Forex Services

Forex Services in India

Forex Services in India

Forex Services or Foreign Exchange Services is the exchange of a particular currency for another or the conversion of currency to another. Foreign exchange transactions comprise of everything starting from the conversion of money at an airport kiosk by a traveller to multi-billion dollar payments processed by governments, corporations and financial institutions. This article talks about the various Forex Services which one may opt for when in India.

Foreign Currency Travellers Cheques

Banks offer Foreign Currency Travellers Cheques (FCTCs) that are 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 cheques are refundable to the holder/ buyer. Travellers Cheques are offered in major currencies such as USD, GBP, Euro, CAD, AUD and JPY. Travellers Cheques are available in various denominations to suit clients’ needs. At present 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 noted to their clients for meeting 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. Normally currencies that are 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 fee at any foreign university
  • Making a gift remittance to a relative or friend
  • Payment of application fees to register for various 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 which are USD, GBP, EURO, AUD, NZD, JPY and CAD.

Deposit of Foreign Currency Cheques

Clients can directly deposit their foreign currency cheques, foreign currency demand draft and Travellers Cheques into their savings or current accounts. The bank will then have the cheques sent for collection, and on being honoured, 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 payable in Frankfurt, to 5 days for USD cheques payable in New York, and 10-15 working days for accepted drawn in other currencies at other centres.

Remittances

Banks offer to their client’s remittance facilities by which they can send and receive money to and from friends and relatives abroad. Most of 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/ harbours in the country. One of the significant requirements during such temporary stays is that of foreign currency that has to be made available to the Captain of the ship for covering crew wages or for 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 authorised 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 remittance 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 Exporters Bank if the Advance amount is greater 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 for the goods. The exporter would then ship the goods to the client. The overseas exporter will then forward the documents directly to the client. When, the client, approached his bank with the papers for sending remittance to the exporter, the bank will process the payment.

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 on collection. The bank will then intimate the importer client about the receipt of the papers. Then the importer will authorise 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 and 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), then 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 will need to pay for his purchases in international and domestic markets. Letters of credit help Indian importers to facilitate a purchase of goods in international and domestic trading operations. Letters of credit issued by major 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 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 as 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 payment 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 subjected to FEMA regulations.

Documents required for Outward Remittances

  • Request Letter
  • Form A2
  • Invoice Copy/ Agreement Copy
  •  FEMA Declaration
  • Annexure A & B

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Post by Chris John

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