Forex

CENTRE FOR LEARNING AND INNOVATION

ADVANCE LEARNING INSTITUTE, LUCKNOW
 Faculty Name

PPT Prepared by : Amit Kumar

PPT Vetted by : Nikhil Agnihotri

Assessment , If any , prepared by Not Applicable

Assessment , If any , vetted by Not Applicable

Circulars/Material/Websites referred KNOWLEDGE REPOSITORY :

BOOK OF INSTRUCTIONS, RBI
Guidelines
Topic Type ( Overview/Introduction/Fundamentals/Policy/Procedural Guidelines/Scheme/Other

Difficulty Level ( Basics/Intermediate/Advanced) BASIC

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 o Types of Accounts
o Exchange Arithmetic
o Documentary Credit / Letter of Credit / UCPDC
o Export Credit
o External Commercial Borrowings
Content o Foreign Trade Policy
o Gold Monetization Scheme,
o Rupee Drawing Arrangements
o WTC / Mult-Currency WTC
o MTSS

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 NRI / PIO / OCI
“Opening, holding and maintaining foreign currency accounts in India by a person resident outside India is regulated in terms of sub-section
(3) of section 6 of the Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Deposit) Regulations,
2016 issued vide Notification No. FEMA 5(R)/2016-RB dated April 1, 2016.
✓Non-Resident Indian (NRI)” means a person resident outside India who is a citizen of India.
✓Person resident outside India means a person who has gone out of India or who stays outside India, in either case:-
I. for or on taking up employment outside India
II. for carrying on outside India a business or vocation, or
III. for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period and Indian
students studying abroad.

PIO is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be
specified by Central Government, satisfying the following conditions:

(a) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
(b) Who belonged to a territory that became part of India after the 15th day of August, 1947; or
(c) Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or
(d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)

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 NRI / PIO / OCI
A foreign national, -
(i) who was a citizen of India at the time of, or at any time after 26th January, 1950; or
(ii) who was eligible to become a citizen of India on 26th January, 1950; or
(iii) who belonged to a territory that became part of India after 15th August, 1947; or
(iv) who is a child or a grandchild or a great grandchild of such a citizen; or
(v) who is a minor child of such persons mentioned above; or
(vi) who is a minor child and whose both parents are citizens of India or one of the parents is a citizen of India
vii. Spouse of foreign origin of a citizen of India or spouse of foreign origin of an Overseas Citizen of India Cardholder and whose
marriage has been registered and subsisted for a continuous period of not less than two years

However, no person, who or either of whose parents or grandparents or great grandparents is or had been a citizen of Pakistan,
Bangladesh or such other country as the Central Government may, by notification in the Official Gazette, specify, shall be eligible for
registration as an Overseas Citizen of India Cardholder.

Foreign nationals cannot apply for OCI in India while on Tourist Visa, Missionary Visa and Mountaineering Visa. Moreover, the foreigner has
to be ordinarily resident of India to be eligible to apply for OCI registration in India.

Note: 'ordinarily resident' will mean a person staying in a particular country or in India for a continuous period of 6 months.

According to the Citizenship Amendment Bill 2015, all PIO card holders are ‘deemed to be’ OCI card holders with effect from January 9,
2016.

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 TYPES OF ACCOUNTS FOR NRI

A. Accounts in Indian Rupees

I. Non-Resident Ordinary (NRO) Account
II. Non-Resident (External) Rupee (NRE) Account
VARIANTS IN NRE AND NRO ACCOUNT
➢ Saving
➢ Current
➢ Recurring Deposit
➢ Fixed Deposit

B. Accounts in Foreign Currency

I. Foreign Currency (Non-Resident) Account (Banks) Scheme- FCNR (B) Deposit Account

VARIANT IN FCNR (B)

➢ Fixed Deposit

Branches authorized to open account

NRE : All Branches

FCNR : AD Branches and branches authorized to open FCNR accounts.

NRO : All Branches, however, NRO accounts of Bangladesh or Pakistan citizens belonging to minority communities in those countries, who
are residing in India and have applied for a Long Term Visa (LTV) or having LTV granted by Government of India can open One NRO account
only in AD Branches.
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 SALIENT FEATURES

Eligibility to open Account

NRE :NRIs and PIOs ( Individual/entities of Pakistan and Bangladesh shall requires prior approval of the Reserve Bank of India however, Indian
staff posted at Indian Embassy in Pakistan/Bangladesh and their non resident dependants may open these accounts.)

FCNR : Same as NRE

NRO :
a) Any person resident of India staying outside India for putting through bonafide transactions in rupees.
b) Any resident Indian when goes abroad for employment or for carrying any business activity indicating an indefinite period of stay outside India
then his existing savings/other deposit accounts are to be re-designated as NRO account.

Eligibility to open Account

NRO :

c) Foreign nationals who have come to India on employment and are eligible to open /hold a resident savings/deposits account then after their
departure such account is redesignated as NRO account to enable them to receive their legitimate dues subject to certain conditions.

d) Individuals/ entities of Pakistan nationality/ origin and entities of Bangladesh origin require the prior approval of the Reserve Bank of India.

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 SALIENT FEATURES
Documents Required
➢ Branches are advised to get prescribed Account Opening Form along with copies of valid KYC documents of the customer as per
guidelines contained in KYC Policy issued by KYC AML Division-HO from time to time. Apart from passport, reference may be made to
other documents like Civil Identity Card, Salary Slips, appointment Order etc. for establishing NRI status.
➢ Photocopies of above documents are to be retained with the branch.

CURRENCY
➢ NRE & NRO : Indian Rupees
➢ FCNR : Pounds Sterling, US Dollars, Euro, Canadian Dollars, Australian Dollars and Japanese Yen ( minimum amount Jap Yen
1000000/=)
➢ Remittances from outside India for opening of or crediting to these accounts should be made in the designated currency in which the a/c
is desired to be opened/ maintained.
➢ If the remittance is received in a currency other than the designated currency mentioned above(including funds received in rupees by
debit to the account of a non-resident bank), it should be converted into the latter currency by the authorized branch at the risk and cost
of the remitter and account should be opened/credited in only the above designated currency.

PERIOD FOR FIXED DEPOSIT

NRE : For terms not less than 1 year and not more than 10 years.

FCNR : For terms not less than 1year and not more than 5 years.

NRO : As applicable to resident accounts.

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 SALIENT FEATURES

JOINT ACCOUNT
NRE & FCNR :
a) May be held jointly in the names of two or more NRIs/ PIOs.
b) NRIs/ PIOs can hold jointly with a resident relative on ‘former or survivor’ basis (relative as defined in Companies Act, 2013).
c) The resident relative can operate the account as a Power of Attorney holder during the life time of the NRI/ PIO account.

NRO :
a) May be held jointly in the names of two or more NRIs/ PIOs.
b) May be held jointly with residents on ‘former or survivor’ basis.

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 Permissible Credit – NRE Account

PERMISSIBLE CREDITS
NRE:
➢ Inward remittance from outside India through banking channels,
➢ Interest accruing on the account,
➢ Interest on investment,
➢ Transfer from other NRE/FCNR(B) accounts, While accepting such credits branches should obtain a letter from the remitting branch/bank
to the effect that the funds remitted are from, the NRE account of the same account holder/another person. Reference to this letter is to
be made in the reference against the relative entry and the letter is to be kept along with credit voucher.
➢ Proceeds of personal cheques drawn by the account holder on his foreign currency account, bank drafts payable in any permitted
currency including instruments expressed in Indian rupees for which reimbursement will be received in foreign currency, deposited by the
account holder in person during his temporary visit to India, provided the AD branch is satisfied that the account holder is still resident
outside India, the drafts are standing/ endorsed in the name of the account holder and they were issued outside India.
➢ Maturity proceeds of NRE/FCNR (B) deposit accounts of the same account holder with the other branch or with other bank, a
confirmatory letter on the status of funds transferred is to be obtained from the transferer branch/bank and preserved with credit voucher.
➢ Transfer in NRE account from NRO accounts within the overall ceiling applicable for repatriation of funds from NRO accounts, as per
extant RBI guidelines.(presently the limit is USD 1 mio per financial year).

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 Permissible Credit – FCNR (B)

PERMISSIBLE CREDITS

FCNR (B):

➢ Credit permitted is for opening of account in the respective designated currencies.

➢ Inward remittance from outside India through banking channels,
➢ Interest accruing on the account.
➢ Transfer from NRE account after conversion in Foreign Currency for opening of new Term Deposit.

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 Permissible Credit – NRO Account

PERMISSIBLE CREDITS
NRO:
➢ Proceeds of remittances received in any permitted currency from outside India through banking channels or transfers from rupee accounts
of non-resident banks.
➢ Legitimate dues in India. This includes current income like rent, dividend, pension, interest etc., as also sale proceeds of assets including
immovable properties acquired out of rupee/ foreign currency funds or by way of legacy/inheritance.
➢ Transfers from other NRO accounts. (Note: Transfers between two NRO accounts maintained by the same person cannot be construed as
an inward remittance and hence their credit to an NRO account would not be in compliance with the extant instructions.)
➢ Rupee gift/ loan made by a resident to a NRI/ PIO relative(relative as defined in Companies Act, 2013) within the limits prescribed under the
Liberalized Remittance Scheme may be credited to the latter’s NRO account.
➢ Credit through RTGS/NEFT/ NECS/ECS is permissible but it is the responsibility of originating/sponsor Bank to ensure that funds are under
the eligible credit to the account. The receiving Bank shall rely on the undertaking of the remitting Bank/remitter. In case of a non-
permissible credit, the amount will need to be reversed at the earliest.

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 Permissible Debit – NRE Account

PERMISSIBLE DEBITS
NRE:

➢ Local disbursements.

➢ Remittance outside India.

➢ Transfer to NRE/FCNR (B) accounts of the account holder or any other person eligible to maintain such account.

➢ Investments in India in shares/ securities/commercial paper of an Indian company or for purchase of immovable property in India
provided such investment/ purchase is covered by the regulations made, or the general/ special permission granted by the Reserve
Bank.

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 Permissible Debit – NRO Account

PERMISSIBLE DEBITS
NRO:

➢ All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by the Reserve
Bank.

➢ Remittance outside India of current income in India of the account holder net of applicable taxes.

➢ Transfers to other NRO accounts. (Note: Transfers between two NRO accounts maintained by the same person cannot be construed as an
inward remittance and hence their credit to an NRO account would not be in compliance with the extant instructions.)

➢ Apart from these, balances in the NRO account cannot be repatriated abroad except by NRIs and PIOs up to USD 1 million, subject to
conditions specified in Foreign Exchange Management (Remittance of Assets) Regulations, 2016.

➢ NRIs are permitted to transfer funds from NRO account to NRE account within the overall ceiling of USD 1 million per financial year, as per
the extant RBI guidelines, subject to payment of taxes as applicable (i.e as applicable if funds were remitted abroad).

Note:- The remittances (net of applicable taxes) will be allowed to be made by the Authorized Dealer banks on production of requisite
information in the formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, Government of India from time to time. Reserve
Bank of India will not issue any instructions under FEMA,clarifying tax issues. It shall be mandatory on the part of Authorized Dealers to comply
with the requirement of tax laws, as applicable.

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 Reptriability & Taxability
REPTRIABILITY
NRE & FCNR:
➢ Fully Repatriable for transactions permitted by Reserve Bank of India.
➢ Authorized Branch may permit remittance of the maturity proceeds of FCNR (B) deposits to third parties outside India, provided the
transaction is specifically authorised by the account holder and the authorised dealer is satisfied about the bonafides of the
transaction.
NRO:
➢ Not repatriable except for all current income.
➢ Balances in an NRO account of NRIs/ PIOs are remittable up to USD 1 (one) million per financial year (April-March) along with their
other eligible assets subject to payment of taxes as applicable.

TAXABILITY
NRE & FCNR:
Income earned in the accounts is exempt from income tax and balances exempt from wealth tax

NRO:
Any interest income from the account is Taxable and branches to deposit the TDS to Income Tax Department as per existing guidelines.

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 Change in Status from Non-Resident to Resident

➢ Non-residents who have returned to India are eligible to open Rupee Foreign Currency (RFC) accounts
➢ NRE accounts should be designated as resident accounts and the funds held in these accounts may be transferred to the RFC
accounts, at the option of the account holder, immediately upon the return of the account holder to India for taking up employment or
on change in the residential status.
➢ Where the account holder is only on a temporary visit to India, the account should continue to be treated as nonresident during such
visit.
➢ The NRE deposits shall be converted into RFC without charging any pre-mature penalty.
➢ Penal provision in the case of premature conversion of balances held in FCNR (B) deposits into RFC accounts by Non Resident Indians
on their return to India shall not be applicable
➢ On change in residential status, FCNR(B) deposits may be allowed to continue till maturity at the contracted rate of interest, if so
desired by the account holder.
➢ Authorized branches should convert the FCNR(B) deposits on maturity into resident rupee deposit accounts or RFC account (if the
depositor is eligible to open RFC account), at the option of the account holder.
➢ Where the account holder is only on a temporary visit to India, the account should continue to be treated as non-resident during such
visit.
➢ NRO accounts may be designated as resident accounts on the return of the account holder to India for any purpose indicating his
intention to stay in India for an uncertain period.
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 Exchange Arithmetic
➢ The term ‘Foreign Exchange’ means foreign currency and includes claims of the residents of the country to foreign currency payable
abroad.
➢ Foreign exchange also means the method of conversion of one currency to another.
➢ Exchange rate is the rate at which one country's currency may be converted into another
➢ In conversion Foreign Currency is always treated as commodity and the home currency as the purchasing power.
➢ The need for conversion arises because the currency of a country is legal tender only in that country.
➢ International transaction in cash requires two distinct purchases
➢ Purchase of foreign currency
➢ Purchase of good/service with the FC
➢ Apart from demand/supply dynamics there are various factors that contribute to a country’s exchange value.
➢ Foreign exchange market exists to cater to the demand for foreign currency/currencies
➢ The foreign exchange market is round-the-clock market due to different time zones
➢ Exchange rate is very dynamic
➢ Major participants include- central banks, commercial banks, forex brokers, corporations, individuals

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 Exchange Arithmetic
Exchange Rate Quotes:- There are two accepted methods of quoting exchange rates in the market:
➢ Direct Quotes
➢ Indirect Quotes
Direct Method/Quote
➢ This is the most commonly used.
➢ In direct quote base currency is the foreign currency and the home currency is the variable currency.
➢ Price of one unit of Foreign Currency is expressed in terms of the number of equivalent units of home currency.

For example, in India we quote exchange rate as:

1 USD=INR 75.83 or 1 GBP=INR 99.75
Here the base currency is Foreign currency and Home currency is the variable currency.

Indirect Method/Quote
➢ A few currencies are quoted in the reverse mode.
➢ In Indirect quote number of units of the foreign currency are expressed as equivalent to one unit of home currency.
For example:
Rs.100= USD 1.318 or Rs.100=GBP 1.002

Here the base currency is home currency and foreign currency is the variable currency.

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 Exchange Arithmetic
➢ Purchase :- For Authorised Dealer’s (ADs) point of view conversion of FCY on behalf of exporter into INR will involve Purchase.
➢ Sale:- conversion of INR into FCY of an importer will be a Sale.
➢ Bid Rate:- The buying rate is also known as the Bid rate
➢ Offer Rate:- The selling rate is known as the Offer rate.
➢ Cross Rate:- The price of one currency is not quoted against the currency the parity between them is obtained by using an intermediary
currency. The rate thus obtained is called Cross Rate.
➢ Value Date: A value date for the foreign exchange transaction is the day on which cash flows are to take place.
➢ Ready or Cash- The transaction to be settled on the same day.
➢ TOM - Settlement of funds takes place on the next working day of the date of the deal.
➢ Spot- Settlement of funds takes place on the second working day following the date of the deal.
➢ Forward- Delivery takes place on any day after the date of the deal
➢ Base Rate:- Base rate is the rate derived from ongoing market rate, based on which buying / selling rates are quoted for merchant
transactions.
➢ SPREAD:- The difference between the buying rate and the selling rate is the profit for the bank and is known as the SPREAD.

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 Exchange Arithmetic
➢ Forward Rate :-
➢ Forward exchange rate is the exchange rate at which a party is willing to enter into a contract to receive or deliver a currency at some
future date.
➢ A currency could be quoted at a higher (Premium) or a lower (Discount) rate for future deliveries.
➢ The forward premium/discount is based on interest rate differentials of the two currencies involved and other factors like the demand
and supply situation on a future date, sudden movements of capital, activities of speculators, restrictions on exchange and money
market operations, actions of the central banks etc.
➢ Merchant rates: Quotes offered to merchants (importers, exporters) by banks.
➢ Inter-bank rates: The rates quoted by banks for dealing in the inter-bank market.
➢ Arbitrage: Arbitrages consist of simultaneous buying and selling of a commodity or currency in two or more markets to take advantage of
temporary discrepancies in prices. Arbitrage keeps exchange rates uniform in all markets
Types of merchant rates:
Following are the main types of merchant rates:
➢TT (Buying)
➢BILL (Buying)
➢TT (Selling)
➢BILL (Selling)
TT stands for Telegraphic Transfer although funds need not be received by telegram 20
 DOCUMENTARY CREDIT
➢ Facilitates trade : Domestic and International.

➢ Helps in reducing FBWC requirement for buyer.

➢ Helps seller to get immediate payment though credit is extended by him.

➢ Bank intermediate, lends its creditworthiness for which it charges the applicant.

➢ FLCs facilitate procurement of imported raw material & spares.

➢ In other words, a Documentary Credit is an undertaking issued by a bank (the issuing bank), on behalf of the buyer (the applicant), to
the seller (the beneficiary) to pay for goods and services provided that the seller presents documents which comply with the terms
and conditions of the Documentary Credit.

➢ Except as otherwise stated, Documentary Credits (LCs) are subject to the terms and conditions of UCPDC, ICC Publication No. 600
(2007).

➢ FLC requirements of a unit depend on various factors, which can be broadly classified as under:

➢ Availability of raw material

➢ Holding requirements

➢ Lead period taken

➢ Terms of payment - Sight/Usance. 21

 DOCUMENTARY CREDIT

➢ We presume lead period of a LC dues as under:

1 month 15 days 15 days 1 month

A<-------------------->B<---------------->C<-- ----------------->D----------------->E
Date of Opening Dispatch Receipt of Arrival of Payment of
of FLC of Goods Documents Goods Documents

In the above case total lead period of FLC is 3 months i.e. A to E. Hence FLC requirements will be 1/4 of raw material consumption.
Period of Creditors will be from D to E, i.e. from arrival of goods this will be taken in stocks but will be shown as unpaid for total LC amount is
paid on E, i.e. total period for which creditors hence will be taken is one month, out of a total LC lead period of 3 months. Therefore, level of
creditors accepted for assessment should be minimum 1/3 of FLC limit sanctioned to party in above case.

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 PARTIES TO DOCUMENTARY CREDIT

➢ Applicant (Buyer / Importer)

➢ Issuing Bank (LC Opening Bank)
➢ Advising Bank
➢ Confirming Bank
➢ Beneficiary (Seller / Exporter)
➢ Negotiating Bank (Paying Bank)
➢ Reimbursing Bank
➢ Second Beneficiary

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 DOCUMENTARY CREDIT PROCEDURE
➢ The Buyer and Seller conclude a sales contract providing for payment by a Documentary Credit (DC).

➢ The Buyer instructs his bank (the Issuing Bank) to issue a DC in favour of the Seller (Beneficiary).

➢ The Issuing Bank issues the DC and asks another bank (the Advising Bank), usually in the country of the Seller to advise or confirm the DC.

➢ The Advising Bank informs the Seller that the DC has been issued.

➢ As soon as the Seller receives the DC and is satisfied that it meets the terms of the sales contract and that he can meet the DC terms and
conditions, he is in a position to effect shipment.

➢ Seller then sends the required documents to the bank where the DC is made available (the Nominated Bank).

➢ The bank examines the documents against the DC. If they meet the requirements of the DC, the bank will pay, accept or negotiate,
according to the terms of the DC.
➢ The bank which takes up the documents sends the documents to the issuing bank.
➢ The Issuing Bank examines the documents and if the documents meet the DC requirements, reimburses in the pre-agreed manner the
Confirming Bank or any other Nominated Bank that has paid, accepted, or negotiated under the DC.
➢ When the documents have been examined by the Issuing Bank and are found to meet the DC requirements, they are released to the Buyer.
➢ The Issuing Bank obtains reimbursement from the Buyer in the pre-agreed manner.
➢ The Buyer forwards the transport document to the local office or agent of the carrier who will then effect delivery of the goods to him.

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 DOCUMENTARY CREDIT

Applicant

Applicant should provide precise details for opening of lc to issuing bank.

Applicant should be bound by and liable to indemnify the banks against all obligations ,rules and
responsibilities imposed by foreign laws and usages

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 ISSUING BANK

Issuing bank gives conditional undertaking and reimburses the negotiating bank against submission of the
prescribed documents.

Issuing bank should examine the documents within reasonable time.

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 ADVISING BANK

➢ Advising bank acts without any engagement on its part.

➢ Advising bank should take reasonable care to check the authenticity of the credit.

➢ Advising bank gives the preliminary information to the beneficiary.

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 CONFIRMING BANK

Confirming bank on the request of the issuing bank if confirmation is added , it constitutes a definite,
equitable undertaking on the part of the confirming bank.

Confirming bank is liable if documents are presented as per the terms and conditions within the expiry
date.

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 BENEFICIARY

➢ Beneficiary of a credit is a person entitled to draw or demand payment.

➢ Usually identified as the person in whose favour credit is issued.
➢ Entitled for payment on submission of credit complied documents.
➢ Can in no case avail himself of the contractual relationship existing between the banks and parties

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 NEGOTIATING BANK

➢ Negotiating bank may be the bank of the beneficiary and/or a bank which pays value against a set of
documents drawn under a credit.

➢ nomination of the bank by issuing bank for negotiation of the credit does not constitute any undertaking
on the nominated bank unless credit is confirmed by it.

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 REIMBURSING BANK

➢ will reimburse the claim made by the negotiating bank or by any claiming bank under the authority of
the issuing bank.

➢ do not require any certificate of compliance from the negotiating bank

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 BENEFICIARY

➢ This is the party, who is entitled to receive payment under the credit on presentation of the
documents in terms of the credit, and is usually the seller/exporter of the goods/ services to be
exported.

SECOND BENEFICIARY
➢ In case, the letter of credit is transferable and the original beneficiary transfers the credit to
another party, then the party in whose favour the credit has been transferred is known as second
beneficiary.

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 DOCUMENTARY CREDIT

➢ Letters of credit are governed by UCPDC issued by ICC. Present version is 600 which came into force
from 01.07.2007. All LCs whether issued in domestic or international businesses are governed by these
rules. There are different types of credits. They are:

(i) Revocable Credit (not in force now)

(ii) Irrevocable Credit
(iii) Confirmed Credit
(iv) Standby Credit
(v) Deferred Payment Credit
(vi) Transferable Credit
(vii) Back to Back credit/ Countervailing Credit
(viii) Restricted Credit
(ix) Revolving Credit
(x) Red/ Green Clause Credit

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 REVOCABLE CREDIT

➢ Revocable credit is one which is expressed stated to be revocable. It can be cancelled or amended by
the Issuing Bank at any time without notice to the Beneficiary. . However, if the Negotiating Bank has
negotiated the documents which appear on their face to be in compliance with the terms and
conditions of the credit before receipt of the notice of amendment/ cancellation, then it becomes
irrevocable.

A problem may arise when the Negotiating Bank has negotiated the documents but the notice of
amendment/cancellation has been received on the same day after negotiation. As per the latest
UCPDC, a credit is always irrevocable even if there is no indication to that effect.

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 CONFIRMED CREDIT

When an irrevocable credit is confirmed by the bank nominated by the issuing bank to add its confirmation
to the credit, at the request of the Issuing Bank, the credit is called a confirmed credit. The nominated bank
can also be the advising bank to the credit. Such a confirmation is a definite and clear undertaking by the
Confirming Bank. So far as the seller is concerned, this is the best form of credit to have as he is assured
of payment by a bank in his own country if he presents the documents asked for in the manner stipulated.

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 STAND BY LETTER OF CREDIT

➢ The standby letter of credit is a guarantee declaration in the broadest sense. A letter of credit issued in
place of a guarantee is known as a standby credit. Strictly speaking this is not a documentary credit as
no document of title will be required to be submitted under the terms of the credit. It functions similar to
a bank guarantee.
➢ Because of the restrictions on the issue of guarantees in certain countries such as the United States of
America, Japan etc. standby letters of credit are common in those countries.
➢ Standby letters of credit can be used , for eg. To guarantee the following types of payment or
performance viz. repayment of loans, fulfillment of sub contracts, securing the payment of goods
delivered by third parties independent of the recipient etc.

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 DEFERRRED PAYMENT CREDIT

➢ Deferred payment credit is one where payment is made in installments over a period of time by a
designated bank on the respective due dates determined in accordance with the stipulations of the
credit without drawing of drafts. In a way, it is an extended payment credit.
➢ Under deferred payment credit, no draft will be called upon to be drawn, but it must specify the maturity
at which payment is to be made and how such maturity is to be determined. Such credits are normally
used in the import/export of capital goods. Deferred payment credit should not be confused with
installment credit.
➢ An installment credit requires specific quantities to be shipped weekly or monthly and it allows partial
shipments and deferred payment credit may or may not allow partial shipments.

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 TRANSFERABLE CREDIT

➢ A credit under which the beneficiary has the right to make part or all of the credit available to one or
more third parties is known as a transferable credit. A credit can be transferable if the Issuing Bank
specifically states and issues a transferable credit. A credit is normally not transferable unless
specifically issued. A credit is normally not transferable as it is not a negotiable instrument. The most
important benefit of a transferable credit is that if the Beneficiary is only an intermediary between the
Applicant and the suppliers of the goods and is keen only on the spread that he can make, he can earn
his profit without tying up his funds.

➢ In other words, the Beneficiary can pass on or transfer the credit to a third party to his profit. The credit
can be transferred only once. Further partial shipments should be allowed and the credit should be
irrevocable. The credit could be transferred subject to the same terms and conditions except for the
credit amount, unit price, the period of validity, the period for shipment and the last date for presentation
of documents. It is important to note that the same letter of credit is endorsed in favour of second
beneficiaries but the second beneficiaries cannot transfer it to any third beneficiary

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 BACK TO BACK CREDIT

A back to back letter of credit is issued on the strength of a credit already issued. It is normally used
where the exporter is not the supplier of the goods and credit is not transferable.

It should be ensured that the second credit terms are identical to those of the first credit; the difference
being mainly on the date of expiry and the amount. The second credit must expire before the first credit
and the amount of the second credit will have to be less than that of the first credit.

A slight variation of the back to back credit is the counter credit. The only identifying factor is that the
seller has his own bank (as opposed the Advising Bank/ Confirming Bank) to issue the credit as a counter
to the first one.

RESTRICTED LETTER OF CREDIT

In this type of credit the Issuing Bank will restrict negotiation to a particular bank or normally to their own
branches/ correspondent banks to offer business to the latter.

39
 REVOLVING LETTER OF CREDIT

A revolving letter of credit is one where the amount of credit is reinstated from time to time after
negotiation/drawing and reimbursement without any specific or further amendment. Such drawings have to
take place within the validity period. The amount under the credit can revolve in relation to time or value.
There are two types of revolving credits. In the first case, credit gets reinstated immediately after a drawing
is made. For example, if a credit is opened for USD 100,000 and the beneficiary draws a bill for USD
25,000; immediately after that drawing, the credit again reverts to its original amount of USD 100,000. In
the second type, the credit reverts to the original amount only after it is confirmed by the Issuing Bank i.e.
after the documents reach the Issuing Bank and it pays for the documents/or such fact is confirmed by the
Issuing Bank.

40
 RED CLAUSE / GREEN CLAUSE LETTER OF CREDIT

Red clause letter of credit is a means of financing before shipment and is so called because the clause
relating to the provision for finance was originally printed in red ink on the credit to draw attention to this
special feature. This credit is available for procuring raw materials, manufacturing and packing of the
goods to be shipped. The advance is liquidated from the proceeds of the negotiated documents.

The green clause letter of credit is an extension of the red clause credits in the sense that it also provides
credit for warehousing and insurance charges at port when the goods are stored pending shipment. In
such cases warehouse receipts/warrants are given as security till shipment in addition to pre-shipment
finance under Red Clause.

41
 DISCREPANCIES

When we are talking about negotiation , it means we are handling the documents under LC . In
negotiation , we either purchase or discount the documents depending on the nature of documents
whether they are sight or usance. The nature of the documents shall be depending on kind of LC under
which are negotiating the documents.

According to the guidelines of UCPDC and terms and conditions of the LC hecking is done and if
somehow the documents are not having conformity with the LC , they are called as discrepant .

There are some common documents which are presented which we shall be discussing in the next slide .

42
 EXPORT CREDIT

• Export credit means any credit provided by a bank to an exporter in the form of pre-shipment (packing)
credit or post-shipment credit.

• As goods and services going in to Special Economic Zone area (SEZ) from Domestic Tariff Area (DTA)
are treated as exports, RBI has advised that supply of goods and services from DTA to SEZ area would
also be eligible for export credit facilities.

As the name suggests , pre shipment credit is provided before the shipment date and post shipment
credit is provided after the shipment date.
Pre Shipment credit is also called as Packing Credit.

43
 PRESHIPMENT CREDIT / PACKING CREDIT

• 'Pre-shipment / Packing Credit' means any loan or advance granted or any other credit provided by a
bank to an exporter for
• financing the purchase,
• processing,
• manufacturing or
• packing of goods prior to shipment / working capital expenses towards rendering of services on the basis
of letter of credit opened in his favour or in favour of some other person by an overseas buyer or a
confirmed and irrevocable order for the export of goods / services from India or
• any other evidence of an order for export from India having been placed on the exporter or some other
person,
• unless lodgement of export order or Letter of Credit with the bank has been waived.

44
 PERIOD OF ADVANCE

The period for which a packing credit advance may be given will depend upon the circumstances of
individual case, such as
the time required for procuring,
manufacturing or processing (where necessary) and
shipping the relative goods / rendering of services.
It is primarily for the branches to decide the period for which a packing credit advance may be given having
regard to various relevant factors, so that the period is sufficient to enable exporter to ship the goods /
rendering of services.

Normally a packing credit advance is to be granted upto a maximum period of 180 days at a concessive rate
of interest.

In case the exporter is not in a position to ship the goods within the maximum period of 180 days, extension
of packing credit may be permitted by authorities shown in next slide on merits of each case:

45
 PERIOD OF ADVANCE

DEALING OFFICE PERMITTING AUTHORITY

EXTENSION UPTO 270 DAYS

MCCs, CBBs, LCBs and ELCBs Heads of MCCs, CBBs, LCBs and ELCBs

Other branches PLP

Extension beyond 270 days and upto 360 days

LCBs & ELCBs HOCAC- I

Other than LCBs & ELCBs CHCAC

46
 PERIOD OF ADVANCE

While granting extension,

it may be noted that extensions in packing credit advances as mentioned above shall be permitted by the
respective officials after satisfying that reason for extension are due to the circumstances beyond control of
the exporter and need for longer duration of credit is justified on the grounds of
seasonality of commodity,
manufacturing cycle,
time normally taken for shipment,
extension of Export order/Export LC etc.

If pre-shipment advances are not adjusted by submission of export documents within 360 days
from the date of pre-shipment advance, the advances will cease to qualify for concessive rate of
interest to the exporter ab initio

47
 LIQUIDATION OF PACKING CREDIT

The packing credit / pre-shipment credit granted to an exporter must be liquidated out of proceeds of bill
drawn for the exported commodities on its purchase, discount etc. thereby converting pre-shipment credit
into post-shipment credit. However, CMs and above may permit liquidation of packing credit out of balances
in Exchange Earners Foreign Currency a/c (EEFC A/C) and / or from rupee resources of the exporter to the
extent exports have actually taken place .

If not so liquidated, the interest rate for ECNOS-Pre-shipment be charged from the date of advance as
indicated in L&A Circulars issued from time to time.

48
 RUNNING ACCOUNT FACILITY

Pre-shipment credit to exporters is normally provided on lodgment of L/Cs or firm export orders. It is
observed that availability of raw materials is seasonal in some cases.

In some other cases, time taken for manufacture and shipment of goods is more than the delivery schedule as
per export contracts. In many cases, the exporters have to procure raw material, manufacture export product
and keep the same ready for shipment, in anticipation of receipt of letters of credit / firm export orders from
the overseas buyers.

Having regard to difficulties being faced by the exporters in availing of adequate pre-shipment credit in such
cases, sanctioning authority not below the rank of MCC-CAC (PLP-CAC where MCC is not located) is
authorized to sanction Pre-shipment Credit 'Running Account' facility in respect of any commodity, without
insisting on prior lodgment of letters of credit / firm export orders, depending on their judgement regarding the
need to extend such a facility and subject to the following conditions:

49
 RUNNING ACCOUNT FACILITY

(a) The facility may be extended, provided the need for 'Running Account' facility has been established by the
exporters to the satisfaction of Bank.

(b) ‘Running Account’ facility may be allowed to exporters having Credit Risk Rating of B1 and above with
good past track record (3 years track record in case of B1 rated borrowers) and where the requirement of
trade justifies the same. Further, this facility may also be allowed to Export Oriented Units (EOUs) / Units in
Free Trade Zones / Export Processing Zones (EPZs) and Special Economic Zones (SEZs).

(c) In all cases, where Pre-shipment Credit ‘Running Account’ facility has been extended, letters of credit / firm
orders should be produced within a reasonable period of time i.e. within a period of one month from the date of
sanction but not later than 10th of the succeeding calendar month. Branches to ensure to enter details of
Export Order / Export LC of such RPC disbursements in CBS.

In case of non-compliance, no further disbursement will be permitted by system.

A letter of commitment for lodgment of LCs / firm orders within the stipulated time frame be obtained from the
exporters and kept on record.

50
 RUNNING ACCOUNT FACILITY

(d) The bank should mark off individual export bills, as and when they are received for negotiation / collection,
against the earliest outstanding pre-shipment credit on 'First In First Out' (FIFO) basis. Needless to add that
while marking off the pre-shipment credit in the manner indicated above, branches should ensure that
concessive credit available in respect of individual pre-shipment credit does not go beyond the period of
sanction or 360 days from the date of advance, whichever is earlier.

Running account packing credit facility can be marked off with proceeds of export documents, against which
no packing credit has been drawn by the exporter.

(ii) ‘Running Account’ facility does not envisage any relaxation in regard to the stipulated period for which pre-
shipment credit advance at lower rate of interest is made available. It will, therefore, be necessary to ensure
that the facility is not misused by the exporters for inventory build up and the limits sanctioned to them are
need based, keeping in view either their past performance in exports or potential thereof.

51
 RUNNING ACCOUNT FACILITY

(d) Due to the concessive element of ROI on Export Credit, branches should keep a close watch to ensure
that pre-shipment credit is used for genuine requirement of exporters and for the purpose for which they are
made. Branches to ensure to disburse all Pre-Shipment advance through current account only specifically
opened for this purpose and amount of Packing Credit should not be transferred to party’s Cash Credit or for
adjustment of any other loan account.

(iii) As the interest rates on pre-shipment credit is lower than the domestic lending rate, branches should
constantly review and monitor the drawls in the accounts vis-à-vis the export bills tendered for negotiation /
collection for adjustment of the pre-shipment credit and take all possible steps to ensure that the borrowers
do not draw funds in excess of their genuine requirements.

(iv) Pre-shipment Credit ‘Running Account’ facility would be available to the exporters, only if they are
complying with the terms and conditions laid down in letter and spirit. If the exporter is found to be abusing
the facility, the facility should be withdrawn forthwith. In all such cases, branches should insist on production
of letter of credit or firm export order before granting a pre-shipment advance

52
 RUNNING ACCOUNT FACILITY

(v) In cases, where exporters have not complied with the terms and conditions, the advance will attract
commercial lending rate ab initio.

(vi) Running account facility should not be granted to sub-suppliers.

53
 Waiver of submission of Export Orders or LCs

Following authorities have the power to waive the submission of export orders or LCs in all Packing Credit
Advances including Running Packing Credit accounts on very selective basis to established exporters (not
less than 3 years old) with proven excellent track record subject to the following conditions.

CASES AT BRANCHES DELEGATED AUTHORITY

For LCB and ELCB cases HOCAC-I

CBB cases ZOCAC

For GBB, PLP and MCC cases CHCAC

54
 Waiver of submission of Export Orders or LCs

Detail conditions for waiver of submission of export orders or LCs enumerated are:

(i) Any waiver of submission of export orders or LCs permitted by the Bank should form part of the terms of
sanction of export credit limits and be communicated to the exporters as well as ECGC.

(ii) In such cases, the exporter will submit a monthly statement as per Appendix-I.

(iii) Where such waivers are permitted ab initio and the system of obtaining monthly statement of outstanding
orders / LCs on hand {as per (ii) above} has been put in place, the same may be incorporated in sanction
proposals as well as in the sanction letters issued to exporters and appropriately brought to the notice of ECGC.

(iv) In cases where waivers are permitted at a time subsequent to sanction of export credit limits, the same may
be incorporated in the terms of sanction by way of amendments and communicated to ECGC.

(v) For waiver of submission of export orders or LCs, it shall be ensured that no export bill of the borrower is
overdue at the time of permitting the waiver.

55
 POST SHIPMENT CREDIT

'Post-shipment Credit' means any loan or advance granted or any other credit provided by a bank to an
exporter of goods / services from India from the date of extending credit after shipment of goods / rendering of
services to the date of realization of export proceeds as per the period of realization prescribed by RBI and
includes any loan or advance granted to an exporter, in consideration of or on the security of any duty
drawback allowed by the Government from time to time.

Post-shipment advance can mainly take the form of -

(i) Export bills purchased / discounted / negotiated.
(ii) Advances against bills for collection.
(iii) Advances against duty drawback receivable from Government.

56
 POST SHIPMENT CREDIT

Post-shipment credit is to be liquidated by the proceeds of export bills received from abroad in respect of
goods exported / services rendered.

Further, subject to mutual agreement between the exporter and the banker, it can also be repaid / prepaid out
of balances in Exchange Earners Foreign Currency Account (EEFC A/C) as also from proceeds of any other
unfinanced (collection) bills.

Such adjusted export bills should however continue to be followed up for realization of the export proceeds and
will continue to be reported in the Export Data Interfacing System (EDIS).

57
 NORMAL TRANSIT PERIOD

‘Normal Transit Period’ means the average period normally involved from the date of negotiation / purchase /
discount, till the receipt of bill proceeds in the Nostro account of the bank concerned, as prescribed by FEDAI from
time to time. It is not to be confused with the time taken for the arrival of goods at overseas destination.

Normal transit period for different categories of export business are laid down as below
SERIAL NO DESCRIPTION NORMAL TRANSIT PERIOD
1 In the case of export usance bills, where due dates are Fixed due date: Transit period is not
fixed or are reckoned from date of shipment or date of bill applicable
of exchange etc, the actual due date is known.

2 Sight Bills in Foreign Currencies 25 DAYS

3 Exports to Iraq under United Nations Guidelines MAX 120 DAYS

4 Bills drawn in Rupees under Letters of Credit (L/C) 3 DAYS

58
 OVERDUE BILL

An overdue bill –

(a) In the case of a demand bill, is a bill which is not paid before the expiry of the normal transit period plus
grace period and

(b) In the case of a usance bill, is a bill, which is not paid on the due date.

59
 Realisation and repatriation of proceeds of export of goods / software /
services

It is obligatory on the part of the exporter to realise and repatriate the full value of goods /software /services to India
within a stipulated period from the date of export, as under:

(i) The period of realization and repatriation of export proceeds shall be nine months from the date of export for all
exporters including Units in Special Economic Zones (SEZs), Status Holder Exporters, Export Oriented Units
(EOUs), Units in Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) & Bio-
Technology Parks (BTPs) until further notice.

(ii) For goods exported to a warehouse established outside India, the proceeds shall be realized within fifteen months
from the date of shipment of goods.

60
 Change of Tenor of Bill

(i) AD branches may permit change of tenor of bills before the original due date of payment of bill or within 15 days
after the due date of payment of bill in respect of bills drawn on the original buyer / consignee, on request from
exporters provided the revised due date of payment does not fall beyond the maximum period prescribed for
realization of export proceeds i.e. Nine months from the date of shipment (15 months in case of warehouse) and
change of tenor / due date takes place before the original due date of payment of bill.

(ii) The extension in due date as mentioned above should be considered in the circumstances beyond control of the
exporter. Further, it should be based on merits of the case and justified with sufficient documentary evidence from
the Buyer /Seller /Overseas bank for change in due date i.e. the request regarding extension in due date should be
obtained directly from overseas bank or buyer.

61
 Change of Tenor of Bill

(iii) The extension is to be considered within the operating cycle or norms defined in the sanction.

(iv) While allowing extension, the same should be communicated to ECGC for availing suitable cover in respect of
such advances.

(v) It should be communicated to the borrower that exchange risk or other expenses, if any, shall be borne by the
borrower.

(vi) In such cases where change of tenor has been allowed, it would be in order for branches to extend the
concessional rate of interest upto the revised notional due date, subject to the interest rate directives issued by RBI.

62
 Interest on Post-shipment Credit

Early payment of export bills

(i) In the case of advances against demand bills, if the bills are realized before the expiry of the normal transit
period (NTP), interest at the prescribed rate shall be charged from the date of advance till the date of realization
of such bills. The date of realization of demand bills for this purpose would be the date on which the proceeds
get credited to the banks' Nostro accounts.

(ii) In the case of advance / credit against usance export bills, interest at prescribed rate may be charged only upto
the notional / actual due date or the date on which export proceeds get credited to the bank’s Nostro account
abroad, whichever is earlier, irrespective of the date of credit to the borrower's / exporter's account in India. In cases
where the correct due date can be established before / immediately after availment of credit due to acceptance by
overseas buyer or otherwise, prescribed interest can be applied only up to the actual due date, irrespective of
whatever may be the notional due date arrived at, provided the actual due date falls before the notional due date.

63
 Interest on Post-shipment Credit

(iii) Where interest for the entire NTP in the case of demand bills or up to notional / actual due date in the case of
usance bills as stated above, has been collected at the time of negotiation / purchase / discount of bills, the excess
interest collected for the period from the date of realization to the last date of NTP / notional due date / actual due
date should be refunded to the borrowers.

64
 Expeditious Clearance of Export Credit Proposals

The competent authority for rejection of export credit proposal are as under:
SANCTIONING AUTHORITY AUTHORITY FOR REJECTION
GBB Power Circle Head

PLP Segment Head PLP Head

PLP Head / PLP CAC

ZOCAC-I
MCC Power

ZOCAC Power Respective Sanctioning Authority

HOCAC I, II and III Power Respective Sanctioning Authority

MC Power HOCAC III

65
 External Commercial Borrowings
What is ECB ( External Commercial Borrowing) ?
➢External Commercial Borrowings are commercial loans raised by eligible resident entities from recognized non-resident entities and should
conform to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc. The parameters as
described apply in totality and not on a standalone basis

➢Minimum Average Maturity Period (MAMP) for External Commercial Borrowings (ECB) will be 3 years. However, for the specific categories
the MAMP will be ranging from 1 Year to 10 Year.

➢They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs.

➢ECBs include commercial bank loans, buyers' credit, suppliers' credit beyond 3 Years, securitised instruments such as floating rate notes and
fixed rate bonds etc

Benefits of ECB
➢ Cost of funds are generally lower than that of domestic funds
➢ Does not dilute equity shareholding in a Company
➢ Bring foreign funds into India
➢ Greater exposure to worldwide entities

ECB Framework
The framework for raising loans through ECB comprises the following two options:
➢ FCY ( Foreign Currency) denominated ECB
➢ INR ( Indian Rupee) denominated ECB

66
 External Commercial Borrowings

Parameters FCY ( Foreign Currency) denominated ECB INR ( Indian Rupee) denominated ECB

Currency of borrowing Any freely convertible Foreign Currency Indian Rupee (INR)

Forms of ECB Loans including bank loans; floating/ fixed rate Loans including bank loans; floating/ fixed rate notes/bonds/
notes/ bonds/ debentures (other than fully and debentures/ preference shares (other than fully and
compulsorily convertible instruments); Trade compulsorily convertible instruments); Trade credits beyond
credits beyond 3 years; FCCBs; FCEBs and 3 years; and Financial Lease. Also, plain vanilla Rupee
Financial Lease denominated bonds issued overseas, which can be either
placed privately or listed on exchanges as per host country
regulations.

Eligible borrowers All entities eligible to receive FDI. Further, the a) All entities eligible to raise FCY ECB; and
following entities are also eligible to raise ECB: b) Registered entities engaged in micro-finance activities, viz.,
i. Port Trusts; registered Not for Profit companies, registered societies/
ii. Units in SEZ; trusts/ cooperatives and NGOs.
iii. SIDBI; and
iv. EXIM Bank of India.

67
 External Commercial Borrowings
Parameters FCY ( Foreign Currency) denominated INR ( Indian Rupee) denominated ECB
ECB
Exchange rate Change of currency of FCY ECB into INR For conversion to Rupee, the exchange rate shall be
ECB can be at the exchange rate prevailing the rate prevailing on the date of settlement.
on the date of the agreement for such
change between the parties concerned or at
an exchange rate, which is less than the rate
prevailing on the date of the agreement, if
consented to by the ECB lender.
All in Cost Celing per Annum Benchmark Rate plus 550 bps spread: For Benchmark rate plus 450 bps spread.
existing ECBs linked to LIBOR whose
benchmarks are changed to ARR.
Benchmark rate plus 500 bps spread: For
new ECBs.
Change of currency of ECB from one freely
Change of currency of convertible foreign currency to any other Change of currency from INR to any freely convertible
borrowing freely convertible foreign currency as well as foreign currency is not permitted.
to INR is freely permitted.

68
 External Commercial Borrowings
Some Restrictions

➢ ECBs cannot be used for investment in stock market or speculation in real estate.
➢ The ECB framework is not applicable in respect of investments in Non-Convertible Debentures in India made by Registered Foreign
Portfolio Investors.
➢ Lending and borrowing under the ECB framework by Indian banks and their branches/subsidiaries outside India will be subject to
prudential guidelines issued by the Department of Banking Regulation of the Reserve Bank.

Procedure to raise ECB

➢ Automatic Route : *If parameters prescribed under the framework have been complied with. Eligible borrowers can raise ECB upto
USD 750 Million or Equivalent per FY under automatic route.
➢ Approval Route:
➢ *Borrowers may approach RBI with application in prescribed format Form ECB
➢ *RBI shall grant approval based on overall guidelines, macro‐economic situation and merits of the proposal

SECURITY
AD Category I banks are permitted to allow creation of charge on:
➢ Immovable assets
➢ Movable assets
➢ Financial securities
➢ Corporate and personal guarantees in favour of overseas lender/security trustee

69
 Foreign Trade Policy – 2023
➢ India's foreign trade policy, or FTP, is an essential set of rules on how India does business with the world.
➢ The Directorate General of Foreign Trade (DGFT) takes charge of it.
➢ The main goals of India's FTP 2023 are to boost exports, create favourable conditions for trade, and support steady economic growth and focus
on rupee trade.
➢ The current FTP is a major shift from Time – Bound to Dynamic Policy

Objective of FTP 2023

➢ Global Integration of India
➢ Creating a Supportive Ecosystem (in line with the principles of 'Atma Nirbhar Bharat' and 'Local goes Global.’)
➢ Preparing for the Future (Focusing on making India one of the top exporting nations, especially during the anticipated 'Amrit Kaal' period.)
➢ Tripling India’s Goods and Services Exports (Push India's exports up to $2 trillion by 2030. This is a huge jump from the present $760
billion).

Highlights of Foreign Trade Policy 2023 - focusing on incentives for exporters and collaborative export promotion efforts:
➢ Incentive to Remission - These benefits include duty refunds, the export growth capital equipment plan, the pre-clearance scheme, and free trade
agreements (FTAs).
➢ Export Promotion through Collaboration
➢ Ease of Doing Business
➢ Emerging Areas (a leading manufacturing, pharmaceutical, and e-commerce player)
➢ Process Re-Engineering and Automation
➢ Towns of Export Excellence (Introducing Faridabad, Mirzapur, Moradabad, and Varanasi as Towns of Export Excellence (TEE) alongside existing
ones aims to boost exports, particularly in handlooms, handicrafts, and carpets. These TEEs will receive priority access to export promotion funds
and benefit from Common Service Provider (CSP) support under the EPCG Scheme.
➢ Recognition of Exporters
➢ Promoting Export from the Districts
➢ Streamlining SCOMET Policy (Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET))
70
➢ Facilitating E-Commerce Exports with the Amnesty Scheme.
 Gold Monetization Scheme
➢ Gold Monetization Scheme (GMS) is aimed to mobilize the domestically available unused /unproductive gold lying with domestic
households and other Indian institutions/entities and to put the same into use for productive purpose.
➢ This in the long run will reduce the country’s reliance on the import of Gold to meet the domestic demand
➢Varient of Gold Monetization Scheme
➢ Short Term Bank Deposit (STBD)
➢ Medium Long Term Government Deposit (MLTGD)
➢ELIGIBILITY:
➢ Resident Indians-Individuals, HUFs, Proprietorship & Partnership firms, Trusts including Mutual Funds/Exchange Traded Funds
registered under SEBI (Mutual Fund) Regulations, Companies, Charitable institution, Central Government, State Government or
any other entity owned by Central Government or State Government.
➢ Joint deposits of two or more eligible depositors are also allowed under the scheme .

SIZE OF DEPOSIT
➢ The minimum net deposit at any one time will be 10 grams of gold (bars, coins, Jewellery excluding stones and other metals) after
certification from CPTC.
➢ There is no maximum limit for deposit under the scheme.
➢ All transactions under the scheme with the Bank will be in gold of 995 fineness.
➢ The deposit will be denominated in gold terms. The quantity of gold will be expressed up to three decimals of a gram.
➢ The Authorised branches for Gold Business will accept up to 2 Kg of Gold under both variants i.e. Short Term Bank Deposit (STBD)
and Medium Long Term Government Deposit (MLTGD).
Interest on the deposit under the scheme will start accruing from the date of conversion of gold deposited into tradable gold bars after
refinement OR 30 days after receipt of the gold at the CPTC/Branch, whichever is earlier. 71
 Gold Monetization Scheme
PERIOD OF DEPOSIT
S. Minimum Lock-in Applicable Interest
Type of Deposit Duration Periodicity of Interest Payment
No. Period Rate
1 year – 0.50%
As determined by
i. Short Term Bank Deposit (STBD) 1-3 years 2 year – 0.60% As determined by banks (Annual)
banks (01 year)
3 year – 0.75%
ii. Medium Term Government 5-7 years 3 years 2.25% p.a. Simple Interest annually or
Deposit (MTGD) cumulative interest at time of maturity
compounded annually.
iii. Long Term Government Deposit 12-15 years 5 years 2.50% p.a. Simple Interest annually or
(LTGD) cumulative interest at time of maturity
compounded annually.

➢ Collection and Purity Testing Centre (CPTC)-The collection and assaying centres certified by the Bureau of Indian Standards (BIS) and
notified by the Central Government for the purpose of handling gold deposited and redeemed under GMS.

➢ Gold Deposit Account–An account opened with a designated Branch under the Scheme and denominated in grams of gold.

➢ GMS Mobilization, Collection and Testing Agent (GMCTA): Jewellers / Refiners certified as CPTCs by BIS and meeting additional eligibility
conditions set by IBA will be recognized as GMS Mobilisation Collection & Testing Agent. For all intents and purposes, the term “CPTC”
shall be read as “CPTC/GMCTA” wherever applicable.

72
 Rupee Drawing Arrangements
➢ Rupee Drawing Arrangement (RDA) is a channel to receive cross-border remittances from overseas jurisdictions.
➢ Under this arrangement, the AD banks enter into tie-ups with the non-resident Exchange Houses in the FATF compliant countries to
open and maintain their Vostro Account.
➢ Currently, PNB has arrangement under RDA with 15 Exchange Houses located in 09 countries.
➢ In our Bank, this scheme is effected by way of two arrangements,
➢ i) Draft Drawing Arrangement and,
➢ ii) Speed Remittance arrangement, which is solely handled by ISB: New Delhi

Some of the Permissible transactions under RDA:

➢ Credit to Non-resident (External) Rupee accounts
➢ Payments to families of Non-resident Indians
➢ Payments in favour of Insurance companies, Mutual Funds
➢ Payments in favour of bankers for investments in shares, debentures.
➢ Payments to medical institutions and hospitals in India for medical treatment of NRIs / their dependents.
➢ Payments to hotels , Travel agents, utility service providers for their stay.
➢ Trade transactions up to Rs. 15 Lac per transaction.
➢ Tax payments in India.
➢ EMI payments in India to Banks and Non-Banking Financial Companies (NBFCs) for repayment of loans.
➢ Under no circumstances Donations/ contributions to charitable institutions should be routed through the Exchange Houses.
➢ No cash disbursement of remittances received is allowed under Rupee Drawing Arrangements.

73
World Travel Card

74
 MCWTC

The card have been launched on MasterCard platform, which is a unique product with multiple currencies loaded on
the same card thus eliminating the need to carry multiple cards for different destinations.

With superior security feature through 3D secure, Chip and PIN technology, the card can be used at ATM, POS
displaying MasterCard logo across the globe (except India, Nepal & Bhutan) & for E-COM transactions.

The card can be accessed from anywhere and anytime through web based customer portal. Branch can also
access the card functionalities under Branch portal ‘Multicurrency WTC’ provided in Non-CBS homepage under IBD.

75
 SALIENT FEATURES - MCWTC

ELIGIBILITY
Indian Nationals, valid PAN Card holder, desirous of visiting/travelling abroad (except Nepal and Bhutan) for any purpose as permitted by RBI
as under:

CODE PARTICULARS

S0304 Travel for Medical Treatment

S0305 Travel for Education (including fees, hostel expenses etc.)

S1107 Studies Abroad

S1108 Medical Treatment

S0306 Travel for Employment and Personal

S0301 Business Travel

S0303 Travel for Pilgrimage

S1307 Emigration-only to meet the incidental expenses

76
Mult-Currency WTC

77
 SALIENT FEATURES - MCWTC

TRANSACTION LIMIT
Maximum cap on overall transactions value wise and frequency wise (daily/monthly/yearly) to prevent misuse of the
card as under:

LIMIT DAILY MONTHY YEARLY

TRANSACTION 5 20 150
FREQUENCY

TRANSACTION VALUE** $5000 $15000 $25000

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LOADING,RELOADING & LIMITS

Maximum loading limits for resident individual in the Card allowed by the branch is at USD 30000 or its equivalent covering all the currencies in a
financial year subject to availability of LRS limit which is USD 2,50,000 or equivalent for any financial year (April to March).

However, if any request received from the customers for loading any amount beyond USD 30000, the card issuing branch will enter relaxation details
in AMTRELAX menu in CBS and will send a suitable recommendation to the respective Circle Office which shall be examined by the Circle office on
case to case basis and accord sanction for relaxation in loading limits up to USD 50,000 or its equivalent subject to applicable LRS limits.

LOADING,RELOADING & LIMITS

Any further relaxation beyond USD 50,000 or its equivalent, the respective Zonal Office will examine and accord sanction for necessary relaxation
subject to applicable LRS limits.

In case of LCB/ELCB, necessary sanction shall be accorded by the branch itself by entering relaxation details in AMTRELAX menu in CBS subject to
applicable LRS limits.

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LOADING,RELOADING & LIMITS

SR NO CURRENCY MINIMUM LOADING

1 USD 150

2 EURO 100

3 GBP 100

4 CAD 200

5 AED 600

6 SGD 200
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 SALIENT FEATURES - MCWTC

(LOADING,RELOADING & LIMITS)

Card may be issued against cash for an amount below Rs. 50,000/-.
Structural reloading of MCWTCs by cash i.e. loading through different transactions on same day or on different
dates for the same date of journey is not permitted.

DATE OF TRAVEL

Branches should ensure that expected date of travel should not be beyond 60 days from the date of loading.

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 SALIENT FEATURES - MCWTC

Surrender/Redemption of unutilized balances

Authorized Branches shall redeem the unutilized balance outstanding in the cards immediately upon request by
the resident Indians to whom the cards are issued subject to retention of:

Amounts that are authorized and remain unclaimed/ not settled by the acquirers as of the date of redemption till
the completion of the respective settlement cycle.

A small balance not exceeding US$ 100, for meeting any pipeline transactions till the completion of the
respective settlement cycle.

Transaction fees / service tax payable in India in Rupees.

For the amount that are authorized but unclaimed/ not settled by the acquirer, the issuer of such cards can hold
such amounts until such transactions are processed/settled by the acquirers within the prescribed settlement
timeframe.

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General permission is available to any resident individual to surrender unspent Foreign Exchange of MCWTC to
authorized branches within a period of 180 days of date of return.

However, if a person approached to the authorized branch to surrender the unspent Forex of MCWTC after the
prescribed period of 180 days, branch cannot refuse to purchase the foreign exchange.

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COMPLAINT HANDLING

Customer can lodge any complaint by contacting our Customer Care Centre at toll free number 18001800,
18002021 or paid helpline at 0120-2490000 or visiting the base branch.

In case of a complaint for decline/ non- working of card at POS, E-com or ATM, branch may take up the issue
with ISB by sending the details of the complaint to isb_vostro@pnb.co.in and ibd.wtc@pnb.co.in.

Upon receiving a complaint regarding refund of amount/ wrong deduction in account/release of preauthorized
holding amount, branches are advised to forward the complaint no. with complete details of claim to settlement
department on its mail ID recon3.isg@pnb.co.in under copy to isb_vostro@pnb.co.in.

In case of non-working of card at foreign centres, in emergent situations Master Card can arrange delivery of
cash at Cardholder’s cost.

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CHARGES

SR NO PARTICULARS CHARGES

1 Issuance/Recharge Rs.100+ Applicable Taxes

2 Duplicate PIN Rs.100+ Applicable Taxes

3 Replacement of Card Rs.100+ Applicable Taxes

(if delivered in India)
USD 20.00 for delivery abroad
4 Refund/ Surrender of Balance in branch** Rs.100+ Applicable Taxes

5 Mark up on conversion(cross currency payment) 2% of transaction amount + applicable Taxes

over and above the charges of the Master Card.

6 For Staff members, no service charge is applicable for Issue/ Recharge/surrender/Replacement of card and issuance of
Duplicate PIN.
**Charges for refund of balance amount through surrender of card at branch in India proposed to be Rs.100. However, no refund is permitted
through ATM in India.

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 Money Transfer Service Scheme - MTSS
➢ MTSS is a quick and easy way of transferring Inward personal remittances from abroad to beneficiaries in India.
➢ ISB works as a Nodal office for various international fund transfers taking place using MTSS facility provided by different Money Transfer
Operators (MTOs).
➢ A cap of USD 2500 has been placed on individual remittance under the scheme.
➢ Only 30 remittances can be received by a single individual beneficiary under the scheme during a calendar year.
➢ Amounts up to Rs. 50,000/- may be paid in cash. Any amount exceeding this limit shall be paid directly to the beneficiary's account.
➢ Branch would verify identity of the beneficiary with the OVD.
➢ MTSS request details are entered and verified in CBS Finacle using menu ‘MTSS’, and the request gets automatically forwarded to the ISB
(Nodal Office).
➢ The respective branch makes the payment to beneficiary by debiting their Suspense A/c once the request is authorized by ISB.

Presently our bank is having MTSS agreement with M/s Transfast Financial Services Private Ltd. through M/s Instant Global Money Transfer
Pvt. Ltd .

Sr. Money Transfer Max. Trx. Service Rem. Track ID Suspense Service Income Per
No Organization Amount Provider Code (Digits) Head Provider Help Trx. (Rs.)
in CBS Desk

1 Transfast Financial Eqv. USD 007 12 or 5711479 0484- Average 150-

Services Private Ltd. 2500 13 2771500 to 200
through M/s Instant Alpha- 505
Global Money Transfer numeric 9464083699
Pvt. Ltd

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Thank you!