Techniques of Foreign Exchange Exposure Used in Banks and in Trading Firms" IN Canara Bank

SAAB MARFIN MBA
Techniques
of Foreign Exchange Exposure used in Banks and

in Trading Firms
IN
Foreign Exchange Exposure
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EXECUTIVE SUMMARY
Techniques
of Foreign Exchange Exposure used in Banks and

in Trading Firms
In a floating exchange rate regime, the value of a currency changes frequently.

Such changes influence the value of those firms that are involved in international
transactions.
Foreign exchange exposure is into 2 classes. One is known as accounting or
translation exposure, while the other is known as economic exposure. The economic
exposure is further divided into transaction exposure and real operating exposure.
If such exposure results in loss to a firm, it needs to manage these exposures. For
this purpose they use some techniques like:
Forward Market Hedges

Hedging through currency futures
Hedging through currency options.
Money Market Hedge.
Leads and Lags
Cross Hedging
Currency diversification
Risk Sharing
Pricing of transaction
If such exposure arises, then firms use some documents for reducing these
exposures through banks like:
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Letter of Credit
Draft
Bill of Exchange
Pre-Shipment Credit
Post-Shipment Credit
Medium-term Credit
Credit under duty draw-back scheme
Factoring
Forfeiting
Sub Objectives:
1. What are the techniques available to reduce the exposure involved in foreign
market?
2. What are the procedures for forecasting the future currency rates?
3. What are the procedures, banks are following in foreign currency market?
4. What are the practical issues used in Banks and in firms i.e., who are actual
traders?
5. What traders are expecting from banks, other than their regular Forex trading?
6. What restrictions are involved in foreign currency market by government or
other concerns?
Data Collection for the Study:
Primary Data:
Questionnaire
Bank Officials in the Forex Department
Secondary Data:
Internet
Newspaper
Magazine
Significance of the Study

The objectives of the project is two-fold
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A)
To provide the guidelines/help lines to traders through the banks for avoiding
and minimizing the exposure.
"The government is concerned over the rapid appreciation of the rupee against the US
dollar and the central bank may have to intervene if there is disorderly movement in the
exchange rate."3
- P Chidambaram, Finance Minister of India, in September, 2007
"The objective of the exchange rate management has been to ensure that the external
value of the rupee is realistic and credible as evidenced by a sustainable current account
deficit and manageable foreign exchange situation. Subject to this predominant objective,
the exchange rate policy is guided by the need to reduce excess volatility, prevent the
emergence of destabilizing speculation activities, help maintain adequate level of
reserves, and develop an orderly foreign exchange market."4
- RBI's Policy in the Foreign Exchange Market
"I expect the rupee to appreciate vis-a-vis the dollar through 2008. However, the
appreciation will be gradual and perhaps, not as rapid as it has been in the last few
months," ABN AMRO Bank's newly-appointed India chief Meera H Sanyal told media
here on Thursday.
IN 1975, about 80% of foreign exchange transactions (where one national currency is
exchanged for another) were to conduct business in the real economy. For instance,
currencies change hands to import oil, export cars, buy corporations, invest in portfolios,
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or build factories. Real transactions actually produce or trade goods and services. The
remaining 20% of transactions in 1975 were speculative, which means that the sole
purpose was an expected profit from buying and selling currencies themselves, based on
their changing values. So, even in the days when the real economy was dominant, some
currency speculation was going on. There had always been that little bit of frosting on the
cake.
'Foreign exchange risk'
In considering the viewpoint of so-called real businesses (those that make cars, mine,
produce electronics, etc.), the 'foreign exchange risk' has by far become the largest risk in
international business today, often larger than political or market risk. For example, if a
German chemical company invests in a plant in India, it makes the investment in deutschmarks. The chemical products sold locally from that plant are paid in rupees, India's
currency. If the value of the rupee then drops in terms of the deutschmark, the return on
the original investment will drop as well. In short, the biggest risk of such investments is
not whether Indians will buy the chemicals (market risk) or whether the Indian
government will nationalise the plant (political risk), but the changes in the values of the
currencies involved (foreign exchange risk).
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COMPANY PROFILE
Late Sri. Ammembal Subba Rao Pai

Our beloved Founder
Founded as 'Canara Bank Hindu Permanent Fund' in
1906, by late Sri. Ammembal Subba Rao Pai, a
philanthropist, this small seed blossomed into a limited
company as 'Canara Bank Ltd.' in 1910 and became
Canara Bank in 1969 after nationalisation.
"A good bank is not only the financial heart of the community, but also one with
an obligation of helping in every possible manner to improve the economic
conditions of the common people" - A. Subba Rao Pai.
Founding Principles
1.
2.
3.
4.
To remove Superstition and ignorance.

To spread education among all to sub-serve the first principle.
To inculcate the habit of thrift and savings.
To transform the financial institution not only as the financial heart of the
community but the social heart as well.
5. To assist the needy.
6. To work with sense of service and dedication.
7. To develop a concern for fellow human being and sensitivity to the surroundings
with a view to make changes/remove hardships and sufferings.
Sound founding principles, enlightened leadership, unique work culture and remarkable
adaptability to changing banking environment have enabled Canara Bank to be a
frontline banking institution of global standards.
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Vision
To emerge as a Best Practices Bank by pursuing global benchmarks in profitability,
operational efficiency, asset quality, risk management and expanding the global reach.
Mission
To provide quality-banking services with enhanced customer orientation, higher value
creation for stakeholders and to continue as a responsive corporate social citizen by
effectively blending commercial pursuits with social banking.
BRAND STORY
The new brand identity for Canara Bank is based on the idea of a bond and is a
representation of the close ties between the Bank and its many stakeholders from
customers and employees to investors, institutions and society at large. With its rich
heritage of banking expertise, dedicated customer service and corporate social
responsibility, Canara Bank is a powerful enabler who helps its stakeholders achieve
their goals. The two seamlessly connected links capture the essence of this
partnership.
Canara Bank has more than 45,800 employees and serves over 31 million customers
through a network of over 2600 branches spread across the country. The simple,
memorable symbol can be easily recalled and decoded by all of the Banks diverse
audiences.
The colour palette and typography have been carefully chosen. The rich blue
represents stability, scale and depth. This contrasts with accents of bright yellow
that evoke optimism, warmth and energy. The Canara Bank logotype has been
hand-crafted. Its classic, serif letterforms communicate heritage and stature.
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Significant Milestones
1st July
1906
Canara Hindu Permanent Fund Ltd. formally registered with a capital of 2000
shares of Rs.50/- each, with 4 employees.
1910
Canara Hindu Permanent Fund renamed as Canara Bank Limited
1969
14 major banks in the country, including Canara Bank, nationalized on July

19
1976
1000th branch inaugurated
1983
Overseas branch at London inaugurated

Cancard (the Banks credit card) launched
1984
Merger with the Laksmi Commercial Bank Limited
1985
Commissioning of Indo Hong Kong International Finance Limited
1987
Canbank Mutual Fund & Canfin Homes, launched
1989
Canbank Venture Capital Fund started
1989-90
Canbank Factors Limited, the factoring subsidiary launched
1992-93
Became the first Bank to articulate and adopt the directive principles of
Good Banking.
1995-96
Became the first Bank to be conferred with ISO 9002 certification for one of
its branches in Bangalore
2001-02
Opened a 'Mahila Banking Branch', first of its kind at Bangalore, for catering
exclusively to the financial requirements of women clientele.
2002-03
Maiden IPO of the Bank
2003-04
Launched Internet & Mobile Banking Services
2004-05
100% Branch computerization
2005-06
Entered 100th Year in Banking Service

Launched Core Banking Solution in select branches
Number One Position in Aggregate Business among Nationalized Banks
2006-07
Notched up the highest ever net profit since its inception

Retained Number One Position in Aggregate Business among Nationalized
Banks
Singed MoUs for Commissioning Two JVs in Insurance and Asset
Management with international majors.
As at march 2007 the total business of the bank was over Rs.2,40,000 crores.
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AWARDS & ACHIEVEMENTS
Canara Bank was awarded the "First National Award" instituted by the Ministry of
Micro, Small & Medium Enterprises, Govt. of India for excellence in "Micro &
Small Enterprises (MSE) Lending" for 2006-07.
Adjudged the 'Best Public Sector Bank' in India under the 'Best Banks Survey'
conducted by 'Financial Express-Ernst and Young' for 2005-06.
Conferred with 'Employer Branding Awards 2007' by Indiatimes Mindscape and
ITM Business School, for excellence in human resources. Canara Bank was the
first Public sector Bank to bag this award.
Won the maiden award of 'Best Performing Bank' under solar water heater finance
for the year 2005-06, instituted by the Ministry of New and Renewable Energy,
Govt. of India.
Received Niryat Bandhu Gold Trophy for outstanding performance under
export finance.
CHAIRMAN'S MESSAGE
As a premier commercial bank in India, Canara Bank's track record in the service of the
nation for over 100 years is both striking and impressive. Today, Canara Bank has a
strong pan India presence with over 2600 branches and 1500 ATMs, catering to all
segments of an ever growing clientele base of exceeding 31 million. Canara Bank is
recognized as a leading financial conglomerate in India, with as many as nine
subsidiaries/sponsored institutions/joint ventures in India and abroad. As the Bank steps
into the second century, it aspires to emerge as a Global Bank with Best Practices in its
endeavour to become a 'Speciality Financial Supermarket'.
Introduction to Topic
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The foreign exchange (also known as "forex" or "FX") market is the place where
currencies are traded. The overall forex market is the largest, most liquid market in the
world with an average traded value that exceeds $1.9 trillion per day and includes all of
the currencies in the world.
There is no central marketplace for currency exchange, rather, trade is conducted
over-the-counter. The forex market is open 24 hours a day, five days a week, with
currencies being traded worldwide among the major financial centers of London, New
York, Tokyo, Zrich, Frankfurt, Hong Kong, Singapore, Paris and Sydney - spanning
most time zones.
The forex is the largest market in the world in terms of the total cash value
traded, and any person, firm, or country may participate in this market.
Meaning of Foreign Exchange Market (Forex Market):
The foreign exchange market is the "place" where currencies are traded.
Currencies are important to most people around the world, whether they realize it or not,
because currencies need to be exchanged in order to conduct foreign trade and business
Foreign Exchange as a Financial Market
Currency exchange is very attractive for both the corporate and individual traders who
make money on the Forex - a special financial market assigned for the foreign exchange.
The following features make this market different in compare to all other sectors of the
world financial system:
Heightened sensibility to a large and continuously changing number of factors;
Accessibility to all traders in the major currencies;
Guaranteed quantity and liquidity of the major currencies;
Increased consideration for several currencies, round-the clock business hours
which enable traders to deal after normal hours or during national holidays in
their country finding markets abroad open and
Extremely high efficiency relative to other financial markets.
This goal of this manual is to introduce beginning traders to all the essential aspects of
foreign exchange in a practical manner and to be a source of best answers on the typical
questions as why are currencies being traded, who are the traders, what currencies do
they trade, what makes rates move, what instruments are used for the trade, how a
currency behavior can be forecasted and where the pertinent information may be obtained
from. Mastering the content of an appropriate section the user will be able to make
his/her own decisions, test them, and ultimately use recommended tools and approaches
for his/her own benefit.
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Foreign Exchange in a Historical Perspective
Currency trading has a long history and can be traced back to the ancient Middle East and
Middle Ages when foreign exchange started to take shape after the international merchant
bankers devised bills of exchange, which were transferable third-party payments that
allowed flexibility and growth in foreign exchange dealings.
The modern foreign exchange market characterized by the consequent periods of
increased volatility and relative stability formed itself in the twentieth century. By the
mid-1930s London became to be the leading center for foreign exchange and the British
pound served as the currency to trade and to keep as a reserve currency. Because in the
old times foreign exchange was traded on the telex machines, or cable, the pound has
generally the nickname cable. In 1930, the Bank for International Settlements was
established in Basel, Switzerland, to oversee the financial efforts of the newly
independent countries, emerged after the World War I, and to provide monetary relief to
countries experiencing temporary balance of payments difficulties.
After the World War II, where the British economy was destroyed and the United
States was the only country unscarred by war, U.S. dollar became the prominent currency
of the entire globe. Nowadays, currencies all over the world are generally quoted against
the U.S. dollar.
Reading a Quote
When a currency is quoted, it is done in relation to another currency, so that the value of
one is reflected through the value of another. Therefore, if you are trying to determine the
exchange rate between the U.S. dollar (USD) and the Japanese yen (JPY), the quote
would look like this:
USD/JPY = 119.50
This is referred to as a currency pair. The currency to the left of the slash is the base
currency, while the currency on the right is called the quote or counter currency. The base
currency (in this case, the U.S. dollar) is always equal to one unit (in this case, US$1),
and the quoted currency (in this case, the Japanese yen) is what that one base unit is
equivalent to in the other currency. The quote means that US$1 = 119.50 Japanese yen. In
other words, US$1 can buy 119.50 Japanese yen.
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Direct Quote vs. Indirect Quote

There are two ways to quote a currency pair, either directly or indirectly. A direct quote is
simply a currency pair in which the domestic currency is the base currency; while an
indirect quote, is a currency pair where the domestic currency is the quoted currency. So
if you were looking at the Canadian dollar as the domestic currency and U.S. dollar as the
foreign currency, a direct quote would be CAD/USD, while an indirect quote would be
USD/CAD. The direct quote varies the foreign currency, and the quoted, or domestic
currency, remains fixed at one unit. In the indirect quote, on the other hand, the domestic
currency is variable and the foreign currency is fixed at one unit.
For example, if Canada is the domestic currency, a direct quote would be 0.85
CAD/USD, which means with C$1, you can purchase US$0.85. The indirect quote for
this would be the inverse (1/0.85), which is 1.18 USD/CAD and means that USD$1 will
purchase C$1.18.
In the forex spot market, most currencies are traded against the U.S. dollar, and the U.S.
dollar is frequently the base currency in the currency pair. In these cases, it is called a
direct quote. This would apply to the above USD/JPY currency pair, which indicates that
US$1 is equal to 119.50 Japanese yen.
However, not all currencies have the U.S. dollar as the base. The Queen's currencies those currencies that historically have had a tie with Britain, such as the British pound,
Australian Dollar and New Zealand dollar - are all quoted as the base currency against
the U.S. dollar. The euro, which is relatively new, is quoted the same way as well. In
these cases, the U.S. dollar is the counter currency, and the exchange rate is referred to as
an indirect quote. This is why the EUR/USD quote is given as 1.25, for example, because
it means that one euro is the equivalent of 1.25 U.S. dollars.
Most currency exchange rates are quoted out to four digits after the decimal place, with
the exception of the Japanese yen (JPY), which is quoted out to two decimal places.
Cross Currency
When a currency quote is given without the U.S. dollar as one of its components, this is
called a cross currency. The most common cross currency pairs are the EUR/GBP,
EUR/CHF and EUR/JPY. These currency pairs expand the trading possibilities in the
forex market, but it is important to note that they do not have as much of a following (for
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example, not as actively traded) as pairs that include the U.S. dollar, which also are called
the majors.
Bid and Ask
As with most trading in the financial markets, when you are trading a currency pair there
is a bid price (buy) and an ask price (sell). Again, these are in relation to the base
currency. When buying a currency pair (going long), the ask price refers to the amount of
quoted currency that has to be paid in order to buy one unit of the base currency, or how
much the market will sell one unit of the base currency for in relation to the quoted
currency.
The bid price is used when selling a currency pair (going short) and reflects how much of
the quoted currency will be obtained when selling one unit of the base currency, or how
much the market will pay for the quoted currency in relation to the base currency.
The quote before the slash is the bid price, and the two digits after the slash represent the
ask price (only the last two digits of the full price are typically quoted). Note that the bid
price is always smaller than the ask price. Let's look at an example:
USD/CAD = 1.2000/05
Bid
=
1.2000
Ask= 1.2005
If you want to buy this currency pair, this means that you intend to buy the base currency
and are therefore looking at the ask price to see how much (in Canadian dollars) the
market will charge for U.S. dollars. According to the ask price, you can buy one U.S.
dollar with 1.2005 Canadian dollars.
However, in order to sell this currency pair, or sell the base currency in exchange
for the quoted currency, you would look at the bid price. It tells you that the market will
buy US$1 base currency (you will be selling the market the base currency) for a price
equivalent to 1.2000 Canadian dollars, which is the quoted currency.
Whichever currency is quoted first (the base currency) is always the one in which the
transaction is being conducted. You either buy or sell the base currency. Depending on
what currency you want to use to buy or sell the base with, you refer to the corresponding
currency pair spot exchange rate to determine the price.
Spreads and Pips
The difference between the bid price and the ask price is called a spread. If we were to
look at the following quote: EUR/USD = 1.2500/03, the spread would be 0.0003 or 3
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pips, also known as points. Although these movements may seem insignificant, even the
smallest point change can result in thousands of dollars being made or lost due to
leverage. Again, this is one of the reasons that speculators are so attracted to the forex
market; even the tiniest price movement can result in huge profit.
The pip is the smallest amount a price can move in any currency quote. In the case of the
U.S. dollar, euro, British pound or Swiss franc, one pip would be 0.0001. With the
Japanese yen, one pip would be 0.01, because this currency is quoted to two decimal
places. So, in a forex quote of USD/CHF, the pip would be 0.0001 Swiss francs. Most
currencies trade within a range of 100 to 150 pips a day.
Currency Quote Overview
USD/CAD = 1.2232/37
Base Currency
Currency to the left (USD)
Quote/Counter
Currency
Currency to the right (CAD)
Bid Price
1.2232
Price for which the market maker

will buy the base currency. Bid is
always smaller than ask.
Ask Price
1.2237
Price for which the market maker

will sell the base currency.
Pip
One point move, in USD/CAD it is .

The pip/point is the smallest
0001 and 1 point change would be
movement a price can make.
from 1.2231 to 1.2232
Spread
Spread in this case is 5 pips/points;

difference between bid and ask
price (1.2237-1.2232).
Spot Market and the Forwards and Futures Markets

There are actually three ways that institutions, corporations and individuals trade
forex: the spot market, the forwards market and the futures market. The spot market
always has been the largest market because it is the "underlying" real asset that the
forwards and futures markets are based on. In the past, the futures market was the most
popular venue for traders because it was available to individual investors for a longer
period of time. However, with the advent of electronic trading, the spot market has
witnessed a huge surge in activity and now surpasses the futures market as the preferred
trading market for individual investors and speculators. When people refer to the forex
market, they usually are referring to the spot market. The forwards and futures markets
tend to be more popular with companies that need to hedge their foreign exchange risks
out to a specific date in the future.
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Spot Market
More specifically, the spot market is where currencies are bought and sold according to
the current price. That price, determined by supply and demand, is a reflection of many
things, including current interest rates, economic performance, sentiment towards
ongoing political situations (both locally and internationally), as well as the perception of
the future performance of one currency against another. When a deal is finalized, this is
known as a "spot deal". It is a bilateral transaction by which one party delivers an agreedupon currency amount to the counter party and receives a specified amount of another
currency at the agreed-upon exchange rate value. After a position is closed, the settlement
is in cash. Although the spot market is commonly known as one that deals with
transactions in the present (rather than the future), these trades actually take two days for
settlement.
Forwards and Futures Markets
Unlike the spot market, the forwards and futures markets do not trade actual currencies.
Instead they deal in contracts that represent claims to a certain currency type, a specific
price per unit and a future date for settlement.
In the forwards market, contracts are bought and sold OTC between two parties, who
determine the terms of the agreement between themselves.
In the futures market, futures contracts are bought and sold based upon a standard size
and settlement date on public commodities markets, such as the Chicago Mercantile
Exchange. In the U.S., the National Futures Association regulates the futures market.
Futures contracts have specific details, including the number of units being traded,
delivery and settlement dates, and minimum price increments that cannot be customized.
The exchange acts as a counterpart to the trader, providing clearance and settlement.
Both types of contracts are binding and are typically settled for cash for the exchange in
question upon expiry, although contracts can also be bought and sold before they expire.
The forwards and futures markets can offer protection against risk when trading
currencies. Usually, big international corporations use these markets in order to hedge
against future exchange rate fluctuations, but speculators take part in these markets as
well.
Two types of analysis are used for the market movements forecasting:
fundamental, and technical (the chart study of past behavior of commodity prices). The
fundamental one focuses on the theoretical models of exchange rate determination and on
the major economic factors and their likelihood of affecting the foreign exchange rates.
The main economic theories found in the foreign exchange deal with parity conditions. A
parity condition is an economic explanation of the price at which two currencies should
be exchanged, based on factors such as inflation and interest rates. The economic theories
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suggest that when the parity condition does not hold, an arbitrage opportunity exists for
market participants. However, arbitrage opportunities, as in many other markets, are
quickly discovered and eliminated before even giving the individual investor an
opportunity to capitalize on them. Other theories are based on economic factors such as
trade, capital flows and the way a country runs its operations. We review each of them
briefly below.
Major Theories: Purchasing Power Parity

Purchasing Power Parity (PPP) is the economic theory that price levels between two
countries should be equivalent to one another after exchange-rate adjustment. The basis
of this theory is the law of one price, where the cost of an identical good should be the
same around the world. Based on the theory, if there is a large difference in price between
two countries for the same product after exchange rate adjustment, an arbitrage
opportunity is created, because the product can be obtained from the country that sells it
for the lowest price
Interest Rate Parity
The concept of Interest Rate Parity (IRP) is similar to PPP, in that it suggests that for
there to be no arbitrage opportunities, two assets in two different countries should have
similar interest rates, as long as the risk for each is the same. The basis for this parity is
also the law of one price, in that the purchase of one investment asset in one country
should yield the same return as the exact same asset in another country; otherwise
exchange rates would have to adjust to make up for the difference.
Balance of Payments Theory
A country's balance of payments is comprised of two segments - the current account and
the capital account - which measure the inflows and outflows of goods and capital for a
country. The balance of payments theory looks at the current account, which is the
account dealing with trade of tangible goods, to get an idea of exchange-rate directions.
If a country is running a large current account surplus or deficit, it is a sign that a
country's exchange rate is out of equilibrium. To bring the current account back into
equilibrium, the exchange rate will need to adjust over time. If a country is running a
large deficit (more imports than exports), the domestic currency will depreciate. On the
other hand, a surplus would lead to currency appreciation.
Real Interest Rate Differentiation Model
The Real Interest Rate Differential Model simply suggests that countries with higher real
interest rates will see their currencies appreciate against countries with lower interest
rates. The reason for this is that investors around the world will move their money to
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countries with higher real rates to earn higher returns, which bids up the price of the
higher real rate currency.
Asset Market Model
The Asset Market Model looks at the inflow of money into a country by foreign investors
for the purpose of purchasing assets such as stocks, bonds and other financial
instruments. If a country is seeing large inflows by foreign investors, the price of its
currency is expected to increase, as the domestic currency needs to be purchased by these
foreign investors. This theory considers the capital account of the balance of trade
compared to the current account in the prior theory. This model has gained more
acceptance as the capital accounts of countries are starting to greatly outpace the current
account as international money flow increases.
Monetary Model
The Monetary Model focuses on a country's monetary policy to help determine the
exchange rate. A country's monetary policy deals with the money supply of that country,
which is determined by both the interest rate set by central banks and the amount of
money printed by the treasury. Countries that adopt a monetary policy that rapidly grows
its monetary supply will see inflationary pressure due to the increased amount of money
in circulation. This leads to a devaluation of the currency.
These economic theories, which are based on assumptions and perfect situations, help to
illustrate the basic fundamentals of currencies and how they are impacted by economic
factors. However, the fact that there are so many conflicting theories indicates the
difficulty in any one of them being 100% accurate in predicting currency fluctuations.
Their importance will likely vary by the different market environment, but it is still
important to know the fundamental basis behind each of the theories.
Economic Data
Economic theories may move currencies in the long term, but on a shorter-term, day-today or week-to-week basis, economic data has a more significant impact. It is often said
the biggest companies in the world are actually countries and that their currency is
essentially shares in that country. Economic data, such as the latest gross domestic
product (GDP) numbers, are often considered to be like a company's latest earnings data.
In the same way that financial news and current events can affect a company's stock
price, news and information about a country can have a major impact on the direction of
that country's currency. Changes in interest rates, inflation, unemployment, consumer
confidence, GDP, political stability etc. can all lead to extremely large gains/losses
depending on the nature of the announcement and the current state of the country.
The number of economic announcements made each day from around the world can be
intimidating, but as one spends more time learning about the forex market it becomes
clear which announcements have the greatest influence. Listed below are a number of
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economic indicators that are generally considered to have the greatest influence regardless of which country the announcement comes from.
Employment Data
Most countries release data about the number of people that currently are employed
within that economy. In the U.S., this data is known as non-farm payrolls and is released
the first Friday of the month by the Bureau of Labor Statistics. In most cases, strong
increases in employment signal that a country enjoys a prosperous economy, while
decreases are a sign of potential contraction. If a country has gone recently through
economic troubles, strong employment data could send the currency higher because it is a
sign of economic health and recovery. On the other hand, high employment can also lead
to inflation, so this data could send the currency downward. In other words, economic
data and the movement of currency will often depend on the circumstances that exist
when the data is released.
Interest Rates
As was seen with some of the economic theories, interest rates are a major focus in the
forex market. The most focus by market participants, in terms of interest rates, is placed
on the country's central bank changes of its bank rate, which is used to adjust monetary
supply and institute the country's monetary policy. In the U.S., the Federal Open Market
Committee (FOMC) determines the bank rate, or the rate at which commercial banks can
borrow and lend to the U.S. Treasury. The FOMC meets eight times a year to make
decisions on whether to raise, lower or leave the bank rate the same; and each meeting,
along with the minutes, is a point of focus.
Inflation
Inflation data measures the increases and decreases of price levels over a period of time.
Due to the sheer amount of goods and services within an economy, a basket of goods and
services is used to measure changes in prices. Price increases are a sign of inflation,
which suggests that the country will see its currency depreciate. In the U.S., inflation data
is shown in the Consumer Price Index, which is released on a monthly basis by the
Bureau of Labor Statistics.
Gross Domestic Product
The gross domestic product of a country is a measure of all of the finished goods and
services that a country generated during a given period. The GDP calculation is split into
four categories: private consumption, government spending, business spending and total
net exports. GDP is considered the best overall measure of the health of a country's
economy, with GDP increases signaling economic growth. The healthier a country's
economy is, the more attractive it is to foreign investors, which in turn can often lead to
increases in the value of its currency, as money moves into the country. In the U.S., this
data is released by the Bureau of Economic Analysis once a month in the third or fourth
quarter of the month.
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Retail Sales
Retail sales data measures the amount of sales that retailers make during the period,
reflecting consumer spending. The measure itself doesn't look at all stores, but, similar to
GDP, uses a group of stores of varying types to get an idea of consumer spending. This
measure also gives market participants an idea of the strength of the economy, where
increased spending signals a strong economy. In the U.S., the Department of Commerce
releases data on retail sales around the middle of the month.
Technical analysis
A method of evaluating securities by analyzing statistics generated by market activity,
such as past prices and volume. Technical analyst does not attempt to measure a
securitys intrinsic value, but instead use charts to identify patterns that can suggest future
activity. Technical analysts believe that the historical performance of stocks and markets
are indications of future performance.
Technical analysis has become increasingly popular over the past several years, as more
and more people believe that the historical performance of a stock is a strong indication
of future performance. People using fundamental analysis have always looked at the past
performance of companies by comparing fiscal data from previous quarters and years to
determine future growth. The deference lies in the technical analysts beliefs that
securities move according to very predictable trends and patterns. These trends continue
until something happens to change the trend, and until this change occurs, price levels are
predictable.
TECHNICAL ANALYSIS
Identification of the current trend i.e. the direction of price movement and
spotting any trend reversal as early as possible.
Historical price and volume data analyzed with the help of charts.
For currencies, shares and commodities traded on exchanges, such data is usually
available but in the case of interbank currency market, volume data is not
available and the analyst makes use of different indicators, which are derived
from the price data. Many of these indicators have become so popular that they
are used extensively even for financial assets and instruments traded on
exchanges.
Applicable only when prices fluctuate freely in response to market forces of

demand and supply for the underlying assets. Obviously not applicable for say a
pegged exchange rate like USD/HKD. Our focus hereafter will be on floating
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exchange rates though the principles of technical analysis apply to other assets
such as commodities, stock market indices, certain heavily traded stocks, etc.
More reliable in case of broad and very liquid markets than thin and shallow
markets.
Helps to judge the emotional state of the market. The market has its own
collective consciousness distinct from the individual consciousness of the
participants.
Technical Analysis in Contrast with Fundamental Analysis
Fundamental analysis is concerned with all the fundamental factors. In the case of
an exchange rate, the concerned factors are the present and expected interest rates,
inflation rates, GDP growth rates, international trade and current account balance,
exchange rate policies of the two countries in question, state of capital markets,
etc. After analysis of all these factors, the fundamental analyst attempts to
ascertain whether a currency is undervalued or overvalued and consequently
whether it is likely to appreciate or depreciate.
Technical analysis, on the other hand, assumes that the price at any given time is
the result of not only the fundamental factors but also the markets collective
response to all the factors. At the extreme, technical analysts dont even want to
read newspapers lest the popular news bias their chart analysis! For the same
reasons. some even dont want to know the identity of the underlying asset!!
Often, economists focus on certain fundamentals and prescribe how the market
ought to behave when the market behaviour is linked to some other factors. A
classic example is the euros persistent decline since its launch. The market is
labelled as crazy when it doesnt behave in the prescribed manner. However, those
who are exposed to risk cant afford to go against the market even if they think it
is crazy. Hence, the importance of technical analysis or proper understanding of
market psychology.
Assumptions in technical analysis
The market discounts everything All known information about a

market is reflected in the price. In other words, all the present political,
economic, psychological and any other type of information pertinent to the
market price, is already discounted or priced in. In electronic age,
information travels at the speed of light and any new information gets
disseminated and discounted quickly whereafter it ceases to be of further
relevance to the process of forecasting.
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Prices move in trends - When a price moves in a particular direction, be

it up or down, it will continue to trend in that direction till some news
changes market perception of future direction and reverses the trend itself.
To sum up the markets move in the path of least resistance.
History repeats itself - This assumption arises from the fact that mass
psychology does not change. Markets overextend because of the herd
instinct leading to panic and euphoria time and again.
Some of the Important terms used in the Technical Analysis

Support and resistance are price levels at which movement should stop and reverse
direction. Think of support/resistance as levels that act as a floor or a ceiling to future
price movements.
Supports- A price level below the current market price, at which buying interest should
be able to overcome selling pressure and thus keep the price from going any lower.
Resistance - A price level above the current market price, at which selling pressure
should be strong enough to overcome buying pressure and thus keep the price from going
any higher.
Concepts of trend
Trend is nothing but the direction of movement of price. Logically the share price can
ether be rising or falling or moving narrowly (flat). Thus there are three directions in
which the price can move these three directions give rise to the three types of trend when
prices are moving upwards, the trend is said to be rising. When prices are moving
downwards it is called a falling trend. And when prices are moving in a narrow range,
the trend can be said to be flat or choppy. Thus, the trend itself has three directions.
Upward Trend
If the market makes a high and then comes down and after that cuts the previous high
makes a new high, it means that the market is in an uptrend and it is making a higher
bottom higher top.
Downward Trend
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If the market is falling and making a lower bottom lower top it is said to be a downtrend
Sideways Trend (flat)
If the market is just drifting and has no clear move it is laid to be a sideways trend.
Trend line
Trend lines are straight lines drawn by connecting either the tops or bottoms. To draw a
straight line, one requires two points. Similarly to draw trend lines, one requires at least
tow tops or bottoms. This however, does not mean that there cannot be more than tow
tops or bottoms that can be connected to draw a trend line, infect the more the number of
tops or bottoms that are touched or connected by the trend line, the better or more
powerful the trend line.
Trend lines are the simplest, yet the most effective way of riding the trend. Just as trend
has three directions rising, falling and flat, there are three types of trend lines to represent
each of the directions of trend
Up ward trend line
An uptrend line has a positive slope and is formed by connecting two or more low points.
The second low must be higher than the first for the line to have a positive slope. Uptrend
line act as support and indicate that net-demand (demand less supply) is increasing even
as the price rises. A rising price combined with increasing demand is bullish.
Down trend lines

A downtrend line has a negative slope and is formed by connecting two or more high
points. The second high must be lower than the first for the line to have a negative slope.
Downtrend lines act as resistance, and indicate that net-supply (supply less demand) is
increasing even as the price declines. A declining price combined with increasing supply
is very bearish, and shows the strong resolve of the sellers. As long as prices remain
below the downtrend line, the downtrend is solid and intact. A break above the downtrend
line indicates that net-supply is decreasing and that a change of trend could be imminent.
Moving Averages
Moving averages are one of the most popular and easy to use tools available to the
technical analyst. They smooth a data series and make it easier to spot trends, something
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that is especially helpful in volatile markets. They also form the building blocks for many
other technical indicators and overlays.
There are three types of moving averages, namely simple moving average, exponential
moving average and weighted moving average. But the most popular types of moving
averages are the Simple Moving Average (SMA) and the Exponential Moving Average
(EMA). They are described in more detail below.
Simple Moving Average

A simple moving average is formed by computing the average (mean) price of a security
over a specified number of periods. While it is possible to create moving averages from
the Open, the High, and the Low data points, most moving averages are created using the
closing price. For example: a 5-day simple moving average is calculated by adding the
closing prices for the last 5 days and dividing the total by 5.
Ex: if the closing prices are as follows: 10, 11, 12, 13, 14, 17, 12
10+11+12+13+14=60
(60/5)=12
Here 12 is a first moving average obtained from the given closing prices, next moving
average can be calculated by deducting first cl price i.e 10 and adding next cl. Price i.e 17
and again dividing it by 5.
Exponential Moving Average (EMA)

In order to reduce the lag in SMA, technicians often use EMA. EMA's reduce the lag by
applying more weight to recent prices relative to older prices. The weighting applied to
the most recent price depends on the specified period of the moving average. The shorter
the EMA's period, the more weight that will be applied to the most recent price. For
example: a 10-period EMA weighs the most recent price 18.18% while a 20-period EMA
weighs the most recent price 9.52%. As such, it will react quicker to recent price changes
than a SMA. Here's the calculation formula
EMA (current) = ((price (current)-EMA (prev)) x multiplier+

EMA(prev)
Where, Multiplier 2/n+1
n- Number of days for which EMA is calculated
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If we take the same example of SMA 5 day EMA is calculated as follows.
EMA= (12-11) X 0.666 + 11 = 11.66
Where multiplier = 2/ (5 +1) = 0.666
For next EMA 11.66 acts as previous EMA and so on
A comparison of a 50-day EMA and a 50-day SMA for a script shows that the
EMA picks up on the trend quicker than the SMA. The blue arrows mark points when the
stock started a strong trend. By giving more weight to recent prices, the EMA reacted
quicker than the SMA and remained closer to the actual price.
Uses of moving averages
There are many uses for moving averages, but three basic uses stand out:
1. Trend identification/confirmation
2. Support and Resistance level identification/confirmation
3. Trading Systems
Moving Average Convergence and Divergence

In this system analyst uses a combination of two moving averages one is a short
term averages and other is long term averages. Also combination of SMA and EMA of
same period is frequently used for identification of selling and buying points in the graph.
Elliot wave theory

R. N. Elliott believed markets had well-define wave that could be used to predict market
direction. In 1939, Elliott detailed the Elliott Wave Theory, which states that stock prices
are governed by cycles founded upon the Fibonacci series (1-2-3-5-8-13-21...).
According to the Elliott Wave Theory, stock prices tend to move in a predetermined
number of waves consistent with the Fibonacci series. Specifically, Elliott believed the
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market moved in five distinct wave on the upside and three distinct on the downside. The
basic shape of the wave is shown below.
waves one, three and five represent the 'impulse', or minor up-wave in a major bull move.
Waves two and four represent the 'corrective,' or minor down-waves in the major bull
move. The waves lettered A and C represents the minor down-wave in a major bear
move, while B represents the one up-wave in a minor bear wave Elliott proposed that the
waves existed at many levels, meaning there could be waves within waves. To clarify,
this means that the chart above not only represents the primary wave pattern, but it could
also represent what occurs just between points 2 and 4.
Elliott wave theory ascribes names to the waves in order of descending size:
1.
2.
3.
4.
5.
6.
7.
Grand Supercycle
Supercycle
Cycle
Primary
Intermediate
Minor
Minute
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8.
9.
Minuette
Sub-Minuette
The major waves determine the major trend of the market, and minor waves determine
minor trends. This is similar to the Dow theory postulates primary and secondary trends.
Elliott provided numerous variations on the main wave, and placed particular importance
on the golden mean, 0.618, as a significant percentage for retracement.
Trading using Elliott wave patterns is quite simple. The trader identifies the main wave
or Supercycle, enters long, and then sells or shorts, as the reversal is determined. This
continues in progressively shorter cycles until the cycle completes and the main wave
resurfaces. The caution to this is that much of the wave identification is taken in hindsight
and disagreements arise between Elliott wave technicians as to which cycle the market is
in.
Chart Patterns
The vast majority of chart patterns fall into two main groups: reversal and continuation.
Reversal patterns indicate a change of trend and can be broken down into top and bottom
formations. Continuation patterns indicate a pause in trend and indicate that the previous
direction will resume after a period of time. Just because a pattern forms after a
significant advance or decline does not mean it is a reversal pattern. Many patterns, such
as a rectangle, can be classified as either reversal or continuation. Much depends on the
previous price action, volume and other indicators as the pattern evolves. This is where
the science of technical analysis becomes the art of technical analysis.
Below is a list of common chart patterns that can be useful in Technical Analysis.
Double Top (Reversal)
Double Bottom (Reversal)
Head and Shoulders Top (Reversal)
Head and Shoulders Bottom (Reversal)
Falling Wedge (Reversal)
Rising Wedge (Reversal)
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Rounding Bottom (Reversal)

Triple Top (Reversal)
Triple Bottom (Reversal)
Bump and Run Reversal (Reversal)
Flag, Pennant (Continuation)
Symmetrical Triangle (Continuation)
Ascending Triangle (Continuation)
Descending Triangle (Continuation)
Rectangle (Continuation)
Price Channel (Continuation)
Measured Move - Bullish (Continuation)
Measured Move - Bearish (Continuation)
Cup with Handle (Continuation)
We shall discus some of these patterns
Double top (reversal)

The double top is a major reversal pattern that forms after an extended uptrend. As its
name implies, the pattern is made up of two consecutive peaks that are roughly equal,
with a moderate trough in-between. The double top looks like the letter "M". The twice
touched high is considered a resistance level.
Although there can be variations, the classic double top marks at least an intermediate
change, if not long-term change, in trend from bullish to bearish. Many potential double
tops can form along the way up, but until key support is broken, a reversal cannot be
confirmed.
Double bottom (reversal)

The double bottom is a major reversal pattern that forms after an extended downtrend. As
its name implies, the pattern is made up of two consecutive troughs that are roughly
equal, with a moderate peak in-between. The double bottom looks like the letter "W". The
twice touched low is considered a support level.
Most technical analysts believe that the advance off of the first bottom should be 10-20%.
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The second bottom should form within 3-4% of the previous low, and volume on the
ensuing advance should increase.
Although there can be variations, the classic double bottom usually marks an
intermediate or long-term change in trend. Many potential double bottoms can form
along the way down, but until key resistance is broken, a reversal cannot be confirmed.
Head and sholder top (reversal)

A Head and Shoulders reversal pattern forms after an uptrend, and its completion marks a
trend reversal. The pattern contains three successive peaks with the middle peak (head)
being the highest and the two outside peaks (shoulders) being low and roughly equal. The
reaction lows of each peak can be connected to form support, or a neckline.
As its name implies, the Head and Shoulders reversal pattern is made up of a left
shoulder, a head, a right shoulder, and a neckline. Other parts playing a role in the pattern
are volume, the breakout, price target and support turned resistance.
Important words used in Technical Market:

The Bulls:
A bull market is when everything in the economy is great, people are finding jobs, GDP
is growing, and stocks are rising. Pecking stocks during the bull market is easier because
everything is going up. Bull market cannot last forever, sometime they can lead to
dangerous situations if stocks become overvalued. If a person is optimistic, believing that
stocks will go up, he or she is called a bull and said to have a bullish outlook.
The Bears:
A bear market I when the economy is bad, recession is looming, and stock prices are
falling. Bear market make it though for investors to pick profitable stocks. One solution
to this is to make money when stocks are falling using a technique called short selling.
Another strategy is to wait on until you feel that the bear market is over, and to buy again
in anticipation of a bull market. If a person is pessimistic, believing that stocks are going
to drop, he or she is called a bear and said to have a bearish outlook.
Other animal on the farm- chickens and pigs

Chickens are afraid to lose anything. Their fear overrides their need to make profits and
so they turn only to money market securities or get out of the markets altogether.
Pigs are high-risk investors looking for the one big score in a short period of time. Pigs
buy on hot tips and invest in hot companies without doing their due diligence. They get
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impatient, greedy, and emotional about their investments, and they are drawn to high risk
securities without putting in the proper time or money to learn about these investment
vehicles. Professional traders love the pigs. As its often from their losses that the bulls
and bears reap their profits.
Short Selling
The selling of a security that the seller does not own, Short sellers assume that
they will be able to buy the stock at a lower amount than the price at which they sold
short.
Bear
An investor who believes that a particular security or market is headed
downward. Bears attempt to profit from a decline in prices. Bears are
generally pessimistic about the state of a given market.
Intraday
Another way of saying "within the day". Intraday price movements are
particularly important to short-term traders looking to make many trades over the course
of a single trading session. The term intraday is occasionally used to describe
securities that trade on the markets during regular business hours, such as stocks and
ETFs, as opposed to mutual funds, which must be bought from a dealer.
Day Trader
A stock trader who holds positions for a very short time (from minutes to hours)
and makes numerous trades each day. Most trades are entered and closed out within the
same day
Speculator
A person who trades with a higher-than-average risk, in return for a higher-thanaverage profit potential. Speculators take large risks, especially with respect
to anticipating future price movements, or gambling, in the hopes of making quick, large
gains.
Going Long
Holding the security for an extended period of time. Depending on the type of
security, a long-term asset can be held for as little as one year or more.
Going short
Selling the existing security immediately to protect the profit made or to
minimizing the lose.
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Short Covering
The act of purchasing securities in order to close an open short position. This is
done by buying the same type and number of securities that were sold short. Most often,
traders cover their shorts whenever they speculate that the securities will rise. In order to
make a profit, a short seller must cover the shorts by purchasing the security below the
original selling price.
Squaring off
Its an intra day trading where in the trader first sells or buys the shares and then
reverse the process (buying/selling) within the closing of market on the same day and
pays off difference amount if he has lost or gains profit. So by doing so at the end of the
day he owns no shares in his account.
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ANALYSIS PART
Structure of Forex Market Transaction in India
RBI
NOSTRO
Authorized
Dealer
(AD)
A Category
VOSTRO
Designated
Branch
(D-Branch)
B Category
Money
Change
(MC)
C Category
ADs are fully pledge ADs, means these ADs are having Accounts in their own
name. Vostro in the sense Foreign Bank opens its Account in Indian Bank. Whereas
Nostro means our Indian Bank opens Account in any Foreign Banks. So Canara Bank is
having both types of accounts. Details about Canara Bank we will see in further pages.
Designated Branches are those branches, where these branches will not trade in
the name of their own account, but in the name of ADs. They can act individually, even
though they dont have accounts in their own name.
Money Change (MC)s, are comes under C category. This category people are
neither having accounts in their own name nor fully authorized to act individually. So
these are comes reports to D-Branches or otherwise they directly related to ADs. We can
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see in Mangalore or in Goa or in Mumbai small export agencies all these agencies are
comes under C category.
Foreign Exchange Operations of Station Road Branch of Canara Bank:
First we will see the Hierarchy of Foreign Exchange Operations in Canara Bank.
First it starts with International Foreign Exchange. Under this International Foreign
Exchange, Forex Department (FD) has existing. FD is having its own Account in their
name. So they do not dependent on any other.
In India around 13 departments are situated. In Karnataka there are only 2 FDs
one is situated in Bangalore and another one is in Mangalore.
Under this FD, Foreign Exchange Cell comes. There are 22 Foreign Exchange
Cells situated in India. These Foreign Exchange Cells should report the daily report of
foreign exchange operations to Foreign Department.
Under this FD another branch also existed called it as Designated Branch (DBranch). This D-Branch is not like a Foreign Exchange Cell. This branch is not
dependent on any other Foreign Exchange Cells, but they have their own Account. For
instance, for foreign exchange transaction purpose a customer approaches Avenue Branch
of Bangalore. Avenue Branch is a D-Branch, so will not send this transaction to any
other Foreign Exchange Cells but it operates in their own account under the name of
Foreign Department.
In Karnataka especially in Bangalore these D-Branches are situated viz., in
Avenue Road Branch, Malleshwaram Branch etc.,
Apart from all these, still another branch is there, it is called Overseas Branch.
These Overseas Branches are Operate as branches or subsidiaries of the parent Bank.
These branches are to seek deposits and grant loans in currencies other than the currency
of the host government.
Diagrammatic way of Hierarchy of Foreign Exchange Operations in

Canara Bank
INTERNATIONAL FOREIGN EXCHANGE
Designated Branch
Foreign Department
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Foreign Exchange Cell
Now Let us see particularly of Hubli Branch:

For entire North Karnataka there is only one Foreign Exchange Transaction Cell,
is situated in Hubli. Hubli Foreign Exchange Transaction is a Foreign Exchange Cell.
This is comes under Foreign Department from previous diagram we can clarify it.
This Hubli Foreign Exchange Cell has been operating since from 1991. Till 2005
Hubli Foreign Exchange Cell was under Mangaloe Foreign Department. But now it is
shifted to Mumbai Foreign Department.
This Hubli Foreign Exchange Cell reports daily foreign exchange operations to
Mumbai Foreign Department. So for this reporting purpose it is having a new computer
technology, by this they only press a key to submit or to send the report at the end of the
day. So for this technology they have separate computer.
Hubli Foreign Exchange Cell covers especially almost all Districts of North
Karnataka (expect Hyderabad Karnataka). Viz., Districts of Dharwad, Belgaum, Bijapur,
Baglkot, Gadag, Koppal, Haveri etc.,
Services has been Providing by Hubli Forex Cell
IMPORT
SERVICES
EXPORT
REMITTANCE
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EXPORT
Collection of
Bills
Finance
Pre & Post
Shipment
Purchase
Discount
Negotiation
Cash in
Advance
Hubli Forex Cell gives service to Exporter in the name of Export Service. Here
they have made 3 types of categories, as in the above figure.
Collection of Bills: Every document should be send through banks only. It is
compulsion made by RBI and also FEMA. Here exporter must submit some documents
are as follows:
Invoice, Packing List, Bill of Lading (in case of Sea) / Airway Bill (in case of
Air), Certificate of Origin, Test Certificate etc., Statutory Declaration Form (SDF) and
Shipping Bill are very important documents where bank will check these documents very
thoroughly. And combining these important documents, and they call it as GR Form.
Exporter or consignor prepares SDF. It is a document where exporter declares the
Type of goods he is exporting, Quantity (Kg & No.s), Name of Importer, Name of
Shipping Agency etc., This is made in 3 copies. One is sent to RBI, another one is to any
commercial Forex traded Bank and remaining is for them. Superidentant of Exercise
Custom certifies all these copies.
Finance: (Pre & Post Shipment loan): At Sight they purchase the document and make
the payment within 15 to 20 days. Bank may discount it as per the instruction by party
like Bill of Exchange. This may maturated at 90 days after or 90 or 120 days as per
agreement between both parties. Negotiation also made by bank to get profits.
Who takes the pre shipment loan they should compulsorily take post shipment
loan also. Because, if any one have taken pre shipment, when goods are ready to
shipment, then bank convert this pre shipment into post shipment. For this purpose Bank
should require Purchase Order (PO), if New Importer / High value goods then opening of
L/c and Bank should take Inventory as a Hypothesis, Guarantee from Director/partner,
some times Mortgage and some times pledge the finished goods. These loan sanctions
stage by stage.
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IMPORT
Letter of
Credit
Advise,
Conformance
Finance
FLC
Here Bank gives service to importers also as an Import Service. Here importer
can open Letter of credit, for this purpose Bank acts as a mediator between exporter and
importer. So bank will take some risks relating to export and import of goods.
Bank also acts as advisor to importer. Incase new exporter or incase of high value
materials or incase first time importing the materials, in all these cases banks will give
advise to the importer that whether to go or not. If any RBIs prior permission is required
or not if so require then what are the procedure all things may advise to importer.
Some times for importer also it gives a loan called Foreign Letter of Credit (FLC).
According to this if exporter fails to supply goods then Bank will take the responsibility.
But some major responsibility will be on importer only.
Outward
REMITTANCE
Inward
Money
Change
Remittance is nothing but receiving and paying of foreign currency in India.
Outward is nothing but paying abroad. Inward means incoming payment from abroad.
Money change means if a person wants to convert the one foreign currency into domestic
currency.
Here TT, DD, Bills, Travelers Cheques, Notes, Now recently Yatri Card etc., are
the major modes of transactions held in this type of service. For this purpose of service,
any receiving / paying person should be a customer i.e., he should be an Account holder
in that particular Bank. But this condition is not applicable to Tourist. For Tourist Bank
only looks out the Passport and Visa (According to FEMA).
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NRI DEPOSITS
NON RESIDENT EXTERNAL RUPEE ACCOUNT (NRE)
Types of account you can open are: Savings, Current or Term Deposit in Indian
Rupees.
You can open a NRE account by:
o Remittance from abroad (through DD/SWIFT TRANSFER)
o Transfer of funds from existing NRE/FCNR accounts with other banks in
India or from other branches of our bank.
o Foreign currency notes/travellers cheques brought in during temporary
visit to India.
o Personal cheques drawn on your account abroad
Unique features of NRE deposits:
o The entire credit balance inclusive of interest earned can be repatriated
outside India without reference to RBI.
o NRE accounts can be operated by Resident Indians on the basis of the
Power of Attorney Or letter of Authority issued by the NRI account holder.
However PA/LA holder can repatriate the funds abroad to the non resident
depositor only.
o Joint accounts can be opened along with other Non Resident Indians.
o Local disbursements, purchase of units of UTI, Central and State
Government securities and National Savings Certificates can be made
from these accounts.
o Sale/Maturity Proceeds/ repurchase proceeds of units of UTI, Securities or
certificates originally purchased out of funds in these accounts can be
credited without reference to RBI.
o Under term deposits accounts can be opened for a minimum period of 1
year and a maximum period of 3 years.
o Loans/overdrafts in India to deposit holders are available against security
of deposits.
o Cheque book facility is available for NRE Savings Bank account.
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NON-RESIDENT (External) RUPEE ACCOUNT SCHEME (NRE Account)

Who can open an account
NRIs (Individuals of Bangladesh/Pakistan

nationality require prior approval of RBI)
Joint account
In the names of two or more non-resident

individuals Subject to a maximum of 4 persons
Nomination
Permitted
Currency in which account is

denominated
Indian Rupees
Repatriability
Repatriable
Type of Account
Savings, Current, Recurring, Fixed Deposit
Period for fixed deposits
Minimum one year and maximum 3 years.
Rate of Interest
Subject to RBI guidelines. The interest rates

are displayed on our web site
Loans
a) In India
Permitted
(i) to the Account holder
Permitted
(ii) to third parties
Permitted
b) Abroad >
Permitted
Permitted
c) Foreign Currency Loans In India

(i) to the account holder
Not permitted
Not permitted
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Purpose of Loan
a) In India
i)Personal purposes or for carrying on business
activities *
ii) Direct investment in India on nonrepatriation basis by way of contribution to the
capital of Indian firms/ companies
iii) Acquisition of flat/ house in India for his
own residential use
Fund based and/or non-fund based facilities

for personal purposes or for carrying on
business activities.
(ii) to third party

b) Abroad
To the account holder and third party
Fund based and/or non-fund based facilities

for bonafide purposes.
* The loans cannot be utilized for the purpose of relending, or carrying on agriculture or
plantation activities or for investment in real estate business.
Note:
a) When a person resident in India leaves India for Nepal and Bhutan for taking up
employment or for carrying on business or vocation or for any other purposes indicating
his intention to stay in Nepal and Bhutan for an uncertain period, his existing account will
continue as a resident account. Such account will not be designated as Non-resident
(Ordinary) Rupee Account (NRO).
b) We open and maintain NRE/FCNR(B) accounts of persons resident in Nepal and
Bhutan who are citizens of India or of Indian origin, provided the funds for opening these
accounts are remitted in free foreign exchange. Interest earned in NRE/FCNR (B)
accounts can be remitted only in Indian rupees to NRIs and PIO resident in Nepal and
Bhutan.
c) We extend all types of rupee loans under the Retail lending scheme to NRIs.
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RESIDENT FOREIGN CURRENCY [DOMESTIC] ACCOUNT [RFCD]
Types of account you can open: Non interest bearing Current Account in Foreign
currency.
A person resident in India can open an RFCD account out of foreign exchange
acquired in the form of currency notes, bank notes and travelers cheques from the
following sources:
o Acquired while on a visit to any place outside India by way of payment for
services not arising from any business in or anything done in India; or
o Acquired from any person not resident in India and who is on a visit to India, as
honorarium or gift or for services rendered or in settlement of any lawful
obligation; or
o Acquired by way of honorarium or gift while on a visit to any place outside India;
or
o Unspent amount of foreign exchange acquired by him from an authorised person
for travel abroad; or
o Unspent amount of foreign exchange received as allowance by Pilots/Crew
Members/Mariners etc., of Indian Airline/Shipping companies
o Foreign exchange earnings through export of goods and/or services,
royalty/honorarium etc. by resident individuals; or
o Insurance claims/maturity value settled in foreign currency.
o Gifts received from close relatives viz.,
Husband and Wife
Father/Mother (including step-mother)
Fathers father/Fathers mother/Mothers mother/ Mothers father
Son (including step-son)/Daughters (including step-daughter)
Sons wife/Sons son/Sons sons wife/Sons daughter/Sons daughters husband
Daughters husband/Daughters son/Daughters sons wife/Daughters
daughter/Daughters daughters husband
Brother (including step-brother)/Brothers wife
Sister (including step-sister)/Sisters husband.
RESIDENT FOREIGN CURRENCY [DOMESTIC] ACCOUNT [RFCD]
Who can open an account
Persons Resident in India.
Joint account
In the names of two or more resident individuals

with a maximum of 4 persons.
Nomination
Permitted
Permissible currencies
USD, GBP & EUR
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Type of Account
Non interest bearing Current Account
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Facilities available to NRIs, PIO for investment in India
I. Bank Accounts and Deposits
a) Non-Resident (External) Rupee (NRE) Accounts (Principal / Interest Repatriable)
Savings - The interest rates on NRE Savings deposits shall be at the rate
applicable to domestic savings deposits. Currently the interest rate is 3.5%.
Term deposits For 1 year to 3 years, the interest rates on fresh repatriable NonResident (External) Rupee (NRE) Term deposits should not exceed the
LIBOR/SWAP rates, as on the last working day of the previous month, for US
dollar of corresponding maturity plus 50 basis points.
The interest rates as determined above for three year deposits should also be applicable in
case the maturity period exceeds three years.
The changes in interest rates will also apply to NRE deposits renewed after their present
maturity period.
b) FCNR (B) (Principal/Interest Repatriable)
Deposits of funds in the account may be accepted in such permissible currencies as may
be designated by the Reserve Bank from time to time.
Presently the term deposit can be placed with ADs in India in 6 specific foreign
currencies (US Dollar, Pound Sterling, EURO, Japanese Yen, Australian Dollar
and Canadian Dollar).
Rate of Interest - Fixed or floating within the ceiling rate of LIBOR/SWAP rates
for the respective currency/corresponding term minus 25 basis points.
Maturity of deposits: 1-5 years.
c) NRO Accounts (Current earnings repatriable)
Savings - Normally operated for crediting rupee earnings / income such as

dividends, interest. Currently the interest rate is 3.5 per cent.
Term Deposits - Banks are free to determine interest rates.
d) Repatriation from NRO balances

Authorised Dealers can allow remittance/s upto USD 1 million per financial year (AprilMarch) for bonafide purposes, from balances in NRO accounts subject to payment of
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applicable taxes. The limit of USD 1 million per financial year includes sale proceeds of
immovable properties held by NRIs/PIO.
II. Other Investments on repatriation basis
Government dated securities/treasury bills.
Units of domestic mutual funds.

Bonds issued by a public sector undertaking (PSU) in India.
Non-convertible debentures of a company incorporated in India.
Shares in Public Sector Enterprises being dis-invested by the Government of
India, provided the purchase is in accordance with the terms and conditions
stipulated in the notice inviting bids.
Shares and convertible debentures of Indian companies under FDI scheme
(including automatic route & FIPB).
Shares and convertible debentures of Indian companies through stock exchange
under Portfolio Investment Scheme.
Perpetual debt instruments and debt capital instruments issued by banks in India.
III. Other Investments on non-repatriation basis
Government dated securities (other than bearer securities)/treasury bills.
Units of domestic mutual funds.

Units of Money Market Mutual Funds in India.
Non-convertible debentures of a company incorporated in India.
The capital of a firm or proprietary concern in India, not engaged in any
agricultural or plantation activity or real estate business.
Deposits with a company registered under the Companies Act, 1956 including
NBFC registered with RBI, or a body corporate created under an Act of
Parliament or State Legislature, a proprietorship concern or a firm out of rupee
funds which do not represent inward remittances or transfer from NRE/FCNR(B)
Accounts into the NRO Account.
Commercial Paper issued by an Indian company.
Shares and convertible debentures of Indian companies other than under Portfolio
Investment Scheme.
IV. Investment in immovable Property
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May acquire immovable property in India other than agricultural land/ plantation
property or a farmhouse out of repatriable and non-repatriable funds.
In respect of such investments NRIs are eligible to repatriate
Sale proceeds of immovable property acquired in India to the extent of repatriable

funds used for acquiring the property, up to two residential properties. The
balance will be repatriable through NRO Account subject to conditions mentioned
at item (I) (d).
Refund of (a) application / earnest money / purchase consideration made by

house-building agencies/seller on account of non-allotment of flats / plots and (b)
cancellation of booking/deals for purchase of residential/commercial properties,
together with interest, net of taxes, provided original payment is made out of
NRE/FCNR(B) account/inward remittances.
Housing Loan in rupees availed of by NRIs from ADs / Housing Financial
Institutions can be repaid by the close relatives in India of the borrower.
V. Facilities to returning NRIs/PIO

Returning NRIs/ PIO
May continue to hold, own, transfer or invest in foreign currency, foreign security
or any immovable property situated outside India, if such currency, security or
property was acquired, held or owned when resident outside India.
May open, hold and maintain with an authorised dealer in India a Resident Foreign
Currency (RFC) Account to transfer balances held in NRE/FCNR(B) accounts.
Proceeds of assets held outside India at the time of return, can be credited to
RFC account. The funds in RFC accounts are free from all restrictions regarding
utilisation of foreign currency balances including any restriction on investment
in any form outside India.
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NRI REMITTANCE FACILITIES
SAFE CUSTODY SERVICES
This subsidiary service is rendered by the Bank to most valued customers. Bank
undertakes the responsibility of safe custody of articles entrusted by the customer under a
contract and return the same according to terms agreed upon.
SAFE DEPOSIT LOCKERS
Keep your valuables in our lockers and have peace of mind.
Lockers available at select branches where Safe Deposit Vaults are installed. Bank lets on
hire safe deposit lockers to individuals (Singly or jointly), Firms, Companies, Association
or Clubs, Trustees on nominal rent.
NOMINATIONS
This facility has been devised with an aim of minimising the hardships caused to the
family members on the death of the depositor/s. Nominations can be made in respect of
all types of deposit accounts by the individual account holders in their own capacity
singly or jointly.
CANBANK ELECTRONIC FUNDS TRANSFER SCHEME
We have a high tech remittance product called Canbank EFT which at present is
extended to the following exchange houses and banks
1. M/s Al Razouki International Exchange Co LLC, Dubai
2. M/s Eastern Exchange Est., Doha, Qatar
3. M/s Al Fardan Exchange Co., UAE
4. M/s Bahrain India International Exchange Co., Bahrain
5. M/s UAE Exchange Centre, Abu Dhabi, UAE
6. M/s Zenj Exchange Co., Bahrain
7. Laxmidas Tharia Ved Exchange
8. Musandam Exchange Oman
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9. Arab National Bank Riyadh Saudi Arabia
10. Canara Bank London
Residents of Dubai, Bahrain and Saudi Arabia can make use of the above product for
making remittances which enables the beneficiaries of the remittance in India to receive
the funds in their accounts with designated Canara Bank branches within 24 hours from
the date of remittance. This facility is highly cost-effective and secured way of
remittance. At present the funds by way of EFT can be remitted to 1022 designated
branches across the Country
Acquisition and Transfer of Immovable Property in India by a person

resident outside India
I)
Regulations/Directions issued by Reserve Bank of India

1.
Regulations regarding acquisition and transfer of immovable property in India

by a person resident outside India have been notified vide RBI Notification
No. FEMA 21/2000-RB dated May 3, 2000 as amended by Notification
No.FEMA 64/2002-RB dated June 29, 2002, Notification No.FEMA 65/2002RB dated June 29, 2002, Notification No.FEMA 93/2003-RB dated June 6,
2003 and Notification No. 146/2006-RB dated 10/02/06 and relevant
directions issued in the form of A.P. (DIR Series) Circulars.
II)
Acquisition of immovable property in India by way of purchase by a

person resident outside India.
2.
General Permission is available to purchase only a residential/commercial

property in India to a person resident outside India who is a citizen of India
(NRI) or who is a Person of Indian Origin (PIO).
3.
For the purpose of acquisition and transfer of immovable property in India, a

PIO means an individual (not being a citizen of Pakistan or Bangladesh or Sri
Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who (i) at any
time, held Indian passport; or (ii) who or either of whose father or
grandfather was a citizen of India by virtue of the Constitution of India or the
Citizenship Act, 1955 (57 of 1955).
4.
NRI/PIO who has purchased residential/commercial property under general

permission is not required to file any documents with the Reserve Bank.
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5.
There is no restriction on number of residential/commercial property that

NRI/PIO can purchase under the general permission available
6.
No foreign national of non-Indian origin be added as a second holder to a

residential/commercial property purchased by NRI/PIO
7.
A foreign national of non-Indian origin resident outside India cannot acquire

any immovable property in India by way of purchase. Sec 2 (ze)
8.
Yes. A Foreign National of non-Indian origin including a citizen of Pakistan or

Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan
may acquire only residential accommodation on lease, not exceeding five
years for which he/she does not require prior permission of Reserve Bank of
India.
9.
A person resident outside India cannot acquire by way of purchase agricultural

land/plantation property/farm house in India.
III)
Acquisition of immovable property in India by way of gift by a person

10.
Yes. Under general permission available NRI/PIO may acquire

residential/commercial property by way of gift from a person resident in India
or a NRI or a PIO.
11.
No. Under section 2 (ze) of the Foreign Exchange Management Act, 1999
transfer includes among others, gift. Therefore, a foreign national of nonIndian
origin
resident
outside
India
cannot
acquire
residential/commercial property in India by way of gift.
12.
No. A person resident outside India cannot acquire agricultural land/plantation

property/farm house in India by way of gift.
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IV)
Acquisition of immovable property in India by way of inheritance by a

person resident outside India
13.
Yes. A person resident outside India can hold immovable property acquired by
way of inheritance from a person resident in India as per the provisions of
Section 6(5) of the Foreign Exchange Management Act, 1999.
14.
With the specific approval of Reserve Bank a person resident outside India
may hold any immovable property in India acquired by way of inheritance
from a person resident outside India, provided the bequeathor had acquired
such property in accordance with the provisions of foreign exchange law in
force at the time of acquisition or under FEMA regulations.
V)
Transfer of immovable property in India by way of sale by a person

15.
NRI can transfer by way of sale residential/commercial property in India to a

person resident in India or to a NRI or a PIO.
16.
PIO can transfer by way of sale residential/commercial property in India only

to a person resident in India.
17.
No. PIO would need to seek Reserve Bank prior approval for transfer by way
of sale residential/commercial property in India to a NRI or a PIO.
18.
No. A foreign national of non-Indian origin whether resident in India or

outside India would need to seek prior approval of Reserve Bank for transfer
by way of sale residential/property in India acquired with the specific
permission of Reserve Bank to a person resident in India or outside India.
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19.
Under the general permission available NRI/PIO may transfer by way of sale
his agricultural land/plantation property/farm house in India to a person
resident in India who is a citizen of India.
20.
A foreign national of non-Indian origin resident outside India would need to

seek prior approval of Reserve Bank for transfer, by way of sale, agricultural
land/plantation property/farm house acquired in India.
VI)
Transfer of immovable property in India by way of gift by a person

21.
Yes. NRI/PIO may transfer by way of gift residential/commercial property in

India to a person resident in India or to a NRI or a PIO.
22.
Under the general permission available NRI/PIO may transfer by way of gift
agricultural land/plantation property/farm house in India to a person resident
in India who is a citizen of India.
23.
No. A foreign national of non-Indian origin resident outside India would need
to seek prior approval of Reserve Bank for transfer by way of gift agricultural
land/plantation property/farm house acquired by him in India.
VII)
Transfer of residential/commercial property in India by way of mortgage

by a person resident outside India
24.
NRI/PIO, transfer by way of mortgage his residential/commercial property in

India to a party abroad. He should seek prior approval of RBI.
25.
No. He should seek prior approval of RBI. However, immovable property

purchased by a person resident outside India who has established a Branch
Office or other place of business for carrying on in India any activity in
accordance with FERA/FEMA regulations, may under general permission
available, mortgage such a property with an authorized dealer as a security for
any borrowing.
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VIII)
Mode of payment for purchase of residential/commercial property in

India by NRI/PIO
26.
Under the general permission available, NRI / PIO may purchase residential /
commercial property in India out of funds remitted to India through normal
banking channel or funds held in his NRE / FCNR (B) / NRO account. No
consideration shall be paid outside India. However, payment for acquisition of
immovable property in India by NRI/PIO cannot be made either by Travellers
cheques or by foreign currency notes.
27.
Provided original payment was made by way of inward remittance or by debit

to NRE/FCNR (B) account. For this purpose no permission of Reserve Bank
is required and they may approach the Authorised Dealer directly in the
matter. (Please refer to A. P. (DIR Series Circular No. 46 dated November 12,
2002).
28.
Subject to certain terms and conditions (Please refer to Schedule 1 and

Schedules 2 to Notification No. FEMA 5/2000-RB dated 3rd May 2000).
29.
Loans can be repaid by the borrower by way of inward remittance through

normal banking channel or by debit to his NRE/FCNR (B)/NRO account or
out of rental income derived from renting out such property. Such loan can
also be repaid by the borrower's close relatives through their account in India
by crediting the borrower's loan account. (Please refer to Regulation 8 to
Notification No. FEMA 4/2000-RB dated 3rd May 2000 and A.P. (DIR Series)
Circular No.95 dated April 20, 2003 and A.P. (DIR Series) Circular No.94
dated May 25, 2003).
30.
NRI avail of housing loan in rupees from his employer in India subject to
certain terms and conditions (Please refer to Regulation 8A to Notification No.
FEMA 4/2000-RB dated 3rd May 2000 and A.P. (DIR Series Circular No.27
dated October 10, 2003).
IX)
Repatriation of sale proceeds of residential/commercial property

purchased by NRI/PIO
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31.
NRI / PIO may repatriate the sale proceeds of residential / commercial

property in India acquired by way of inward remittance through normal
banking channel or by debit to NRE /FCNR (B) account. The amount to be
repatriated should not exceed the amount paid for acquisition of residential /
commercial property (a) in foreign exchange received through normal banking
channel or by debit to FCNR (B) account or (b) the foreign currency
equivalent, as on the date of payment, of the amount paid by debit to NRE
account.
From out of balances in NRO account, he may remit upto USD one million
per financial year for any bonafide purposes, eligible balances including the
sale proceeds of immovable property.
32.
Yes. Repayment of loan in foreign exchange is treated as equivalent to the

foreign exchange received for purchase of residential accommodation.
33.
No lock in period is applicable for sale of such property.
34.
Yes. Repatriation of sale proceeds is restricted to not more than two residential
properties.
X)
Remittance of sale proceeds of residential/commercial property received

by way of gift by NRI/PIO
35.
The sale proceeds of residential/commercial property received by way of gift

by NRI/PIO should be credited to NRO account only.
XI)
Remittance of sale proceeds of immovable property inherited by a person

36.
Yes. Amount not exceeding USD one million, per calendar year subject to
production of documentary evidence in support of inheritance and Tax
clearance certificate/no objection certificate from Income Tax authority to
authorized dealer for remittances. However, if a PIO is a citizen of Pakistan or
Bangladesh or Sri Lanka or Afghanistan or China or Iran he should seek prior
approval of Reserve Bank with documentary evidence in support of
inheritance and tax clearance/no objection certificate from Income Tax
authority. This remittance facility is not available to a citizen of Nepal or
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Bhutan. (Please refer to Regulation 4 (3) to Notification No. FEMA 13/RB2000 dated 3rd May 2000)
37.
Yes. Amount not exceeding USD one million, per calendar year subject to
production of documentary evidence in support of inheritance and Tax
clearance certificate/no objection certificate from Income Tax authority to
authorized dealer for remittances. However, a citizen of Pakistan or
Bangladesh or Sri Lanka or Afghanistan or China or Iran shall seek prior
approval of Reserve Bank with documentary evidence in support of
inheritance and tax clearance/no objection certificate from Income Tax
authority. This remittance facility is not available to a citizen of Nepal or
Bhutan. (Please refer to Regulation 4 (2) (ii) to Notification No. FEMA
13/RB-2000 dated 3rd May 2000)
38.
No. He needs to seek prior approval of Reserve Bank with documentary

evidence in support of inheritance and tax clearance/no objection certificate
from Income Tax authority.
XII)
Acquisition of immovable property for carrying on a permitted activity

in India
39.
No. A person resident outside India who has established a Liaison Office in
India in accordance with FERA/FEMA regulations purchase immovable
property
40.
Yes, provided it is necessary for or incidental to carrying on such activity and

all applicable laws, rules, regulations or directions are duly complied with.
The purchase price should be paid by way of inward remittance through
proper banking channel. A declaration in form IPI should be filed with
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Reserve Bank within ninety days from the date of acquisition of
commercial/residential property.
41.
Yes, a property referred to in No.41 (above) be mortgaged with an authorized

dealer as a security for any borrowing. RBI has granted general permission
for such a mortgage.
42.
Yes, on winding up of the business the sale proceeds of such property be

repatriated with prior approval of Reserve Bank.
XIII)
Acquisition/Transfer of immovable property in India by Foreign

Embassies/Diplomats /Counsel Generals
43.
Yes. Under general permission available Foreign Embassies / Diplomats /

Consulate Generals may acquire any immovable property other than
agricultural land / plantation property / farm house in India. Such property
may be purchased / sold provided prior clearance from the Government of
India, Ministry of External Affairs has been obtained for such purchase / sale.
The consideration for purchase of such property should be paid by way of
inward remittance through normal banking channel.
Forex Facilities for Residents (Individuals)

Introduction
The legal framework for administration of foreign exchange transactions in India is
provided by the Foreign Exchange Management Act, 1999. Under the Act, freedom has
been granted for buying and selling of foreign exchange for undertaking current account
transactions. The Government has issued Foreign Exchange Management (Current
Account Transactions) Rules, 2000 which have been notified vide Notifications GSR.
381(E) dated May 3, 2000, S.O. 301(E) dated March 30, 2001 and GSR 608(E) dated
September 13, 2004 as amended from time to time. The last amendment to the G.S.R is
viding Notification No. G.S.R. No.412 (E) dated July 10, 2006 notifying certain
relaxations on current account transactions in public interest.
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Under the Foreign Exchange Management Act, 1999 (FEMA) [in lieu of FERA], which
has come into force with effect from June 1, 2000, all transactions involving foreign
exchange have been classified either as Capital or Current Account transactions. All
transactions undertaken by a resident that do not alter his assets or liabilities outside India
are current account transactions. In terms of Section 5 of the FEMA, persons are free to
buy or sell foreign exchange for any current account transaction except for those
transactions on which Central Government has imposed restrictions, vide its Notification
referred to above A copy of the Notification is available in the Official Gazette
I. Guidelines on Travel Related Matters
A 'person resident in India' is defined in Section 2(v) of FEMA, 1999 as:
A person residing in India for more than one hundred and eighty-two days during the
course of the preceding financial year but does not include
(A) a person who has gone out of India or who stays outside India, in either case - for or
on taking up employment outside India, or for carrying on outside India a business or
vocation outside India, or for any other purpose, in such circumstances as would indicate
his intention to stay outside India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than for or on
taking up employment in India, or for carrying on in India a business or vocation in India,
or for any other purpose, in such circumstances as would indicate his intention to stay in
India for an uncertain period; any person or body corporate registered or incorporated in
India, an office, branch or agency in India owned or controlled by a person resident
outside India, an office, branch or agency outside India owned or controlled by a person
resident in India; That is to qualify as a resident the person concerned will have to fulfill
the criterion regarding (a) the duration of stay and (b) the purpose of stay.
The term Person Resident Outside India is defined in the Act as a person who is not a
person resident in India.
Buying foreign exchange
Foreign exchange can be purchased from any authorised dealer. Besides authorised
dealers, full-fledged moneychangers are also permitted to release exchange for business
and private visits.
Authorised Dealer
An Authorised Dealer is normally a bank specifically authorised by the Reserve Bank
under Section 10(1) of FEMA,1999, to deal in foreign exchange or foreign securities
(List available on www.fedai.org.in ).
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Exchange is available for a business trip
Authorised Dealers can release foreign exchange up to USD 25,000 for a business trip to
any country other than Nepal and Bhutan. Release of foreign exchange exceeding USD
25,000 for a travel abroad (other than Nepal and Bhutan) for business purposes,
irrespective of period of stay, requires prior permission from Reserve Bank. Visits in
connection with attending of an international conference, seminar, specialised training,
study tour, apprentice training, etc., are treated as business visits. Maintenance expense of
a patient going abroad for medical treatment and/or check up or for accompanying as
assistant to the patient going abroad for medical treatment / check-up also falls within this
category. Incidentally, no release of foreign exchange is admissible for any kind of travel
to Nepal and Bhutan or for any transaction with persons resident in Nepal and Bhutan.
Obtaining of foreign exchange for medical treatment outside India
Authorised Dealers may release foreign exchange upto USD 100,000 or its equivalent to
resident Indians for medical treatment abroad on self declaration basis of essential details,
without insisting on any estimate from a hospital/doctor in India/abroad. A person visiting
abroad for medical treatment can obtain foreign exchange exceeding the above limit,
provided the request is supported by an estimate from a hospital/doctor in India/abroad.
This exchange is to meet the expenses involved in treatment.
Exchange is available for studies outside India
ADs may release an amount of USD 100,000 per academic year or the estimate received
from the institution abroad, whichever is higher.
Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are
eligible for all the facilities available to NRIs under FEMA. In addition, they can receive
remittances up to USD 100,000 from close relatives (as defined in Section 6 of the
Companies Act, 1956) from India on self-declaration, towards maintenance, which could
include remittances towards their studies also. Educational and other loans availed of by
students as resident in India can be allowed to continue. There is no dilution in the
existing remittance facilities to students in regard to their academic pursuits.
Foreign exchange one can buy when traveling abroad on private visits to a country
outside India
In connection with private visits abroad, viz., for tourism purposes, etc., foreign exchange
up to USD10,000, in any financial year may be obtained from an authorised dealer on a
self-declaration basis. The ceiling of USD10,000 is applicable in aggregate and foreign
exchange may be obtained for one or more than one visit provided the aggregate foreign
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exchange availed of in one financial year does not exceed the prescribed ceiling of
USD10,000 {The facility was earlier called B.T.Q or F.T.S.}. This limit of USD10,000
per financial year can be availed of by a person along with foreign exchange for travel
abroad for any purpose, including for employment or immigration or studies. However,
no foreign exchange is available for visit to Nepal and/or Bhutan for any purpose.
Foreign exchange is available to a person going abroad on employment
Person going abroad for employment can draw foreign exchange up-to USD100,000 from
any authorised dealer in India on the basis of self-declaration.
Foreign exchange is available to a person going abroad on emigration
Person going abroad on emigration can draw foreign exchange upto USD100,000 on selfdeclaration basis from an authorised dealer in India or the amount prescribed by the
country of emigration. This amount is only to meet the incidental expenses in the country
of emigration. No amount of foreign exchange can be remitted outside India to become
eligible or for earning points or credits for immigration. All such remittances require prior
permission of the Reserve Bank.
Category of visit, which requires prior approval from the Reserve Bank or Govt. of
India
Dance troupes, artistes, etc., who wish to undertake cultural tours abroad, are required to
obtain prior approval from the Ministry of Human Resources Development, Government
of India, New Delhi.
Foreign exchange can be purchased in foreign currency notes while buying
exchange for travel abroad
Travellers are allowed to purchase foreign currency notes/coins only up to USD 2000.
Balance amount can be taken in the form of travellers cheque or bankers draft.
Exceptions to this are (a) travellers proceeding to Iraq and Libya can draw foreign
exchange in the form of foreign currency notes and coins not exceeding USD 5000 or its
equivalent; (b) travellers proceeding to the Islamic Republic of Iran, Russian Federation
and other Republics of Commonwealth of Independent States can draw entire foreign
exchange released in the form of foreign currency notes or coins.
Rules apply to persons going for studies abroad
For the purpose of studies abroad, exchange for maintenance expenses is released in the
form of (i) currency notes up to USD 2,000, (ii) the balance foreign exchange may be
taken in the form of travelers cheques or bank draft payable overseas.
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Advance one can buy foreign exchange for travel abroad
The foreign exchange acquired for any purpose has to be used within 60 days of
purchase. In case it is not possible to use the foreign exchange within the period of 60
days, it should be surrendered to an authorised dealer.
One can pay by cash full rupee equivalent of foreign exchange being purchased for
travel abroad
Foreign exchange for travel abroad can be purchased from authorized banks against rupee
payment in cash up to Rs.50,000/-. However, if the rupee equivalent exceeds Rs.50,000/-,
the entire payment should be made by way of a crossed cheque/bankers cheque/pay
order/demand draft only.
Time frame for a traveller for surrender of foreign exchange on his return to India
On his return to India, the traveller is required to surrender the unspent foreign exchange,
whether in the form of currency notes or travellers cheques, within 180 days from the
date of return. However, a traveller can retain up to USD 2000 or its equivalent, either in
the form of currency notes or travellers cheques, for future use. Further, the traveller also
has the facility of retaining the entire unspent foreign exchange in his Resident Foreign
Currency (Domestic) Account.
On return to India one should retain foreign exchange
Yes. Resident travellers, on return to India, can retain unspent foreign exchange up to
USD 2,000 or its equivalent, either in the form of currency notes or travellers cheques.
The traveller can also credit the foreign currency amount to their RFC (Domestic)
Account, without any limit, where the foreign exchange has been acquired by the
traveller by any of the following modes :
a. while on a visit abroad as payment for services not arising from any business in or
anything done in India; or
b. as honorarium or gift or for services rendered or in settlement of any lawful obligation
from any person who is not resident in India and who is on a visit to India; or
c. as honorarium or gift while on a visit to any place outside India; or
d. from an authorised person for travel abroad and represents the unspent amount thereof.
Required to surrender foreign coins also to an authorised dealer

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There is no restriction on residents holding foreign coins.
Foreign exchange, a resident individual send as gift / donation to a person resident
outside India
Limit of USD 200,000 per financial year under the Liberalized Remittance Scheme
would also include remittances towards gift and donation by a resident individual.
Accordingly, under the Scheme, any resident individual, if he so desires, may remit the
entire limit of USD 200,000 in one financial year as gift to a person residing outside India
or as donation to a charitable/educational/ religious/cultural organization outside India.
Remittances exceeding the limit will require prior permission from the Reserve Bank.
Other residents send as gift / donation to a person resident outside India
Other residents like corporates, partnership firms, trusts etc., are free to remit up to USD
5000 per annum per donor/remitter each as gift and donation. Remittances exceeding the
limit will require prior permission from the Reserve Bank.
One is permitted to use International Credit Card (ICC) for undertaking foreign
exchange transactions
Use of the International Credit Cards (ICCs) / ATMs/ Debit Cards can be made for
making personal payments like subscription to foreign journals, internet subscription,
etc., and for travel abroad in connection with various purposes. The entitlement of foreign
exchange on International Credit Cards (ICCs) is limited by the credit limit fixed by the
card issuing authority only. With ICCs one can (i) meet expenses/make purchases while
abroad (ii) make payments in foreign exchange for purchase of books and other items
through internet in India. If the person has a foreign currency account in India or with a
bank overseas, he/she can even obtain ICCs of overseas banks and reputed agencies.
Use of these instruments for payment in foreign exchange in Nepal and Bhutan is not
permitted.
While coming into India how much Indian currency can be brought in?
A person coming into India from abroad can bring in with him Indian currency notes
within the limits given below:
a. up to Rs. 5,000 from any country other than Nepal or Bhutan, and
b. any amount in denomination not exceeding Rs.100 from Nepal or Bhutan.
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While going abroad how much foreign exchange, in cash, can a person carry?
Residents are free to carry the foreign exchange purchased from an authorised dealer or
full fledged money changer in accordance with the Rules. They are, however, allowed to
carry foreign exchange in the form of currency notes/coins up to USD 2,000 or its
equivalent only. Balance amount can be carried in the form of travellers cheque or
banker/s draft.
While going abroad how much Indian currency, in cash, can a person carry?
Residents are free to take outside India (other than to Nepal and Bhutan) currency notes
of Government of India and Reserve Bank of India notes up to an amount not exceeding
Rs. 5,000/ - per person. They may take or send outside India (other than to Nepal and
Bhutan) commemorative coins not exceeding two coins each.
Explanation : 'Commemorative Coin' includes coin issued by Government of India Mint
to commemorate any specific occasion or event and expressed in Indian currency.
A person can take or send out of India to Nepal or Bhutan, currency notes of Government
of India and Reserve Bank of India notes (other than notes of denominations of above Rs.
100);
While coming into India how much foreign exchange can be brought in?
A person coming into India from abroad can bring with him foreign exchange without
any limit. However, if the aggregate value of the foreign exchange in the form of
currency notes, bank notes or travellers cheques brought in exceeds USD 10,000/- or its
equivalent and/or the value of foreign currency exceeds USD 5,000/- or its equivalent, it
should be declared to the Customs Authorities at the Airport in the Currency Declaration
Form (CDF), on arrival in India.
One is required to follow complete export procedure when a gift parcel is sent
outside India
A person resident in India is free to send (export) any gift article of value not exceeding
Rs. 5,00,000 provided export of that item is not prohibited under the extant Foreign Trade
Policy.
Jewellery one can carry while going abroad
Taking personal jewellery out of India is governed by Baggage Rules framed under
Foreign Trade Policy by the Government of India. No approval of Reserve Bank is
required in this case.
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A resident can extend local hospitality to a non-resident

A person resident in India is free to make any payment in Indian Rupees towards meeting
expenses on account of boarding, lodging and services related thereto or travel to and
from and within India of a person resident outside India who is on a visit to India.
Residents can purchase air tickets in India for their travel not touching India
Residents may book their tickets in India for their visit to any third country. That is,
residents can book their tickets for travel, for instance from London to New York,
through domestic/foreign airlines in India itself.
A resident can open a foreign currency denominated account in India
Persons resident in India are permitted to maintain foreign currency accounts in India
under the following three Schemes:
a. Exchange Earners' Foreign Currency (EEFC) Accounts:All categories of resident foreign exchange earners can credit up to 100 per cent of their
foreign exchange earnings, as specified in the paragraph 1 (A) of the Schedule to
Notification No.FEMA.10/2000-RB dated 3rd May, 2000 and as amended from time to
time, to their EEFC Account with an authorised dealer in India. Funds held in EEFC
account can be utilised for all permissible current account transactions and also for
approved capital account transactions as specified by the extant Rules/Regulations/
Notifications/ Directives issued by the Government/RBI from time to time.
b. Resident Foreign Currency (RFC) Accounts :Returning Indians, i.e., those Indians, who were non-residents earlier, and are returning
now for permanent stay, are permitted to open, hold and maintain with an authorised
dealer in India a Resident Foreign Currency (RFC) Account to keep their foreign
currency assets. Assets held outside India at the time of return can be credited to such
accounts. The foreign exchange (i) received or acquired as gift or inheritance from a
person referred to sub-section (4) of section 6 of FEMA,1999 or (ii) referred to in clause
(c) of section 9 of the Act or acquired as gift or inheritance therefrom may also be
credited to this account or (iii) received as the proceeds of life insurance policy
claims/maturity/ surrender values settled in foreign currency from an insurance company
in India permitted to undertake life insurance business by the Insurance Regulatory and
Development Authority.
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The funds in RFC account are free from all restrictions regarding utilisation of foreign
currency balances including any restriction on investment outside India.
c. RFC (Domestic) Account:A person resident in India can open, hold and maintain with an authorized dealer in India,
a Resident Foreign Currency (Domestic) Account, out of foreign exchange acquired in
the form of currency notes, Bank notes and travellers cheques from any of the sources
like, payment for services rendered abroad, as honorarium, gift, services rendered or in
settlement of any lawful obligation from any person not resident in India. The account
may also be credited with/opened out of foreign exchange earned like proceeds of export
of goods and/or services, royalty, honorarium, etc., and/or gifts received from close
relatives (as defined in the Companies Act) and repatriated to India through normal
banking channels by resident individuals. The account shall be maintained in the form of
Current Account and shall not bear any interest. There is no ceiling on the balances in the
account.
A person can resident in India hold assets outside India
In terms of sub-section 4, of Section (6) of the Foreign Exchange Management Act, 1999,
a person resident in India is free to hold, own, transfer or invest in foreign currency,
foreign security or any immovable property situated outside India if such currency,
security or property was acquired, held or owned by such person when he was resident
outside India or inherited from a person who was resident outside India.
II. Liberalised Remittance Scheme of USD 200,000
This is a facility extended to all resident individuals under which, they may freely remit
upto USD 200,000 per fianancial year for any permissible current or capital account
transaction or a combination of both.
Eligibility to avail of this Liberalised Remittance Facility?
The facility is available to resident individuals only.
Frequency for the remittance
There is no restriction on the frequency. However, the total amount of foreign exchange
purchased from or remitted through, all sources in India during the current financial year
should be within the limit of USD 200,000/-.
The purpose/s for which remittance can be made under the Scheme
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This facility is available for making remittance/s for any permissible current or capital
account transaction or a combination of both. It is not available for purposes specifically
prohibited (Schedule I) or regulated by the Government of India (Schedule II) of Foreign
Exchange Management (Current Account Transactions) Rules, 2000.
Residents can avail of this facility for acquiring immovable property and other
assets abroad
Yes. Individuals are free to use this Scheme to acquire and hold immovable property,
shares or any other asset outside India without prior approval of Reserve Bank.
Individuals can open foreign currency account abroad for making remittance under
the Scheme
Yes. Individuals are free to open, hold and maintain foreign currency accounts with a
bank outside India for making remittances under the Scheme without the prior approval
of Reserve Bank. The account can be used for putting through any transaction connected
with or arising from remittances under the Scheme.
The impact of the Scheme on the existing facilities for private/business travel,
studies, medical treatment etc./items covered in Schedule III of Foreign Exchange
Management (Current Account Transactions) Rules, 2000
The facility under the Scheme is in addition to those already available under Foreign
Exchange Management (Current Account Transactions) Rules, 2000.
An individual send remittance under the Scheme to any country
Remittance cannot be made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan.
The facility is also not available for making remittances directly or indirectly to countries
identified by the Financial Action Task Force (FATF) as non-co-operative Countries or
Territories, from time to time.
Further, remittance under the facility cannot be made to individuals and entities identified
as posing significant risk or committing acts of terrorism as advised to banks by Reserve
Bank from time to time.
The requirements to be complied with by the remitter
The individual will have to designate a branch of an AD through which all the
remittances under the Scheme will be made. The applicants should have maintained the
bank account with the bank for a minimum period of one year prior to the remittance. He
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has to furnish an application-cum-declaration in the specified format regarding the
purpose of the remittance and declare that the funds belong to him and will not be used
for purposes prohibited or regulated under the Scheme.
If an investment of USD 200,000 rises in value within the year, can one book profits
and invest abroad again?
The investor is free to book profit or loss abroad and to invest abroad again. He is under
no obligation to repatriate the funds remitted abroad.
An individual, can who has repatriated the amount remitted during the financial
year, avail of the facility once again
Once a remittance is made for an amount upto USD 200,000 during the financial year, he
would not be eligible to make any further remittances under this route, even if the
proceeds of the investments have been brought back into the country.
Remittances are made only in US Dollars
The remittances can be in any currency equivalent to USD 200,000 in a financial year.
Last year, resident individuals could invest in overseas companies listed on a
recognised stock exchange abroad and which has the shareholding of at least 10 per
cent in an Indian company listed on a recognised stock exchange in India. Does this
condition still exist?
Investment by resident individual in overseas companies is subsumed under the Scheme
of USD 200,000. The requirement of 10 per cent reciprocal shareholding in the listed
Indian companies by such overseas companies has since been dispensed with.
III. Guidelines for Financial Intermediaries offering special schemes, protection
under the Scheme.
Intermediaries are expected to seek specific approval for making overseas
investments available to clients
Banks including those not having operational presence in India are required to obtain
prior approval from Reserve Bank for soliciting deposits for their foreign/overseas
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branches or for acting as agents for overseas mutual funds or any other foreign financial
services company.
There are any restrictions on the kind/quality of debt or equity instruments an
individual can invest in
No ratings or guidelines have been prescribed under the Liberalized Remittance
Scheme of USD 200,000 on the quality of the investment an individual can make.
However, the individual investor is expected to exercise due diligence while taking a
decision regarding the investments which he or she proposes to make.
Minor resident individuals would be permitted to open, maintain and hold such
foreign currency accounts, if the same is permissible as per local law in the country
of the overseas branch
Banks may take necessary steps in the matter based on the settled legal position regarding
enforcement of the declaration in case the remittance is made on behalf of a minor.
Credit facilities in Indian Rupees or foreign currency would be permissible against
security of such deposits
No. The Scheme does not envisage extension of credit facility against the security of the
deposits.
Can bankers open foreign currency accounts in India for residents under the
Scheme?
No. Banks in India can not open foreign currency accounts in India for residents under
the Scheme.
Can an Offshore Banking Unit (OBU) in India be treated on par with a branch of
the bank outside India for the purpose of opening of foreign currency accounts by
residents under the Scheme?
No. For the purpose of the Scheme, an OBU in India is not treated as an overseas branch
of a bank in India.
General Information
For further details/guidance, please approach any bank authorised to deal in foreign
exchange or contact Regional Offices of the Foreign Exchange Department of the
Reserve Bank.
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Exchange Earner's Foreign Currency (EEFC) Account

An EEFC Account
Exchange Earners' Foreign Currency Account (EEFC) is an account maintained in
foreign currency with an Authorised Dealer, i.e a bank dealing in foreign exchange.
The account is a Non-interest bearing current account.
A person resident in India may open the account.
One can credit 100 percent of his foreign exchange earnings into this account
subject to permissible credits and debits.
The permissible credits into this account

o Inward remittance through normal banking channel, other than
remittances received on account of foreign currency loan or
investment received from abroad or received for meeting specific
obligations by the account holder.
o ii )Payments received in foreign exchange by a 100 per cent Export
Oriented Unit or a unit in (a) Export Processing Zone or (b) Software
Technology Park or (c) Electronic Hardware Technology Park for
supply of goods to similar such unit or to a unit in Domestic Tariff
Area.
o Payments received in foreign exchange by a unit in Domestic tariff
Area for supply of goods to a unit in Special Economic Zone (SEZ);
o Payment received by an exporter from an account maintained with an
authorised dealer for the purpose of counter trade. (Counter trade is an
arrangement involving adjustment of value of goods imported into
India against value of goods exported from India in terms of Reserve
Bank guidelines);
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o Advance remittance received by an exporter towards export of goods
or services;
o Payment received for export of goods and services from India, out of
funds representing repayment of State Credit in U.S. dollar held in the
account of Bank for Foreign Economic Affairs, Moscow, with an
authorised dealer in India,
o Professional earnings including directors fees, consultancy fees,

lecture fees, honorarium and similar other earnings received by a
professional by rendering services in his individual capacity.
o Interest earned, if any, on the funds held in the account;
o Re-credit of unutilised foreign currency earlier withdrawn from the
account;
o Amount representing repayment by the account holder's importer
customer, of loan/advances granted, by the exporter holding such
account.
Foreign exchange earnings received through an international credit card for which
reimbursement are provided in foreign exchange may be regarded as a remittance
through normal banking channels and can be credited to the EEFC account.
The permissible debits into this account

o Payment outside India towards a permissible current account
transaction [in accordance to the provisions of the Foreign Exchange
Management (Current Account Transactions) Rules, 2000] and
permissible capital account transaction [in accordance to the Foreign
Exchange Management (Permissible Capital Account Transactions)
Regulations, 2000].
o
Payment in foreign exchange towards cost of goods purchased from a

100 percent Export Oriented Unit or a Unit in (a) Export Processing
Zone or (b) Software Technology Park or (c) Electronic Hardware
Technology Park and payment of customs duty in accordance with the
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provisions of the Foreign Trade Policy of Central Government for the

time being in force.
Trade related loans/advances, by an exporter holding such account to
his importer customer outside India, subject to compliance with the
Foreign Exchange Management (Borrowing and Lending in Foreign
Exchange) Regulations, 2000.
Payment in foreign exchange to a person resident in India for supply of
goods/services including payments for airfare and hotel expenditure.
There is no restriction on withdrawal in rupees of funds held in an EEFC account.

However, the amount withdrawn in rupees shall not be eligible for conversion into
foreign currency and for re-credit to the account.
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Minimization of Forex Exposure techniques uses in Hubli Forex Cell
Exporters Credit Guarantee Corporation (ECGC)
This is the Government owned corporation. This company gives insurance not
only to banks but also to the exporters and importers. And it also gives the
guarantee towards the opposite party i.e., customer of domestic party.
If exporter or importer cheats in their business, then Banks will take the
responsible all those losses. For this purpose only Government has established
this ECGC to minimize the risk or losses to banks. So if something happens then
banks straightly approach this ECGC to refund or reimburse its losses.
Banned / Caution List by Government
Every year Government makes 2 type of list. One is related to company and
another one is about country. In that it makes 2 categories, one is banning
category and another one is caution category.
If any exporter or importer wants to trade with any country / company, which is
banned by Government at that time banks will not act as a mediator between these
two parties.
Suppose any company / country in the list of caution. Then bank may advice to
its customers to take the permission from government or RBI. Then only banks
are ready to act as a mediator between both parties.
Don &Break Agency
This is international Agency situated in Russia. This is nothing but Credit Rating
Agency. If any customer comes to trade with any country which is not banned /
cautioned by Government but bank is having some fear of cheat. Then for safety
purpose banks approaches this Agency called D&B Agency.
This agency studies the pros and cons in details about all aspects of that country /
company. And submit the report to particular bank. For this purpose Agency
takes some commissions, paid by banks only. Prevention Better than Cure
theory they are adopting to minimize the exposure.
Square of the position
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Banks not kept themselves any amount or transaction at the end of the day. Every
day they square of their positions. So by this they do not have any exchange rate
exposure. For only working capital requirement they have some foreign currency
with them, this is very minor not much affective with exchange rate exposure.
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Other Activities in Hubli Forex Cell
Report
They prepare 2 types of reports. One is to RBI and another one is to FDs.
Submission of Report to RBI: RBI made a Form called R-Return Form. This form is
concern with outflows and inflows of Rupee and Net. If any deposits made by particular
cell in any banks and minimum deposit maintained by this particular cell with RBI. All
such informations are involved in this R-Return Form.
This report includes only in value terms not the Number of Transactions. As per
RBI guidelines Hubli forex cell makes this report with different currencies whatever they
have transacted in a particular period. In the sense they make report of dollar, pound,
yen, euro and any currency they have transacted in terms of value. And they make it as
one and convert it in rupee terms and submit it to RBI.
This report should prepare for every fortnight i.e., every 15 th and 30th / 31st as the
case may be of every month. And for this submission purpose, RBI has made relaxation
period as up to 5 days after that specified dates. If banks fail to do so they have to pay
penalty to RBI, each day, after that grace period.
Another report is submitted to its FD. Every quarterly they have to prepare this
report. Here they reports about the transaction held in that particular quarter in terms of
Number of transactions and value.
Peak Month
Peak month starts from November and grow fast in December month. Matures in
January to March months. Declines in April and ends with May month. Why?
First reason is RBI. Yes, RBI declares credit rating twice in a year. This peak is
nothing but comes in November month. Many foreigners are observing this credit policy
of RBI, after declaration of credit rate by RBI, accordingly they will ready to trade. So
these months are says to be peak months.
As we know, from June to September is a rain season. Because of this climatic
condition: transportation may delay, storage is main problem, high protection is require
for materials, so many exporters and importers are not ready to trade in these seasons.
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They are trade in other than these months. This also one reason, to say November to May
is the peak season for Hubli Forex Cell.
Profitable Customers
As already we know that for Hubli Forex Cell, they have 3 types of customers
viz., exporter, importer and remitters. Who are more the beneficial customers to Bank?
Importer takes the first place among all customers. Because here bank will get
more exchange rate spread. That is differences between buying and selling rates of
particular currency. Here bank and also government are not bothering about the importer.
Means they are not giving any privileges to importer for importing of materials. So here
banks may charge high exchange rates to importers. Whereas for exporters government
is providing some privileges, because of enjoying some privileges and encouraging the
exporters bank will minimize its profit in way of minimizing the spread rates. So by this
way importers are takes the first place to increase the profits of the banks.
Next place occupied by Remitters. Because these customers are visit the banks
only at once or twice not more than that. For this purpose banks are not viewing these
customers as lifetime customers. So banks will make much profit from exchange rate
spreads.
But exporters are not in the least place. But really these customers are beneficial
customers rather than profitable customers. Of course these customers are long-term
profitable customers.
So every customer is important for bank. Only for giving more privileges to
exporters they seems to be as least profitable customers otherwise they are also profitable
as well as beneficial customers.
SWIFT
Every bank is having Bank Identification Code. By entering this code only they
can operate and open the SWIFT system. SWIFT system is nothing but sending a
message to other bank situated in foreign countries.
If Hubli Forex Cell sends the messages then they immediately receive an
acknowledgement in printed format. If Hubli Forex Cell received any messages from
other banks then they have a set of words like RCVD, means received.
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This system is already programmed by giving some codes we can operate it. Like
700 code for L/c, 707 is for Opening of L/c, 707 is for Amendment of L/c, 103
for Receiving / Paying of Amount, 100series for Remittance operated by Single to
Single Person, 400 Series for Exporting transaction.
If bank specify the specific code, then related blank boxes come on the screen.
These boxes are filled by operator, who is a banker and these boxes are changes
according to codes given by banks for specific purposes.
Sometimes SWIFT is also uses for non-financial purpose. Like opening of L/c
and amendment of L/c etc., here we cannot find out any financial transaction. So this is
nothing but sending the message to other banks through Internet media.
Mainly in this format we observe Code Number, Senders Name, Receivers
Name, Date, Currency, Amount etc., This SWIFT mechanism is same all over the world.
So by this we cannot have a Rupee V/s other currency exchange rates. This is used for
only sending the messages.
Rate Mechanism:
From Mumbai FD only they get the exchange rates of all currencies with cross
currency exchange rates.
Mumbai Internal Forex Department sends exchange rates to all its branches and
cells. This rate is driven by again market Demand & supply. But also some persons of
Canara Bank International Department decide the final exchange rates for their bank.
By this only all branches and cells will get the information about the rates. So it is online
connection from International Department to all its branches and cells.
Here we can see two rates, one is Buying Rate and another one is Selling Rate. If
any customer wants to convert his Dollar into Rupee, then bank goes to the buy option
and buy the dollar and sell the rupee.
Here banks should give the type of transaction. Means whether this transaction is
for remittance purpose or is it for TT or Cheque, or L/c etc., After doing all these things
Hubli Forex cell submit report to their International Branch.
Sometimes this Hubli Forex cell chats with its International Division. If customer
is a lifetime customer, then Hubli cell chats with its International Division to reduce or to
increase the exchange rate in the benefit of customer. In other words, this cell requests to
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International Division for changing the exchange rates in the beneficial of customers. So
for this purpose only they use this Chatting option.
Doing all these transaction is nothing but indirectly sending the report to its
International Forex Department. So for this purpose now Hubli Forex Cell is having
special computer. Recently, in October it was started its operation through this special
computer. By this they can send and receive the message very fast and easily.
TRADING FIRMS
We just only saw how Canara Bank is operating its Forex transactions? When we
come to North Karnataka, the awareness of Forex Market is very less (Refer
Bibliography). It means, here individually people are do not have their account in Forex
Market. Means, they not ready to purchase or sell dollars or any other currencies directly.
They purchase for specific purpose like Remittance, but not for trading.
By seeing all those things, here we have gone for some companies which are there
in this type of business. Foreign currencies transaction will be made by those companies
which are there in the business of import or export.
Yes, of course, now it is time to understand why so many exports oriented
companies are closing. Especially SSI units are in more loss, because they do not have
that much of capacity to pick up its forex losses. It means, now dollar is depreciating and
Rupee is Appreciating, by this now exporters are getting less income in terms of Rupee.
So they are hesitating to sell their goods in dollar terms. But they do not have any other
option of currency to sell their goods, and also they do not have that much of knowledge
to hedge the dollar and minimize the risk. For all these reasons so many SSIs are closing
their units. Is it same situation in Hubli also?
Banks are now hesitating to make any hedge options to their customers, because;
now so many companies are making losses in derivative transactions. Companies are do
not know the concept of Mark to Market and hedging in different currencies i.e. other
than domestic currency. So companies are now making losses and they are not ready to
accept those losses. So they are now approaching Courts to reimburse their losses by
banks. Now banks are in trouble to step ahead. So it is the time to ask some customers
of banks that, is it same happing in your business also, if yes, then whom you blame? So
let us see what is the present scenario in Hubli?
In Hubli import and exporting companies are there. Here we have taken only ten
companies as sample among all those export/import companies situated in Hubli.
Because, here we would like to know that, whether exposure is there in Forex Market?
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And how they mitigate that risk? For this purpose we want only samples rather than
whole population.
Yes, it is enough for us to take only ten samples. In these samples we have taken
very small business units to large units. Different types of business having different type
of risks in their forex business, to understand some different types we have taken only ten
as a sample. By this only we can come to conclusion to whether risks are there? And
how they mitigate and where they are lacking? For all these we have made questions.
We have made questionnaire to get the accurate answers. Please refer Annexurefor pattern of questionnaire. By this we have surveyed ten companies, and their
responses we will see now:
SUPRIYA PROTOTECH
C-43, Industrial Estate, Gokul Road, Hubli - 580030, Karnataka, India
Phone:91-836-2212416
Fax:91-836-2333641
Profile
Exporter
Products
Quarter Turn Gear Actuator, Multi Turn Gear Actuator,

Rotary Limit Switch Box, Graphite Seals, Pneumatic Gear
Actuator.
Currency
USD (Usually)
Mode of Payment
Letter of Credit
Risks involved in Forex Market:

Translation Risk
Currency
Risk
Barriers
(If branch is situated in other country/ies)
More Competition
Yes, More
Not having any branches

Lack of Knowledge
Minimization techniques for exposure involved in Forex Market:
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Translation Risk
Currency
Risk
Banks will
do
Barriers
Some permanent
Customers
Appointment of
Knowledgeable persons
Privileges enjoying
Tax reduction
Service Expecting from Bank
Nothing
N-26, Industrial Estate, Gokul Road Hubli 580030, Karnataka.

Tel: 91-836-333759 Fax: --
Profile
Importer
Products
Gear Boxes, Bearings, Chains
Currency
USD (Usually), Yen, Singapore Dollar
Mode of Payment
Letter of Credit
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Translation Risk
Currency
Risk
Yes, Little
More
Barriers
Lack of Knowledge

Translation Risk
Currency
Risk
Everything
Bank will do
Barriers
Need some training,

Seminars and Govt. help
Privileges enjoying
Tax reduction
Nothing
Extra things
1) They are in Export business, so there are

some concision for importing some
materials.
2) Risk arises due to New Customer.
FORM MBA FINANCE
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Profile
Exporter
Products
Chip Conveyor, Coolant Filters, Filter Papers, Oil

Skimmers, Paper Band Filter.
Currency
USD (Usually)
Mode of Payment
Letter of Credit

Translation Risk
Currency
Risk
Barriers
More Competition
Yes, Little
More

Lack of Knowledge

Translation Risk
Currency
Risk
Banks will
do
Barriers
Some permanent
Customers
Privileges enjoying
Tax reduction
Detail about forex market
FORM MBA FINANCE
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Shakti Group of Companies, R.M. Joshi Building, 2nd Floor,-43, Industrial Estate, Lamington Road, Hubli - 580020,
Karnataka, India
Phone: 91-836-2356582
Fax: 91-836-2356586
Profile
Exporter
Products
Animal Feeds Manufacturing,

International Trading.
Currency
USD (Usually)
Mode of Payment
Letter of Credit
Textile
Trading
&

Translation Risk
Currency
Risk
Yes, More
Barriers
More Competition

Translation Risk
Currency
Risk
Banks will
do
Barriers
Appointment of
FORM MBA FINANCE
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Privileges enjoying
Tax reduction
SWASTIK WIRE INDUSTRIES

M4 Industrial Estate,, Gokul Road,
HUBLI - 580030
(Karnataka) India
Office: +91 836 2331243, Fax: +91 836 2331780
Profile
Exporter
Products
Bare, paper covered, nomex covered, cotton covered

insulated winding copper and aluminum conductors wires
and strips.
Currency
USD (Usually)
Mode of Payment
Letter of Credit

Translation Risk
Currency
Risk
Barriers
More Competition
Yes, More

Lack of Knowledge

Translation Risk
Currency
Risk
Barriers
FORM MBA FINANCE
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Banks will
do
Some permanent
Customers
Appointment of
Privileges enjoying
Tax reduction
INTERNATIONAL SALES OFFICES

BDK Process Equipment Inc.
BDK Process Equipment Inc.
47/48, Gokul Road,
Shiv Sagar Estate "A" Block,
Hubli - 580 030,
Dr. Annie Besant Road, Worli,
Karnataka - India
Mumbai - 400 018 - India
Phone: +91-836-2331499 / 2333930
Phone : +91-22-2492 5319 / 2492 7671
Fax: +91-836-2330799 / 2330899
Fax : +91-22-24950580
Email : bdkhubli@bdkindia.com
Email : bdkmumbai@bdkindia.com
Profile
Exporter
Products
Valves, Pumps and other chemical industry products for all

process handling needs.
Currency
USD, Euro, Pond.
Mode of Payment
Letter of Credit

Translation Risk
Currency
Risk
Yes, More
Barriers
More Competition
FORM MBA FINANCE
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Translation Risk
Currency Risk
Barriers
(If branch is situated in other
country/ies)
We have Skilled
employees and
Diversification
of Currency
Different types of
Customers
Privileges enjoying
Tax reduction
Some seminars from Banks.
Why USD only?

Although the Indian rupee-US dollar exchange rate has a significant impact on the Indian
economy and business sector, the rupee has also appreciated against other currencies as
well. In January-July 2007, the rupee's value in terms of Pounds, Euros and Yen rose by
8%, 6.9% and 11.2%, respectively. According to the Reserve Bank of India (RBI) during
2005-06, 86% of Indian exports and 89% of imports were invoiced in US dollars. The
Euro was a distant second, with shares of 8% in exports and 7% in imports.
Is Dollar depreciating recent trend in India?
The recent strengthening of the rupee is a dramatic departure from the past trends. The
currency depreciated steadily for a decade after being floated in 1993, dropping from an
average annual rate of Rs. 31.37: US $1 in the 1993-94 fiscal year (April-March) to Rs.
48.40: US $1 in 2002-03 (an average annual depreciation of nearly 5%). Between 200304 and 2005-06, however, the rupee appreciated against the dollar by 3% an on
average a yearalthough there was considerable two-way movement of the rupee
from month to month. The trend of steady month-on-month appreciation began in
September 2006 and has been continuous since then.
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How to forecast the future prices? What are the techniques practically banks and
companies are using? The answer for second one is No! In Hubli city almost all banks
and companies are not using any techniques to forecast the exchange rates.
Then we will see some techniques and tools to forecast the future exchange rates.
For forecasting the future rates banks and companies can minimize their risk situated in
forex market. If we know what will be happen in near future then it is good for them to
hedge their currencies and accordingly they can easily trade and earn some profit,
minimize the risk. There are two methods:
1. Technical Analysis
2. Fundamental Analysis
TECHNICAL ANALYSIS
Trend Lines
1.
Upward Trend Line:
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2.
Downward Trend Line:
3.
Sideways Trend Line:
Support Level:
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Here both dark lines are showing support level. In a bull run support level was
nearly Rs.44/$, where after finishing of downward trend support level become Rs.39/$.
Resistance Level:
The First Resistance Level was situated nearly at Rs.47/$. And support level was
situated at Rs. 44/$. See it carefully, after the March 2007 this support level become a
highest resistance level. When dollar appreciates more than the said resistance level then
again it becomes a support level and new resistance level will be created. But here, dollar
was depreciated so the new resistance level was created below that old resistance level.
That old resistance level is a largest one, but for time being i.e., for short time period we
can consider Rs.42/$ is a new resistance level.
Head and Shoulder:
Head
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Shoulder
Triple Top Pattern:
Here we easily can see the triple pattern between INR/USD on 7/2/06 it was at
Rs.44.26/$ and went down to Rs.44.21/$ and again it goes up to the same level
Rs.44.26/$ and again went down. At the third time it reached Rs.44.26/$ and crossed it.
Whenever it crosses that resistance level of triple top then it is guarantee that it will goes
to 100% more than resistance of the top. Here Rs.44.26/$ is a resistance its 100% is
Rs.44.46/$. Exactly it went up to Rs.44.46/$.
Elliott Wave Theory:
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Here 1st wave starts from Rs.39.66/$ and ends with Rs.40.15/$ and from there 2 nd
wave starts. As per condition always 3rd wave should be more than 1st wave. Here the
condition is same 3rd wave is highest peak than 1st wave. And at the end 5th wave it stops
and after wards bears market starts. If we consider next to 5th wave is 1st wave in bear
trend, 2nd wave is very small and 3rd will be more than 1st wave. So it indicates that in
near future Rupee may appreciates in short term future.
Moving Average:
Simple Moving Average:

The pink line in the diagram shows that SMA. For calculation of SMA, here we have
taken 20 days as average. Why 20 days only? This is (20 days) to be a medium term
average. Short term may be 10 days and long term might be 30 days. So medieval of
these is 20 days so here we have taken 20 days as average.
Exponential Moving Average:
The yellow line shows EMA. For this also we have taken 20 days as average. Because
of its 20-period EMA it weights more recent price at 9.52%. As such, it will react quicker
to recent price changes than a SMA.
Moving Average Convergence-Divergence (MACD):
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It Indicates Selling Point

It Indicates Buying Point
In the above diagram it is clearly understood that, when to buy and when to sell?
Wherever EMA crosses the SMA line and goes down to SMA then it is the time to buy
the dollar or vice-versa (i.e. If EMA line crosses the SMA line and goes up then that is the
time to sell the dollar).
Green Circle shows that to buy the dollar, and please clearly observe there, where
EMA was below the line of SMA. First One, Red Circle shows that to sell the dollar, so
we can get more Indian Rupee Currency.
At the end we can conclude that in short run Rupee will slightly appreciates as
against Dollar, because high pressure or demand for INR to purchase as low cost. But this
is for only short run not for long run. For long run we should consider other tools.
And also we can analyze this only by seeing SMA. Yes, if SMA line cross and
goes upper level than closing price then that will be a selling point. Whereas, on other
hand, if SMA line comes below the actual price (i.e., closing price) then it indicates that
the buying point.
At the end we should see where the SMA line is situating. In this project SMA
line is situated slightly below the actual line (closing price). It indicates that, in short
term dollar will depreciates and INR will appreciates, and at the end this closing price
touches this SMA line. And where, we can buy the dollar.
There are other techniques to find out Purchase Point and Selling Point. It is very
popular called RSI. We will see that RSI in detail now,
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Relative Strength Index (RSI):
It Indicates Selling Point

It Indicates Buying Point
This RSI calculation also tells that when to buy and when to sell? The above diagram
clearly shows that if RSI points goes beyond 70 then that is the time to sell where prices
are very high. And in other hand if RSI points goes below 30 then that is the time to buy
the Dollar where it is very low cost. This buy and sell signals are shown in Green and
Red color respectively.
But the main limitation of this calculation is it does not forecast clearly. Only we can
assume that, Dollar will in near short feature appreciates.
When we compare RSI with MACD slightly difference we will find out in purchase and
selling time.
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FUNDAMENTAL ANALYSIS
From 2003-07 Indian market is booming in leaps & bounds, today after China India is 2nd
fastest growing economy of the world with a growth rate of 9.4% in the first quarter. Its
a trillion dollar country surpassed Russia & has become worlds 10 th largest economy,
today (till 30th march, 2007) Indian forex reserve is around $200 bn.
Now the hot bubble on the brink in every Indians mind is Rupee Appreciation. From
July,2006-May,2007, value of rupee has highly appreciated by 10.7% from Rs 46 to Rs
40.56. There is a big dilemma in everyone's mind, will the rupee appreciation adversely
effect our economic growth or is it an indicator of Indian growing economy?
Indian import & export growth rates in March & June 2007 were 34.8% & 18 %
respectively which reduced from April 2007 by 6% & 5% respectively.
According to an industry analyst - Every 10 paisa appreciation in rupee negates one
dollar upward movement in international prices
According to IOC managers statement: for every Rs1 appreciation crude oil price
dip by 2%
Major reasons of this bubble are:
Huge foreign Investment in our country
FIIs Inflow
ECB borrowings
Slowdown of US economy
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We will see one by one in detail:
Appreciation: Reasons
One striking feature of economic
presence. The total value of the takeover
billion in 2006. January 2007 alone saw
Steel/Corus. There have been 72 foreign
billion in the first four months of this year.
strength is that its reach in terms of global

deals by Indian companies was less than $1
two mega deals; Hindalco/Novelis and Tata
takeovers by Indian companies worth $24.4
Inflow of dollars
Foreign direct investment (FDI) in India almost trebled to $4.9 billion during the June
2007 quarter from a year earlier on the back of large deals by Vodafone and Matsushita
Electric. During January-June 2007, FDI inflows were $11.4 billion, more than three
times the $3.6 billion received a year earlier. FDI inflows were $15.7 billion for the fiscal
year that ended in March 2007, almost three times the level in 2005/06. The gross FII
investments in the country till June from the time they were allowed to invest in the India
equity markets stands at $53.06 billion.
NRI deposits
Indians settled in other countries have also been a major source of capital inflows, with
many non-resident Indians (NRIs) investing large amounts in special bank accounts.
While NRIs' emotional connection to their country of origin is part of the explanation for
this, the attractive interest rates offered on such deposits has also provided a powerful
incentive. In 2006-07, NRI deposits amounted to US $3.8bn, a 35% increase over the
previous year; the outstanding value of NRI deposits as of end-March 2007 was US
$39.5bn. Another large source of foreign-exchange inflows has been remittances from the
huge number of Indians working overseas temporarily. Such remittances amounted to a
colossal US $19.6bn in April-December 2006, a 15% year-on-year increase.
NRI deposits have increased from $17,156 million in 1995 to $39,624 million in 2007.
Investment highlights
Positive tidings about the Indian economy combined with a fast-growing market have
made India an attractive destination for foreign institutional investors (FIIs).
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The number of foreign institutional investors (FIIs) registered with the Securities
and Exchange Board of India (Sebi) has now increased to 1,042 in June 2007. In the
beginning of calendar year 2006, the figure was 813. Till May 2007, FIIs had pumped in
a hefty $6 billion in equities. Last year, during the same period, the FIIs exposure to
Indian equities was 25 per cent lower at $ 4.5 billion.
FIIs have raised their holding in 540 companies out of top 1,000 companies on the
Bombay Stock Exchange (BSE) during September-March (2006-07) period.
According to the data released by the Securities and Exchange Board of India
(SEBI), FIIs have invested Rs.61,234 crore (US $ 14.9 billion) in the Indian equity
market during 2007-08 so far (up to January 18, 2008) as compared with net purchases of
Rs.18,045 crore (US $ 3.9 billion) during the corresponding period of the previous year.
Mutual funds have made net investments of Rs. 9,788 crore during 2007-08 so far (up to
January 18, 2008) as compared with net investments of Rs.12,595 crore during the
corresponding period of last year.
Here we can observe that FIIs are more contribution that Domestic Mutual
Funds. If FII wants to invest in our domestic stock market, then they have purchase
stocks, here they not only purchasing stocks but also they purchasing our Rupee also. At
the end we would like to say here if Nifty goes up or down, how it affects to Exchange
rate? Because as already saw FIIs are major players in the stock market. Then how it
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affects to the Exchange rate? So for this we have taken correlation between Nifty Index
return and Exchange rate (INR/USD) return.
Correlation: -0.23742 or -23.742% (Negative Correlation)

It indicates that if Nifty goes up 100%, then Exchange rate comes down to 23%
only or vice-versa. It means, if Nifty goes up to 100% then Rupee will appreciates to
23% only, in the same way dollar will depreciates to 23% against Rupee.
It means Stock Market is not a full pledged player in Forex Market. If exchange
rate changes or fluctuates because of stock market, then the effects from stock market is
only 23% not more than that.
There are so many factors to affect the fluctuations in Forex Market. Of-course
nowadays Stock market is having major player (but not full pledged player) in Forex
Market.
External Commercial Borrowings (ECBs)

Indian companies have borrowed enormous amounts of money overseas to finance
investments and acquisitions at home and abroad. India's balance-of-payments (BoP) data
reveal that inflows through ECBs amounted to an enoromous US $12.1bn during AprilDecember 2006, a year-on-year jump of 33%. The flood of borrowed money is likely to
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grow in 2007. In the first three months of the year, Indian companies have notified the
RBI of their plans to raise nearly US $10bn in overseas debt markets.
Foreign Trade
After the liberalisation programme was launched the exports did leap at 20 per cent per
annum for many years from $45 billion at March 2002 to the current level of $126 Billion
as of March 2007.
Effect On Employment
Already various export promotion councils and business federations have drawn up plans
to counter the effect on competitiveness of Indian products.
It is already reported by the Confederation of Indian Textile industry that 579,000 jobs
could be lost in 2007-2008. This could include the direct loss as well loss in dependent
ancillaries.
Inflation in India
The rise in the value of rupee meant that inflation was curbed. The inflation rate in India
declined from 6.73 percent in February 2007 to 4.10 percent in August 2007. Now in end
of March 29th 2008 inflation rate went up to 7.41%.
Gross Domestic Product
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At the end of May 2007, the Central Statistical Organisation (CSO) released quarterly
real GDP growth estimates for January-March 2007 at 9.1 per cent as against 10.0 per
cent a year ago. Along with revisions for the preceding three quarters, real GDP growth in
2006-07 was raised to 9.4 per cent from 9.2 per cent in the CSOs February 2007 advance
estimates. In the revised estimates, real GDP originating in agriculture, industry and
services sectors increased by 2.7 per cent, 11.0 per cent and 11.0 per cent, respectively, in
2006-07 as against 6.0 per cent, 8.0 per cent and 10.3 per cent in 2005-06. Over the fouryear period starting in 2003-04 when the current expansionary phase began, real GDP
growth has averaged 8.6 per cent, up from 5.1 per cent in the preceding four years and
also above the average of 5.7 per cent achieved in the 1990s.
Interest Rates
Table 35 : Short-term Interest Rates
(Per cent)
Region/Country
End of
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March March June
2006
2007 2007
1
September
2007
December
2007
January
2008*
Advanced Economies
Euro Area
2.80
3.91
4.16
4.73
4.88
4.51
Japan
0.04
0.57
0.63
0.73
0.73
0.74
Sweden
1.99
3.21
3.42
3.54
4.02
4.02
UK
4.58
5.55
5.92
6.28
6.41
5.58
US
4.77
5.23
5.27
4.72
4.16
3.74
9.63
9.25
12.31
14.50
12.94
12.68 11.93
11.18
11.18
11.18
Emerging Market Economies

Argentina
9.63
Brazil
16.54
China
2.40
2.86
3.08
3.86
4.35
4.48
Hong Kong
4.47
4.17
4.43
4.97
3.73
3.12
India
6.11
7.98
7.39
7.19
7.35
7.10
Malaysia
3.51
3.64
3.62
3.62
3.62
3.62
Philippines
7.38
5.31
6.19
6.94
6.56
6.25
Singapore
3.44
3.00
2.55
2.56
2.56
1.75
South Korea
4.26
4.94
5.03
5.34
5.71
5.86
Thailand
5.10
4.45
3.75
3.55
3.90
3.55
*: As on January 16, 2008.

Note : Data for India refer to 91-day Treasury Bills rate and for other countries 3-month
money market rates.
Source : The Economist.
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Short-term interest rates in the US declined during the third quarter of 2007-08 reflecting
the monetary easing. Short-term interest rates in the EMEs witnessed a mixed trend,
firming up in Argentina, China, South Korea and Thailand, while softening in Hong
Kong and Philippines.
Other Major Currencies
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The exchange rate of the rupee was Rs.39.57 per US dollar as on January 23,
2008. At this level, the Indian rupee appreciated by 10.2 per cent over its level on March
31, 2007. Over the same period, the rupee appreciated by 10.5 per cent against the Pound
sterling, 0.4 per cent against the Euro and 3.1 per cent against the Chinese yuan, while
depreciated by 0.5 per cent against the Japanese yen
Conclusion:
Currencies
Rs in terms of USD
Rs in terms of Euro
Rs in terms of Yen
Rs in terms of Pound
Year (may, 2006)

46.2
59.05
41.1
86.55
Year (July, 2007)

41.05
55.35
33.20
82.20
Change %
11.12%
6.26%
19.22%
5.02%
According to the given above we can conclude that rupee is appreciating with all
currencies given above which reflects that Indian economy is doing very well, though it
carries with it certain demerits (mentioned above). But these demerits can be worked
upon and transformed into a blessing for the economy.
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The average daily turnover in the foreign exchange market increased to US $ 45.9
billion during April-November 2007 from US $ 23.8 billion in the corresponding period
of 2006. While inter-bank turnover increased to US $ 31.9 billion from US $ 17.2 billion,
the merchant turnover increased to US $ 14.0 billion from US $ 6.6 billion. The ratio of
inter-bank to merchant turnover was 2.4 during April-November 2007 as compared with
2.6 a year ago.
Let us now look at the pros and cons of a rising rupee.

Advantages of the rising rupee:
Foreign debt service: Appreciation of the rupee helps in easing the pressure,
related to foreign debt servicing (interest payments on debt raised in foreign
currency), on India and Indian companies.With Indian companies taking
advantage of the United States soft interest rate regime and raising foreign
currency loans, known as external commercial borrowings (ECBs), this is a
welcome phenomenon from the point of view of their interest commitments on
the loans raised. This will help them avoid taking a bigger hit on their bottomline, which is beneficial for its shareholders.
Outbound tourists/student bonanza: The appreciating rupee is a big positive for
tourists traveling or wanting to travel abroad. Considering that the rupee has
appreciated by over 10% against the US dollar since mid-2002, traveling to the
US is now cheaper by a similar quantum in rupee terms.The same applies to
students who are still in the process of finalizing their study plans abroad. For
example, a student's enrollment for a $1,000 course abroad would now cost only
Rs.44,000 instead of the earlier Rs 49,000!
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Government reserves: Considering that the government has been selling its stake
aggressively in major public sector units in the recent past, and with a substantial
chunk of this being subscribed by FIIs, the latter will have to invest more dollars
to pick up a stake in the company being divested, thus aiding the governments
build up of reserves.
Disadvantages of the rising rupee:
Exporters' disadvantage: The exporters are at a disadvantage owing to the

currency appreciation as this renders their produce expensive in the international
markets as compared to other competing nations whose currencies haven't
appreciated on a similar scale. This tends to take away a part of the advantage
from Indian companies, which they enjoy due to their cost competitiveness.
However, it must be noted that despite the sharp currency appreciation in recent
times, Indian exports have continued to grow. This is vindicated from the fact that
while in the month of February 2004, India's exports were higher by 35% over the
same month previous year, in the first 11 months of the current fiscal, Indian
exports have been higher by 15% year-on-year.
Dollar denominated earnings hurt: The strengthening rupee has an adverse impact on
various companies/sectors, which derive a substantial portion of their revenues from the
US markets (or in dollar denominations). Software and BPO are typical examples of the
sectors adversely impacted by the appreciation of rupee.
Looking Ahead:
However certain sections of the economy have welcomed the rupee appreciation. This is
because of the following key reasons:
Firstly, the IT industry which is strongly lobbying against the appreciation of the
INR should realize that its phenomenal growth during the last decade is partly
because of INR depreciation too. INR depreciated by almost 100% against the
USD from a level of 25 in 1992 to 48 in 2003. Further, Indian economy needs
development of infrastructure which warrants huge investments. A big chunk of
the said investments must come from overseas. The host country's currency, viz.,
INR, must appreciate to instill confidence into overseas investors.
Secondly INR appreciation is welcomed by those companies with overseas
borrowings. Significant levels of foreign currency denominated, especially
USD-denominated loans generate forex gains because of reduced interest payout
occasioned by the rising INR. Companies like Ranbaxy and L&T have been able
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to generate forex gains in the last quarter because they have substantial exposure
to ECBs.
Thirdly, major Indian stock indices are able to scale new peaks because of recent
appreciation in the INR. It has been proved beyond any doubt that there is a very
strong correlation between our stock indices and the parity value of the rupee vis-vis major currencies like the USD. Analysts point out that during the last year
Sensex and INR exhibited a correlation of approximately 80% as against the 3040% exhibited in the last three years. FII's who have heavily invested in India are
reluctant to sell off mainly because of the appreciating INR.
Lastly and most importantly, INR appreciation has helped control inflation. (It
touches a 5 year low at 3.32%)
The general index of industrial production (IIP) rose by 11.7 per cent in April-May 2007
from 10.8 per cent a year ago. The acceleration in industrial activity in the current
financial year was led by manufacturing output which rose by 12.7 per cent as against
12.2 per cent in April-May 2006. Electricity generation and mining activity increased by
9.0 per cent and 3.0 per cent, respectively, as against 5.5 per cent and 3.2 per cent a year
ago. Within manufacturing, industries such as machinery and equipment, food products,
basic metals and alloys and chemicals emerged as growth drivers in 2007-08 (up to May).
In terms of the use-based classification, production of capital goods increased by 18.6 per
cent (20.6 per cent a year ago), while the production of basic goods and intermediate
goods rose by 9.4 per cent (9.2 per cent) and 10.5 per cent (10.5 per cent), respectively.
Consumer goods output increased by 12.7 per cent (9.7 per cent). The six infrastructure
industries, comprising nearly 27 per cent of the IIP, posted a growth of 8.1 per cent
during April-May 2007 as against 7.2 per cent a year ago. Output growth picked up in
respect of petroleum products and electricity, whereas some deceleration was recorded in
steel, coal and cement output and crude petroleum production declined marginally.
In the Reserve Banks Industrial Outlook Survey conducted during May 2007, nearly 60
per cent of respondent companies reported no change in capacity utilisation and a
majority also indicated no change in the financial situation, working capital finance
requirements and availability of finance. Responses relating to export orders, imports and
profits were somewhat mixed. The business expectations index for April-June 2007
declined by 7.1 percentage points from its level in the preceding quarter and by 6.0
percentage points from its level a year ago. The outlook for July-September 2007 appears
to be optimistic with 54 per cent of the respondents expecting an improvement in the
overall business situation on the back of increase in production, order books and capacity
utilisation. As in April-June 2007 a majority of respondents expect no change in the
financial situation, working capital finance requirements, availability of finance and in
profit margins. The overall business expectations index for July-September 2007 declined
by 3.8 percentage points from its level in the previous quarter and by 5.4 percentage
points from a year ago.
FORM MBA FINANCE
99
SAAB MARFIN MBA

Business sentiment polled by other surveys presents a varied response, with optimism
relating to sales volume, order books and net profits being tempered by the impact of
exchange rate changes on services sector companies as well as export industries with
relatively low import content. According to one survey, business confidence for July 2007
continues to be high but has declined by 8.8 per cent from its level in April-June 2007
and by 2.7 per cent year-on-year. Seasonally adjusted purchasing managers indices for
the first quarter of 2007-08 indicate favourable operating conditions in the manufacturing
sector with the growth of output and new orders being maintained, a modest rise in staff
hiring and selling prices, some easing of input price inflation and a build-up in preproduction and finished goods inventory levels. These indices also reflect some optimism
about the general business scenario among micro, small and medium enterprises with
more than 90 per cent planning higher capital investment.
Money supply (M3) increased by 21.6 per cent on a year-on-year basis on July 6, 2007
which was above the projected trajectory of 17.0-17.5 per cent indicated in the Annual
Policy Statement for 2007-08 and higher than 19.0 per cent a year ago. On a financial
year basis, M3 increased by 3.8 per cent (Rs.1,24,365 crore) during 2007-08 up to July 6,
2007 as compared with the increase of 3.5 per cent (Rs.95,488 crore) in the
corresponding period of the previous year.
In the foreign exchange market, large surplus conditions in the spot market were
accompanied by a sharp increase in average daily turnover in the foreign exchange
market to US $ 38.2 billion from a level of US $ 23.6 billion a year ago. While the interbank turnover increased from US $ 17.1 billion to US $ 27.7 billion, the merchant
turnover increased from US $ 6.5 billion to US $ 10.5 billion. Forward premia spiked in
April 2007 but in subsequent months, there has been a softening across all maturities. The
six-month forward premia eased from 3.60 per cent in March 2007 to 2.53 per cent by
end-June 2007 and further to 1.28 per cent as on July 27, 2007.
During 2006-07, gross invisible receipts at US $ 119.2 billion amounted to as much as 94

per cent of merchandise exports, recording an increase of 29.1 per cent. The sustained
growth of software exports as well as earnings from other professional and business
services and travel have provided innate strength to the invisibles account in conjunction
with steadily rising inflows of remittance from overseas Indians. During 2006-07,
invisible payments increased by 28.7 per cent, mainly on account of a surge in outbound
tourist traffic, imports of business and management consultancy services, engineering and
technical services as well as dividend and profit payouts. The net invisibles surplus rose
to US $ 55.3 billion in 2006-07 from US $ 42.7 billion in the previous year. Accordingly,
the current account deficit (CAD) amounted to US $ 9.6 billion (1.1 per cent of GDP), up
from US $ 9.2 billion (1.1 per cent of GDP) in 2005-06.
FORM MBA FINANCE
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SAAB MARFIN MBA
Net capital flows were buoyant in 2006-07, nearly doubling to US $ 44.9 billion from US
$ 23.4 billion in 2005-06. Sizeable increases in net inflows were received under foreign
direct investment (FDI), non-resident Indian (NRI) deposits, external commercial
borrowings (ECB), external assistance and short-term credit while net portfolio inflows
moderated in relation to their levels in the preceding year. There was bi-directional
movement in direct investment flows with Indian corporates exhibiting a strong appetite
for global expansion. As regards inward FDI, sectors such as manufacturing and
construction, financial and banking services and information technology services were
the main recipients in the net inflows of US $ 8.4 billion in 2006-07, sizeably higher than
US $ 4.7 billion in 2005-06. Net ECB disbursements accounted for a third of total net
capital inflows in 2006-07, reflecting extremely favourable conditions for Indian
borrowers in the global financial markets. Net portfolio inflows were lower at US $ 7.1
billion than US $ 12.5 billion in 2005-06, partly due to volatility in Asian and global
equity markets in February-March 2007. On the other hand, American Depository
Receipts/Global Depository Receipts (ADRs/GDRs) issuances remained buoyant as
corporates took advantage of favourable external market conditions to issue equities
abroad. NRI deposits increased by US $ 3.9 billion as compared with US $ 2.8 billion in
the previous year.During the first two months of 2007-08, developments in the external
sector indicate sustained strength and resilience. Export growth rose to 20.2 per cent from
19.2 per cent in the corresponding period of the previous year. Imports also posted a
sharp rise of 33.0 per cent as compared with 16.9 per cent in the corresponding period of
the previous year. Non-POL imports rose by 47.3 per cent whereas oil imports remained
broadly stable at the level recorded a year ago. As a result, the merchandise trade deficit
widened to US $ 13.3 billion during April-May 2007 from US $ 8.2 billion in April-May
2006.
On July 12, 2007 the Government announced a package of measures to provide

relief to exporters for a temporary period in response to representations received in regard
to exchange rate movements. The package, involving an estimated outlay of Rs.1,400
crore, included tax/duty concessions and other measures such as concessional preshipment and post-shipment credit by banks for small and medium exporters and
enterprises that export textiles, readymade garments, leather products, handicrafts,
engineering products, processed agricultural products, marine products, sports goods and
toys. Under the scheme, interest subvention of 2 percentage points per annum would be
provided to all scheduled commercial banks in respect of rupee export credit extended by
them to the specified categories of exporters.
FORM MBA FINANCE
101
SAAB MARFIN MBA
Global Economy:
In the US, real GDP growth which had decelerated to 0.6 per cent in the first quarter of
2007, accelerated to 3.4 per cent in the second quarter of 2007 as compared to 2.6 per
cent a year ago, reflecting positive contributions from narrowing trade deficit,
commercial structures investment, personal consumption expenditure and government
spending, partly offset by a decrease in residential fixed investment. Several headwinds
to growth are, however, evident in the weak growth in incomes and consumer spending
and the continued weakness in the sub-prime housing sector which is spilling over to
higher quality credit market as also into debt and equity markets.
Risks to the outlook for global growth and financial markets from the prolonged slump in
the US housing market have become accentuated with the adverse developments in the
subprime mortgage market that surfaced in late 2006 and has continued into 2007. In the
recent period, solvency threats to hedge funds with large subprime exposure have
increased the danger of event risk in leveraged loan and junk bond markets from the
collapse in prices of illiquid or hard-to-trade securities linked to subprime loans. Limits
on redemptions by several hedge funds and the ensuing flight to quality has raised
concerns that contagion could spread across credit markets and corporate bond markets in
a spiral of repricing, tighter mortgage and borrowing conditions, falling house prices and
slower consumption growth which could ultimately drag down US and global economic
growth. Regulators and monetary authorities have expressed concern about the
vulnerability of the global financial system due to excessive leveraging and gaps in
creditor supervision in the context of rising levels of widely diffused risks.
In the overall assessment, therefore, domestic economic activity has continued to expand
at a strong pace and there are indications that the impulses of growth are getting broadbased. The recent gains in bringing down inflation and in stabilising inflation
expectations should support the current expansionary phase of the growth cycle. While
noting the inflation environment in recent weeks, it is necessary to continuously assess
the risks to the inflation outlook emanating from high and volatile international crude
prices, the continuing firmness in key food prices and the uncertainties surrounding the
evolution of demand-supply gaps globally as well as in India. It is also necessary to note
that demand pressures and cyclical effects persist, mirrored in investment and consumer
demand, monetary and banking aggregates, capacity constraints and a widening trade
FORM MBA FINANCE
102
SAAB MARFIN MBA

deficit. Financial markets are reflecting the interplay of these factors, although surges in
capital inflows and large changes in liquidity conditions are obscuring an accurate
assessment of risks, with attendant uncertainty. It is necessary to note that while there is
an abatement of inflation in the recent period, upward pressures persist. In this regard, it
is essential to carefully monitor developments relating to aggregate supply conditions and
the supply response to the impulses of demand in the short-term, while stepping up
efforts to expand production capabilities over the medium-term.
Risks from global developments continue to persist, especially in the form of inflationary
pressures, re-pricing of risks by financial markets and danger of downturn in some asset
classes, with implications for EMEs in general. International food and energy prices are
likely to settle at higher levels than before with indications that the sharp acceleration
recorded in 2006 will not reverse. In addition, there are risks emanating from the
developments in global financial markets. While excessive leveraging by hedge funds
and private equity has enhanced the vulnerability of the global financial system,
exchange rate fluctuations in respect of the major currencies have become amplified with
large changes in the magnitude and direction of capital flows.
FORM MBA FINANCE
103
SAAB MARFIN MBA

Findings
Canara Bank is one of the good banks in Hubli city, which provides almost all
facilities to its customers. They had opened a stall in Hubli Expo, held in Indira
Glasshouse.
Hubli is not a major city in forex market like Bangalore. But there are some
players in Hubli, they trade very cautiously. But some need training programs,
seminars, some knowledge to trade in forex market.
As per some samples we found it out that, almost all exporters or importers trades
in only currency, i.e., USD. Because of Dollar depreciation they are in some
currency loss. So to avoid this risk or exposure they can go for currency
diversification. For that they require some guidelines. Anyhow now banks are
ready for that.
Canara Bank, Forex Cell is very cautious regarding the risk arises in forex market.
And they are having some techniques and tools to minimize those risks. They are
in the theory of Prevention better than cure. Means, before causing something
now only they are takes some steps to avoid the adverse effect.
But Trading Firms are not in the position to recognize the risk. Then minimizing
is secondary. Any how they need some training programs.
Government is not making any restrictions on forex market. Rather it is making

some help to exporters and also importers (especially those who are importing of
materials for exporting purpose).
FORM MBA FINANCE
104
SAAB MARFIN MBA

Recommendation
1. To Bank:
Now they have a time to conduct some seminars, training

programs of forex market.
By this they can get some customers or traders.
And others (i.e, especially companies) will feel, you are doing
social welfare. And they are very happy to close with you.
Existing customers will feel proud for their bank and they are also
give some good word of mouth.
By this you can get more information about: Whats really

customer wants? What we suppose to do for our customers?
What are the troubles for customers? By understanding this what
can we provide the service so customer will come to us very
easily?
So it is recommend to Canara Bank that: CONDUCT A

SEMINAR OR 15 DAYS TRAINING PROGRAM IN FOREX
MARKET.
By this Hubli also recognize itself in forex market. And more and
more traders will create, because some are hesitate to export or
import the goods, if you made easy then many traders may ready to
come in forex market. All these credit will goes to Canara Bank.
2. To Trading Firms:
All trading firms should go for diversification of currency risk by

trading in different currencies.
Do not rely on single currency.
FORM MBA FINANCE
105
SAAB MARFIN MBA
And future is for Rupee. It means, in future Rupee will be strong

currency, so do not depends on thumb rules, that everything will be
done by banks.
As per this report we have said some tools and techniques, where
everyone can easily understand the future volatility.
So please refer or follow some techniques or tools before going to

forex market.
As a general:
Nevertheless, given this economic verity, it is important that exporters, in particular, and
Indian businesses, in general, recalibrate their position. These include:
Consequent to Rupee appreciation, the net earnings of our exporters in rupee

terms would necessarily dip. Exporters need to guard themselves against antidumping investigations that would necessarily follow in this new paradigm.
Accordingly, an exporter has to perhaps conduct a comprehensive risk analysis of
his exports to various countries, taking into account the probability of facing antidumping measures in those countries, and has to strategies his operations.
Our businesses need to rework their position in the value chain. As the Rupee
appreciates, exporters must realize that 'brand India' has arrived. This means we
cannot continue to export or produce products at the low end of the value chain.
India, perhaps, needs to import such goods from other developing countries and
concentrate on value-added products. This is possible as, with the appreciation of
the Rupee, newer technologies become economical and accessible to Indian
manufacturers.
Further, the changing paradigm calls for a re-look at domestic markets by
exporters. To aid domestic consumption, the government too has to play its part.
One factor that inhibits domestic consumption is the high incidence of indirect
taxes -- we end up paying 16% to the central government and another 12.5% as
VAT to state governments, aggregating to approximately 30% or one-fourth of
retail prices. This is one of the highest in the world. Obviously, indirect tax
reforms are crucial to boost domestic consumption.
Exports of services would apparently be hit due to appreciation of Rupee and
salary levels in this sector may see a dip. But the rise in the intrinsic value of the
Rupee compensates for the same. For instance, an Rs 50 tip to the waiter may do
when Rs 100 would do today. An alternative that could be explored would be to
bill in other currencies, perhaps in Euro, Yuan or Rupee.
Another area that requires deep contemplation by the business community is to recompute their entire strategy on Special Economic Zones (SEZs) given these
developments. It has to be noted that the success of the Chinese SEZs was aided
and abetted almost close to a decade by a tightly pegged Yuan to US dollar. The
FORM MBA FINANCE
106
SAAB MARFIN MBA
entire economics of SEZs could undergo a tectonic shift in light of a sustained

Rupee appreciation.
An appreciating Rupee makes foreign direct investment (FDI) into India attractive
as it hedges such investments from exchange rate depreciation. On the contrary, it
provides a further incentive through capital appreciation. This once again calls for
a comprehensive strategic positioning to leverage the opportunity -- not only by
exporters but even by others. Obviously, as an investment destination, India and
perhaps China, with their booming stock exchanges and rising currency, could be
the best bet for investments. Of course, one cannot forget investments in gold and
real estate.
CONCLUSION
Now banks are moving towards their core business to other businesses like
mutual fund, stock market and forex market also. Because of low IRP
(Interest Rate Parity) between deposit and lending.
Hubli also one of growing city in Karnataka. So year on year new firms
are establishing and some existing firms are also ready to enter into forex
market.
Exposure is there everywhere; Banks are avoiding these exposures by

following some methods and techniques as already told.
But trading firms are not having that much of knowledge as for as Forex
Market concern. They required much training and knowledgeable persons
to conduct their business of import / export.
FORM MBA FINANCE
107
SAAB MARFIN MBA
Some firms, they do not know whether they are in exposure or not. So it
is a time to all banks and especially EXIM bank to conduct some seminars
to all exporters and importers and especially to all traders of Forex Market
situated in North Karnataka.
FORM MBA FINANCE
108
SAAB MARFIN MBA

LIMITATION
Survey made only in Hubli City.
Taken only 7 companies (trading firms).
2 years data was taken for technical analysis.
Project was done for only 4 months.
FORM MBA FINANCE
109
SAAB MARFIN MBA

ANNEXURE
Date
2/1/2006
3/1/2006
4/1/2006
5/1/2006
6/1/2006
9/1/2006
10/1/2006
12/1/2006
13/01/2006
16/01/2006
17/01/2006
18/01/2006
19/01/2006
20/01/2006
23/01/2006
24/01/2006
25/01/2006
27/01/2006
30/01/2006
31/01/2006
1/2/2006
2/2/2006
3/2/2006
6/2/2006
7/2/2006
8/2/2006
10/2/2006
13/02/2006
14/02/2006
15/02/2006
16/02/2006
17/02/2006
20/02/2006
21/02/2006
22/02/2006
23/02/2006
24/02/2006
27/02/2006
28/02/2006
1/3/2006
2/3/2006
3/3/2006
6/3/2006
7/3/2006
8/3/2006
9/3/2006
USD
45.05
44.95
44.85
44.67
44.66
44.28
44.38
44.15
44.26
44.17
44.31
44.51
44.36
44.36
44.15
44.21
44.29
44.15
44.14
44.07
44.15
44.31
44.23
44.2
44.27
44.2
44.21
44.26
44.22
44.27
44.3
44.46
44.43
44.4
44.51
44.56
44.45
44.42
44.44
44.35
44.34
44.36
44.32
44.33
44.42
44.55
SMA
CALCULATION OF SMA & EMA
EMA
FORMULA OF EMA
44.3985
44.3535
44.3215
44.2905
44.267
44.2475
44.2435
44.235
44.2405
44.2385
44.2435
44.243
44.2405
44.244
44.246
44.264
44.2815
44.2895
44.303
44.318
44.332
44.3415
44.344
44.3485
44.355
44.3625
44.38
44.3985
44.39421
44.38728
44.37805
44.36747
44.35603
44.3453
44.33479
44.3258
44.31748
44.31043
44.304
44.29794
44.2928
44.28834
44.28602
44.28559
44.28596
44.28759
44.29049
44.29444
44.29893
44.30323
44.30754
44.31207
44.31687
44.32289
`=(((C22-D21)*0.095328095)+D21)
FORM MBA FINANCE
110
SAAB MARFIN MBA

10/3/2006
13/03/2006
14/03/2006
44.5
44.53
44.47
44.3945
44.408
44.4205
44.32972
44.33718
44.34512
RSI
Date
2/1/2006
3/1/2006
4/1/2006
5/1/2006
6/1/2006
9/1/2006
10/1/2006
12/1/2006
13/01/2006
16/01/2006
17/01/2006
18/01/2006
19/01/2006
20/01/2006
23/01/2006
24/01/2006
25/01/2006
27/01/2006
30/01/2006
31/01/2006
1/2/2006
2/2/2006
3/2/2006
6/2/2006
7/2/2006
8/2/2006
10/2/2006
13/02/2006
14/02/2006
15/02/2006
16/02/2006
17/02/2006
20/02/2006
21/02/2006
22/02/2006
23/02/2006
24/02/2006
27/02/2006
28/02/2006
1/3/2006
USD
45.05
44.95
44.85
44.67
44.66
44.28
44.38
44.15
44.26
44.17
44.31
44.51
44.36
44.36
44.15
44.21
44.29
44.15
44.14
44.07
44.15
44.31
44.23
44.2
44.27
44.2
44.21
44.26
44.22
44.27
44.3
44.46
44.43
44.4
44.51
44.56
44.45
44.42
44.44
44.35
Change
-0.100
-0.100
-0.180
-0.010
-0.380
0.100
-0.230
0.110
-0.090
0.140
0.200
-0.150
0.000
-0.210
0.060
0.080
-0.140
-0.010
-0.070
0.080
0.160
-0.080
-0.030
0.070
-0.070
0.010
0.050
-0.040
0.050
0.030
0.160
-0.030
-0.030
0.110
0.050
-0.110
-0.030
0.020
-0.090
Advance
Decline
Avg.
Gain
Avg.
Loss
NR
DR
RS
RSI
0.1
0.1
0.18
0.01
0.38
0.100
0.23
0.110
0.09
0.140
0.200
0.000
0.15
0
0.21
0.060
0.080
0.14
0.01
0.07
0.080
0.160
0.08
0.03
0.070
0.07
0.010
0.050
0.04
0.050
0.030
0.160
0.03
0.03
0.110
0.050
0.11
0.03
0.020
0.09
`=100-100/(1+J17))
`=H17/I17
`=(((F16*13)+D17)/14)
0.039 0.104 `=(F16*13+D17)/14
0.041 0.096 0.041
0.096
0.044 0.089 0.044
0.089
0.040 0.093 0.040
0.093
0.038 0.087 0.038
0.087
0.035 0.086 0.035
0.086
0.038 0.080 0.038
0.080
0.047 0.074 0.047
0.074
0.043 0.074 0.043
0.074
0.040 0.071 0.040
0.071
0.042 0.066 0.042
0.066
0.039 0.066 0.039
0.066
0.037 0.062 0.037
0.062
0.038 0.057 0.038
0.057
0.036 0.056 0.036
0.056
0.037 0.052 0.037
0.052
0.036 0.048 0.036
0.048
0.045 0.045 0.045
0.045
0.042 0.044 0.042
0.044
0.039 0.043 0.039
0.043
0.044 0.040 0.044
0.040
0.044 0.037 0.044
0.037
0.041 0.042 0.041
0.042
0.038 0.041 0.038
0.041
0.037 0.038 0.037
0.038
0.034 0.042 0.034
0.042
FORM MBA FINANCE
111
0.424
0.488
0.435
0.432
0.407
0.478
0.633
0.584
0.567
0.642
0.594
0.605
0.668
0.634
0.702
0.747
1.002
0.953
0.905
1.102
1.199
0.976
0.925
0.962
0.815
29.769
32.789
30.331
30.157
28.908
32.357
38.758
36.879
36.170
39.109
37.262
37.714
40.043
38.793
41.261
42.752
50.038
48.785
47.503
52.437
54.530
49.383
48.051
49.038
44.904
SAAB MARFIN MBA

2/3/2006
44.34
-0.010
0.01 0.032
3/3/2006
44.36
0.020
0.020
0.031
6/3/2006
44.32
-0.040
0.04 0.029
7/3/2006
44.33
0.010
0.010
0.027
RUPEE V/s DOLLAR FROM 1ST JAN 2006 TO 31ST MAR 2008
Date
USD
DATE
USD
2/1/2006
45.05
17/03/2006
44.42
3/1/2006
44.95
20/03/2006
44.44
4/1/2006
44.85
21/03/2006
44.38
5/1/2006
44.67
22/03/2006
44.47
6/1/2006
44.66
23/03/2006
44.55
9/1/2006
44.28
24/03/2006
44.66
10/1/2006
44.38
27/03/2006
44.66
12/1/2006
44.15
28/03/2006
44.66
13/01/2006
44.26
29/03/2006
44.69
16/01/2006
44.17
31/03/2006
44.61
17/01/2006
44.31
3/4/2006
44.61
18/01/2006
44.51
4/4/2006
44.61
19/01/2006
44.36
5/4/2006
44.69
20/01/2006
44.36
7/4/2006
44.63
23/01/2006
44.15
10/4/2006
44.74
24/01/2006
44.21
12/4/2006
44.93
25/01/2006
44.29
13/04/2006
45.3
27/01/2006
44.15
17/04/2006
45.15
30/01/2006
44.14
18/04/2006
45.15
31/01/2006
44.07
19/04/2006
45.14
1/2/2006
44.15
20/04/2006
45.15
2/2/2006
44.31
21/04/2006
45.09
3/2/2006
44.23
24/04/2006
45.06
6/2/2006
44.2
25/04/2006
44.83
7/2/2006
44.27
26/04/2006
45.03
8/2/2006
44.2
27/04/2006
45.06
10/2/2006
44.21
28/04/2006
44.97
13/02/2006
44.26
2/5/2006
44.9
14/02/2006
44.22
3/5/2006
44.86
15/02/2006
44.27
4/5/2006
44.97
16/02/2006
44.3
5/5/2006
44.88
17/02/2006
44.46
8/5/2006
44.88
20/02/2006
44.43
9/5/2006
44.96
21/02/2006
44.4
10/5/2006
44.93
22/02/2006
44.51
11/5/2006
45.07
23/02/2006
44.56
12/5/2006
45.05
24/02/2006
44.45
15/05/2006
45.39
27/02/2006
44.42
16/05/2006
45.61
28/02/2006
44.44
17/05/2006
45.34
1/3/2006
44.35
18/05/2006
45.48
2/3/2006
44.34
19/05/2006
45.46
3/3/2006
44.36
22/05/2006
45.68
0.040
0.037
0.037
0.034
FORM MBA FINANCE
0.032
0.031
0.029
0.027
DATE
2/6/2006
5/6/2006
6/6/2006
7/6/2006
8/6/2006
9/6/2006
12/6/2006
13/06/2006
14/06/2006
15/06/2006
16/06/2006
19/06/2006
20/06/2006
21/06/2006
22/06/2006
23/06/2006
26/06/2006
27/06/2006
28/06/2006
29/06/2006
30/06/2006
3/7/2006
4/7/2006
5/7/2006
6/7/2006
7/7/2006
10/7/2006
11/7/2006
12/7/2006
13/07/2006
14/07/2006
17/07/2006
18/07/2006
19/07/2006
20/07/2006
21/07/2006
24/07/2006
25/07/2006
26/07/2006
27/07/2006
28/07/2006
31/07/2006
0.040
0.037
0.037
0.034
0.800
0.839
0.774
0.795
USD
46.17
45.82
45.92
45.93
46.06
45.92
45.88
46.04
45.98
45.91
45.92
45.89
45.91
45.92
46.01
46.2
46.34
46.36
46.4
46.34
46.08
45.98
46.01
46.03
46.15
46.12
46.06
46.21
46.21
46.29
46.43
46.44
46.73
46.95
46.84
46.83
46.93
46.81
46.85
46.64
46.56
46.51
112
44.456
45.625
43.646
44.296
SAAB MARFIN MBA

6/3/2006
7/3/2006
8/3/2006
9/3/2006
10/3/2006
13/03/2006
14/03/2006
16/03/2006
11/8/2006
14/08/2006
16/08/2006
17/08/2006
18/08/2006
21/08/2006
22/08/2006
23/08/2006
24/08/2006
25/08/2006
28/08/2006
29/08/2006
30/08/2006
31/08/2006
1/9/2006
4/9/2006
5/9/2006
6/9/2006
7/9/2006
8/9/2006
11/9/2006
12/9/2006
13/09/2006
14/09/2006
15/09/2006
18/09/2006
19/09/2006
20/09/2006
21/09/2006
22/09/2006
25/09/2006
26/09/2006
27/09/2006
28/09/2006
29/09/2006
3/10/2006
4/10/2006
5/10/2006
6/10/2006
9/10/2006
44.32
44.33
44.42
44.55
44.5
44.53
44.47
44.41
46.52
46.56
46.55
46.46
46.48
46.45
46.52
46.56
46.5
46.61
46.56
46.52
46.51
46.55
46.53
46.44
46.22
46.21
46.1
46.2
46.27
46.34
46.22
46.15
46.13
46.12
46.11
46.05
45.88
45.94
45.86
45.97
45.92
45.92
45.96
45.84
45.69
45.71
45.61
45.72
23/05/2006
24/05/2006
25/05/2006
26/05/2006
29/05/2006
30/05/2006
31/05/2006
1/6/2006
27/10/2006
30/10/2006
31/10/2006
1/11/2006
2/11/2006
3/11/2006
6/11/2006
7/11/2006
8/11/2006
9/11/2006
10/11/2006
13/11/2006
14/11/2006
15/11/2006
16/11/2006
17/11/2006
20/11/2006
21/11/2006
22/11/2006
23/11/2006
24/11/2006
27/11/2006
28/11/2006
29/11/2006
30/11/2006
1/12/2006
4/12/2006
5/12/2006
6/12/2006
7/12/2006
8/12/2006
11/12/2006
12/12/2006
13/12/2006
14/12/2006
15/12/2006
18/12/2006
19/12/2006
20/12/2006
21/12/2006
45.52
45.73
45.85
45.85
45.97
46.19
46.43
46.22
45.22
45.09
45.02
44.93
44.93
44.84
44.86
44.83
44.68
44.65
44.45
44.9
45.16
45.34
45.17
45.01
44.86
44.99
44.75
44.7
44.87
44.64
44.74
44.65
44.76
44.67
44.59
44.56
44.51
44.66
44.69
44.76
44.82
44.83
44.74
44.66
44.79
44.83
44.74
44.73
FORM MBA FINANCE
1/8/2006
2/8/2006
3/8/2006
4/8/2006
7/8/2006
8/8/2006
9/8/2006
10/8/2006
10/1/2007
11/1/2007
12/1/2007
15/01/2007
16/01/2007
17/01/2007
18/01/2007
19/01/2007
22/01/2007
23/01/2007
24/01/2007
25/01/2007
29/01/2007
31/01/2007
2/2/2007
5/2/2007
6/2/2007
7/2/2007
8/2/2007
9/2/2007
12/2/2007
13/02/2007
14/02/2007
15/02/2007
19/02/2007
20/02/2007
21/02/2007
22/02/2007
23/02/2007
26/02/2007
27/02/2007
28/02/2007
1/3/2007
2/3/2007
5/3/2007
6/3/2007
7/3/2007
8/3/2007
9/3/2007
12/3/2007
46.65
46.56
46.72
46.54
46.49
46.59
46.53
46.43
44.53
44.56
44.61
44.31
44.32
44.27
44.25
44.34
44.21
44.21
44.23
44.24
44.27
44.17
44.11
44.11
44.13
44.09
44.12
44.06
44.18
44.17
44.16
44.09
44.07
44.2
44.19
44.25
44.28
44.17
44.2
44.31
44.27
44.28
44.49
44.56
44.5
44.44
44.27
44.22
113
SAAB MARFIN MBA

10/10/2006
11/10/2006
12/10/2006
13/10/2006
16/10/2006
17/10/2006
18/10/2006
19/10/2006
20/10/2006
23/10/2006
26/10/2006
30/03/2007
3/4/2007
4/4/2007
5/4/2007
9/4/2007
10/4/2007
11/4/2007
12/4/2007
13/04/2007
16/04/2007
17/04/2007
18/04/2007
19/04/2007
20/04/2007
23/04/2007
24/04/2007
25/04/2007
26/04/2007
27/04/2007
30/04/2007
3/5/2007
4/5/2007
7/5/2007
8/5/2007
9/5/2007
10/5/2007
11/5/2007
14/05/2007
15/05/2007
16/05/2007
17/05/2007
18/05/2007
21/05/2007
22/05/2007
23/05/2007
24/05/2007
25/05/2007
45.74
45.76
45.6
45.49
45.46
45.36
45.26
45.32
45.31
45.4
45.3
43.59
43.13
42.9
43.15
42.88
42.86
42.87
42.86
42.74
42.3
41.73
41.89
42.15
41.99
41.67
41.64
40.97
40.78
41.07
41.29
41.18
40.9
40.57
40.78
40.91
41
41.34
40.93
40.87
40.84
40.84
40.9
40.6
40.64
40.55
40.57
40.6
22/12/2006
26/12/2006
27/12/2006
28/12/2006
29/12/2006
2/1/2007
3/1/2007
4/1/2007
5/1/2007
8/1/2007
9/1/2007
15/06/2007
18/06/2007
19/06/2007
20/06/2007
21/06/2007
22/06/2007
25/06/2007
26/06/2007
27/06/2007
28/06/2007
29/06/2007
2/7/2007
3/7/2007
4/7/2007
5/7/2007
6/7/2007
9/7/2007
10/7/2007
11/7/2007
12/7/2007
13/07/2007
16/07/2007
17/07/2007
18/07/2007
19/07/2007
20/07/2007
23/07/2007
24/07/2007
25/07/2007
26/07/2007
27/07/2007
30/07/2007
31/07/2007
1/8/2007
2/8/2007
3/8/2007
6/8/2007
44.59
44.54
44.39
44.36
44.23
44.2
44.33
44.42
44.3
44.42
44.47
40.97
40.76
40.7
40.82
40.75
40.71
40.81
40.95
41.01
40.84
40.75
40.66
40.58
40.49
40.46
40.46
40.41
40.41
40.38
40.38
40.47
40.37
40.36
40.4
40.39
40.33
40.34
40.24
40.3
40.27
40.48
40.54
40.44
40.55
40.43
40.36
40.45
FORM MBA FINANCE
13/03/2007
14/03/2007
15/03/2007
16/03/2007
20/03/2007
21/03/2007
22/03/2007
23/03/2007
26/03/2007
28/03/2007
29/03/2007
29/08/2007
30/08/2007
31/08/2007
3/9/2007
4/9/2007
5/9/2007
6/9/2007
7/9/2007
10/9/2007
11/9/2007
12/9/2007
13/09/2007
14/09/2007
17/09/2007
18/09/2007
19/09/2007
20/09/2007
21/09/2007
24/09/2007
25/09/2007
26/09/2007
27/09/2007
28/09/2007
1/10/2007
3/10/2007
4/10/2007
5/10/2007
8/10/2007
9/10/2007
10/10/2007
11/10/2007
12/10/2007
15/10/2007
16/10/2007
17/10/2007
18/10/2007
19/10/2007
44.22
44.31
44.22
44.17
43.98
43.63
43.66
43.7
43.39
43.14
43.47
41.24
41.04
40.96
40.88
40.91
40.94
40.85
40.71
40.63
40.58
40.49
40.44
40.45
40.47
40.59
40.26
39.91
39.87
39.82
39.81
39.7
39.75
39.74
39.73
39.79
39.56
39.49
39.43
39.55
39.34
39.31
39.33
39.31
39.31
39.68
39.47
39.79
114
SAAB MARFIN MBA

28/05/2007
29/05/2007
30/05/2007
31/05/2007
1/6/2007
4/6/2007
5/6/2007
6/6/2007
7/6/2007
8/6/2007
11/6/2007
12/6/2007
13/06/2007
14/06/2007
12/11/2007
13/11/2007
14/11/2007
15/11/2007
16/11/2007
19/11/2007
20/11/2007
21/11/2007
22/11/2007
23/11/2007
26/11/2007
27/11/2007
28/11/2007
29/11/2007
30/11/2007
3/12/2007
4/12/2007
5/12/2007
6/12/2007
7/12/2007
10/12/2007
11/12/2007
12/12/2007
13/12/2007
14/12/2007
17/12/2007
18/12/2007
19/12/2007
20/12/2007
24/12/2007
26/12/2007
27/12/2007
28/12/2007
31/12/2007
40.53
40.45
40.64
40.73
40.54
40.47
40.56
40.55
40.63
40.98
40.91
40.73
40.93
40.84
39.33
39.39
39.33
39.28
39.35
39.29
39.34
39.39
39.41
39.57
39.68
39.85
39.68
39.77
39.67
39.56
39.43
39.45
39.47
39.41
39.38
39.36
39.36
39.37
39.35
39.37
39.57
39.55
39.57
39.49
39.39
39.43
39.44
39.41
7/8/2007
8/8/2007
9/8/2007
10/8/2007
13/08/2007
14/08/2007
16/08/2007
17/08/2007
21/08/2007
22/08/2007
23/08/2007
24/08/2007
27/08/2007
28/08/2007
24/01/2008
25/01/2008
28/01/2008
29/01/2008
30/01/2008
31/01/2008
1/2/2008
4/2/2008
5/2/2008
6/2/2008
7/2/2008
8/2/2008
11/2/2008
12/2/2008
13/02/2008
14/02/2008
15/02/2008
18/02/2008
19/02/2008
20/02/2008
21/02/2008
22/02/2008
25/02/2008
3/3/2008
4/3/2008
5/3/2008
7/3/2008
10/3/2008
11/3/2008
12/3/2008
13/03/2008
14/03/2008
17/03/2008
18/03/2008
40.37
40.58
40.4
40.67
40.56
40.69
41.09
41.57
41.06
41.01
40.86
41.18
40.98
41.12
39.43
39.4
39.47
39.4
39.43
39.39
39.36
39.38
39.43
39.6
39.48
39.55
39.73
39.65
39.68
39.65
39.66
39.66
39.87
40.15
40.07
39.98
40.05
40.26
40.29
40.29
40.53
40.67
40.47
40.36
40.44
40.45
40.77
40.62
FORM MBA FINANCE
22/10/2007
23/10/2007
24/10/2007
25/10/2007
26/10/2007
29/10/2007
30/10/2007
31/10/2007
1/11/2007
2/11/2007
5/11/2007
6/11/2007
7/11/2007
8/11/2007
7/1/2008
8/1/2008
9/1/2008
10/1/2008
11/1/2008
14/01/2008
15/01/2008
16/01/2008
17/01/2008
18/01/2008
21/01/2008
22/01/2008
23/01/2008
27/03/2008
28/03/2008
31/03/2008
39.79
39.69
39.57
39.54
39.51
39.38
39.4
39.32
39.32
39.37
39.32
39.29
39.27
39.34
39.28
39.27
39.29
39.29
39.29
39.29
39.27
39.27
39.29
39.27
39.38
39.73
39.56
40.15
40.1
39.97
115
SAAB MARFIN MBA

1/1/2008
2/1/2008
3/1/2008
4/1/2008
39.42
39.43
39.45
39.32
19/03/2008
24/03/2008
25/03/2008
26/03/2008
40.45
40.34
40.12
40.14
Questionnaire:
Respected sir/madam,
Pavan Kulkarni, fourth semester student of KLESS IMSR, thank you for agreeing to
participate in the survey. Your inputs will be valuable for us, please feel free to express
your frank opinion on all issues. Your responses are entirely anonymous.
Name of the Organization
:
Address of the Organization :
Business of the Organization :
Import/Export/Both
Since from the year in Import/Export/Both Business:

Type of the Materials (Imports/Exports):
Name of the Respondent:
1.
Designation:
Exports / Imports by:

Your own Branch, or
Head Office / Some other Branch
2.
3.
How many times you export / import the materials in a year?

1 to 3 times
7 to 9 times
4 to 6 times
More than 10 times
In which currency you usually export / import the materials?

USD
GBP
EURO
If other Specify ________
If more than one currency give the weights in % age
FORM MBA FINANCE
116
SAAB MARFIN MBA

4.
Mode of Payment
Advance Payment
5.
6.
7.
8.
After receipts of Goods/Payment
Bills Collection
Letter of Credit
If any other please specify: _____________________
What are the risks involved in forex market according to you?
1)__________________________
2)____________________________
3)__________________________
4)____________________________
What the techniques you are using to minimize these exposures / risks?
Hedging
Options Market
Lead or Lags
Others, Specify ________________
What are the techniques you are using to forecast the exchange rates?
1)__________________________
2)____________________________
3)__________________________
4)____________________________
If you have branches in other countries, how you translate the P&L A/c and
Balance Sheet, What are the risks involved in it?
1)__________________________
9.
2)____________________________
How you minimize these exposures / risks?

1)__________________________
2)____________________________
10.
What are the privileges you are enjoying, provided from Governments (S/C)?
11.
What are the restrictions in forex market by Government or other concerns?
FORM MBA FINANCE
117
SAAB MARFIN MBA
12.
What other Services you are expecting from Banks?
Thank You Sir,
BIBILOGRAPHY
www.rbi.org.in
www.khsitij.com
www.google.com
www.nse-india.com
Business world magazine
Business & Economy - magazine
Business Standard Daily Newspaper
Business Line Daily Newspaper
FORM MBA FINANCE
118

Techniques of Foreign Exchange Exposure Used in Banks and in Trading Firms" IN Canara Bank

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Techniques of Foreign Exchange Exposure Used in Banks and in Trading Firms" IN Canara Bank

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SAAB MARFIN MBA

of Foreign Exchange Exposure used in Banks and

Foreign Exchange Exposure

FORM MBA FINANCE

SAAB MARFIN MBA

of Foreign Exchange Exposure used in Banks and

In a floating exchange rate regime, the value of a currency changes frequently.

Forward Market Hedges

Foreign Exchange Exposure

FORM MBA FINANCE

SAAB MARFIN MBA

Significance of the Study

Foreign Exchange Exposure

FORM MBA FINANCE

SAAB MARFIN MBA

FORM MBA FINANCE

SAAB MARFIN MBA

Foreign Exchange Exposure

FORM MBA FINANCE

SAAB MARFIN MBA

Late Sri. Ammembal Subba Rao Pai

To remove Superstition and ignorance.

Foreign Exchange Exposure

FORM MBA FINANCE

SAAB MARFIN MBA

Foreign Exchange Exposure

FORM MBA FINANCE

SAAB MARFIN MBA

Canara Hindu Permanent Fund renamed as Canara Bank Limited

14 major banks in the country, including Canara Bank, nationalized on July

1000th branch inaugurated

Overseas branch at London inaugurated

Merger with the Laksmi Commercial Bank Limited

Commissioning of Indo Hong Kong International Finance Limited

Canbank Mutual Fund & Canfin Homes, launched

Canbank Venture Capital Fund started

Canbank Factors Limited, the factoring subsidiary launched

Maiden IPO of the Bank

Launched Internet & Mobile Banking Services

100% Branch computerization

Entered 100th Year in Banking Service

Notched up the highest ever net profit since its inception

FORM MBA FINANCE

SAAB MARFIN MBA

AWARDS & ACHIEVEMENTS

FORM MBA FINANCE

SAAB MARFIN MBA

Foreign Exchange Exposure

FORM MBA FINANCE

SAAB MARFIN MBA

Foreign Exchange Exposure

FORM MBA FINANCE

SAAB MARFIN MBA

Direct Quote vs. Indirect Quote

FORM MBA FINANCE

SAAB MARFIN MBA

FORM MBA FINANCE

SAAB MARFIN MBA

Currency to the left (USD)

Currency to the right (CAD)

Price for which the market maker

Price for which the market maker

One point move, in USD/CAD it is .