Wednesday, September 19, 2018 New York : London: India: Tokyo:


List of Terms Definitions
Authorised Dealers List of banks authorised by RBI for undertaking foreign exchange transactions
Permitted Currencies Currencies permitted by RBI for trade and ECB purposes.The permitted currencies exclude South American and African Currencies
Value Date The date on which the settlement of debit or credit takes palce in the account.Value date can also be adjusted at a later date to reflect the true position of receipt and payment.
Intervention The foreign currency buying or selling undertaken by RBI to restrict the sharp volatilities in the domestic currency.
Forex Broker Intermediates between the buyer and seller in the interbank and earns commission as fixed by FEDAI for different types of transactions.
Seller Refers to seller of foreign currency against either Rupee or another foreign currency on outright basis.
Buyer Refers to buyer of foreign currency against either rupee or another foreign currency on outright basis.
FIRC Forward Inward Remittance certificate issued by the local receiving bank.
Marked to Market Budget rates fixed by the company for cash flow purposes.
Benchmark rates Budget rates fixed by the company for cash flow purposes.
Core Cover Refers to the percentage of forward cover to total exposures.
Interest risk Interest rate variations in the borrowing currencies.
Currency risk a. USD/INR: Risk on appreciation/depreciation of domestic currency on the forex assets and liabilities.
b.Cross-currency risk: relates to risk on overseas currency pairs viz.'$/euro $/yen,$/pound currency fluctuation risk.
Settlement risk Credit limit extended to the counter party of the forex transactions for settlement of the forex deals.


List of Terms Definitions
LIBOR London Inter-bank offered rate.Quotes available for 1,2,3,6,9 and 12 months.
EURIBOR Euro Inter-bank offered rate is the rate at which Euro interbank term deposits within the Euro zone are offered by one Prime Bank to another Prime Bank.It is computed as an average of daily quotes provided for thirteen maturities by a panel of 57 of the most active banks in the Euro zone.It is quoted on an act/360 days count convention.
Base Rate Money market reference rate used by BOE.
Prime rate Interest rate quoted for prime customers.
Discount rate Bank rate for transactions between the central bank and other commercial banks.
Repo Rate Buy back facility offered to banks against the government debt.Extended for short-term maturities to ease the liquidity overhang or injection of funds into the market by the central bank.
Mean Rate Mean of inter-bank buying and selling rates.


List of Terms Definitions
Exchange Rates Exchange rate quotes for domestic currency against foreign currencies.
Cash Same day settlement -cash/spot difference adjusted spot rate.
Tom Settlement value next day. Tom/spot(T/n) swap difference adjusted spot rate.
Spot Settlement 2 days after deal date.
Forward Settlement beyond spot can be for any maturities.
Repo Rate Buy back facility offered to banks against the government debt.Extended for short-term maturities to ease the liquidity overhang or injection of funds into the market by the central bank. USD/INR for one year and major overseas currencies upto 5 years.
Card Rates Exchange rates fixed by the bank for merchant transactions.
TT buying rates Exchange rate applied by the bank for inward remittance.
Bill buying rate Exchange rate applied for purchase/negotiation/discounting of export bills by the bank.
TT selling rates Exchange rate quoted by the bank for outward remittance.
Bill selling rates Exchange rate quoted by the bank for retirement/crystallisation of import bills under L/c.
T/c. buying & selling rates Not exceeding 1% margin on cover rate.
Currency buying and selling rates The currency rate buying and selling rates for major currencies are fixed by the bank based on the cover quotes available from authorised money exchangers like Thomas Cook,Phiroze & Framroze etc.


List of Terms Definitions
FRA Forward Rate Agreement Instrument used for hedging the short-term currency risk.
Depo Rates quoted by banks for acceptance of foreign currency deposits for various maturities.
Fixed rate Interest rate is fixed
Floating rate Interest rate is floating
Currency option To hedge the cross-currency,risk options are used.The option buyer gets a protection from the downside currency risk.The buyer pays front ended premium to the seller.
Cap Interest rate option to cap the interest cost.
Floor Interest rate option to maximise the yield.
Collar/Corridor Zero cost interest rate option.
Knock-in/knock out Knock-in/knock out Option product built on a corridor to enhance the risk-reward pay-off profile.
Vanilla swap Simple interest rate swap from floating to fixed to floating.


List of Terms Definitions
Interest rate swap Conversion of floating to fixed rate to crystallise the interest cost.Conversion from fixed to floating with a view to save the interest cost by taking the interest rate risk, based on views.
Currency swap Swapping into another currency with a view to reduce the interest cost-aggressive hedging strategy.
Forward to forward swap Permitted in the local market for receiving or paying forward premium based on the market trends.
Short swap Swap period within 6 working days.
Long swap Swap period exceeding 6 working days.
Payer Selling spot and buying forward dollar to hedge currency payables. pays the forward premium.
Receiver Buying spot and selling forward dollar to hedge currency receivables-receives the forward premium.
o/n Value same day against next working day.
t/n Value tomorrow against spot.
s/n Settelement on spot value date against 3rd working day.
Swap exchange rate exchange rate agreed by the counter party of the swap transactions applicable at commencement and end date of the transactions.


Trade date Date on which the deal has taken place.
Commencement date Value date of the deal.
Period Tenor of the transaction.
Int.act/360 days Actual no.of days on 360 days basis-360 days is taken as a base for interest computation. example USD borrowing,etc.
Int.act/365 days Actual no.of days on 365 days basis-365 days is taken as a base for interest computation. example GBP borrowing.
End date/maturity date Maturity date or the expiration date of the transactions.


List of Terms Definitions
FCNR(N) Foreign Currency Non-Resident (Bank) account scheme-the exchange risk on NRI deposit is taken by the banks.
NRNR Non resident non-repatriable account-the principal amount is not repatriable-carries high interest rate.
NRO Non-resident Ordinary account-Rupee account of NRI-non-repatriable/can be used for purposes within India.
NRE Non-resident (External) account.It is a Rupee account with full repatriation benefits.
Nostro a/c Foreign currency accounts maintained abroad by authorised dealers in India.
Vostro a/c. Rupee accounts maintained by overseas banks in India-non-convertible account.


Bid A quote to buy the base currency.
Offer A qoute to sell the base currency.
Quoting Bank Offers 2 way quotes for buying and selling-to be dealt at his price.
Taking Bank A bank which takes a quote from the quoting bank.


Negotiation Negotiation of documents on sight basis.
Purchase Travellers cheque and other bills purchase.
Discounting Discounting of usance bills and interest amount deducted front-ended.
Overdue bills Import and export bills not settled on the due date becomes overdue-definition of FEDAI.

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