Forex Services in India
Forex Services in India
Forex Services or Foreign Exchange Services is exchanging a particular currency for another or converting cash to another. Foreign exchange transactions comprise everything from a traveler’s money conversion at an airport kiosk to multi-billion dollar payments processed by governments, corporations, and financial institutions. This article discusses the various Forex Services that one may opt for in India.
Foreign Currency Travellers Cheques
Banks offer Foreign Currency Travellers Cheques (FCTCs), a safe and easy way to protect money during international travel. FCTCs can be encashed when needed and only against the holder’s signature, unlike cash which has the possibility of being stolen or misused by anybody. Loss of a Travellers Cheque can be reported anywhere in the world by making a single phone call, and the pre-fixed amount on the cheque is refundable to the holder/ buyer. Travelers’ Cheques are offered in major currencies such as USD, GBP, Euro, CAD, AUD, and JPY. Travelers’ Cheques are available in various denominations to suit clients’ needs. Currently, many Indian banks offer American Express Travellers Cheques, which are widely accepted at Merchant Establishments and Financial Institutions across more than 200 countries.
Foreign Currency Cash
Banks sell foreign Currency notes to their clients to meet expenses on travel abroad. Foreign Currency is a convenient way of meeting personal expenses during the journey, paying for taxis/ internal travel, food expenses, etc. Usually, currencies sold are in USD, GBP, EURO, AUD, and CAD.
Foreign Currency Demand Drafts
Banks in India offer FC Demand Drafts to their clients for various expenses such as the following.
- Payment of fees at any foreign university
- Making a gift remittance to a relative or friend
- Application fees are paid to register for exams like TOEFL, GMAT, etc.
- Payment for medical treatment abroad
- All other permitted purposes as per the RBI guidelines.
FC Demand Drafts are typically issued in seven currencies: USD, GBP, EURO, AUD, NZD, JPY, and CAD.
Deposit of Foreign Currency Cheques
Clients can deposit their foreign currency cheques, currency demand drafts, and Travellers’ Cheques into their savings or current accounts. The bank will then have the cheques sent for collection, and on being honored, the funds will be credited to the client’s account in Indian Rupees. Banks in India usually accept cheques of various currencies like USD, GBP, EURO, JPY, Australian Dollars, Canadian Dollars, UAE Dirhams, Hong Kong Dollars, and Swiss Francs. The collection period could vary from 2 international working days for Euro cheques in Frankfurt to 5 days for USD cheques in New York and 10-15 working days for accepted drawn in other currencies at other centers.
Remittances
Banks offer their clients remittance facilities by which they can send and receive money to and from friends and relatives abroad. Most such payments are executed through SWIFT, a secure, inter-bank communication facility.
Cash to Master
Often, foreign ships travel through India and dock their vehicles at various ports/harbors in the country. One of the essential requirements during such temporary stays is that foreign Currency must be made available to the ship’s Captain to cover crew wages or other expenses on the vessel. These requirements are usually met through a facility called “Cash to Master.” To collect this cash, the master of the shop has to approach the designated branch of an authorized bank with his passport and a duly filled-up application form. This product is available only in United States Dollars, Pounds Sterling, and Euros.
Advance Remittance
The client’s overseas exporter may require the client to make full payment in advance for the goods to be exported to him. The exporter would dispatch the goods to the importer client only after he receives the total amount in advance. For this purpose, banks will make remittances in foreign Currency to the importer.
Documents required for sending Advance Remittance:
- Request Letter/ Debit Authority/ OGL/ FEMA Declaration (Giving all beneficiary’s banking details)
- IE Code Number Certificate
- Form A1 (Duplicate)
- KYC Report
- Purchase Order/ Performa Invoice accepted by the importer with Advance payment term.
- Bill of Entry Declaration with Commercial Invoice.
- Original Bank Guarantee from the Exporter’s Bank if the Advance amount is more significant than $1,00,000 or equivalent.
Direct Remittance
An importer client may require the exporter overseas to dispatch the goods first and then remit the payment. The exporter would then ship the goods to the client. The overseas exporter will then forward the documents directly to the client. The bank will process the payment when the client approaches his bank with the papers for sending remittances to the exporter.
Documents required for Direct Remittance
- Request Letter/ Debit Authority/ OGL/ FEMA Declaration (Giving all the beneficiary’s banking details)
- IE Code Number Certificate
- Form A1
- KYC Report
- Transport documents in original/ copy – Bill of Lading/ Airway Bill
- Invoice
- Bill of Entry (Exchange Control Copy) (Original)
- Original License (Exchange control copy), if applicable.
Import Collection
The exporter from overseas exports the goods to the importer client. The foreign exporter/ exporter’s bank sends the documents to the client’s bank for collection. The bank will then inform the importer client about the receipt of the papers. Then the importer will authorize his bank to debit his account and send the remittance to the exporter’s bank. The necessary documents and the debit authority is collected from the importer, and remittance is made to the exporter’s bank. The documents are released to the importer if it is a sight bill (Documents against Payment). If it is a usance bill (Documents against Acceptance), the acceptance letter is taken from the importer, and the documents are released. On the due date, remittance is made to the exporter’s bank by debiting the importer’s account.
Documents required for Import Collection
- Request Letter/ Debit Authority/ OGL/ FEMA Declaration
- IE Code Number Certificate
- Form A1
- KYC Report
- Bill of Entry Declaration
- Acceptance Letter with Debit Authority for Usance Bill
Letters of Credit
In a business cycle, an importer must pay for his purchases in international and domestic markets. Letters of credit help Indian importers to facilitate the purchase of goods in international and domestic trading operations. Letters of credit issued by central Indian banks are accepted worldwide.
Documents required for Letters of Credit
- L/C Application Form
- General Undertaking/ Indemnity on Stamp Paper (value applicable as per the state)
- Recommend Board Resolution for Companies/ Partnership Deed for Partnership Firms
- IE Code Number Certificate
- OGL cum FEMA Declaration
- KYC Report
- Purchase Order/ Performa Invoice (accepted by the applicant)
- Insurance Copy only on FOB Basis
- Annexure to the LC (Mentioning additional conditions to be incorporated in the LC)
- Original License (Exchange control copy), if applicable.
Export Collection
When an exporter client sells goods overseas, he needs to receive payment for the goods that have been exported. Through a network of correspondent banks, Indian banks ensure a faster collection process for all export bills, provided all the necessary documents are in place, which will be sent to the overseas bank for collection.
Documents required for Export Collection
- Request Letter
- IE Code Number Certificate
- FEMA Declaration
- KYC Report
- SDF (exchange control copy)/ GR Form/ PP Form/ Softex Form
- Original Transport Documents – Bill of Lading or Airway Bill
- Insurance Copy (if on CIF terms)
- Bill of Exchange (in case of D/A)
- Original L/C in case of L/C Bill
- Clarification letter for delay beyond 21 days of export
- Any other documents per terms and conditions between Exporter and Importer Commercial Invoice.
Export Advance Payment
An Indian exporter might require the importer overseas to make advance payment for the goods he is importing. The exporter can ask his counterparty to send the cost to the exporter’s bank through their network of correspondents.
Documents required for Export Advance Bill
Export Advance Bill requires all the documents as mentioned for Export Collection. Additional Documents are as follows.
- Invoice of Export
- Original FIRC
Miscellaneous Outward Remittance
Outward Remittances (Miscellaneous) for other purposes can be effected quite easily. Remittances by way of SWIFT can be made through a network of correspondent banks to any part of the world. All transactions are subject to FEMA regulations.
Documents required for Outward Remittances
- Request Letter
- Form A2
- Invoice Copy/ Agreement Copy
- FEMA Declaration
- Annexures A & B
