Rule 1 Hours of Business

1.1 The exchange trading hours for Inter-bank forex market in India would be from 9.00 a.m. to 5.00 p.m. No customer transaction should be undertaken by the Authorised Dealers after 4.30 p.m. on all working days.

1.2 Cut-off time limit of 05.00 p.m. is not applicable for cross currency transactions.

In terms of paragraph 7.1 of Internal Control Guidelines over Foreign Exchange

Business of Reserve Bank of India (February 2011), Authorised Dealers are permitted

to undertake cross currency transactions during extended hours, provided the

Managements lay down the extended dealing hours.

1.3 For the purpose of Foreign Exchange business, Saturday will not be treated as a working day.

1.4 “Known holiday” is one which is known at least 4 working days before the date.

A holiday that is not a “known holiday” is defined as a “suddenly declared holiday”.


2.1. Post shipment Credit in Rupees

  1. a) Application of exchange rate:

Foreign Currency bills will be purchased/discounted/negotiated at the Authorised Dealer’s current bill buying rate or contracted rate. Interest for the normal transit period and/or usance period shall be recovered upfront simultaneously.

  1. b) Crystallisation and Recovery:
  2. i) Authoried Dealers should formulate own policy for crystallisation of foreign currency liability into rupee liability, in case of non-payment of bills on the due date.
  3. ii) The policy in this regard should be transparently available to the customers.

iii) For crystallisation into Rupee liability, the Authorised Dealer shall apply its TT selling rate of exchange. The amount recoverable, thereafter, shall be the crystallised Rupee amount along with interest and charges, if any.

  1. iv) Interest shall be recovered on the date of crystallisation for the overdue period at the appropriate rate; and thereafter till the date of recovery of the crystallised amount.
  2. v) Export bills payable in countries with externalisation issues shall also be crystallised as per the policy of the authorised dealer, notwithstanding receipt of advice of payment in local currency.
  3. c) Realisation of Bills after crystallisation.

After receipt of advice of realisation, the authorised dealer will apply TT buying rate or contracted rate (if any) to convert foreign currency proceeds.

  1. d) Dishonour of bills

In case of dishonour of a bill before crystallisation, the bank shall recover.

  1. i) Rupee equivalent amount of the bill and foreign currency charges at TT selling rate.
  2. ii) appropriate interest and rupee denominated charges.

2.2. Application of Interest

  1. a) Rate of interest applicable to all export transactions shall be as per the guidelines of Reserve Bank of India from time to time.
  2. b) Overdue interest shall be recovered from the customer, if payment is

not received within normal transit period in case of demand bills and on/or before notional due date/actual due date in case of usance bills, as per RBI directive.

  1. c) Early Realisation

In case of early realisation, interest for the unexpired period shall be refunded to the customer. The bank shall also pay or recover notional swap cost as in the case of early delivery under a forward contract.

2.3. Normal Transit Period

Concepts of normal transit period and notional due date are linked to concessional interest rate on export bills.

Normal transit period comprises of the average period normally involved from the date of negotiation/purchase/discount till the receipt of bill proceeds.

It is not to be confused with the time taken for the arrival of the goods at the destination.

Normal transit period for different categories of export business are laid down as below

  1. a) Fixed Due Date

In the case of export usance bills, where due dates are fixed or are reckoned from date of shipment or date of bill of exchange etc, the actual due date is known. Therefore in such cases, normal transit period is not applicable.

  1. b) Bills in Foreign Currencies – 25 days
  2. c) Exports to Iraq under United Nations Guidelines – Max. 120 days
  3. d) Bills drawn in Rupees under Letters of Credit (L/C)
  4. i) Reimbursement provided at centre of negotiation – 3 days
  5. ii) Reimbursement provided in India at centre different

from centre of negotiation – 7 days

iii) Reimbursement provided by banks outside India – 20 days

  1. iv) Exports to Russia under L/C where reimbursement is provided by RBI – 20 days.
  2. e) Bills in Rupees not under Letter of Credit – 20 days

f)TT reimbursement under Letters of Credit (L/C)

  1. i) Where L/C provides for reimbursement by electronic means – 5 days
  2. ii) Where L/C provides reimbursement claim after

certain number of days from the date of negotiation – 5 days + this additional period.

2.4. Substitution/Change in Tenor

  1. a) In case of change in the usance of a bill, interest on post shipment credit shall be charged to the customer, as per RBI guidelines. In addition, the bank shall charge or pay notional swap difference. Interest on outlay of funds for such swaps shall also be recovered from the customer at rate not below base rate of the bank concerned.
  2. b) It is optional for banks to accept delivery of bills under a contract made for

purchase of a clean TT. In such cases, the bank shall recover/pay notional swap

difference for the relative cover. Interest at the rate not below base rate of the

bank would be charged on the outlay of funds.

2.5. Export Bills sent for collection:

  1. a) Application of exchange rates

The conversion of foreign currency proceeds of export bills sent for collection or of goods sent on consignment basis shall be done at prevailing TT buying rate or the forward contract rate, as the case may be. The conversion to Rupee equivalent shall be made only after the foreign currency amount is credited to the nostro account of the bank.

  1. b) On receipt of credit advice/statement of nostro account and compliances of guidelines, requirements of the Bank and FEMA, the Bank shall transfer funds for the credit of exporter’s account within two working days.
  2. c) If the above stipulated time limit is not observed, the Bank shall pay compensation for the delayed period at the minimum interest rate charged on export credit. Compensation for adverse movement of exchange rate, if any, shall also be paid as per the compensation policy of the bank.


3.1 Application of exchange rate:

  1. a) Retirement of import bills – Exchange rate as per forward sale

contract, if forward contract is in place.

Prevailing Bills selling rate, in case there is

no forward contract.

  1. b) Crystallisation of Import – same as above

bill (vide para 3.3 below)

  1. c) For determination of stamp – As per exchange rate provided by the

duty on import bills authority concerned.

3.2. Application of Interest:

  1. a) Bills negotiated under import letters of credit shall carry commercial rate of interest as applicable to banks’ domestic advances from time to time.
  2. b) Interest remittable on interest bearing bills shall be subject to the directive of Reserve Bank of India in this regard.

3.3. Crystallisation of Import Bill under Letters of Credit.

Unpaid foreign currency import bills drawn under letters of credit shall be crystallised as per the stated policy of the bank in this respect

Rule 4

Clean Instruments:

4.1. Outward Remittance:

Outward remittance shall be effected at TT selling rate of the bank ruling on that date or at the forward contract rate.

4.2. Encashment of foreign currency notes and instruments

Foreign currency travelers’ cheques, currency notes, foreign currency in prepaid card, debit/credit card will be encashed at Authorised Dealer’s option at the appropriate buying rate ruling on the date of encashment.

4.3. Payment of foreign inward remittance

Foreign currency remittance up to an equivalent of USD 10,000/- shall be immediately converted into Indian Rupees. Remittance in excess of equivalent of USD 10,000 shall be executed in foreign currency. The beneficiary has the option of presenting the related instrument for payment to the executing bank within the period prescribed under FEMA.

4.4. The applicable exchange rate for conversion of the foreign currency inward remittance shall be T T buying rate or the contracted rate as the case may be.

4.5. Compensation for delayed payment : Authorised Dealers shall pay or send

Intimation, as the case may be, to the beneficiary in two working days from the date

of receipt of credit advice / nostro statement.

In case of delay, the bank shall pay the beneficiary interest @ 2 % over its savings bank interest rate. The bank shall also pay compensation for adverse movement of exchange rate, if any, as per its compensation policy.

Rule 5 Foreign Exchange Contracts

5.1. Contract amounts

Exchange contracts shall be for definite amounts and periods.

When a bill contract mentions more than one rate for bills of different deliveries,

the contract must state the amount and delivery against each such rate.

5.2. Option period of delivery

Unless the date of delivery is fixed and indicated in the contract, the option period may be specified at the discretion of the customer subject to the condition that such option period of delivery shall not extend beyond one month.

If the fixed date of delivery or the last date of delivery option is a known holiday; the last date for delivery shall be the preceding working day.

In case of suddenly declared holidays, the contract shall be deliverable on the next working day.

Contracts permitting option of delivery must state the first & last dates of delivery.

For Example: 18th January to 17th February, 31st January to 29th Feb. 2012.

“Ready” or “Cash” merchant contract shall be deliverable on the same day.

“Value next day” contract shall be deliverable on the working day immediately succeeding the contract date.

A spot contract shall be deliverable on second succeeding working day following the contract date.

A forward contract is a contract deliverable at a future date, duration of the contract being computed from spot value date at the time of transaction”.

5.3. Place of delivery

All contracts shall be understood to read “to be delivered or paid for at the Bank” and “at the named place”.

5.4. Date of delivery

Date of delivery under forward contracts shall be :

  1. i) In case of bills/documents negotiated, purchased or discounted – the date of negotiation/purchase/ discount and payment of Rupees to the customer.

However, in case the documents are submitted earlier to, or later than the original delivery date, or for a different usance, the bank may treat it as proper delivery, provided there is no change in the expected date of realisation of foreign currency calculated at the time of booking of the contract. No early realisation or late delivery charges shall be recovered in such cases.

  1. ii) In case of export bills/documents sent for collection – date of payment of Rupees to the customer on realisation of the bills.

iii) In case of retirement/crystallisation of import bills/documents – the date of

retirement/ crystallisation of liability, whichever is earlier.

5.5. Option of delivery

In all forward merchant contracts, the merchant, whether a buyer or a seller, will have the option of delivery.

5.6. Option of usance

The merchant purchase contract should state the tenor of the bills/documents.

Acceptance of delivery of bills/documents drawn for a different tenor will be at the discretion of the bank.

5.7. Merchant quotations

The exchange rate shall be quoted in direct terms i.e. so many Rupees and

Paise for 1 unit or 100 units of foreign currency.

5.8. Rounding off Rupee equivalent of the foreign currency

Settlement of all merchant transactions shall be effected on the principle of rounding off the Rupee amounts to the nearest whole Rupee i.e. without paise.


“Settlement of all merchant transactions may be effected by rounding off rupee amount or in actual paise, as per the banks own policy”. ( AR Circular No. 01/2015 dated 12th January 2015 )



RULE 6 Early Delivery, Extension and Cancellation of Foreign Exchange Contracts

6.1. General

  1. i) At the request of a customer, unless stated to the contrary in the provisions of

FEMA, 1999, it is optional for a bank to:

  1. Accept or give early delivery; or b. Extend the contract.
  2. ii) It is the responsibility of a customer to effect delivery or request the bank for extension / cancellation as the case may be, on or before the maturity date of the contract.

6.2. Early delivery

If a bank accepts or gives early delivery, the bank shall recover/pay swap difference, if any.

6.3. Extension

Foreign exchange contracts where extension is sought by the customers shall be cancelled (at an appropriate selling or buying rate as on the date of cancellation) and rebooked simultaneously only at the current rate of exchange. The difference between the contracted rate, and the rate at which the contract is cancelled, shall be recovered from/paid to the customer at the time of extension. Such request for extension shall be made on or before the maturity date of the contract.

6.4. Cancellation

  1. i) In case of cancellation of a contract at the request of a customer, (the request shall be made on or before the maturity date) the Authorised Dealer shall recover/ pay, as the case may be, the difference between the contracted rate and the rate at which the cancellation is effected. The recovery/payment of exchange difference on cancellation of forward contracts before the maturity date may be either upfront or back-ended at the discretion of banks.
  2. ii) Rate at which cancellation is to be effected:
  3. Purchase contracts shall be cancelled at T.T. selling rate of the contracting

Authorised Dealer

  1. Sale contracts shall be cancelled at T.T. buying rate of the contracting

Authorised Dealer

  1. Where the contract is cancelled before maturity, the appropriate forward T.T. rate shall be applied.

iii) Notwithstanding the fact that the exchange contract between the customer and the bank becomes impossible of performance, for whatever reason, including Government prohibitory orders, the exchange contract shall not be deemed to have become void and the customer shall forthwith apply to the Authorised Dealer for cancellation, as per the provisions of paragraph 6.4.(i) and

(ii) above.

  1. iv) a. In the absence of any instructions from the customer, vide para 6.1(ii), a contract which has matured shall be cancelled by the bank on the 7th working day after the maturity date.
  2. Swap cost, if any, shall be recovered from the customer under advice to him.
  3. When a contract is cancelled after the maturity date, the customer shall not be entitled to the exchange difference, if any, in his favour, since the contract is cancelled on account of his default. He shall, however, be liable to pay the exchange difference, against him.

6.5. Swap cost/gain

  1. i) In all cases of early delivery of a contract, swap cost shall be recovered from the customer, irrespective of whether an actual swap is made or not. Such recoveries should be made either back-ended or upfront at discretion of the bank.
  2. ii) Payment of swap gain to a customer shall be made at the end of the swap period.

6.6. Outlay and Inflow of funds

Authorised Dealer shall recover interest on outlay of funds for the purpose of arranging the swap, in addition to the swap cost in case of early delivery of a contract.

If such a swap leads to inflow of funds, interest shall be paid to the customer. Funds outlay / inflow shall be arrived at by taking the difference between the original contract rate and the rate at which the swap could be arranged.

The rate of interest to be recovered / paid should be determined by banks as per their policy in this regard.