International trade policy frame work

Organizational bodies

WTO

The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 124 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world.



The WTO deals with regulation of trade in goods, services and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments. The WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals. Trade-related disputes are resolved by independent judges at the WTO through a dispute resolution process.



WTO came into being on 1995.

It has come into existence after GAAT General Agreement on Tariffs and Trade (GAAT)

It helps producers of good and services, importer, exporters to do their business

Uruguay rounds of talks made for the formation of WTO

Totally 164 countries present in WTO as of July 29th 2016

In 2000 agriculture and services discussions started in Doha round of talks

Fourth ministerial conference held in Doha Qatar in november20001

In the fourth conference non-agricultural tariff antidumping details are discussed

World bank identified 32 major regional trade blocks

Trade block means group of countries that have established preferential trade agreements among member countries

PTA stands for preferential trade agreements

Most commonly used PTA is Free Trade agreement

Free Trade Agreement means reducing or removing the tariff and non-tariff barrier between member nations but not with the non-member nations

A step forward for the FTA is the Custom Union (CU) where not only removing trade barrier with the member nations but also maintaining the identical trade with non-members.

Regional and Bi lateral trade agreements can cause trade diversion and trade distortions

List of RTB:

ASEAN: It was founded in August 8th 1967

Meeting will be held annually

APEC: Asia Pacific Economic Cooperation

It has 21 members called Member Economies

EAEC: East Asia Economic Caucus

It is known as Asian Plus Three

ASEM: Asia Europe Meeting

It is established in 1996

CHOGM: Common Wealth Heads of Government Meetings

EU: European Union strong international trade

There are five EU institutions namely European Parliament, Council of EU, E Commission, Court of Justice, Court of Auditors

NAFTA: North America Free Trade Agreement

CIS: Common Wealth of Independent States

COMESA: Common Market for Eastern and Southern Africa

SAARC: South Asian Association of Regional Cooperation established on Dec 8th 1985

ITR: Intellectual Property rights

It will be held annually.

MERCOSUR: It is a tariff union of South American Countries

It is the fastest growing trading blocks

G-15 group established in 1989

G7 economic power group became G8 after adding Russia

G77 is the third largest world coalition in United Nations

D8 is the group of developing eight countries

IOR-ARC (Indian Ocean Rim Association for Regional Cooperation) established in Mauritius March 1995

RISK MANAGEMENT important terms

Credit risk : The possibility of loss arising on account default by the borrower or counterparties due to inability or willingness
or deterioration in the quality of credit portfolio.
Default risk The risk on account of potential failure of the borrower to make promised payments, partly or wholly. Credit
spread risk or downgrade risk : The risk arising on account of actual or perceived deterioration in credit quality and may arise
from a rating change. There may not be actual default on the part of the borrowers.
Systematic or intrinsic risk : It is the risk which corresponds to the risk to that segment of the economy, to which that loan is
extended. If a portfolio is diversified across regions, industries, markets and borrowers, the portfolio risk is minimized but the
risk is still prevalent due to risk to those regions, industries or market.
Concentration risk : The risk to the portfolio on account of concentration of loans in specific regions, industries, markets or
borrowers, instead of diversification of the portfolio.
Counterparty risk : The risk arising on account of non-performance of trading partners of the borrower, leading to default by
the borrower. It is a transient financial risk associated with trading.
Country risk : The risk arising due to default by the borrower or counterparty on account of restrictions imposed by the govt.
of other countries due to economic conditions prevailing in the countries of counterparties.
Credit rating : An assessment of the borrower to determine whether after expiry of a given period, the borrower will have the
capability to honour the financial commitments.

Credit rating model : The tool or a methodology, used by a credit rating agency to carry credit rating.
Rating migration : The change in the rating of a borrower over a period of time when rated on the same standard or model,
which may lead to down grade risk.
Altman's Z Score : A credit rating model that forecasts the probability of a firm becoming bankrupt within 12 months' period.
It combines five financial ratios.
JPMorgan's Credit Metrics: A credit rating model developed by .113 Morgan which focuses on estimating the volatility in the
value of assets caused by variations in the quality of assets.
Credit Risk+: A credit rating model by Credit Swiss which is based on actuarial calculation of expected default rates and
unexpected losses from the default.
Credit appraisal : The process of evaluation of creditworthiness of the borrower and the activity/project with a view to take
decision on the credit request from a prospective borrower.
Prudential limits : The ceilings fixed by the bank on different type of exposure say, loan concentration, credit exposure,
maturity profile of the loan book etc.
Risk pricing : The fixation of interest rates and other levies by the bank corresponding to the quantified risk.

Loan review mechanism: A tool for constant evaluation of the quality of the loan portfolio with a view to bringing qualitative
improvements in credit administration.
Credit risk mitigation : The process through which the credit risk is reduced or transferred to a counter party. It may involve
proper documentation, securing through collaterals etc.
Securitisation: A process where the financial securities are issued against the cash inflows (in the form of repayment of
principal and interest) generated from a pool of loan assets.
Special purpose vehicle : An agency that carries the process of securitization.
Credit derivatives : The tradable financial instruments created on the basis of underlying credit assets (like loans, bonds,
accounts receivables etc.) by unbundling them into a commodity. CDs transfer the risk in the credit assets without
transferring the underlying assets_
Protection buyers The originators of the credit derivatives which transfer the credit risk to the protection sellers without
transferring the credit asset.
Protection sellers: The party which undertakes to provide the protection to the protection buyer, for a price, from credit risk
with reference to a notional value.
Credit event: In the context of credit derivatives, it is a happening like delinquency, default, foreclosures, prepayment etc. as
agreed in the contract, taking place with reference to the obligation, when protection seller shall be required to make the
payment.
Credit default swaps (CDS) A simple and popular form of Credit Derivative under which the protection buyer agrees to pay
regular premium to the protection seller for buying protection against the reference obligation. These are generally offbalance
sheet items.
Credit linked notes (CLN) : These are on-balance sheet equivalents of a credit default swap, that combine credit derivatives to
normal bond instruments. lt converts a credit derivative to a marketable instrument.
Total return swap (TRS): Under this arrangement the protection buyers swaps with the Protection seller , the actual return on
an asset, in return for a premium.

Operational Risk Quantification...Risk management

Operational Risk Quantification
The Basel Committee has put forward a framework consisting of 3 options for calculating operational risk capital charges in a
'continuum' of increasing sophistication and risk sensitivity. These are, in the order of their increasing complexity, viz.,
(i) the Basic Indicator Approach
(ii) the Standardised Approach and
(iii) Advanced Measurement Approach.
Reserve Bank has initially allowed the banks to use the Basic Indicator Approach for computing regulatory capital for
operational risk. Some banks are expected to move along the range toward more sophisticated approaches as they develop
more sophisticated operational risk management systems and practices which meet the prescribed qualifying criteria.
The Basic Indicator Approach

At the minimum, banks in India should adopt this approach immediately while computing capital for operational risk. Under this,
the banks have to hold capital for operational risk equal to a fixed percentage (alpha) of a single indicator which has currently been
proposed to be "gross income". This approach is available for all banks irrespective of their level of sophistication. The charge may
be expressed as follows:
K BIA = [ E (GI a)]/n
Where: KBIA = the capital charge under the Basic Indicator Approach.
GI = annual gross income, where positive, over the previous three years
a =15% set by the Committee, relating the industry-wide level of required capital to the industry-wide level of the indicator.
n = number of the previous three years for which gross income is positive.
The Standardised Approach
In the Standardised Approach, banks' activities are divided into 8 business lines given above.
Within each business line, gross income is a broad indicator that serves as a proxy for the scale of business operations and thus the
likely scale of operational risk exposure within each of these business lines. The capital charge for each business line is calculated
by multiplying gross income by a factor (denoted beta) assigned to that business line. Beta serves as a proxy for the industry-wide
relationship between the operational risk loss experience for a given business line and the aggregate level of gross income for that
business line_ It should be noted that in the Standardised Approach gross income is measured for each business line, not the whole
institution, i.e. in corporate finance, the indicator is the gross income generated in the corporate finance business line.
Beta factors for different business lines
Corporate finance Gross income 18% Trading and sales Gross income 18%
Retail banking Gross income 12% Commercial banking Gross income 15%
Payment and settlement Gross income 18% Agency services Gross income 15%
Asset management Gross income 12% Retail brokerage Gross income 12%
Advanced Measurement Approaches (AMA)
Under the AMA, the regulatory capital requirement will be equal the risk measure generated by the bank's internal operational risk
measurement system using the quantitative and qualitative criteria for the AMA. Use of the AMA is subject to supervisory approval.
Supervisory approval would be conditional on the bank demonstrating to the satisfaction of the relevant supervisors that the
allocation mechanism for these subsidiaries is appropriate and can be supported empirically.. The board of directors and senior
management of each subsidiary are responsible for conducting their own assessment of the subsidiary's operational risks and
controls and ensuring the subsidiary is adequately capitalised in respect of those risks.
Generic Measurement Approach
Measurement approach implementation begins with operational risk profiling which involves the following:
 Identification and quantification of operational risk
 Prioritization of operation risk and identification of risk concentrations
 Formulation of strategy by the bank for operational risk management and risk based audit. The
estimated levels of operational risk depend on:
(a) Estimated probability of occurrence which is mapped on a scale of 5 which implies
1. negligible risk
2. low risk
3. medium risk
4. high risk &
5. very high risk.
(b) Estimated potential financial impact : It is also mapped on,a scale of5 as above.
(c) Estimated impact of internal controls: This is estimated as fraction in relation to total control which is valued at 100%.
For example if the probability of occurrence is medium i.e. 2, potential financial impact is very high i.e. 4 and impact of internal
controls is 50%, the estimated level of operational risk can be worked out as:
Estimated level of operational risk = estimated level of occurrence x estimated potential financial impact x estimated impact of
internal controls.
=I (2 x 4 x (1— 0.5] ^0.5 =1.73 or Low.
Risk mitigation
Under the AMA, a bank will be allowed to recognise the risk mitigating impact of insurance in the measures of operational risk used
for regulatory minimum capital requirements. The recognition of insurance mitigation will be limited to 20% of the total
operational risk capital charge calculated under the AMA. A bank's ability to take advantage of such risk mitigation will depend on
compliance with the following criteria:
 The insurance provider has a minimum claim paying ability rating of A (or equivalent).
The insurance policy must have an initial term of no less than one year. For policies with a residual term of less than one year, the
bank must make appropriate haircuts reflecting the declining residual term of the policy, up to a full 100% haircut for policies with a
residual term of 90 days or less. The insurance policy has a minimum notice period for cancellation of 90 days

 The insurance policy has no exclusions or limitations triggered by supervisory actions or, in the case of a failed bank, that
preclude the bank. receiver or liquidator from recovering for damages suffered or expenses incurred by
the bank, except in respect of events occurring after the initiation of receivership or liquidation proceedings in respect of the
bank, provided that the insurance policy may exclude any fine, penalty, or punitive damages resulting from supervisory actions.
 The risk mitigation calculations must reflect the bank's insurance coverage in a manner that is transparent in its relationship to,
and consistent with, the actual likelihood and impact of loss used in the bank's overall determination of its operational risk
capital.
 The insurance is provided by a third-party entity. In the case of insurance through captives and affiliates, the exposure has to be
laid off to an independent third-party entity, for example through re-insurance, that meets the eligibility criteria_
 The framework for recognising insurance is well reasoned and documented.
 The bank discloses a description of its use of insurance for the purpose of mitigating operational risk.
Scenario analysis
A bank must use scenario analysis of expert opinion in conjunction with external data to evaluate its exposure to high-severity
events. This approach draws on the knowledge of experienced business managers and risk management experts to derive
reasoned assessments of plausible severe losses_ For instance, these expert assessments could be expressed as parameters of an
assumed statistical loss distribution. In addition, scenario analysis should be used to assess the impact of deviations from the
correlation assumptions embedded in the bank's operational risk measurement framework, in particular, to evaluate potential
losses arising from multiple simultaneous operational risk loSs events. Over time, such assessments need to be validated and reassessed
through comparison to actual loss experience to ensure their reasonableness.
Business environment and internal control factors
in addition to using loss data, whether actual or scenario-based, a bank's bank-wide risk assessment methodology must capture
key business environment and internal control factors that can change its operational risk profile. These factors will make a bank's
risk assessments more forward-looking, more directly reflect the quality of the bank's control and operating environments, help
align capital assessments with risk management objectives, and recognise both improvements and deterioration in operational
risk profiles in a more immediate fashion. To qualify for regulatory capital purposes, the use of these factors in a bank's risk
measurement framework must meet the following standards:
 The choice of each factor needs to be justified as a meaningful driver of risk, based on experience and involving the expert
judgment of the affected business areas. Whenever possible, the factors should be translatable into quantitative measures that
lend themselves to verification.
 The sensitivity of a bank's risk estimates to changes in the factors and the relative weighting of the various factors need to be
well reasoned. In addition to capturing changes in risk due to improvements in risk controls, the framework must also capture
potential increases in risk due to greater complexity of activities or increased business volume.
 The framework and each instance of its application, including the supporting rationale for any adjustments to empirical
estimates, must be documented and subject to independent review within the bank and by supervisors.
 Over time, the process and the outcomes need to be validated through comparison to actual internal loss experience, relevant
external data, and appropriate adjustments made.
Integrated Risk Management (IRM)
IRM stands for management of all risk that are associated with the activities undertaken across the entire organistion. For banks
these risks are liquidity risk, interest rate risk, market risk, credit risk and operational risks.
Total risk to an organization is the net effect of all risks associated with the activities of a bank. Net effect of all risks may not be
same as sum total of all risk due to diversification effect of risk. Hence integration implies a coordinated approach (and not
accounting approach) across various activities and taking benefit of various diversification opportunities that exist or may be
created in the bank.
Need for IRM: This approach centralizes the process of supervising risk exposure so that the organization can determine how
best to absorb, limit or transfer the risk. The information available with the bank can be analyzed to determine the overall
nature of organizational risk exposures including their correlation, dependencies and off-sets. The advantages are:
1. It aligns the strategic aspects of risk with day to day operational activities.
2. It facilitates greater transparency for investors and regulators
3.- It enhances revenue and earning growth
4. It controls downside risk potential.
Integrated Risk Management Approach
The process of IRMconsists of :
(a) strategy—integration of risk management as a key corporate strategy.
(b) organization—establishment of Chief Risk Officer position with accountability to board.
(c) process— identifying, assessing and controlling risk should be common across the banks
(d) systems — risk management systems should be developed to provide information to support the enterprise risk management
functions.
Organizational structure : The Board is the apex unit responsible for the entire risk of the bank. Risks are not to be seen in
isolation and have to be managed in an integrated manner.
Policies and procedures: These should be developed using a top down approach and consistent with one another. Risk
limits: Such limits assist in maintaining overall exposures at acceptable levels.
Risk reporting : Bank wide risk reports are used to quantify sources of risk across the bank and to estimate total exposure to
financial markets.
Integrated systems: The framework should be supported by an information technology architecture consistent with such
integration.

Trade finance

Trade finance

Trade finance is the financing of international trade flows. It exists to mitigate, or reduce, the risks involved in an international trade transaction.

There are two players in a trade transaction: (1)an exporter, who requires payment for their goods or services, and (2)an importer who wants to make sure they are paying for the correct quality and quantity of goods.


WHAT ARE THE RISKS?

As international trade takes place across borders, with companies that are unlikely to be familiar with one another, there are various risks to deal with. These include:

Payment risk: Will the exporter be paid in full and on time? Will the importer get the goods they wanted?

Country risk: A collection of risks associated with doing business with a foreign country, such as exchange rate risk, political risk and sovereign risk. For example, a company may not like exporting goods to certain countries because of the political situation, a deteriorating economy, the lack of legal structures, etc.

Corporate risk: The risks associated with the company (exporter/importer): what is their credit rating? Do they have a history of non-payment?

To reduce these risks, banks – and other financiers – have stepped in to provide trade finance products.


TYPES OF TRADE FINANCE PRODUCTS

The market distinguishes between short-term (with a maturity of normally less than a year) and medium to long-term trade finance products (with tenors of typically five to 20 years)

             





Trade finance signifies financing for trade, and it concerns both domestic and international trade transactions. A trade transaction requires a seller of goods and services as well as a buyer. Various intermediaries such as banks and financial institutions can facilitate these transactions by financing the trade.

LOANS AND ADVANCES INCLUDING BALANCE SHEET ANALYSIS

LOANS AND ADVANCES INCLUDING BALANCE SHEET ANALYSIS

1. ˜Credit Rating Agencies in India are regulated by: RBI
2. ˜CRISIL stands for: Credit Rating Information Services of India Ltd.
3. ˜Deferred Payment Guarantee is : Guarantee issued
when payment by applicant of guarantee is to be made in installments over a period of time.
4. ˜If Break Even Point is high, it can be construed that the margin of safety is ____: Low.
5. ˜Long Term uses – 12; total Assets – 30; Long Term source 16; What is net working capital : 4
6. ˜On which one of the following assets, depreciation is applied on Straight line method: Computers.
7. ˜Projected Turnover is Rs.400 lacs, margin by promoter is Rs. 20 lacs. What is maximum bank
finance as per Annual Projected Turnover method: 80 lakhs.
8. ˜Rohit was a loanee of the branch and news has come that he has expired. On enquiry, it was
observed that he left some assets. Upto what extent the legal heirs are liable to the Bank? Legal heirs are
liable for the liabilities upto the assets inherited by them.
9. ˜The appraisal of Deferred Payment Guarantee is same as that of a) Demand Loan b) OD c) Term
Loan d) CC : Term Loan.
10. A cash credit account will be treated as NPA if the CC limit is not renewed within ___days from the
due date of renewal: 180 days.
11. A director of a bank wants to raise loan of Rs 10 lakh from his bank against Life Insurance Policy with
surrender value of more than Rs 15 lakh. What will be done?: Bank can sanction.
12. A firm is allowed a limit of Rs.1.40 lac at 30% margin. It wants to avail the limit fully. How much will
be the value of security : Rs.2 lac
13. A guarantee issued for a series of transactions is called: Continuing guarantee
14. A lady who has taken a demand loan against FD come to the branch and wants to add name of her
minor son, as joint a/c holder. What you will do?: Name can be added only after adjustment of the loan.
15. A letter of credit which is issued on request of the beneficiary in favour of his supplier: Back to Back

LC
16. A loan is given by the bank on hypothecation of stock to Mr. A. Bank receives seizure order from
State Govt. What should bank do?: Bank will first adjust its dues and surplus if any wilt be shared with
the Govt.
17. A loan was sanctioned against a vacant land. Subsequently a house was constructed at the site.
What security is available now to the bank? : Both
18. A minor was given loan. On attaining majority he acknowledges having taken loan and promises to
pay. Whether the loan can be recovered? : He can not ratify the contract. Hence recovery not possible.
19. A negotiating bank and issuing bank are allowed days each for scrutiny of documents drawn
under Letter of credit to ensure that documents are as per LC: 5 banking days each.
20. Age limit staff housing loan: 70 years;
21. An L/C is expiring on 10.05.2008. A commotion takes place in the area and bank could not open.
Under these circumstances can the LC be negotiated?: The L/C can not be negotiated because expiry date
of LC can not be extended if banks are closed for reasons beyond their control.
22. As per internal policy of certain banks, the net worth of a firm does not include: a. Paid up capital b.
Free Reserve c. Share Premium d. Equity received from Foreign Investor : Revaluation Reserves
23. Authorised capital is Rs.10 lac. Paid up capital Rs.6 lac. The loss of previous year is Rs.1 lac. Loss in
current year is Rs3 _ lac. The tangible net worth is : Rs.2 lac
24. Authorised capital= 10 lac, paid-up capital = 60%, loss during current year = 50000, loss last year =
2 lacs, what is the tangible net worth of the company? : 3.5 lac
25. Bailment of goods by a person to another person, to secure a loan is called : Pledge
26. Balance outstanding in a CC limit is Rs.9 lakh. Value of stock is Rs.5 lakhs. It is in doubtfUl for more
than two years as on 31 March 2012. What is the amount of provision to be made on 31-03-2013?: Rs.9
lakhs (100% of liability as account is doubtful for more than 3 years)
27. Balance Sheet of a firm indicates which of the following – Balance Sheet indicates what a firm
owes and what a firm owns as on a particular date.
28. Bank limit for working capital based on turn over method: 20% of the projected sales turnover
accepted by Banks
29. Banks are required to declare their financial results quarterly as per provisions of : SEBI
30. Banks are required to maintain -a margin of ___ for issuing Guarantee favouring stock exchange on
behalf of share Brokers.
31. Banks are required to obtain audited financial papers from non corporate borrowers for granting
working capital limit of: Rs.25 lakh &above
32. Banks provide term loans and deferred payment guarantee to finance capital assets like plant and
machinery. What is the difference between these two: Outlay of funds.
33. Benchmark Current Ratio under turn over method is: 1.25
34. Break Even Point: No profit no loss. ( TR-TC=Zero)
35. Calculate Debt Equity ratio – Debenture – Rs 200, capital 50; reserves – 80; P& L account credit
balance – Rs 20: 4: 3 ( 200 divided by 150).
36. Calculate Net working capital– Total assets 1000; Long Term liabilities 400; Fixed assets, Intangible
assets and Non current assets (i.e. long term uses) Rs 350; What is net working capital : 400- 350= Rs
50
37. Calculate Tangible Net Worth: Land and building: 200 Lacs; Capital:80000 intangible asset:15000:

Micro, Small & Medium Enterprises Development (MSMED) Act, 2006

  

The Government of India has enacted the Micro, Small and Medium Enterprises Development

(MSMED) Act, 2006 on June 16, 2006 which was notified on October 2, 2006. With the

enactment of MSMED Act 2006, the paradigm shift that has taken place is the inclusion of the

services sector in the definition of Micro, Small & Medium enterprises, apart from extending

the scope to medium enterprises. The MSMED Act, 2006 has modified the definition of micro,

small and medium enterprises engaged in manufacturing or production and providing or

rendering of services. The Reserve Bank has notified the changes to all scheduled commercial

banks.

1.1 Definition of Micro, Small and Medium Enterprises

(a) Manufacturing Enterprises i.e. Enterprises engaged in the manufacture or production,

processing or preservation of goods as specified below:

(i) A micro enterprise is an enterprise where investment in plant and machinery does not

exceed Rs. 25 lakh;

(ii) A small enterprise is an enterprise where the investment in plant and machinery is more

than Rs. 25 lakh but does not exceed Rs. 5 crore; and

(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more

than Rs.5 crore but does not exceed Rs.10 crore.

In case of the above enterprises, investment in plant and machinery is the original cost

excluding land and building and the items specified by the Ministry of Small Scale Industries

 (b) Service Enterprises i.e. Enterprises engaged in providing or rendering of services and

whose investment in equipment (original cost excluding land and building and furniture, fittings

and other items not directly related to the service rendered or as may be notified under the

MSMED Act, 2006) are specified below.

(i) A micro enterprise is an enterprise where the investment in equipment does not exceed Rs.

10 lakh;

(ii) A small enterprise is an enterprise where the investment in equipment is more than Rs.10

lakh but does not exceed Rs. 2 crore; and

(iii) A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2

crore but does not exceed Rs. 5 crore.

1.2 Bank Loans to Micro and Small enterprises, both Manufacturing and Service are eligible

to be classified under Priority Sector advance as per the following:

1.2.1 Direct Finance

1.2.1.1 Manufacturing Enterprises

The Micro and Small enterprises engaged in the manufacture or production of goods to any

industry specified in the first schedule to the Industries (Development and regulation) Act, 1951

and notified by the Government from time to time. The manufacturing enterprises are defined

in terms of investment in plant and machinery.

1.2.1.2. Loans for food and agro processing

Loans for food and agro processing will be classified under Micro and Small Enterprises,

provided the units satisfy investments criteria prescribed for Micro and Small Enterprises, as

provided in MSMED Act, 2006.

1.2.1.3 Service Enterprises

Bank loans up to Rs.5 crore per borrower / unit to Micro and Small Enterprises engaged in

providing or rendering of services and defined in terms of investment in equipment under

MSMED Act, 2006.

1.2.1.4 Export Credit

Export credit to MSE units (both manufacturing and services) for export of goods/services

produced / rendered by them.

1.2.1.5 Khadi and Village Industries Sector (KVI)

All loans sanctioned to units in the KVI sector, irrespective of their size of operations and

location and amount of original investment in plant and machinery. Such loans will be eligible

for classification under the sub-target of 60 percent prescribed for micro enterprises within the

micro and small enterprises segment under priority sector.

1.2.1.6. If the loans under General credit Card (GCC) are sanctioned to Micro and Small

Enterprises, such loans should be classified under respective categories of Micro and Small

Enterprises.

1.2.2 Indirect Finance

(i) Loans to persons involved in assisting the decentralised sector in the supply of inputs to

and marketing of outputs of artisans, village and cottage industries.

(ii) Loans to cooperatives of producers in the decentralised sector viz. artisans village and

cottage industries.

(iii) Loans sanctioned by banks to MFIs for on-lending to MSE sector as per the conditions

specified in extant Master Circular on Priority Sector Lending.

1.3 Lending by banks to medium enterprises will not be included for the purpose of

reckoning of advances under the priority sector.

1.4 Since the MSMED Act, 2006 does not provide for clubbing of investments of different

enterprises set up by same person / company for the purpose of classification as Micro, Small

and Medium enterprises, the Gazette Notification No. S.O.2 (E) dated January 1, 1993 on

clubbing of investments of two or more enterprises under the same ownership for the purpose

of classification of industrial undertakings as SSI has been rescinded vide GOI Notification No.

S.O. 563 (E) dated February 27, 2009.

Customer service in banks as per RBI circulers

Customer service in banks

1. Introduction

Customer service has great significance in the banking industry. The banking system in India today has perhaps the largest outreach for delivery of financial services and is also serving as

an important conduit for delivery of financial services. While the coverage has been expanding day by day, the quality and content of dispensation of customer service has come under

tremendous pressure mainly owing to the failure to handle the soaring demands and expectations of the customers.

The vast network of branches spread over the entire country with millions of customers, a complex variety of products and services offered, the varied institutional framework – all these add

to the enormity and complexity of banking operations in India giving rise to complaints for deficiencies in services. This is evidenced by a series of studies conducted by various committees

such as the Talwar Committee, Goiporia Committee, Tarapore Committee, etc., to bring in improvement in performance and procedure involved in the dispensation of hassle-free customer service.

Reserve Bank, as the regulator of the banking sector, has been actively engaged from the very beginning in the review, examination and evaluation of customer service in banks. It has

constantly brought into sharp focus the inadequacy in banking services available to the common person and the need to benchmark the current level of service, review the progress periodically,

enhance the timeliness and quality, rationalize the processes taking into account technological developments, and suggest appropriate incentives to facilitate change on an ongoing basis

through instructions/guidelines.

Depositors' interest forms the focal point of the regulatory framework for banking in India. There is a widespread feeling that the customer does not get satisfactory service even after

demanding it and there has been a total disenfranchisement of the depositor. There is, therefore, a need to reverse this trend and start a process of empowering the depositor.

Broadly, a customer can be defined as a user or a potential user of bank services. So defined, a ‘Customer’ may include:

· a person or entity that maintains an account and/or has a business relationship with the bank;

· one on whose behalf the account is maintained (i.e. the beneficial owner);

· beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors, etc., as permitted under the law, and

· any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as

a single transaction.

1.1 General

Policy for general management of the branches

Banks' systems should be oriented towards providing better customer service and they should periodically study their systems and their impact on customer service. Banks should have a Board

approved policy for general management of the branches which may include the following aspects:-

(a) providing infrastructure facilities by branches by bestowing particular attention to providing adequate space, proper furniture, drinking water facilities, with specific emphasis on

pensioners, senior citizens, disabled persons, etc.

(b) providing entirely separate enquiry counters at their large / bigger branches in addition to a regular reception counter.

(c) displaying indicator boards at all the counters in English, Hindi as well as in the concerned regional language. Business posters at semi-urban and rural branches of banks should also be

in the concerned regional languages.

(d) posting roving officials to ensure employees' response to customers and for helping out customers in putting in their transactions.

(e) providing customers with booklets consisting of all details of service and facilities available at the bank in Hindi, English and the concerned regional languages.

(f) use of Hindi and regional languages in transacting business by banks with customers, including communications to customers.

(g) reviewing and improving upon the existing security system in branches so as to instil confidence amongst the employees and the public.

(h) wearing on person an identification badge displaying photo and name thereon by the employees.

(i) Periodic change of desk and entrustment of elementary supervisory jobs.

(j) Training of staff in line with customer service orientation. Training in Technical areas of banking to the staff at delivery points. Adopting innovative ways of training / delivery

ranging from job cards to roving faculty to video conferencing.

(k) visit by senior officials from Controlling Offices and Head Office to branches at periodical intervals for on the spot study of the quality of service rendered by the branches.

(l) rewarding the best branches from customer service point of view by annual awards/running shield.

(m) Customer service audit, Customer surveys.

(n) holding Customer relation programmes and periodical meetings to interact with different cross sections of customers for identifying action points to upgrade the customer service with

customers.

(o) clearly establishing a New Product and Services Approval Process which should require approval by the Board especially on issues which compromise the rights of the Common Person.

(p) appointing Quality Assurance Officers who will ensure that the intent of policy is translated into the content and its eventual translation into proper procedures.

2. Customer Service: Institutional Framework

Need for Board's involvement

Matters relating to customer service should be deliberated by the Board to ensure that the instructions are implemented meaningfully. Commitment to hassle-free service to the customer at

large and the Common Person in particular under the oversight of the Board should be the major responsibility of the Board.

2.1 Customer Service Committee of the Board

Banks are required to constitute a Customer Service Committee of the Board and include experts and representatives of customers as invitees to enable the bank to formulate policies and assess

the compliance thereof internally with a view to strengthening the corporate governance structure in the banking system and also to

.bring about ongoing improvements in the quality of customer service provided by the banks.

2.1.1 Role of the Customer Service Committee

Customer Service Committee of the Board, illustratively, could address the following:-

· formulation of a Comprehensive Deposit Policy

· issues such as the treatment of death of a depositor for operations of his account

· product approval process with a view to suitability and appropriateness

· annual survey of depositor satisfaction

· tri-enniel audit of such services.

Besides, the Committee could also examine any other issues having a bearing on the quality of customer service rendered.

2.1.2 Monitoring the implementation of awards under the Banking Ombudsman Scheme

The Committee should also play a more pro-active role with regard to complaints / grievances resolved by Banking Ombudsmen of the various States.

The Scheme of Banking Ombudsman was introduced with the object of enabling resolution of complaints relating to provision of banking services and resolving disputes between a bank and its

constituent through the process of conciliation, mediation and arbitration in respect of deficiencies in customer service. After detailed examination of the complaints / grievances of

customers of banks and after perusal of the comments of banks, the Banking Ombudsmen issue their awards in respect of individual complaints to redress the grievances. Banks should ensure that

the Awards of the Banking Ombudsmen are implemented expeditiously and with active involvement of Top Management.

Further, with a view to enhancing the effectiveness of the Customer Service Committee, banks should also :

.

a) place all the awards given by the Banking Ombudsman before the Customer Service Committee to enable them to address issues of systemic deficiencies existing in banks, if any, brought out

by the awards; and

b) place all the awards remaining unimplemented for more than three months with the reasons therefor before the Customer Service Committee to enable the Customer Service Committee to report

to the Board such delays in implementation without valid reasons and for initiating necessary remedial action.

2.1.3 Board Meeting to Review and Deliberate on Customer Service

Banks are advised to review customer service / customer care aspects in the bank and submit a detailed memorandum in this regard to the Board of Directors, once every six months and initiate

prompt corrective action wherever service quality / skill gaps have been noticed.

2.2 Standing Committee on Customer Service

The Committee on Procedures and Performance Audit of Public Services (CPPAPS) examined the issues relating to the continuance or otherwise of the Ad hoc Committees and observed that there

should be a dedicated focal point for customer service in banks, which should have sufficient powers to evaluate the functioning in various departments. The CPPAPS therefore recommended that

the Ad hoc Committees should be converted into Standing Committees on Customer Service.

On the basis of the above recommendation, banks are required to convert the existing Ad hoc Committees into a Standing Committee on Customer Service. The Ad hoc Committees when converted as a

permanent Standing Committee cutting across various departments can serve as the micro level executive committee driving the implementation process and providing relevant feedback while the

Customer Service Committee of the Board would oversee and review / modify the initiatives. Thus the two Committees would be mutually reinforcing with one feeding into the other.

The constitution and functions of the Standing Committee may be on the lines indicated below :-

.



i) The Standing Committee may be chaired by the CMD or the ED and include non-officials as its members to enable an independent feedback on the quality of customer service rendered by the

bank.

ii) The Standing Committee may be entrusted not only with the task of ensuring timely and effective compliance of the RBI instructions on customer service, but also that of receiving the

necessary feedback to determine that the action taken by various departments of the bank is in tune with the spirit and intent of such instructions.

iii) The Standing Committee may review the practice and procedures prevalent in the bank and take necessary corrective action, on an ongoing basis as the intent is translated into action only

through procedures and practices.

iv) A brief report on the performance of the Standing Committee during its tenure indicating, inter alia, the areas reviewed, procedures / practices identified and simplified / introduced may

be submitted periodically to the Customer Service Committee of the Board.

With the conversion of the Ad hoc Committees into Standing Committees on Customer Service, the Standing Committee will act as the bridge between the various departments of the bank and the

Board / Customer Service Committees of the Board.

2.3 Branch Level Customer Service Committees

Banks were advised to establish Customer Service Committees at branch level. In order to encourage a formal channel of communication between the customers and the bank at the branch level,

banks should take necessary steps for strengthening the branch level committees with greater involvement of customers. It is desirable that branch level committees include their customers

too. Further, as senior citizens usually form an important constituent in banks, a senior citizen may preferably be included therein. The Branch Level Customer Service Committee may meet at

least once a month to study complaints/ suggestions, cases of delay, difficulties faced / reported by customers / members of the Committee and evolve ways and means of improving customer

service.

The branch level committees may also submit quarterly reports giving inputs / suggestions to the Standing Committee on Customer Service thus enabling the

.

- 7 -

Standing Committee to examine them and provide relevant feedback to the Customer Service Committee of the Board for necessary policy / procedural action.

2.4 Nodal department / official for customer service

Each bank is expected to have a nodal department / official for customer service in the Head Office and each controlling office, with whom customers with grievances can approach in the first

instance and with whom the Banking Ombudsman and RBI can liaise.

3. Board approved policies on Customer Service

Customer service should be projected as a priority objective of banks along with profit, growth and fulfilment of social obligations. Banks should have a Board approved policy for the

following:

3.1 Comprehensive Deposit Policy

Banks should formulate a transparent and comprehensive policy setting out the rights of the depositors in general and small depositors in particular. The policy would also be required to

cover all aspects of operations of deposit accounts, charges leviable and other related issues to facilitate interaction of depositors at branch levels. Such a policy should also be explicit

in regard to secrecy and confidentiality of the customers. Providing other facilities by "tying-up" with placement of deposits is clearly a restrictive practice.

3.2 Cheque Collection Policy

Code of Bank’s Commitment to Customers January 2018

Code of Bank’s Commitment to Customers January 2018

Referance BANKING CODES AND STANDARDS
BOARD OF INDIA
www.bcsbi.org.in

1.1 Objectives of the Code
The Code has been developed to:
a. promote good and fair banking practices by setting minimum
standards in our dealings with you;
b. increase transparency so that you can have a better understanding
of what you can reasonably expect from us;
c. encourage market forces, through competition, to achieve higher
operating standards;
d. promote a fair and cordial relationship between you and your bank;
e. foster confidence in the banking system;
f. promote safe and fair customer dealing in case of banking in a
digitized environment;
g. increase awareness of customers and to enhance customer
protection.
The standards of the Code are covered by the Key Commitments in
Chapter 2.
2
Code of Bank’s Commitment to Customers – January 2018
1.2 Application of the Code
This Code applies to all the products and services listed below, whether
they are provided by our branch or agents acting on our behalf, whether
across the counter, over the phone, by post, through interactive electronic
devices, on the internet or by any other method. However, all products
discussed here may or may not be offered by us.
a. Current accounts, savings accounts, term deposits, recurring
deposits, PPF accounts and all other deposit accounts;
b. Payment services such as pension, payment orders, remittances by
way of demand drafts, wire transfers and all electronic transactions
e.g. RTGS, NEFT, IMPS, UPI;
c. Banking services related to Government transactions;
d. Demat accounts, Equity, Government bonds;
e. Indian currency notes / coins exchange facility;
f. Collection of cheques, safe custody services, safe deposit locker
facility;
g. Loans, overdrafts and guarantees;
h. Foreign exchange services including money changing;
i. Third party insurance and investment products marketed through
our branch and / or our authorised representatives or agents;
j. Card products including credit cards, debits cards, ATM cards,
smart cards and POS services (including credit cards offered by our
subsidiaries / companies promoted by us);
k. Digital Products such as e-wallet, Mobile Banking, internet banking,
UPI, BHIM, Aadhaar Pay.
The meanings of key words appearing in bold black have been given in
the Glossary.
2. KEY COMMITMENTS
2.1 Our Key Commitments to you
2.1.1 Right to Fair Treatment
Act fairly and reasonably in all our dealings with you by:
3
a. Providing minimum banking facilities of receipt and payment of
cash / cheques, remittances, exchange of soiled notes, etc. at the
bank’s counter and also providing cashless transactions through
alternate delivery channels.
b. Meeting the commitments and standards set in this Code, for the
products and services we offer, and in the procedures and practices
we follow.
c. Making sure our products and services meet relevant laws and
regulations in letter and spirit and are appropriate to your needs
and in line with the banking scenario, including digital banking.
d. Ensuring that our dealings with you rest on ethical principles of
integrity and transparency.
e. Offering digital banking and payment systems in a secure,
convenient and robust technological environment.
f. Not discriminating against you on the basis of age, race, gender,
marital status, religion, disability or financial status when offering
and delivering our products and services.
g. Promoting good and fair banking practices by setting minimum
standards in all dealings with you.
h. Promoting a fair and equitable relationship with you.
i. Training our staff attending to you adequately and appropriately and
ensuring that our staff attends to you promptly and courteously and
to deal quickly and sympathetically with things that may go wrong
by correcting mistakes and handling your complaints expeditiously.
2.1.2 Right to Transparency, Fair and Honest Dealing
We will help you to understand how our financial products and services
work by:

Banking codes rules

1. Title These Rules may be called the Banking Code Rules. 2. Definitions In these Rules - a. 'BCSBI' means the Banking Codes and Standards Board of India; b. 'Board' means the Governing Council of the Banking Codes and Standards Board of India (BCSBI); c. 'Code' means the Code of Bank's Commitment to Customers, as amended from time to time; d. 'Code Compliance Officer' means an employee of a Member appointed as such in accordance with the requirements of these Rules; e. 'Compliance Policy' means the policy set out in Chapter II of these Rules; f. 'Covenant' means the Covenant as in Form A of these Rules; g. ' Disciplinary Procedure' means the disciplinary procedures set out in Chapter III of these Rules; h. 'Executive' means the Chief Executive Officer of the BCSBI; i. 'Member' means a bank which has been admitted as a member of the BCSBI in terms of Chapter I of these Rules. CHAPTER I - MEMBERSHIP 3. Eligibility for Membership 3.1 The applicant must be a bank in India included in Schedule II to the Reserve Bank of India Act, 1934. 3.2 The applicant must agree to adhere to the Code and sign the Covenant in Form A. 3.3 The applicant must pay a non-refundable registration fee of Rs.10,000/- (Rupees ten thousand only) to the BCSBI. 4. Application for Membership 4.1 Application for membership of the BCSBI shall be made in Form B. 4.2 The Chief Executive Officer shall place the application within 30 days of its receipt before the Board. 4.3 The decision of the Board for admitting the applicant as member or rejecting the application shall be communicated to the applicant within 45 days from the date of receipt of the application. 4.4 The communication for admission shall state the membership fee payable by the applicant for the first year, which it shall pay within thirty days from the date of the receipt of the said communication. 4.5 The applicant whose application is rejected may make a representation to the Board within 30 days from the date of receipt of communication of rejection. 4.6 The Board may, if it considers necessary, afford an opportunity of hearing to the applicant. 4.7 The decision of the Board regarding the admission of the applicant to the membership of the BCSBI shall be final. 5. Membership Fees 5.1 Membership fees payable by Members shall be in proportion to their gross domestic assets as on March 31, of the previous year and shall be of such amount, as the Board may determine as payable by each Member. Provided that the Board may prescribe a minimum fee that each Member shall be liable to pay. 5.2 Membership fee for the first year shall be paid as stated in Rule 4.4. 5.3 Membership fee for the subsequent years shall be paid annually in advance in respect of each financial year commencing April 1 within 30 days of the date of the invoice issued by the Executive. 5.4 Failure to pay annual membership fee within the specified time shall incur a charge of interest at the rate of 2 percent per annum above the Bank Rate from the date it is payable till the date of payment. Provided where a Member does not pay the membership fee together with interest due thereon for six months from the date of invoice, the Board shall have a right to cancel membership of the bank without any further notice in the matter. 5.5 Membership fee shall not be liable to be refunded on cessation of membership whether on account of the Member's voluntary withdrawal or on cancellation by the Board or for any reason whatsoever 5.6 Voluntary withdrawal of membership by the Member or its cancellation by the Board shall not prejudice the right of the Board to institute any investigation or disciplinary proceedings within three months of such withdrawal/ cancellation or the right to continue any investigation or disciplinary proceedings following such withdrawal/cancellation 6. Obligations of the Member (a) A Member shall provide the BCSBI with such information as the BCSBI may require from it from time to time to discharge its function of monitoring compliance with the Code. (b) Authorised representatives of the BCSBI shall be entitled to visit the premises of any Member to verify and gather such information deemed necessary for monitoring compliance with the Code. (c) The Member shall cooperate with the authorised representatives of the BCSBI visiting the bank. (d) Incognito visits may also be undertaken to the premises of the Member. (e) Member shall publish in its Annual Report sanctions imposed by the BCSBI. 7. Obligations of the BCSBI

Caiib results out

Congratulations all.
IIBF results link here
https://iibf.esdsconnect.com/result/caiib118

 My heartiest congratulations to all and best wishes for  your success.

Foreign exchange facilities recollected questions

#RecollectedQuestions
Foreign exhange facilities for individuals-:

1. Seven exchange rate calculation numericals of 2 marks each.. mostly tt selling and buying rate for DD issue, nostro settelment, nre to fcnr b conversion
2. Approx 12 questions on nre, nro and EEFC account.. through knowledge is required.
3. Ad1 and ad2 category dealers
4.resident joint savings account with nri will be treated as ? And mode of operation will be ?
5. Transfer limit of funds in foreign currency for accompanying relative facing medical emergency per fy
6. Capital account and current account transactions
7. How much money can given to a consultant as commission for sale of property in india by an nri and outside india by a resident
8. Can nro/nre funds be used to purchase property in India ?
9.if nri/PIO s close relative dies in India then how much funds can he transfer from proceeds if sale of assets in India
10. When NRI becomes Indian resident what happens to his nro account ?
11. If an employee gets shares under ESOP outside India then after selling shares should he immediately transfer funds to india or not.
12. Is interest given for sat n sunday if renewal of fcnr deposit lies on sat/sun - 3 questions with variations if savings interest will be given or no interest will be given or full interest on maturity amount from date of maturity/renewal to be given.
13.FCNR TO NRE NUMERIC
14.INT PAYMENT IN PREMATURE FCNR WITHDRAWAL
15. NOMINATION IN NRE
16. EEFC FOR STARTUP
17. P and I club permission
18. CULUTURAL GROUP PERMISSION FROM WHICH MIISTRY
19. FORM A 2 PURPOSE
20. LOAN CONDITION TO NRI FROM CLOSE RELATIVE
21. WHO ARE CLOSE RELATIVE
22. FOREX WHEN TO BUY BEFORE TRAVELLING
23. SURRENDER TIME OF FOREX
24. HONARAIUM RCVED CAN BE DEPOSIT IN WHICH A/c
25 LRS
26. TT BUY / SELLING DEF
27. INDO NEPAL REMITTANCE
28. CDF FORM
29. MTSS NO IN YR
30. NRE NOMINATION
31. NRO PERMIT DEBIT
32. RFC D ACCOUNT
33. EMIGRATION AMT LIMIT
34. LIBIYA 5000 USD
35. BILL BUYING NUMERIC
36. FEMA SCHED 3
37. KYC 4 SIMPLIFIED MEASURE

Thanks to members For their Contributions....

CASE STUDIES ON DOCUMENTARY CREDITS AND UCP600

CASE STUDIES ON DOCUMENTARY CREDITS AND UCP600
CASE STUDY 1
Banks have a practice of calling for the original LC at the time of presentation of documents and
endorse any drawings on its reverse.
LC's may be made available by Acceptance / Defferred Payment / Negotiation and to be freely
available with any bank.
Is it mandatory to endorse the original LC on its reverse?
Analysis
Most LCs contain a clause indicating such a requirement.
The practice is required by SWIFT standards cat.7, for freely negotiable credits, available with any
bank.
Conclusion
What is the problem?
CASE STUDY 2
If a nominated bank does not incur a deffered payment undertaking on presentation of complying
documents and forwards them to the Issuing Bank.
Subsequently can it a purchases a deferred payment undertaking from the issuing bank and seek
protection under UCP600?
Articles 7c. UCP600
CASE STUDY 3
If a LC is confirmed and is available with the Confirming Bank and the beneficiary chooses to
present the document directly to the Issuing Bank and the Issuing Bank wrongfully dishonors.
Should the confirming bank honor the presentation given that the LC has meanwhile expired?
Article 8a. UCP600
CASE STUDY 4
A documentary credit requires all documents must to be issued in English language.
The presentation includes a Certificate of Origin bearing a Stamp / Legalisation done in another
language
Is this a discrepancy?
Issued in?
CASE STUDY 5
As per Article 38 of UCP 600, A LC can be transferred to more than one second beneficiary. This
can be done preferably when the Partial Shipments are allowed under the LC.
If the first Beneficiary is certain that he would be able to comply with article 31(b) of UCP600 (re
partial shipments – submission of multiple BLs on the same voyage), can a LC be transferred to
more than one second beneficiary even if the LC states Partial Shipment is prohibited provided
Article 38.d. UCP600
CASE STUDY 6
If the nominated bank does not accept a bill of exchange drawn on them by the beneficiary, can the
same bill of exchange be presented to the issuing bank or should they present a fresh bill of
exchange drawn on the Issuing Bank
UCP Article 7a (iv)
CASE STUDY 7

EXPORT - IMPORT FINANCE MCQs

 EXPORT - IMPORT FINANCE MCQs

Multiple Choice Questions.
1. Incoterms cover
A. trade in intangibles
B. ownership and transfer rights
C. contracts of carriage.
D. rights and obligations of parties to contract of sales
ANSWER: D
2. Which of the following term cannot be used for transportation of goods by sea?
A. CFR.
B. DDP.
C. DES
D. DEQ.
ANSWER: B
3. The incoterm providing least responsibility to seller is
A. EXW.
B. DDP.
C. FOB
D. CIF.
ANSWER: A
4. The group of incoterms under which the seller's responsibility is to obtain freight paid transport
document for the main carriage is
A. E terms
B. C terms.
C. D terms
D. F tenns.
ANSWER: B
5. The incoterm should indicate the place of shipment in case of
A. F terms
B. E terms.
C. C terms.
D. D terms.
ANSWER: A
a
6. Incoterm is specific about the responsibility for marine insurance in case of
A. FOB and EXW
B. FOB and CIF.
C. CIF and CIP.
D. CPT and DDP.
ANSWER: C
7. The group of terms arranged in order of increasing responsibility of exporter is.
A. C,D,E and F terms.
B. D,E,F and C terms.
C. E,F,C and D terms.
D. F,C,E and D tenns.
ANSWER: C
8. The price quoted by the seller for the product
A. will vary depending upon the incoterm chosen.
B. irrespective of the incoterm.
C. will be the base price; the effect of incoterm to be added later.
D. will include only cost.
ANSWER: A
9. Adoption of incoterm is
A. compulsory for all international contracts
B. compulsory for all letter of credit transactions.
C. optional for the parties to the contract.
D. mandatory for transactions with Europe.
ANSWER: C
10. Which of the following term cannot be used for transportation of goods by Road or Air?
A. FAS.
B. DDR
C. EXW.
D. CIR
ANSWER: A
11. Packing credit is
A. an advance made for packing goods for export.
B. pre-shipment finance for export.
C. a priority sector advance.
D. advance for importer.
ANSWER: B
12. The amount of packing credit should not normally exceed
A. the local cost of manufacture for the exporter.
B. FOB value of the export contract.
C. CIF value of the export contract.
D. the cost of manufacture or FOB value of the export contract whichever is less.
ANSWER: D
13. Which of the following person is not eligible for packing credit?
A. a .merchant exporter.
B. a person making deemed exports.
C. sub-suppliers to manufacture exporter.
D. supplier to sub-supplier to manufacture exporter.
ANSWER: D
14. The running account facility for packing credit is available for
A. status holders only.
B. export for specified goods.
C. exporters with good track record
D. exporters with orders above Rs. 100 crores.
ANSWER: C
15. The advantage to the exporter of running account facility of packing credit is
A. production of letter of credit or firm order is completely waive
B. the period of facility need not be adhered to.
C. production of letter credit on firm order is waived immediately they must be produced within
reasonable time.
D. the rate of interest is low.
ANSWER: C
16. The exemption from the condition credit should not exceed domestic cost of production is not waived
for
A. commodity eligible for duty drawback.
B. commodity imported under advance licence
C. HPS groundnuts.
D. agro based productions like tobacco.
ANSWER: B
17. The substitution of commodity/fresh export of adjustment of packing credit is not available for
A. advance against sensitive commodities.
B. transactions of sister/associate/group concerns.
C. exports availing running account facility.
D. exports with imports.
ANSWER: B
18. Normally the maximum period for which packing credit advances are made is
A. 90 days.
B. 135 days.
C. 180 days.
D. 360 days.
ANSWER: C
19. A pre-shipment advance is not expected to be adjusted by
A. proceeds of export bill
B. export incentives.
C. post-shipment finance.
D. local funds.
ANSWER: D

FOREIGN EXCHANGE MANAGEMENT- CAIIB BFM and Forex , ITP

FOREIGN EXCHANGE MANAGEMENT-

Multiple Choice Questions.
1. Foreign exchange transactions involve monetary transactions
A. among residents of the same country
B. between residents of two countries only
C. between residents of two or more countries
D. among residents of at least three countries
ANSWER: B
2. Under FEMA, the RBI has been authorised to make ------ to carry out the provisions of the Act.
A. rules
B. regulations
C. both rules and regulations
D. notifications
ANSWER: B
3. A foreign currency account maintained by a bank abroad is its
A. nostro account
B. vostro account
C. loro account
D. foreign bank account
ANSWER: A
4. 'Non-resident Bank Accounts' refer to
A. nostro account
B. vostro account
C. accounts opened in offshore centres
D. none of the above
ANSWER: B
5. Non-resident bank accounts are maintained in
A. the permitted currencies
B. the currency of the country of the bank maintaining the account
C. the currencies in which FCNR accounts are permitted to be maintained
D. Indian Rupee
ANSWER: D

6. The statutory basis for administration of foreign exchange in India is
A. Foreign Exchange Regulation Act, 1973
B. Conservation of foreign Exchange and Prevention of Smuggling Act.
C. Foreign Exchange Management Act, 1999
D. Exchange Control Manual
ANSWER: C
7. Full fledged money changers are authorized to undertake
A. only sale transactions
B. only purchase transactions
C. all types of foreign exchange transactions
D. purchase and sale of foreign currency notes, coins and travellers cheques
ANSWER: D
8. The acronym FEDAI stands for
A. Foreign Exchange Dealers' Association of India
B. Federal Export Dealers' Association of India
C. Fixed Earners' Draft Agreement on Interest
D. None of the above
ANSWER: A
9. An authorised person under FEMA does not include
A. an authorised dealer
B. an authorised money changer
C. an off-shore banking unit
D. an exchange broker
ANSWER: D
10. The authorised dealers under FEMA are classified into ----- categories
A. Three
B. one
C. two
D. four
ANSWER: A
11. The term 'loro account' means
A. our account with you
B. your account with us
C. their account with them
D. none of the above
ANSWER: C

12. The term 'Nostro account' means
A. our account with you
B. your account with us
C. their account with them
D. none of the above

ANSWER: A
13. The term 'Vostro account' means
A. our account with you
B. your account with us
C. their account with them
D. none of the above
ANSWER: B
14. The market forces influencing the exchange rate are not fully operational under
A. floating exchange rate system
B. speculative attack on the market
C. fixed exchange rate system
D. current regulations of IMF
ANSWER: C
15. According to classification by IMF, the currency system of India falls under
A. managed flating
B. independently floating
C. crawling peg
D. pegged to basked of currencies
ANSWER: A
16. Under fixed exchange rate system, the currency rate in the market is maintained through
A. official intervention
B. rationing of foreign exchange
C. centralising all foreign exchange operations with central bank of the country
D. none of the above
ANSWER: A
17. The reduction in the value of a currency due to market forces is known as
A. revaluation
B. depreciation
C. appreciation
D. inflation
ANSWER: B
18. The largest foreign exchange market in the world is
A. Newyork
B. London
C. Japan
D. Swiss
ANSWER: B
19. Foreign exchange market is considered 24 hours market because
A. it is open all through the day
B. all transactions are to be settled with in 24 hours
C. due to geographical dispersal at least one market is active at any point of time

D. minimum 24 hours must lapse before any transaction is settled
ANSWER: C
20. The major players in the foreign exchange market are
A. commercial banks
B. corporates
C. exchange brokers
D. central bank of the country and the central government
ANSWER: A
21. Speculation in foreign exchange market refers to
A. buying or selling of currencies in large volumes
B. booking of forward contracts without intention to execute
C. buying or selling with a view to make profits from movement in rates
D. buying or selling with a view to making riskless profits.
ANSWER: C
22. Arbitrageur in a foreign exchange market
A. buys when the currency is low and sells when it is high
B. buys and sells simultaneously the currency with a view to making riskless profit
C. sells the currency when he has a receivable in furture
D. buys or sells to make advantage of market imperfections
ANSWER: B
23. The acronym SWIFT stands for -
A. Safety Width in Financial Transactions
B. Society for Worldwide International Financial Telecommunication
C. Society for Worldwide Interbank Financial Telecommunication
D. Swift Worldwide Information for Financial Transactions
ANSWER: C
24. Indirect rate in foreign exchange means -
A. the rate quoted with the units of home currency kept fixed
B. the rate quoted with units of foreign currency kept fixed
C. the rate quoted in terms of a third currency
D. none of the above
ANSWER: A
25. Indirect rate of exchange is quoted in India for -
A. sale of foreign travellers cheque
B. sale of rupee travellers cheques
C. purchase of personal cheques
D. none of the above
ANSWER: D
26. In direct quotation, the unit kept constant is -
A. the local currency
B. the foreign currency

C. the subsidiary currency
D. none of the above.
ANSWER: B
27. The maxim 'buy low; sell high' is applicable for -
A. quotation of pound-sterling
B. indirect rates
C. direct rates
D. US dollars
ANSWER: C
28. In Mumbai, US Dollar is quoted as under: USD 1 = Rs.43.6725/6875. It means-
A. The buying rate is Rs.43.6725 and selling rate is Rs.43.6875.
B. The buying rate is Rs.43.6875 and selling rate is Rs.43.6725
C. The dollar is appreciating in value.
D. The dollar is depreciating in value
ANSWER: A
29. In foreign exchange markets, 'American Quotation' refers to-
A. quotation by a US based bank
B. quotation in New York foreign exchange market
C. quotation in which the value of foreign currency is expressed per US dollar.
D. quotation in which the value of US dollar is expressed per unit of foreign currency
ANSWER: D
30. Forward margin is-
A. the profit on forward contract
B. commission payable to exchange brokers.
C. difference between the spot rate and forward rate
D. none of the above
ANSWER: C
31. In the following quote: Spot USD 1 = Rs.45.6500/650 Spot September 100/150 September forward
buying rate for dollar is -
A. Rs.45.6800
B. Rs.45.6600
C. Rs.45.7500
D. Rs.45.6500
ANSWER: B
32. the transaction where the exchange of currencies takes place two days after the date of the contract is
known as
A. ready transaction
B. value today
C. spot transactions
D. value tomorrow
ANSWER: C

33. The transaction where the exchange of currencies takes place on the same date is known as
A. tom
B. ready transaction
C. spot transactions
D. value tomorrow
ANSWER: B
34. A transaction in which the currencies to be exchanged the next dayof the transaction is known as
A. ready transaction
B. value today
C. spot transactions
D. Value tomorrow
ANSWER: D
35. The transaction in which the exchange of currencies takes place at a specified future date, subsequent
to the spot date is known as a
A. swap transaction
B. forward transaction
C. future transaction
D. non-deliverable forwards
ANSWER: B
36. One month forward contract entered into on 22nd March will fall due on
A. 21th April
B. 22nd April
C. 23rd April
D. 24th April
ANSWER: D
37. The buying rate is also known as the
A. bid rate
B. offer rate
C. spread
D. swap
ANSWER: A
38. The selling rate is also known as
A. bid rate
B. offer rate
C. spread
D. swap
ANSWER: B
39. The difference between buying rate and selling rate is the gross profit for the bank and is know as the
A. bid rate
B. offer rate
C. spread
D. swap

ANSWER: C
40. Direct quotation is also known as
A. home currency quotation
B. foreign currency quotation
C. currency quotation
D. American quotation
ANSWER: A
41. In direct quotation the principle adopted by the bank is to
A. buy low only
B. buy low; sell high
C. buy high; sell low
D. sell low only
ANSWER: B
42. In indirect quotation the principle adopted by the bank is to
A. buy low only
B. buy low; sell high
C. buy high; sell low
D. sell low only
ANSWER: C
43. Indirect quotation is also known as
A. home currency quotation
B. foreign currency quotation
C. European quotation
D. American quotation
ANSWER: B
44. Derivatives can be used by an exporter for managing-
A. currency risk
B. cargo risk
C. credit risk
D. all the above
ANSWER: A
45. The term risk in business refers to-
A. chance of losing business
B. chance of making losses
C. uncertainty associated with expected event leading to losses or gains
D. threat from competitors
ANSWER: C
46. Under the forward exchange contract-
A. the exchange rate is determined on the future date
B. the parties agree to meet at a future date for finalisation
C. delivery of foreign exchange is done on a predetermined future date

D. none of the above
ANSWER: C
47. The bank should verify the letter of credit/sale contract for booking a-
A. forward sale contract
B. forward purchase contract
C. cancelleing a forward contract
D. none of the above
ANSWER: B
48. Normally forward purchase contract booked should be used by the customer-
A. for executing the export order for which the contract was booked
B. for any export order from the same buyer
C. for any export order for the same commodity
D. for any export order
ANSWER: A
49. A currency future is not
A. traded on futures exchanges
B. a special type of forward contract
C. of standard size
D. available in India
ANSWER: D
50. Which of the following statements is true?
A. Exchange exposure leads to exchange risk
B. exchange risk leads to exchange exposure
C. exchange exposure and exchange risk are unrelated
D. none of the above
ANSWER: A
51. The net potential gain or loss likely to arise from exchange rate changes is-
A. exchange exposure
B. exchange risk
C. profit/loss on foreign exchange
D. exchange difference
ANSWER: B
52. The exchange loss/gain due to transaction exposure is reckoned on-
A. entering into a transaction in foreign exchange
B. quoting a price for a foreign currency transaction
C. conversion of foreign currency into domestic currency
D. entry in the books of accounts
ANSWER: C
53. Transaction exposure can be hedged
A. by internal methods only
B. by external methods only

C. either by internal methods or by external methods, but not by both
D. either by internal methods or by external methods or a combination of both
ANSWER: D
54. The external methods of hedging transaction exposure does not include-
A. forward contract hedge
B. money market hedge
C. cross hedging
D. futures hedging
ANSWER: C
55. The true cost of hedging transaction exposure by using forward market is-
A. the difference between agreed rate and the spot rate at the time of entering into the contact
B. the difference between agreed rate and the spot rate on the due date of the contract.
C. the forward premium/discount annualised
D. none of the above
ANSWER: B
56. Money market hedge involves-
A. borrowing/investing the concerned currency in the money market and squaring the position on the
due date of receivable/payable
B. borrowing/investing the concerned currency in the money market and covering the position
immediately in the forward market.
C. covering an exposure int he domestic currency
D. simultaneous borrowing and lending int he money market.
ANSWER: A
57. The cost of hedging through options includes-
A. option premium
B. interest on option premium till due date of the contract
C. both (a) and (b) above
D. (a) above and differences between option price and spot price.
ANSWER: C
58. Hedging with options is best recommended for-
A. hedging receivables
B. hedging contingency exposures
C. hedging foreign currency loans.
D. hedging payables
ANSWER: B
59. A firm operating in India cannot hedge its foreign currency exposure through
A. forwards
B. futures
C. options
D. none of the above
ANSWER: B

60. Internal hedge for transaction exposure does not include-
A. exposure netting
B. choosing currency of invoicing
C. cross hedging
D. none of the above
ANSWER: D
61. Foreign currency exposure can be avoided by
A. entering into forward contracts
B. denominating the transaction in domestic currency
C. exposure netting
D. maintaining foreign currency account
ANSWER: B
62. Maintaining a foreign currency account is helpful to-
A. avoid transaction cost
B. avoid exchange risk
C. avoid both transaction cost and exchange risk
D. avoid exchange risk and domestic currency depreciation
ANSWER: C
63. The following method does not result in sharing of exchange risk between importer and exporter-
A. denominating in a third currency
B. denominating partly in the importer's currency and partly int he exporter's currency.
C. entering a exchange rate clause in the contract
D. denominating in domestic currency
ANSWER: D
64. Leading refers to-
A. advancing of receivables
B. advancing of payables
C. advancing payments either receivables or payables
D. advancing of receivables and delaying of payables.
ANSWER: C
65. Translation exposure arises in respect of items translated at -
A. current rate
B. historical rate
C. average rate
D. all the above
ANSWER: A
66. Translation loss is-
A. a loss to the parent company
B. a loss to the subsidiary company
C. a notional loss
D. an actual loss
ANSWER: C

67. The translation exposure is positive when-
A. exposed assets are lesser than exposed liabilities
B. exposed liabilities are lesser than exposed assets
C. the exposure results in profit
D. there are no agreed liabilities
ANSWER: B
68. For the purpose of translation, current rate refers to-
A. the rate current at the time of the transaction
B. the rate prevalent on the date of the balance sheet
C. the rate prevalent on the date of preparation of the balance sheet
D. the spot rate
ANSWER: B
69. For the purpose of translation exposure, historical rate is the rate prevalent on the date-
A. the parent company was established
B. the foreign subsidiary was established
C. the investment in the subsidiary was made by the parent company
D. the asset was acquired or the liability was incurred
ANSWER: D
70. Exposed assets are those translated at-
A. historical rate
B. average rate
C. current rate
D. current rate or average rate.
ANSWER: C
71. A positive exposure will lead to .............when the currency of the subsidiary company appreciates.
A. translation gain
B. translation loss
C. exchange gain
D. exchange loss
ANSWER: A
72. Translation loss may occur when-
A. exposed assets exceed exposed liabilities and foreign currency appreciates
B. exposed assets exceed exposed liabilities and foreign currency depreciates
C. the subsidiary's balance sheet shows a loss
D. the foreign currency depreciates
ANSWER: B
73. The following method cannot be used for managing translation exposure
A. forward contract
B. option contract
C. exposure netting
D. leading and laging

ANSWER: B
74. The method of managing translation exposure that is also available for managing transaction exposure
is-
A. balance sheet hedge
B. transfer pricing
C. swaps
D. none of the above
ANSWER: D
75. Economic exposure does not deal with-
A. changes in real exchange rates
B. future cash flows of the firm
C. expected exchange rate changes
D. none of the above
ANSWER: C
76. If rupee depreciates in real terms, cash inflows of a firm engaged in exports is-
A. definite to increase
B. definite to decrease
C. generally will increase, if government does not intervene.
D. will increase provided the demand for its exports is elastic.
ANSWER: D
77. Market selection as a strategy to manage economic exposure requires-
A. preferring domestic market to foreign market
B. preferring market with fixed exchange rate
C. shifting to a market whose currency has appreciated
D. shifting to a market whose currency has depreciated
ANSWER: C
78. Ideal time for launching a product in foreign market is
A. when domestic currency has depreciated
B. when domestic currency has appreciated
C. when exchange rate in the markets are fluctuating violently
D. none of the above
ANSWER: A
79. Production strategies for managing economic exposure do not include-
A. importing input if local currency appreciates
B. shifting production to a country whose currency has not appreciated
C. shifting production to a low cost centre
D. reviving uneconomic units
ANSWER: D
80. Financial strategies for managing economic exposure does not include-
A. minimising cost of borrowing by sourcing from cheaper market
B. matching of assets and liabilities in a currency
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C. securing parallel loans and swaps
D. delaying the product launch
ANSWER: D
81. The transaction in which the bank receives foreign currency from the customer and pays him in local
currency is a -
A. purchase transaction
B. sale transaction
C. direct transaction
D. indirect transaction
ANSWER: A
82. The transaction in which the bank receives local currency from the customer and pays him foreign
currency is a-
A. purchase transaction
B. sale transaction
C. direct transaction
D. indirect transaction
ANSWER: B
83. The following is not a sale transaction of foreign exchange:
A. issue of a foreign demand draft
B. payment of an import bill
C. realisation of an export bill
D. none of the above
ANSWER: C
84. Interest for the transit period is included in -
A. bill buying rate
B. bill selling rate
C. usance bill buying rate
D. none of the above
ANSWER: D
85. The exchange margin included by a bank in the exchange rate quoted to the customer is-
A. prescribed by Reserve Bank
B. prescribed by FEDAI
C. determined by the bank concerned within the limits prescribed by FEDAI
D. determined by the bank concerned
ANSWER: D
86. The minimum fraction in which exchange rates are quoted by banks to their customers is-
A. 0.0001
B. 0.005
C. 0.0025
D. 0.01
ANSWER: C

87. The exchange rates quoted by an authorised dealer to its customers are known as-
A. authorised rates
B. commercial rates
C. merchant rates
D. indirect rates
ANSWER: C
88. TT buying rate is not applicable for the following transaction-
A. encashment of a DD for which cover has already been received
B. encashment of an MT for which paying bank has to make reimbursement claim with the issuing bank.
C. realisation of a foreign bill sent for collection
D. payment of a cable transfer.
ANSWER: B
89. Bill buying rates are applicable to
A. all export transactions
B. any transaction to which TT buying rate is not applicable
C. realisation of a foreign bill sent for collection
D. only for puchase/negotiation of export bills
ANSWER: D
90. As per FEDAI Rules, the rupee value of all foreign exchange transactions should be rounded off tto-
A. nearest rupee
B. nearest ten rupees
C. nearest paise
D. nearest ten paise
ANSWER: A
91. Buying rate for ready merchant rate is derived from-
A. interbank spot buying rate
B. interbank ready buying rate
C. interbank spot selling rate
D. interbank ready selling rate
ANSWER: A
92. The quotation for merchant transaction is-
A. two-way quotation
B. applicable to all merchant transactions uniformly
C. specific to the transaction for which it is quoted
D. applicable only for traders.
ANSWER: C
93. An export bill is taken for collection by the bank. The exchange rate applied for the transaction will be:
A. bill buying rate
B. bill selling rate
C. TT buying rate as on the date of sending the bill for collection
D. TT buying rate as on the date of realisation of the bill
ANSWER: D

94. An import customer accepts a bill drawn on him. The bank will apply-
A. bill selling rate
B. bill acceptance rate
C. TT selling rate
D. no exchange rate, since no foreign exchange transaction is executed
ANSWER: D
95. TT buying rate is applicable for transactions where-
A. remittance is received by telecommunicaton
B. remittance is sent by telecommunication
C. the nostro account of the bank is already credited
D. the nostro account of the bank is already debited
ANSWER: C
96. The term notional due date refers to-
A. the date on which an export bill is likely to be paid
B. due date arrived at without considering the holidays
C. due date of a bill drawn without a due date
D. none of the above
ANSWER: A
97. TT selling rate is applicable for transactions of-
A. issue of telegraphci transfers
B. outward remittances other than for retirement of import bill
C. retirement of import bill for which remittance is sent by TT
D. payment of telegraphic transfer
ANSWER: B
98. In calculating cross rates, exchange margin is entered-
A. only once int he dollar/rupee rate
B. only once int he dollar/foreign currency rate
C. twice in the dollar/rupee rate and dollar/foreign currency rate
D. twice int he dollar/rupee rate and dollar/foreign
ANSWER: A
99. The merchant rate for pound sterling is calculated by banks in India-
A. directly based on interbank sterling/rupee rate
B. directly based on RBI rate for sterling
C. as a cross rate using dollar/rupee rate and dollar/sterling rate
D. as a cross rate using Euro/rupee rate and Euro/sterling rate
ANSWER: C
100. For calculating cross currency rates, banks in India use the dollar/foreign currency rate quotedin-
A. Mumbai
B. London
C. New York
D. any international market

ANSWER: D
101. For cross currency quotation rounding off is done to the nearest multiple of-
A. 0.0001
B. 0.0025
C. 0.001
D. No rounding off.
ANSWER: B
102. for option forward purchase transactions the forward premium will be reckoned
A. based on earliest delivery date
B. based on latest delivery date
C. based on the average due date for delivery
D. none of the above.
ANSWER: A
103. cover deal by a dealer of an authorised dealer is undertaken to-
A. profit from exchange rate movements
B. cover up mistakes done by the dealer
C. square up the position resulting from dealings with customers
D. none of the above.
ANSWER: C
104. For funding the vostro acount, the bank in India will apply-
A. its TT buying rate
B. its TT selling rate
C. interbank spot buying rate
D. interbank spot selling rate
ANSWER: C
105. The objective of trading inforeign exchange by a dealer of a bank is to-
A. make profit out of exchange rate fluctuations
B. insulate the bank from exchange rate changes
C. comply with exchange control regulations
D. none of the above
ANSWER: A
106. For the banker, the spread will be wider when-
A. purchase of foreign currency from a customer is covered by a sale to another customer of the bank
B. merchant trades are covered by interbank deals
C. exposure in one currency is covered by a position in another currency
D. purchase of foreign currency from a customer is covered by sale to customer of another bank
ANSWER: A
107. Both legs of swap will be executed
A. at the same rate
B. on the same date
C. at different rates

D. at different rates on different dates
ANSWER: D
108. A swap deal is executed by
A. settling the difference int he rates
B. actual delivery of currencies
C. entering into another swap deal
D. none of the above
ANSWER: B
109. Foreign Exchange Management Act Passed int he year
A. 1997
B. 1998
C. 1999
D. 2000
ANSWER: C
110. Euro was launched on
A. 1999
B. 2000
C. 2001
D. 2002
ANSWER: A
111. -------- transaction the quoting bank acquires foreign currency and parts with home currency
A. Sale
B. purchase
C. spot
D. forward
ANSWER: B
112. In a ------------ transaction the quoting bank parts with foreign currency and acquires home currency
A. sale
B. purchase
C. spot
D. forward
ANSWER: B
113. TT stands for
A. Telegraphic Transfer
B. Telex Transfer
C. Telephone Transfer
D. Today Transfer
ANSWER: A
114. The rate applied when the Nostro account of the bank would already have been credited
A. TT selling rate
B. Bill buying rate

C. Bill selling rate
D. TT buying Rate
ANSWER: D
115. The rate applied when payment of demand draft drawn on the bank where bank's nostro account is
already credited
A. TT selling rate
B. Bill selling rate
C. Bill buying rate
D. TT buying Rate
ANSWER: C
116. The rate applied when payment of mail transfers drawn on the bank where bank's nostro account is
already credited
A. TT selling rate
B. Bill selling rate
C. TT buying Rate
D. Bill buying rate
ANSWER: C
117. The rate applied when payment of telegraphic transfers drawn on the bank where bank's nostro
account is already credited
A. TT selling rate
B. Bill selling rate
C. Bill buying rate
D. TT buying Rate
ANSWER: D
118. The rate applied when foreign bills collected and the bank's nostro account abroad is credited
A. TT buying Rate
B. TT selling rate
C. Bill selling rate
D. Bill buying rate
ANSWER: A
119. The rate applied when a foreign bills is purchased
A. TT buying Rate
B. TT selling rate
C. Bill selling rate
D. Bill buying rate
ANSWER: D
120. The rate used for all transactions that do not involve handling of documents by the banks is
A. TT buying Rate
B. TT selling rate
C. Bill selling rate
D. Bill buying rate
ANSWER: B

121. TT selling rate is calculated on the basis of ------selling rate
A. interbank
B. merchant
C. spot
D. security
ANSWER: A
122. Exchange margin enters into the bills selling rate
A. one time only
B. twice
C. three times
D. none of the above
ANSWER: B
123. The bills selling rate is calculated by adding exchange margin to the
A. TT buying rate
B. TT selling rate
C. Bills buying rate
D. Bills selling rate
ANSWER: B
124. In India exchange rates for foreign currencies other than US dollar are calculated as
A. TT buying rate
B. Cross rates
C. TT sellling rate
D. Bill sellling rate
ANSWER: B
125. -------- are authorised to carry out all current account and capital account transaction.
A. Authorised Dealer - Category I
B. Authorised Dealer - Category II
C. Authorised Dealer - Category II
D. money changers
ANSWER: A
126. FEDAI was established in
A. 1956
B. 1957
C. 1958
D. 1959
ANSWER: C
127. FEDAI has its headquarters at
A. Delhi
B. Mumbai
C. Kolkatta
D. Bangalore

ANSWER: B
128. With regard to charging of commission, quotation of rates, etc., the authorised dealer should also
comply with the rules of
A. RBI
B. FEDAI
C. Central Government
D. Bank
ANSWER: B
129. The system under which maintenance of external value of the currency at a predetermined level is
A. fixed exchange rate
B. floating exchange rate
C. gold standard
D. par value system
ANSWER: A
130. In a pure form fixed exchange rate system the exchange rate for currency is determined by the ---------
A. Demand forces
B. Supply forces
C. Government
D. Banks
ANSWER: C
131. The reduction in the value of a currency due to market forces is known as
A. Appreciation
B. Revaluation
C. Depletion
D. Depreciation
ANSWER: D
132. The purchase or sale of foreign exchange by the central bank of the country to influence the exchange
rate is known as -----
A. Appreciation
B. official intervention
C. Depreciation
D. Inflation
ANSWER: B
133. Paper currency was used for internal use and gold was used for international settlement under ----------
standard
A. IMF
B. gold bullion
C. fixed
D. floating
ANSWER: B
134. Rupee is partially convertible on
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A. current account
B. vostro account
C. capital account
D. nostro account
ANSWER: C
135. Convertibility of rupee refers to its convertibility into a ______ as desired by its holder.
A. foreign currency
B. local currency
C. Bank Notes
D. Demand Draft
ANSWER: A
136. IMF classifies Indian curreny system as
A. Currency Board Arrangements
B. Independently floating
C. Managed floating with no predetermined path for the exchange rate
D. Exchange rates within crawling bankds
ANSWER: C
137. Balance of payment records ---------transactions of the country with outsiders
A. economic
B. debit
C. credit
D. cash
ANSWER: A
138. For balance of payments statistics, visible trade refers to trade in
A. goods only
B. service only
C. goods/commodities
D. gold
ANSWER: C
139. Generally imports are recorded at ---------- value in balance of payments
A. FOB
B. CIF
C. CPT
D. CIP
ANSWER: B
140. Generally exports are recorded at ------value in balance of payments
A. FOB
B. CIF
C. CPT
D. CIP
ANSWER: A

141. Difference in balance of payments due to statistical discrepancies are recorded as
A. balance of trade
B. balance of payment
C. errors and omissions
D. deficit
ANSWER: C
142. A 'credit in balance of payments indicates
A. accumulation of bank balances abroad
B. foreign direct investment received into the country
C. earning of foreign exchange by the country
D. earning of foreign exchange or incurring of liability abroad or decrease in asset abroad
ANSWER: D
143. A debit in balance of payments does not indicate
A. import of goods and services
B. foreign tourists encashing travellers cheque in the country
C. investments made abroad
D. none of the above
ANSWER: B
144. The current account of balance of payments includes
A. unilateral payments
B. portfolio investments
C. short term borrowings
D. long term borrowings
ANSWER: A
145. The balance of payment does not include
A. transactions in real assets
B. transactions of financial claims
C. transactions between two non-residents
D. transactions in gold
ANSWER: C
146. Country A imports gold worth USD 100 million for commercial purposes. The transaction will affect
A. current account only
B. capital account only
C. official reserves account only
D. both current account and capital account
ANSWER: D
147. Basic balance in balance of payments refers to
A. the balance of payments on current account
B. the combined balance of current and capital accounts
C. the balance in official reserves account
D. the total of balance of current account and balances on long term items in capital account.
ANSWER: D

148. Autonomous transactions in balance of payments take place
A. only among private individuals
B. without the approval of the government
C. generally for profit motive
D. as an effect of exchange rate changes
ANSWER: C
149. Exchange control as a method of correcting balance of payments disequilibrium does not include
A. exchange restriction
B. exchange reserves
C. exchange intervention
D. exchange clearing arrangement
ANSWER: B
150. The strategy of deflation employed to correct balance of payments deficit includes use of
A. monetary policy
B. fiscal policy
C. both fiscal and monetary policy
D. exchange rate policy
ANSWER: C