TT Rates and Bill Rates

 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 ofForeign bills. This rate is used for cancellation of Forward Sales Contract.

Calculation

Spot Rate – Exchange Margin

Bill Buying Rate::

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::

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:::

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.