TT Rates and Bill Rates
Following 4 types of buying and selling rates are important:
1. TT Buying rate
2. Bill Buying rate
3. TT Selling rate
4. Bill Selling rate
In Interbank market, exchange rate is quoted up to 4 decimals in multiples of 0.0025. e.g.
1USD=53.5625/5650
For customers the exchange rate is quoted in two decimal places i.e. Rupees and paisa. e.g. 1
USD =Rs. 55.54.
Amount being paid or received will be rounded off to nearest Rupee.
TT Buying Rate
It is required to calculate when our Nostro account is already credited or
being credited without delay e.g. Receipt of DD, MT, TT or collection of
Foreign bills. This rate is used for cancellation of Forward Sales Contract.
Calculation
Spot Rate – Exchange Margin
Bill Buying Rate Bill Buying rate is applied when bank gives INR to the customer before
receipt of Foreign Exchange in the Nostro account i.e. Nostro account is
credited after the purchase transaction. In such cases.
Examples are:
Export Bills Purchased/Discounted/Negotiated.
Cheques/DDs purchased by the bank.
Calculation
Spot Rate + Forward Premium (or deduct forward discount) – Exchange
margin.
TT Selling Rate Any sale transaction where no delay is involved is quoted at TT selling rate.
It is desired in issue of TT, MT or Draft. It is also desired in crystallization of
Export bills and Cancellation of Forward purchase contract.
Calculation
Spot Rate + Exchange Margin
Bill Selling Rate It is applied where handling of documents is involved e.g. Payment against
Import transactions:
Calculation
Spot Rate + Exchange Margin for TT selling + Exchange margin for Bill
Selling
Examples
Q. 1
Bank received MT of USD 5000 on 15th Sep. The Nostro account was already credited. What
amount will be paid to the customer: Spot Rate 34.25/30. Oct Forward Differential is 22/24.
Exchange margin is .80%
Solution
TT buying Rate will be applied
34.25 - .274 = 33.976 Ans.
Q. 2
On 15th July, Customer presented a sight bill for USD 100000 for Purchase under LC. How
much amount will be credited to the account of the Exporter. Transit period is 20 days and
Exchange margin is 0.15%. The spot rate is 34.75/85. Forward differentials:
Aug: .60/.57 Sep:1.00/.97 Oct: 1.40/1.37
Solution
Bill Buying rate of August will be applied.
Spot Rate----34.75 Less discount .60 = 34.15
Less Exchange Margin O.15% i.e. .0512 =34.0988 Ans.
( Transit period is rounded to next month since currency will be cheaper as it is buy transaction)
Q. 3
Issue of DD on New York for USD 25000. The spot Rate is IUSD = 34.3575/3825 IM forward
rate is 34.7825/8250
Exchange margin: 0.15%
Solution:
TT Selling Rate will Apply
Spot Rate = 34.3825 Add Exchange margin (.15%) i.e. 0.0516
TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.
Q. 4
On 12th Feb, received Import Bill of USD-10000. The bill has to retired to debit the account of
the customer. Inter-bank spot rate =34.6500/7200. The spot rate for March is 5000/4500. The
exchange margin for TT selling is .15% and Exchange margin for Bill selling is .20%. Quote rate
to be applied.
Solution
Bill Selling Rate will be applied.
Spot Rate + Exchange margin for TT Selling + Exchange margin for Bill selling =
34.7200+.0520+.0695 = 34.8415 Ans.
Forward Contract – Due date and Transit period
(Bill Buying Rates and Bill Selling Rates)
If due date after adding transit period and forward period falls in a particular month
Buy Transactions
Quote rates applicable to lower month (if currency is at premium) and same month (if currency
is at discount) due to the reason that currency becomes cheaper and Buy low and Sell High
Sale Transactions
Quote rates applicable to Same month (if currency is at premium) and lower month (if currency
is at discount) due to the reason that currency becomes dearer and Buy low and Sell High
Forward contracts can be booked by Resident Individuals up to USD1lac.
Buy
Transactions-
Currency at
Premium
Transit Period is
rounded off to
lower month in
which due date
falls
Spot Rate on 16.07.2012 is 1 USD = 34.6850/7275
Spot August = 4000/4200, Spot Sep = 7500/7700, Spot Oct = 1.05/1.07
Spot Nov =1.40/1.42
Transit Period = 25 days , Exchange Margin = 0.15%
Calculate Forward Buying Rate of 3 M Usance bill.
Due date of realization of Bill = 16.7.2012 + 3M + 25 days = 9.11.2012
By Rounding Transit period to lower month, Oct Rate will be as under:
34.6850+1.05 - .0536 (exchange margin) = 35.6814
Buy
Transactions-
Currency at
Discount
Transit Period is
rounded off to
same month in
which due date
falls
On 22.7.2013,
Spot Rate is 35.6000/6500 Forward 1M=3500/3000 2M=5500/5000
3M=8500/8000
Transit Period ----20 days Exchange Margin = 0.15%.
Find Bill Buying Rate & 2 M Forward Buying Rate
Solution
Bill Buying Rate (Ready) : Bill Date +20 days = 11.8.2013
Spot Rate = 35.6000 Less Forward Discount 1M (0.3500) Less Exchange
Margin 0.15% (0.529)
i.e. 35.6000-.3500-.0529(0.15% of 35.2500) = 35.1971
Solution:
TT Selling Rate will Apply
Spot Rate = 34.3825 Add Exchange margin (.15%) i.e. 0.0516
TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.
Q. 4
On 12th Feb, received Import Bill of USD-10000. The bill has to retired to debit the account of
the customer. Inter-bank spot rate =34.6500/7200. The spot rate for March is 5000/4500. The
exchange margin for TT selling is .15% and Exchange margin for Bill selling is .20%. Quote rate
to be applied.
Solution
Bill Selling Rate will be applied.
Spot Rate + Exchange margin for TT Selling + Exchange margin for Bill selling =
34.7200+.0520+.0695 = 34.8415 Ans.
Forward Contract – Due date and Transit period
(Bill Buying Rates and Bill Selling Rates)
If due date after adding transit period and forward period falls in a particular month
Buy Transactions
Quote rates applicable to lower month (if currency is at premium) and same month (if currency
is at discount) due to the reason that currency becomes cheaper and Buy low and Sell High
Sale Transactions
Quote rates applicable to Same month (if currency is at premium) and lower month (if currency
is at discount) due to the reason that currency becomes dearer and Buy low and Sell High
Forward contracts can be booked by Resident Individuals up to USD1lac.
Buy
Transactions-
Currency at
Premium
Transit Period is
rounded off to
lower month in
which due date
falls
Spot Rate on 16.07.2012 is 1 USD = 34.6850/7275
Spot August = 4000/4200, Spot Sep = 7500/7700, Spot Oct = 1.05/1.07
Spot Nov =1.40/1.42
Transit Period = 25 days , Exchange Margin = 0.15%
Calculate Forward Buying Rate of 3 M Usance bill.
Due date of realization of Bill = 16.7.2012 + 3M + 25 days = 9.11.2012
By Rounding Transit period to lower month, Oct Rate will be as under:
34.6850+1.05 - .0536 (exchange margin) = 35.6814
Buy
Transactions-
Currency at
Discount
Transit Period is
rounded off to
same month in
which due date
falls
On 22.7.2013,
Spot Rate is 35.6000/6500 Forward 1M=3500/3000 2M=5500/5000
3M=8500/8000
Transit Period ----20 days Exchange Margin = 0.15%.
Find Bill Buying Rate & 2 M Forward Buying Rate
Solution
Bill Buying Rate (Ready) : Bill Date +20 days = 11.8.2013
Spot Rate = 35.6000 Less Forward Discount 1M (0.3500) Less Exchange
Margin 0.15% (0.529)
i.e. 35.6000-.3500-.0529(0.15% of 35.2500) = 35.1971
USA, rate of interest is 6% whereas in Germany, rate of interest is 3% for
EURO. We will borrow from Germany and lend in USA where
1EURO =1.5 USD
Forward Point Calculation for 3 Months
Spot Rate x Interest rate difference x Forward Period
100 x Nos. of days in a year
= 1.5 x 3 x 90
100*360
=0.01125
3 month swap rate = 1.5 + 0.01125 = 1.5112
Calculation of Interest Differential
Forward Points x Nos. of Days x 100
Forward Period x Spot Rate
= 0.01125 x 360 x 100 =3%
1.5 x 90
Ex.1
Calculate TT selling rate for GBP/INR, if USD/INR is 43.85/87 & GBP/USD is 1.9345/49. A
margin of 0.15% is to be loaded.
Solution ; TT selling rate of GBP/INR
1 GBP = 1.9349 USD
= (1.9349 *43.87)+Margin 0.15%
=84.8841+.1273=85.0114 INR 85.0114-------------------------Ans.
Ex.2
A foreign correspondent intends to fund his Vostro Account maintained with Mumbai branch of
SBI. What rate will be quoted if 1 USD = 44.23/27 and margin is 0.08%
Solution : TT buying rate will quoted
44.23-.035 = 44.195 ---------------------------------------Ans.
Ex.3
If Swiss Franc is quoted as USD = CHF 1.2550/54 and in India, USD =INR43.50/52, how much
INR will exporter get for his export bill of CHF 50000.
Solution :
Swiss Franc will be sold for USD in overseas market and USD will be bought in local market i.e.
Sell Rate of CHF and Buy rate of USD.(Buy Low Sell High in both quotations)
1 USD = 1.2554 CHF and 1USD=INR 43.50
1CHF=43.50/1.2554 = 34.6503
Amount as paid to exporter = 34.6503*50000=17,32,515/- ----------------Ans.
(Both are direct quotations and Maxim Buy Low Sell High will apply in both)
Ex.4
If Swiss Franc is quoted as USD = CHF 1.2550/54 and USD =INR43.50/52, how much INR will
Importer pay for his import bill of CHF 50000.
Solution :
Swiss Franc will be bought against USD in overseas market and USD will be sold in local
market i.e. Buy rate of CHF and Sell rate of USD.
1 USD = 1.2550 CHF and 1USD=INR 43.52
1CHF=43.52/1.2550 = 34.6773
Amount to be received from Importer = 34.6773*50000
=17,33,865/- ----Ans.
(Both are direct quotations and Maxim Buy Low Sell High will apply in both)
Q. 5
Exporter received Advance remittance by way of TT French Franc 100000.
The spot rates are in India IUSD = 35.85/35.92 1M forward =.50/.60
The spot rates in Singapore are 1USD = 6.0220/6.0340 1M forward =.0040/.0045
Exchange margin = 0.8%
Solution
Cross Rate will apply
USD will be bought in the local market at TT Buying rate and sold at Spot Selling Rates in
Singapore for French Francs:
TT Buying Rates USD/INR = Spot rate – Exchange margin = 35.8500-.0287 = 35.8213
Spot Selling Rate for USD/Francs = 6.0340
Inference:
6.0340 Franc = 1USD
= INR 35.8213
1 franc = 35.8213/6.0340 = INR 5.9366 Ans.
(Both are direct quotations and Maxim Buy Low Sell High will apply in both)
Q.6 What rate will be quoted for repatriation of FCNR deposit (spot rate or TT rate)
Ans. No rate as the amount is to be paid in Foreign currency itself.
Forex Dealing
Room
operations
It is a service branch which deals Buying and Selling Operations of the
bank. It manages Foreign currency Assets and Liabilities and also
manages Nostro accounts.
A dealer has to maintain two positions:
1. Funds position
2. Currency Position
Currency position can be Overbought or Oversold.It is called Open
position. Hedging is done to square off the open position.
Mid Office deals with Risk Management.
Back Office takes care of settlement and Reconciliation.
Following 4 types of buying and selling rates are important:
1. TT Buying rate
2. Bill Buying rate
3. TT Selling rate
4. Bill Selling rate
In Interbank market, exchange rate is quoted up to 4 decimals in multiples of 0.0025. e.g.
1USD=53.5625/5650
For customers the exchange rate is quoted in two decimal places i.e. Rupees and paisa. e.g. 1
USD =Rs. 55.54.
Amount being paid or received will be rounded off to nearest Rupee.
TT Buying Rate
It is required to calculate when our Nostro account is already credited or
being credited without delay e.g. Receipt of DD, MT, TT or collection of
Foreign bills. This rate is used for cancellation of Forward Sales Contract.
Calculation
Spot Rate – Exchange Margin
Bill Buying Rate Bill Buying rate is applied when bank gives INR to the customer before
receipt of Foreign Exchange in the Nostro account i.e. Nostro account is
credited after the purchase transaction. In such cases.
Examples are:
Export Bills Purchased/Discounted/Negotiated.
Cheques/DDs purchased by the bank.
Calculation
Spot Rate + Forward Premium (or deduct forward discount) – Exchange
margin.
TT Selling Rate Any sale transaction where no delay is involved is quoted at TT selling rate.
It is desired in issue of TT, MT or Draft. It is also desired in crystallization of
Export bills and Cancellation of Forward purchase contract.
Calculation
Spot Rate + Exchange Margin
Bill Selling Rate It is applied where handling of documents is involved e.g. Payment against
Import transactions:
Calculation
Spot Rate + Exchange Margin for TT selling + Exchange margin for Bill
Selling
Examples
Q. 1
Bank received MT of USD 5000 on 15th Sep. The Nostro account was already credited. What
amount will be paid to the customer: Spot Rate 34.25/30. Oct Forward Differential is 22/24.
Exchange margin is .80%
Solution
TT buying Rate will be applied
34.25 - .274 = 33.976 Ans.
Q. 2
On 15th July, Customer presented a sight bill for USD 100000 for Purchase under LC. How
much amount will be credited to the account of the Exporter. Transit period is 20 days and
Exchange margin is 0.15%. The spot rate is 34.75/85. Forward differentials:
Aug: .60/.57 Sep:1.00/.97 Oct: 1.40/1.37
Solution
Bill Buying rate of August will be applied.
Spot Rate----34.75 Less discount .60 = 34.15
Less Exchange Margin O.15% i.e. .0512 =34.0988 Ans.
( Transit period is rounded to next month since currency will be cheaper as it is buy transaction)
Q. 3
Issue of DD on New York for USD 25000. The spot Rate is IUSD = 34.3575/3825 IM forward
rate is 34.7825/8250
Exchange margin: 0.15%
Solution:
TT Selling Rate will Apply
Spot Rate = 34.3825 Add Exchange margin (.15%) i.e. 0.0516
TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.
Q. 4
On 12th Feb, received Import Bill of USD-10000. The bill has to retired to debit the account of
the customer. Inter-bank spot rate =34.6500/7200. The spot rate for March is 5000/4500. The
exchange margin for TT selling is .15% and Exchange margin for Bill selling is .20%. Quote rate
to be applied.
Solution
Bill Selling Rate will be applied.
Spot Rate + Exchange margin for TT Selling + Exchange margin for Bill selling =
34.7200+.0520+.0695 = 34.8415 Ans.
Forward Contract – Due date and Transit period
(Bill Buying Rates and Bill Selling Rates)
If due date after adding transit period and forward period falls in a particular month
Buy Transactions
Quote rates applicable to lower month (if currency is at premium) and same month (if currency
is at discount) due to the reason that currency becomes cheaper and Buy low and Sell High
Sale Transactions
Quote rates applicable to Same month (if currency is at premium) and lower month (if currency
is at discount) due to the reason that currency becomes dearer and Buy low and Sell High
Forward contracts can be booked by Resident Individuals up to USD1lac.
Buy
Transactions-
Currency at
Premium
Transit Period is
rounded off to
lower month in
which due date
falls
Spot Rate on 16.07.2012 is 1 USD = 34.6850/7275
Spot August = 4000/4200, Spot Sep = 7500/7700, Spot Oct = 1.05/1.07
Spot Nov =1.40/1.42
Transit Period = 25 days , Exchange Margin = 0.15%
Calculate Forward Buying Rate of 3 M Usance bill.
Due date of realization of Bill = 16.7.2012 + 3M + 25 days = 9.11.2012
By Rounding Transit period to lower month, Oct Rate will be as under:
34.6850+1.05 - .0536 (exchange margin) = 35.6814
Buy
Transactions-
Currency at
Discount
Transit Period is
rounded off to
same month in
which due date
falls
On 22.7.2013,
Spot Rate is 35.6000/6500 Forward 1M=3500/3000 2M=5500/5000
3M=8500/8000
Transit Period ----20 days Exchange Margin = 0.15%.
Find Bill Buying Rate & 2 M Forward Buying Rate
Solution
Bill Buying Rate (Ready) : Bill Date +20 days = 11.8.2013
Spot Rate = 35.6000 Less Forward Discount 1M (0.3500) Less Exchange
Margin 0.15% (0.529)
i.e. 35.6000-.3500-.0529(0.15% of 35.2500) = 35.1971
Solution:
TT Selling Rate will Apply
Spot Rate = 34.3825 Add Exchange margin (.15%) i.e. 0.0516
TT Selling Rate = Spot Rate + Exchange Margin = 34.4341 Ans.
Q. 4
On 12th Feb, received Import Bill of USD-10000. The bill has to retired to debit the account of
the customer. Inter-bank spot rate =34.6500/7200. The spot rate for March is 5000/4500. The
exchange margin for TT selling is .15% and Exchange margin for Bill selling is .20%. Quote rate
to be applied.
Solution
Bill Selling Rate will be applied.
Spot Rate + Exchange margin for TT Selling + Exchange margin for Bill selling =
34.7200+.0520+.0695 = 34.8415 Ans.
Forward Contract – Due date and Transit period
(Bill Buying Rates and Bill Selling Rates)
If due date after adding transit period and forward period falls in a particular month
Buy Transactions
Quote rates applicable to lower month (if currency is at premium) and same month (if currency
is at discount) due to the reason that currency becomes cheaper and Buy low and Sell High
Sale Transactions
Quote rates applicable to Same month (if currency is at premium) and lower month (if currency
is at discount) due to the reason that currency becomes dearer and Buy low and Sell High
Forward contracts can be booked by Resident Individuals up to USD1lac.
Buy
Transactions-
Currency at
Premium
Transit Period is
rounded off to
lower month in
which due date
falls
Spot Rate on 16.07.2012 is 1 USD = 34.6850/7275
Spot August = 4000/4200, Spot Sep = 7500/7700, Spot Oct = 1.05/1.07
Spot Nov =1.40/1.42
Transit Period = 25 days , Exchange Margin = 0.15%
Calculate Forward Buying Rate of 3 M Usance bill.
Due date of realization of Bill = 16.7.2012 + 3M + 25 days = 9.11.2012
By Rounding Transit period to lower month, Oct Rate will be as under:
34.6850+1.05 - .0536 (exchange margin) = 35.6814
Buy
Transactions-
Currency at
Discount
Transit Period is
rounded off to
same month in
which due date
falls
On 22.7.2013,
Spot Rate is 35.6000/6500 Forward 1M=3500/3000 2M=5500/5000
3M=8500/8000
Transit Period ----20 days Exchange Margin = 0.15%.
Find Bill Buying Rate & 2 M Forward Buying Rate
Solution
Bill Buying Rate (Ready) : Bill Date +20 days = 11.8.2013
Spot Rate = 35.6000 Less Forward Discount 1M (0.3500) Less Exchange
Margin 0.15% (0.529)
i.e. 35.6000-.3500-.0529(0.15% of 35.2500) = 35.1971
USA, rate of interest is 6% whereas in Germany, rate of interest is 3% for
EURO. We will borrow from Germany and lend in USA where
1EURO =1.5 USD
Forward Point Calculation for 3 Months
Spot Rate x Interest rate difference x Forward Period
100 x Nos. of days in a year
= 1.5 x 3 x 90
100*360
=0.01125
3 month swap rate = 1.5 + 0.01125 = 1.5112
Calculation of Interest Differential
Forward Points x Nos. of Days x 100
Forward Period x Spot Rate
= 0.01125 x 360 x 100 =3%
1.5 x 90
Ex.1
Calculate TT selling rate for GBP/INR, if USD/INR is 43.85/87 & GBP/USD is 1.9345/49. A
margin of 0.15% is to be loaded.
Solution ; TT selling rate of GBP/INR
1 GBP = 1.9349 USD
= (1.9349 *43.87)+Margin 0.15%
=84.8841+.1273=85.0114 INR 85.0114-------------------------Ans.
Ex.2
A foreign correspondent intends to fund his Vostro Account maintained with Mumbai branch of
SBI. What rate will be quoted if 1 USD = 44.23/27 and margin is 0.08%
Solution : TT buying rate will quoted
44.23-.035 = 44.195 ---------------------------------------Ans.
Ex.3
If Swiss Franc is quoted as USD = CHF 1.2550/54 and in India, USD =INR43.50/52, how much
INR will exporter get for his export bill of CHF 50000.
Solution :
Swiss Franc will be sold for USD in overseas market and USD will be bought in local market i.e.
Sell Rate of CHF and Buy rate of USD.(Buy Low Sell High in both quotations)
1 USD = 1.2554 CHF and 1USD=INR 43.50
1CHF=43.50/1.2554 = 34.6503
Amount as paid to exporter = 34.6503*50000=17,32,515/- ----------------Ans.
(Both are direct quotations and Maxim Buy Low Sell High will apply in both)
Ex.4
If Swiss Franc is quoted as USD = CHF 1.2550/54 and USD =INR43.50/52, how much INR will
Importer pay for his import bill of CHF 50000.
Solution :
Swiss Franc will be bought against USD in overseas market and USD will be sold in local
market i.e. Buy rate of CHF and Sell rate of USD.
1 USD = 1.2550 CHF and 1USD=INR 43.52
1CHF=43.52/1.2550 = 34.6773
Amount to be received from Importer = 34.6773*50000
=17,33,865/- ----Ans.
(Both are direct quotations and Maxim Buy Low Sell High will apply in both)
Q. 5
Exporter received Advance remittance by way of TT French Franc 100000.
The spot rates are in India IUSD = 35.85/35.92 1M forward =.50/.60
The spot rates in Singapore are 1USD = 6.0220/6.0340 1M forward =.0040/.0045
Exchange margin = 0.8%
Solution
Cross Rate will apply
USD will be bought in the local market at TT Buying rate and sold at Spot Selling Rates in
Singapore for French Francs:
TT Buying Rates USD/INR = Spot rate – Exchange margin = 35.8500-.0287 = 35.8213
Spot Selling Rate for USD/Francs = 6.0340
Inference:
6.0340 Franc = 1USD
= INR 35.8213
1 franc = 35.8213/6.0340 = INR 5.9366 Ans.
(Both are direct quotations and Maxim Buy Low Sell High will apply in both)
Q.6 What rate will be quoted for repatriation of FCNR deposit (spot rate or TT rate)
Ans. No rate as the amount is to be paid in Foreign currency itself.
Forex Dealing
Room
operations
It is a service branch which deals Buying and Selling Operations of the
bank. It manages Foreign currency Assets and Liabilities and also
manages Nostro accounts.
A dealer has to maintain two positions:
1. Funds position
2. Currency Position
Currency position can be Overbought or Oversold.It is called Open
position. Hedging is done to square off the open position.
Mid Office deals with Risk Management.
Back Office takes care of settlement and Reconciliation.
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