BY:

ANVIN
ANISH
DORIN
SANDEEP
SHREYANS
PRADEEP

Foreign Exchange Dealer's

Association of India (FEDAI) was set up
in 1958 as an Association of banks
dealing in foreign exchange in India
(typically called Authorised Dealers - ADs)
as a self regulatory body and is
incorporated under Section 25 of The
Companies Act,

Guidelines and Rules for Forex Business

Training of Bank Personnel in the areas of
Foreign Exchange Business
Accreditation of Forex Brokers
Advising/Assisting member banks in
settling issues/matters in their dealings
Represent member banks on
Government/Reserve Bank of India/Other
Bodies
Announcement of daily and periodical
rates to member banks

Public Sector Banks

Foreign Banks
Private Sector Banks/Co-operatives
Financial Institutions/Others

Total Membership=94

1. The directives issued by the Reserve

Bank of India in respect of Interest rates
on Export & Import Finance shall be
adhered to by the Authorised Dealers.
2. The member banks are totally free to
determine their own charges for various
types of forex transactions, keeping in
view the advice of RBI that such charges
are not out of line with the average cost
of providing services.

3. Authorised Dealers shall ordinarily not be

parties to any guarantees for an unlimited
amount and/or an unlimited period.
Authorised Dealers shall ensure to include a
specific clause in all the guarantees stating
the exact period within which claims must
be made under the guarantee besides the
expiry date for the guarantee.
4. With a view to simplifying and
liberalising import, authorised dealers are
permitted to open standby letters of credit
on behalf of their importer constituents for
importing goods into India permissible
under Foreign Trade Policy.

5. Guidelines for calculation of Merchant

Rate have been deleted from the Rule
Book as the procedure for calculating the
rate for Merchant transactions have been
left for our member banks to decide.

1.A-1 Each Authorised Dealer will establish its

business hours for various types of foreign
exchange transactions at each centre where its
branches undertake forex business.
1.A-2 It is upto the management of each
Authorised Dealer to decide whether they would
like to have uniform hours of business for all
categories or different business hours for
different categories of forex business.
1.A-3 Heads of International Divisions/Forex
Departments of Authorised Dealers shall advise
their designated branches regarding the
establishment of business hours for various
types of foreign exchange transactions.

2.A-1 General
Authorised Dealers will purchase only
Approved Bills and the decision as to
what is an approved bill lies solely with
Authorised Dealers. This includes bills
tendered under forward contracts, letters
of credit, letters of guarantee, letters of
authority, orders to negotiate, orders for
payment and any other type of document
of similar nature. Authorised Dealers will
have the discretion to handle export bills
on purchase/discount/negotiation or
collection basis.

[2.A-2 Export Bills

purchased/discounted/negotiated

i. Application of rates
Foreign currency bills will be

purchased/negotiated/discounted at the
Authorised Dealers current bill buying rate or at
the contracted rate. Interest for the normal
transit period, and usance period shall be
recovered simultaneously.

ii. Crystallisation and Recovery

Exporters are liable for the repatriation of

proceeds of the export bills sent for collection by

the Authorised Dealers.

2.A-3 Application of interest

i. The rates of interest applicable for all
export transactions shall be as prescribed by
Reserve Bank of India from time to time.
ii. Concept of Normal Transit Period and
Notional Due Date

Concessional rate of interest on export bills is

linked to the concept of normal transit period

and notional due date. Normal transit period
comprises the average period normally involved
from the date of negotiation/purchase/discount
till the receipt of bill proceeds in the Nostro
account of the bank.

2.A-5 Fixed Due Date

In case of export usance bills (foreign currency

and rupee bills) where due dates are reckoned
from date of shipment or date of bill of
exchange etc. no Normal Transit Period shall
be applicable, since the actual due date is
known.

2.A-7 Overdue Interest

Overdue interest in all cases shall be

recovered from the customer in case payment
is not received on or before the expiry date of
Normal Transit Period in case of demand bills

3.A-1 General
i. Bills shall include all
documentary/clean bills received under
letter/s of credit, standby letter/s of credit,
letter/s of guarantee, letter/s of authority,
order/s to negotiate, order/s for payment and
other document/s or undertaking/s of a similar
nature or on collection basis covering imports
into India.
ii. Establishment and amendment of all
import letters of credit shall be at the
discretion of the Authorised Dealers.

3.A-2 Application of rates

i. For the purpose of retirement of import
bills whether received under letters of credit or
otherwise, the bills selling rate ruling on the
date of retirement or the forward sale contract
rate as the case may be shall be applied.
For the purpose of crystallisation vide para
3.A-4 below, of importers liability into Rupees
the bills selling rate ruling on the date of such
crystallisation or the forward sale contract rate
as the case may be shall be applied.
ii. For the purpose of determining stamp duty
on import bills, the foreign currency amount of
the bills shall be converted into Rupees at the
exchange rates prescribed by Government of
India from time to time.

3.A-3 Application of interest

i. Bills negotiated under import letters of
credit shall carry commercial rate of interest
as applicable to banks domestic advances
from time to time and shall be recovered from
the date of debit to the Authorised Dealers
Nostro account to the date of
crystallisation/retirement whichever is earlier.
ii. Interest remittable on interest bearing bills
shall be subject to the directives of Reserve
Bank of India.

4.A-1 Encashment of foreign currency

travellers cheques and currency notes

Foreign currency travellers cheques/currency

notes will be encashed at the Authorised Dealers
option at the travellers cheques/currency note
encashment rates ruling on the date of such
encashment.

4.A-2 Outward remittances

Outward remittances shall be effected at the TT

selling rate of the bank ruling on the date of such
remittance or at the forward contract rate.

4.A-3 Miscellaneous Instructions

i. Payment of foreign inward remittances

All foreign currency inward remittances up to an

equivalent of USD 5000 shall be immediately

converted into Indian Rupees. Remittances in
excess of equivalent of USD 5000 shall be
executed in foreign currency and the beneficiary
has the option of presenting the relative
instrument for payment within the maximum
period prescribed under FEMA, 1999.
The applicable exchange rate for conversion of
the foreign currency inward remittances shall be
the one prevailing as on the date of conversion
of foreign currency amount into Indian Rupees by
the concerned Authorised Dealer.

5.A-1 Contract amounts

Exchange contracts shall be for definite
amounts and periods.
When a bill contract, mentions more than one
rate for bills of different deliveries, the
contract must state the amount and delivery
against each such rate.

5.A-2 Option period of delivery

Unless date of delivery is fixed and indicated in

the contract, the option period may be specified

at the discretion of the customer subject to the
condition that such option period of delivery
shall not extend beyond one month. If the fixed
date of delivery or the last date of delivery
option is a holiday/declared a holiday the
delivery shall be effected/delivery option
exercised on the preceding working day.
Contracts permitting option of delivery must
state the first and last dates of delivery.

5.A-3 Place of delivery

Date

of delivery under forward contracts

shall be :

i. In case of bills/documents negotiated,

purchased or discounted - the date of
negotiation/purchase/discount and payment of
Rupees to the customer.
ii. In case of export bills/documents sent for
collection - date of payment of Rupees to the
customer on realisation of the bills.
iii. In case of retirement/crystallisation of
import bills/documents - the date of
retirement/crystallisation of liability whichever
is earlier.

5.A-5 Option of delivery

In all forward merchant contracts, the merchant

whether a buyer or a seller will have the option

of delivery.

5.A-6 Option of usance

The merchant purchase contract should state the

tenor of the bills/documents. Acceptance of

delivery of bills/documents drawn for a different
tenor will be at the discretion of the bank.

Currencies to be quoted
against one unit of
foreign currency :
1. Australian Dollar
2. Bahraini Dinar
3. Canadian Dollar
4. Danish Kroner
5. Egyptian Pound
6. Hongkong Dollar
7. Kuwaiti Dinar
8. Malaysian Ringgit
9. New Zealand Dollar

10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

Norwegian Kroner
Oman Rial
Qatar Riyal
Saudi Riyal
Singapore Dollar
Sterling Pound
Swedish Kroner
Swiss Franc
Thai Baht
UAE Dirham
US Dollar
Euro

6.A-1 General
i. At the request of the customer, unless
stated to the contrary in the provisions of
FEMA, 1999, it is optional for a bank to :
a. Accept or give early delivery.
b. Extend the contract.

6.A-2 Early delivery

If a bank accepts or gives early delivery, the

bank shall recover/pay swap difference, if any.

6.A-3 Extension

Foreign exchange contracts either short term or

long term contracts where extension is sought
by the customers shall be cancelled (at
appropriate Selling or Buying Rate as on the
date of cancellation) and rebooked
simultaneously only at current rate of exchange.
The difference between the contracted rate and
the rate at which the contract is cancelled shall
be recovered from/paid to the customer at the
time of extension.

6.A-5 Swap cost/gain

i. In all cases of early delivery of purchase or

sale contracts, swap cost shall be recovered from

customers irrespective of whether an actual
swap is made or not. Such recoveries should be
made either back-ended or upfront in the
discretion of banks.
ii. Payment of swap gain to the customer will
normally be made at the end of the swap period.

6.A-6 Outlay and Inflow of funds

i. Interest at not below the prime lending rate of

the respective Authorised Dealer on outlay of

funds by the Authorised Dealer for the purpose
of arranging the swap shall be recovered in
addition to the swap cost in case of early
delivery of purchase or sale contracts. The
amount of funds outlayed shall be arrived at by
taking the difference between the original
contract rate and the rate at which the swap
could be arranged.

7.A-1 Exchange Brokers

When Authorised Dealers make contracts
through brokers, such contracts shall only be
made through and exchange brokerage be paid
only to accredited exchange brokers.
No brokerage or other form of remuneration
shall be paid by the Authorised Dealers to other
bank employees on contracts made in respect of
any foreign exchange business.
Accredited exchange brokers are permitted to
contract exchange business on behalf of
Authorised Dealers in foreign exchange only
upon the understanding that they will conform
to the rates, rules and conditions laid down by
this Association.