currency and restricted moneychangers are allowed only to buy.

Indian markets also has accredited brokers who match buyers and sellers. FEDAI ie. Foreign exchange Dealers Associaton Of India has made it mandatory to route deals between two ADs through brokers.

FUNCTIONAL OVERVIEW OF INTERNATIONAL BANKING

Banks have various departments which are as follows International banking department/group Foreign exchange department (FED) Overseas business division (OBD)

Banks transact with forex customers.

Accordingly international Banking has functions sub-grouped Customer related functions Compliance related (regulatory) functions Inter-bank functions Internal Function

Customer Related functions

(A) Trade Finance Export Avenue Import Avenue

(B) International Merchant banking (Forex)

(C) Finance of Project export• Non Fund Based Facilities• Fund Based

(D) Derivative offering

(E) Remittances

Compliance related (regulatory) functions

Inter-bank functions

Internal Functions

CUSTOMER RELATED FUNCTIONS

1) Pre – Shipment Export Credit

2) Post Shipment Credit

3) Export Bill Rediscounting (EBR)

4) Gold Card Scheme Approved by RBI

5) Foreign Currency Import Credit

6) Suppliers’ Credit

7) Bank Guarantees for Imports

8) LC for Project Exports

9) Guarantees for Project Exports Bid Bond Guarantee Advance Payment Guarantee Performance Guarantee Retention GuaranteeOverseas Borrowing GuaranteeMaintenance Guarantee

10) Fund Based Facilities for Project Exports

11) Remittances

12) Derivatives Offering

TREASURY FUNCTIONS

Monitoring of forex operation

Structuring, marketing, facilitating execution of foreign currency derivatives

Maintenance of reciprocal lines, Nostro, Vostro, and Mirror accounts

Custodian and portfolio management services

Treasury related other customer activities

STRUCTURE OF INTERNATIONAL BANKING DEPARTMENT

Dealing room

Dealing room environment

Profile of a dealer

Responsibilities of a dealer

Interbank and merchant transaction

Working hours of interbank market

Thank

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