CHAPTER-I

INTRODUCTION

1 . 0 I N T R O D U C T I O N T O T H E S T U DY
1 .1 F O R E I G N E XC H A N G E
(FOREX)

FOREX-The abbreviation of Foreign Exchange

What is Foreign Exchange?
Foreign Exchange is the purchase or sale of one nations currency in
exchange for another nations currency.Foreign Exchange makes possible
international transactions such as imports and exports and the movement
of capital between countries.

Foreign Exchange is the money in one country for money or credit

or goods or services in another country.Foreign Exchange includes foreign
currencies, foreign cheques and foreign drafts.
Foreign Exchange is the transaction of international monetary business,
as between governments or businesses of different countries.
Foreign Exchange is the negotiable bills drawn in one country to be
paid in another country.
Foreign Exchange is any currency other than the local currency which is
used in settling international transactions.
Foreign Exchange is the system of trading in and converting the
currency of one country into that of another country.

Foreign Exchange is the transfer of credits to a foreign country to settle

debts or accounts between residents of the home country and those of the
foreign country.

D e fi n i t i o n o f Fo r e i g n E x c h a n g e :

The foreign capital earned by a countrys exports.Since the currency of

many less developed countries is not accepted by international markets,it
often becomes necessary to earn foreign exchange in order to buy
imports.

- Geography
Dictionary
Foreign exchange exposure and risk are important concept in the study
of international finance. It is the sensitivity of the home currency value of
asset, liabilities, or operating incomes to unanticitpated changes in the
exchange rates.

Exposure exists if the home currency values on an average in a particular

manner. It also exists where numerous currencies are involved.

Foreign exchange risk is the variance of the home currency value of items
arising on account of unanticipated changes in the exchange rates.

The derivative instruments like forwards, futures and options are used to
hedge against the foreign exchange risk of the Multinational companies.

The original derivatives contract of International Finance is the Forward

exchange contract. Forward Foreign exchange is a traditional and popular
risk management tool to obtain protection against adverse exchange rate
movements. The exchange rate is locked in for a specific date in future,
which enables the person involved in the contract to plan for and budget
the business expenses with more certainty.

Forward exchange market, has since the 1960s, played the role of linking
international interest rates. Today, however, Forward contract have to
share other instruments and markets for arbitrage and for hedging. These
newer derivative instruments include Futures, Options and Swaps.

1.2 SCOPE OF THE STUDY:-

To know what is foreign exchange and what are the various foreign exchange
services.

To know how the transactions related to foreign exchange volatility carried out.

To have a brief knowledge about various foreign currencies and their exchange
rates compare to other nations currencies.

1.3 NEED AND IMPORTANCE OF THE STUDY

The world nations are increasingly becoming more interrelated global

trade, and global investment. These international result in cross country
flow of world nations. Countries hold currencies of other countries and that
a market, dealing of foreign exchange results.
Foreign exchange means reserves of foreign currencies. More aptly,
foreign exchange refers to claim to foreign money balances. Foreign
exchange gives resident of one country a financial claim on other country
or countries. All deposits, credits and balances payable in foreign currency
and any drafts, travelers cheques, letters of credit and bills of exchange
payable in foreign currency constitute foreign exchange. Foreign exchange
market is the market where money denominated in one currency is bought
and sold with money denominated in another currency. Transactions in
currencies of countries, parties to these transactions, rates at which one
currency is exchanged for other or others, ramification in these rates,

derivatives to the currencies and dealing in them and related aspects

constitute the foreign exchange (in short, forex) market.
Foreign exchange transactions take place whenever a country imports
goods and services, people of a country undertake visits to other counties,
citizens of a country remit money abroad for whatever purpose, business
units set up foreign subsidiaries and so on. In all these cases the nation
concerned buys relevant and required foreign exchange, in exchange of its
currency, or draws from foreign exchange reserves built. On the other
hand, when a country exports goods and services to another country,
when people of other countries visit the country, when citizens of the
country settled abroad remit money homewards, when foreign citizens,
firms and institutions invest in the country and when the country or its
business community raises funds from abroad, the countrys currency is
bought by others, giving foreign exchange, in exchange. Multinational
firms operate in more than one country and their operations involve
multiple foreign currencies. Their operations are influenced by politics and
the laws of the counties where they operate. Thus, they face higher
degree of risk as compared to domestic firms. A matter of great concern
for the international firms is to analyze the implications of the changes in
interest rates, inflation rates and exchange rates on their decisions and
minimize the foreign exchange risk. The importance of the study is to
know the features of foreign exchange and the factors creating risk in
foreign exchange transactions and the techniques used for managing that
risk.

1.4 OBJECTIVES OF THE STUDY

To study the foreign exchange in ICICI Limited.

To analyze the revenues of the company when the exchange rates

fluctuate.

To analyze income statement and find out the revenues when the
dollars are converted into Indian rupees.

To study the different types of foreign exchange exposures including

risk and risk management techniques which the company is used to
minimize the risk.

To present the findings and conclusions of the company in respect of

foreign exchange risk management

1.5 SOURCES OF DATA

Primary data:
The primary data information is gathered from ICICI Limited executives.

Secondary data:
The secondary data is collected from various financial books, magazines.

LIMITATIONS

The study is confined just to the foreign exchange risk but not the
total risk.

The analysis of this study is mainly done on the income statements.

This study is limited for the year 2013-2014.

It does not take into consideration all Indian companies foreign

exchange risk.

The hedging techniques are studied only which the company

adopted to minimize foreign exchange risk.

CHAPTER-II
INDUSTRY PROFILE
AND
COMPANY PROFILE

2.0 FOREIGN EXCHANGE MARKET

The foreign exchange market (forex, FX, or currency market) is a
worldwide decentralized over-the-counter financial market for the trading
of currencies. Financial centers around the world function as anchors of
trading between a wide range of different types of buyers and sellers
around the clock, with the exception of weekends. The foreign exchange
market determines the relative values of different currencies.
Despite the announcement on December 18, 2013 of commencement of
tapering by the US Fed starting from January 2014 and the subsequent
announcements about the increase in its pace, the Rupee has generally
remained stable, which indicates that the markets have broadly shrugged
off QE tapering fears. The Rupee has remained relatively stable as
compared to other major EME currencies like Brazilian Real, Turkish Lira
South African Rand, Indonesian Rupiah and Russian Rouble. The daily
volatility (annualised) of Rupee during the period from January 1 to
September 30, 2014 remained at 5.9 per cent as against South African
Rand (11.5 per cent), Brazilian Real (10.8 per cent), Turkish Lira (10.6 per
cent), Russian Rouble (9.9 per cent) and Indonesian Rupiah (6.9 per cent).
In terms of point-to-point variation, Rupee has marginally appreciated by
about 0.5 per cent during the above period, while other currencies have
witnessed depreciation, viz. Russian Rouble (16.9 per cent depreciation),
South African Rand (7.4 per cent), Turkish Lira (5.8 per cent) and Brazilian

Real (3.4 per cent).The contagion effect of sharp fall in Argentine Peso
against the US dollar in the second half of January 2014 also did not have
any major impact on the Rupee. Even the recent geo political crises in
Ukraine, Iraq and Gaza did not have any significant impact on the Indian
financial markets. This has led to some analysts describing Indian Rupee
as the most agile out of the fragile currencies of EMEs.
9. The fact that weak macroeconomic fundamentals have a tendency to
accentuate the contagion effect of any adverse external development was
amply demonstrated during the May-August 2013 episode of volatility.
Countries with large macroeconomic imbalances, especially large CAD,
such as, Brazil, Turkey, India, Indonesia, etc., experienced much larger
volatility as compared to other EDMEs with current account surplus/better
fundamentals. In a scenario of intense volatility, traditional monetary
policy defence at times proves inadequate as was experienced by other
EDMEs like Turkey and Indonesia. Thus, a mix of measures, including
administrative measures, coupled with effective communication by central
banks helps in containing the exchange rate volatility. I feel that the main
lesson from this episode of volatility for an EMDE central bank is to have
sufficient tools in its toolkit and employ them in a flexible, proactive and
pragmatic manner. In this context, having large forex reserves, which was
earlier considered wasteful on account of quasi fiscal costs, has become a
new virtue. Even the debate surrounding capital account liberalisation has
decisively veered towards having some necessary capital controls in place
to protect the EMDEs from the vagaries of international capital flows where
a deluge is generally followed by sudden stops. The need for the EMDEs to
have prudent capital controls in place has been duly recognized by the
ardent votaries of full capital account liberalization like the IMF. Unfettered
capital account liberalization is now pass and the new mantra is having
certain necessary capital controls in place and uses them proactively
during episodes of heightened volatility.
10. As regards the movement of Rupee during the recent period, it has
remained largely range-bound with strengthening bias on the back of
sustained capital inflows and improving macroeconomic fundamentals. In
a comparative sense in Q2 of 2014-15, the Indian Rupee depreciated 2.72
per cent against the US dollar while the Russian Ruble depreciated about

13 per cent, Turkish Lira by 6.5 per cent, the Brazilian Real by 10 per cent,
and the South African Rand by 5.5 per cent. There has been continuing FII
inflows to the domestic equity markets as well as resumption of FII inflows
to debt market, especially since December 2013 (except in April 2014
when there was a net outflow). During 2014 so far, foreign portfolio inflows
to debt and equity markets have been around US$ 34 billion with the
larger part going to the debt segments. The substantial reduction in gold
imports and increase in exports led to significant reduction in current
account deficit to 1.7 per cent of GDP in Q1 2014-15 from 4.8 per cent in
Q1 2013-14. In the recent period, inflation has decelerated (7.8 per cent
CPI inflation in August 2014), growth has picked up (5.7 per cent in Q1 of
2014-15 as compared to 4.7 per cent in Q1 of previous year), and fiscal
deficit has reduced (4.5 per cent of GDP during 2013-14). Indias forex
reserves have increased by around US$ 40.3 billion in the past one year to
around US$ 316 billion as on September 12, 2014.While the countrys
external debt may have risen to 1.8 per cent for the quarter ended June
2014, the share of short-term debt in the total debt has declined primarily
due to restrictions on FII investments in the short end of the G-sec. It is
equally important to note that short term debt as a percentage of reserves
have also declined largely due to increase in the size of foreign exchange
reserves. The sharp increase in forex reserves and improvement in
macroeconomic fundamentals, including the short-term debt profile, have
significantly enhanced the resilience of the economy to external shocks.
Political stability in terms of formation of a new Government with clear
mandate, Governments continued commitment to fiscal consolidation and
sustained decline in oil prices have boosted the confidence in the
countrys macro-economy. The recent upgrade in countrys outlook from
negative to stable by S & P in a sense reflects and reinforces this new
confidence. Thus, it can be said that India is in a much better position to
withstand large capital outflows triggered by external developments. We,
however, have to be alive to a few downside risks.
Downside Risks
11. Downside risks in the form of still elevated retail inflation, continued
weak economic performance, uncertainty surrounding global economic
recovery, potential slowdown of capital flows to EMEs once interest rate

10

cycle in advanced economies reverses, geopolitical risks, etc., remain. We

need to be particularly cautious of the likely impact of headwinds arising
due to growing robustness in the growth outlook of the US and the
strengthening of the US dollar and the dovish stance of the European
Central Bank. These can cause problems to Indias external sector.
Additionally; the recent surge in equity markets has created concerns
about under-pricing of risks with attendant implications for financial
stability. Any abrupt correction of such risks may result in sharp fall in
asset prices and enhanced volatility in global financial markets, especially
in the EMDEs. Moreover, as we have seen while financial risk taking has
gone up substantially, aided by accommodative policies of central banks
of AEs, economic risk taking in conspicuously absent or muted. This has
implications for global output growth and in turn trade growth trajectory;
WTO, for instance, has lowered its world trade growth forecast for 2014
from 4.7 in in April to 3.1 in September. Further, though macro-economic
fundamentals and business sentiments in the country have improved
during the recent period, more needs to be done in terms of removing
structural impediments, building durable business confidence and creating
fiscal space to support investments in order to secure sustainable growth.
In the long-run, the resilience and robustness of the macro-economy in
conjunction with the depth, breadth and orderliness of the financial
markets will determine the stability of the external sector as well as the
overall financial sector.
The exchange rate of Rupee has witnessed both periods of intense
volatility and periods of stability since May 2013 when the Fed Chairman
Bernanke first hinted at early tapering of Feds Quantitative Easing (QE)
programme. Against this backdrop, I would like to start my address by
briefly touching upon the developments in the domestic forex market,
especially after Chairman Bernankes testimony, and the measures taken
by the RBI to restore orderly conditions in the market. Then I would also
like to focus on the possible risks to the stability of the forex market going
forward and how well is India placed now as compared to 2008 and 2013
to cope with large capital outflows if they were to materialize. Finally, I will
discuss some of the major issues and concerns pertaining to the Indian

11

forex market which are presently engaging the attention of the policy
makers.
The primary purpose of the foreign exchange is to assist international
trade and investment, by allowing businesses to convert one currency to
another currency. For example, it permits a US business to import British
goods and pay Pound Sterling, even though the business's income is in US
dollars. It also supports speculation, and facilitates the carry trade, in
which investors borrow low-yielding currencies and lend (invest in) highyielding currencies, and which (it has been claimed) may lead to loss of
competitiveness in some countries.
In a typical foreign exchange transaction, a party purchases a quantity of
one currency by paying a quantity of another currency. The modern
foreign exchange market began forming during the 1970s when countries
gradually switched to floating exchange rates from the previous exchange
rate regime, which remained fixed as per the Bretton Woods system.

2.1 Market size and liquidity

The foreign exchange market is the largest and most liquid financial
market in the world. Traders include large banks, central banks, currency
speculators, corporations, governments, and other financial institutions.
The average daily volume in the global foreign exchange and related
markets is continuously growing. Daily turnover was reported to be over
US$3.98 trillion in April 2010 by the Bank for International Settlements.
Of the $3.98 trillion daily global turnover, trading in London accounted for
around $1.85 trillion, or 36.7% of the total, making London by far the
global

center

for

foreign

exchange.

In

second

and

third

places

respectively, trading in New York City accounted for 17.9%, and Tokyo
accounted for 6.2%. In addition to "traditional" turnover, $2.1 trillion was
traded in derivatives.
Exchange-traded FX futures contracts were introduced in 1972 at the
Chicago Mercantile Exchange and are actively traded relative to most
other futures contracts.

12

Several other developed countries also permit the trading of FX derivative

products (like currency futures and options on currency futures) on their
exchanges. All these developed countries already have fully convertible
capital accounts. Most emerging countries do not permit FX derivative
products on their exchanges in view of prevalent controls on the capital
accounts. However, a few select emerging countries have already
successfully experimented with the currency futures exchanges, despite
having some controls on the capital account.
FX futures volume has grown rapidly in recent years, and accounts for
about 7% of the total foreign exchange market volume, according to The
Wall Street Journal Europe (5/5/06, p. 20).

Top 10 currency traders

% of overall volume, May 2014

Rank

Name

Market share

Deutsche Bank

17.06%

UBS AG

12.30%

Barclays Capital

11.08%

Citi

8.69%

Royal Bank of Scotland

6.50%

JPMorgan

6.35%

HSBC

4.55%

Credit Suisse

4.44%

Goldman Sachs

3.28%

10

Morgan Stanley

2.91%

13

Foreign exchange trading increased by over a third in the 12 months to

April 2014 and has more than doubled since 2001. This is largely due to
the growing importance of foreign exchange as an asset class and an
increase in fund management assets, particularly of hedge funds and
pension funds. The diverse selection of execution venues have made it
easier for retail traders to trade in the foreign exchange market. In 2009,
retail traders constituted over 5.21% of the whole FX market volumes (see
retail trading platforms).
Because foreign exchange is an OTC market where brokers/dealers
negotiate directly with one another, there is no central exchange or
clearing house. The biggest geographic trading centre is the UK, primarily
London, which according to TheCity UK estimates has increased its share
of global turnover in traditional transactions from 34.6% in April 2007 to
36.7% in April 2010. Due to London's dominance in the market, a
particular currency's quoted price is usually the London market price. For
instance, when the IMF calculates the value of its SDRs every day, they
use the London market prices at noon that day.

2.2 Market participants

Unlike a stock market, the foreign exchange market is divided into levels
of access. At the top is the inter-bank market, which is made up of the
largest commercial banks and securities dealers. Within the inter-bank
market, spreads, which are the difference between the bid and ask prices,
are razor sharp and usually unavailable, and not known to players outside
the inner circle. The difference between the bid and ask prices widens
(from 0-1 pip to 1-2 pips for some currencies such as the EUR). This is due
to volume. If a trader can guarantee large numbers of transactions for
large amounts, they can demand a smaller difference between the bid and
ask price, which is referred to as a better spread. The levels of access that
make up the foreign exchange market are determined by the size of the
"line" (the amount of money with which they are trading). The top-tier
inter-bank market accounts for 53% of all transactions. After that there are
usually smaller banks, followed by large multi-national corporations (which
need to hedge risk and pay employees in different countries), large hedge

14

funds, and even some of the retail FX-metal market makers. According to
Galati and Melvin, Pension funds, insurance companies, mutual funds,
and other institutional investors have played an increasingly important
role in financial markets in general, and in FX markets in particular, since
the early 2000s. (2004) In addition, he notes, Hedge funds have grown
markedly over the 20012004 period in terms of both number and overall
size Central banks also participate in the foreign exchange market to
align currencies to their economic needs.

Banks
The interbank market caters for both the majority of commercial turnover
and large amounts of speculative trading every day. A large bank may
trade billions of dollars daily. Some of this trading is undertaken on behalf
of customers, but much is conducted by proprietary desks, trading for the
bank's own account. Until recently, foreign exchange brokers did large
amounts

of

business,

facilitating

interbank

trading

and

matching

anonymous counterparts for large fees. Today, however, much of this

business has moved on to more efficient electronic systems. The broker
squawk box lets traders listen in on ongoing interbank trading and is heard
in most trading rooms, but turnover is noticeably smaller than just a few
years ago.

Commercial companies
An important part of this market comes from the financial activities of
companies seeking foreign exchange to pay for goods or services.
Commercial companies often trade fairly small amounts compared to
those of banks or speculators, and their trades often have little short term
impact on market rates. Nevertheless, trade flows are an important factor
in

the

long-term

direction

of

currency's

exchange

rate.

Some

multinational companies can have an unpredictable impact when very

large positions are covered due to exposures that are not widely known by
other market participants.

Central banks

15

National central banks play an important role in the foreign exchange

markets. They try to control the money supply, inflation, and/or interest
rates and often have official or unofficial target rates for their currencies.
They can use their often substantial foreign exchange reserves to stabilize
the market. Nevertheless, the effectiveness of central bank "stabilizing
speculation" is doubtful because central banks do not go bankrupt if they
make large losses, like other traders would, and there is no convincing
evidence that they do make a profit trading.

Forex Fixing
Forex fixing is the daily monetary exchange rate fixed by the national bank
of each country. The idea is that central banks use the fixing time and
exchange rate to evaluate behavior of their currency. Fixing exchange
rates reflects the real value of equilibrium in the forex market. Banks,
dealers and online foreign exchange traders use fixing rates as a trend
indicator.
The mere expectation or rumor of central bank intervention might be
enough to stabilize a currency, but aggressive intervention might be used
several times each year in countries with a dirty float currency regime.
Central banks do not always achieve their objectives. The combined
resources of the market can easily overwhelm any central bank. Several
scenarios of this nature were seen in the 199293 ERM collapse, and in
more recent times in Southeast Asia.

Retail foreign exchange brokers

Retail traders (individuals) constitute a growing segment of this market,
both in size and importance. Currently, they participate indirectly through
brokers or banks. Retail brokers, while largely controlled and regulated in
the USA by the CFTC and NFA have in the past been subjected to periodic
foreign exchange scams. To deal with the issue, the NFA and CFTC began
(as of 2012) imposing stricter requirements, particularly in relation to the

16

amount of Net Capitalization required of its members. As a result many of

the smaller, and perhaps questionable brokers are now gone.
There are two main types of retail FX brokers offering the opportunity for
speculative currency trading: brokers and dealers or market makers.
Brokers serve as an agent of the customer in the broader FX market, by
seeking the best price in the market for a retail order and dealing on
behalf of the retail customer. They charge a commission or mark-up in
addition to the price obtained in the market. Dealers or market makers, by
contrast, typically act as principal in the transaction versus the retail
customer, and quote a price they are willing to deal atthe customer has
the choice whether or not to trade at that price.
In assessing the suitability of an FX trading service, the customer should
consider the ramifications of whether the service provider is acting as
principal or agent. When the service provider acts as agent, the customer
is generally assured of a known cost above the best inter-dealer FX rate.
When the service provider acts as principal, no commission is paid, but the
price offered may not be the best available in the marketsince the
service provider is taking the other side of the transaction, a conflict of
interest may occur.

Non-bank foreign exchange companies

Non-bank foreign exchange companies offer currency exchange and
international payments to private individuals and companies. These are
also known as foreign exchange brokers but are distinct in that they do not
offer speculative trading but currency exchange with payments. I.e., there
is usually a physical delivery of currency to a bank account. Send Money
Home offers an in-depth comparison into the services offered by all the
major non-bank foreign exchange companies.
It is estimated that in the UK, 14% of currency transfers/payments are
made via Foreign Exchange Companies. These companies' selling point is
usually that they will offer better exchange rates or cheaper payments
than the customer's bank. These companies differ from Money

17

Transfer/Remittance Companies in that they generally offer higher-value

services.

Money transfer/remittance companies

Money transfer companies/remittance companies perform high-volume
low-value transfers generally by economic migrants back to their home
country. In 2007, the Aite Group estimated that there were $369 billion of
remittances (an increase of 8% on the previous year). The four largest
markets (India, China, Mexico and the Philippines) receive $95 billion. The
largest and best known provider is Western Union with 345,000 agents
globally followed by UAE Exchange & Financial Services Ltd.
There is no unified or centrally cleared market for the majority of FX
trades, and there is very little cross-border regulation. Due to the over-thecounter (OTC) nature of currency markets, there are rather a number of
interconnected marketplaces, where different currencies instruments are
traded. This implies that there is not a single exchange rate but rather a
number of different rates (prices), depending on what bank or market
maker is trading, and where it is. In practice the rates are often very close,
otherwise they could be exploited by arbitrageurs instantaneously. Due to
London's dominance in the market, a particular currency's quoted price is
usually the London market price. A joint venture of the Chicago Mercantile
Exchange and Reuters, called Fxmarketspace opened in 2007 and aspired
but failed to the role of a central market clearing mechanism.
The main trading center is London, but New York, Tokyo, Hong Kong and
Singapore are all important centers as well. Banks throughout the world
participate. Currency trading happens continuously throughout the day; as
the Asian trading session ends, the European session begins, followed by
the North American session and then back to the Asian session, excluding
weekends.
Fluctuations in exchange rates are usually caused by actual monetary
flows as well as by expectations of changes in monetary flows caused by
changes in gross domestic product (GDP) growth, inflation (purchasing
power parity theory), interest rates (interest rate parity, Domestic Fisher

18

effect, International Fisher effect), budget and trade deficits or surpluses,

large cross-border M&A deals and other macroeconomic conditions. Major
news is released publicly, often on scheduled dates, so many people have
access to the same news at the same time. However, the large banks
have an important advantage; they can see their customers' order flow.
On the spot market, according to the BIS study, the most heavily traded
products were:

EURUSD: 27%

USDJPY: 13%

GBPUSD (also called cable): 12%

and the US currency was involved in 84.39% of transactions, followed by

the euro (39.1%), the yen (19.0%), and sterling (12.9%) .Volume
percentages for all individual currencies should add up to 200%, as each
transaction involves two currencies.
Trading in the euro has grown considerably since the currency's creation in
January 1999, and how long the foreign exchange market will remain
dollar-centered is open to debate. Until recently, trading the euro versus a
non-European currency US would have usually involved two trades:
EURUSD and USD. The exception to this is EURJPY, which is an established
traded currency pair in the interbank spot market. As the dollar's value
has eroded during 2008, interest in using the euro as reference currency
for prices in commodities (such as oil), as well as a larger component of
foreign reserves by banks, has increased dramatically. Transactions in the
currencies of commodity-producing countries, such as AUD, NZD, CAD,
have also increased.

2.3 Determinants of FX rates

The following theories explain the fluctuations in FX rates in a floating
exchange rate regime (In a fixed exchange rate regime, FX rates are
decided by its government):

19

(a) International parity conditions: Relative Purchasing Power Parity,

interest rate parity, Domestic Fisher effect, International Fisher
effect. Though to some extent the above theories provide logical
explanation for the fluctuations in exchange rates, yet these
theories falter as they are based on challengeable assumptions
[e.g., free flow of goods, services and capital] which seldom hold
true in the real world.
(b) Balance of payments model (see exchange rate): This model,
however, focuses largely on tradable goods and services, ignoring
the increasing role of global capital flows. It failed to provide any
explanation for continuous appreciation of dollar during 1980s and
most part of 1990s in face of soaring US current account deficit.
(c) Asset market model (see exchange rate): views currencies as an
important asset class for constructing investment portfolios. Assets
prices are influenced mostly by peoples willingness to hold the
existing quantities of assets, which in turn depends on their
expectations on the future worth of these assets. The asset market
model of exchange rate determination states that the exchange
rate between two currencies represents the price that just balances
the relative supplies of, and demand for, assets denominated in
those currencies.
None of the models developed so far succeed to explain FX rates levels
and volatility in the longer time frames. For shorter time frames (less than
a few days) algorithm can be devised to predict prices. Large and small
institutions and professional individual traders have made consistent
profits

from

it.

It

is

understood

from

above

models

that

many

macroeconomic factors affect the exchange rates and in the end currency
prices are a result of dual forces of demand and supply. The world's
currency markets can be viewed as a huge melting pot: in a large and
ever-changing mix of current events, supply and demand factors are
constantly shifting, and the price of one currency in relation to another
shifts accordingly. No other market encompasses (and distills) as much of
what is going on in the world at any given time as foreign exchange.

20

Supply and demand for any given currency, and thus its value, are not
influenced by any single element, but rather by several. These elements
generally fall into three categories: economic factors, political conditions
and market psychology.

Economic factors
These include: (a)economic policy, disseminated by government agencies
and central banks, (b)economic conditions, generally revealed through
economic reports, and other economic indicators.

Economic

policy

comprises

government

fiscal

policy

(budget/spending practices) and monetary policy (the means by

which a government's central bank influences the supply and "cost"
of money, which is reflected by the level of interest rates).

Government budget deficits or surpluses: The market usually reacts

negatively to widening government budget deficits, and positively
to narrowing budget deficits. The impact is reflected in the value of
a country's currency.

Balance of trade levels and trends: The trade flow between

countries illustrates the demand for goods and services, which in
turn indicates demand for a country's currency to conduct trade.
Surpluses and deficits in trade of goods and services reflect the
competitiveness of a nation's economy. For example, trade deficits
may have a negative impact on a nation's currency.

Inflation levels and trends: Typically a currency will lose value if

there is a high level of inflation in the country or if inflation levels
are perceived to be rising. This is because inflation erodes
purchasing power, thus demand, for that particular currency.
However, a currency may sometimes strengthen when inflation
rises because of expectations that the central bank will raise shortterm interest rates to combat rising inflation.

Economic growth and health: Reports such as GDP, employment

levels, retail sales, capacity utilization and others, detail the levels

21

of a country's economic growth and health. Generally, the more

healthy and robust a country's economy, the better its currency will
perform, and the more demand for it there will be.

Productivity of an economy: Increasing productivity in an economy

should positively influence the value of its currency. Its effects are
more prominent if the increase is in the traded sector.

Political conditions
Internal, regional, and international political conditions and events can
have a profound effect on currency markets.
All exchange rates are susceptible to political instability and anticipations
about the new ruling party. Political upheaval and instability can have a
negative impact on a nation's economy. For example, destabilization of
coalition governments in Pakistan and Thailand can negatively affect the
value of their currencies. Similarly, in a country experiencing financial
difficulties, the rise of a political faction that is perceived to be fiscally
responsible can have the opposite effect. Also, events in one country in a
region may spur positive/negative interest in a neighboring country and, in
the process, affect its currency.

Market psychology
Market psychology and trader perceptions influence the foreign exchange
market in a variety of ways:

Flights to quality: Unsettling international events can lead to a

"flight to quality," with investors seeking a "safe haven." There will
be a greater demand, thus a higher price, for currencies perceived
as stronger over their relatively weaker counterparts. The U.S.
dollar, Swiss franc and gold have been traditional safe havens
during times of political or economic uncertainty.

22

Long-term trends: Currency markets often move in visible long-term

trends. Although currencies do not have an annual growing season
like physical commodities, business cycles do make themselves felt.
Cycle analysis looks at longer-term price trends that may rise from
economic or political trends.

"Buy the rumor, sell the fact": This market truism can apply to many
currency situations. It is the tendency for the price of a currency to
reflect the impact of a particular action before it occurs and, when
the anticipated event comes to pass, react in exactly the opposite
direction. This may also be referred to as a market being "oversold"
or "overbought". To buy the rumor or sell the fact can also be an
example of the cognitive bias known as anchoring, when investors
focus too much on the relevance of outside events to currency
prices.

Economic numbers: While economic numbers can certainly reflect

economic policy, some reports and numbers take on a talisman-like
effect: the number itself becomes important to market psychology
and may have an immediate impact on short-term market moves.
"What to watch" can change over time. In recent years, for
example, money supply, employment, trade balance figures and
inflation numbers have all taken turns in the spotlight.

Technical

trading

considerations:

As

in

other

markets,

the

accumulated price movements in a currency pair such as EUR/USD

can form apparent patterns that traders may attempt to use. Many
traders study price charts in order to identify such patterns.

Algorithmic trading in foreign exchange

Electronic trading is growing in the FX market, and algorithmic trading is
becoming much more common. According to financial consultancy Celent
estimates, by 2008 up to 25% of all trades by volume will be executed
using algorithm, up from about 18% in 2005.

2.4 Financial instruments

23

Spot
A spot transaction is a two-day delivery transaction (except in the case of
trades between the US Dollar, Canadian Dollar, Turkish Lira, EURO and
Russian Ruble, which settle the next business day), as opposed to the
futures contracts, which are usually three months. This trade represents a
direct exchange between two currencies, has the shortest time frame,
involves cash rather than a contract; and interest is not included in the
agreed-upon transaction.

Forward
One way to deal with the foreign exchange risk is to engage in a forward
transaction. In this transaction, money does not actually change hands
until some agreed upon future date. A buyer and seller agree on an
exchange rate for any date in the future, and the transaction occurs on
that date, regardless of what the market rates are then. The duration of
the trade can be one day, a few days, months or years. Usually the date is
decided by both parties. Then the forward contract is negotiated and
agreed upon by both parties.

Swap
The most common type of forward transaction is the currency swap. In a
swap, two parties exchange currencies for a certain length of time and
agree to reverse the transaction at a later date. These are not
standardized contracts and are not traded through an exchange.

Future
Foreign currency futures are exchange traded forward transactions with
standard contract sizes and maturity dates for example, $1000 for next
November at an agreed rate. Futures are standardized and are usually

24

traded on an exchange created for this purpose. The average contract

length is roughly 3 months. Futures contracts are usually inclusive of any
interest amounts.

Option
A foreign exchange option (commonly shortened to just FX option) is a
derivative where the owner has the right but not the obligation to
exchange money denominated in one currency into another currency at a
pre-agreed exchange rate on a specified date. The FX options market is
the deepest, largest and most liquid market for options of any kind in the
world..

2.7 COMPANY PROFILE

ICICI Bank is India's largest private sector bank with total assets of Rs.
5,946.42 billion (US$ 99 billion) at March 31, 2014 and profit after tax Rs.
98.10 billion (US$ 1,637 million) for the year ended March 31, 2014.ICICI
Bank currently has a network of 3,839 Branches and 11,943 ATM's across
India.

History
1955
The Industrial Credit and Investment Corporation of India Limited (ICICI)
incorporated at the initiative of the World Bank, the Government of India
and representatives of Indian industry, with the objective of creating a
development financial institution for providing medium-term and longterm project financing to Indian businesses. Mr.A.Ramaswami Mudaliar
elected

as

the

first

Chairman

of

ICICI

Limited.

ICICI emerges as the major source of foreign currency loans to Indian

industry. Besides funding from the World Bank and other multi-lateral
agencies, ICICI was also among the first Indian companies to raise funds
from international markets.

25

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian

financial

institution,

and

was

its

wholly-owned

subsidiary.

ICICI's

shareholding in ICICI Bank was reduced to 46% through a public offering of

shares in India in fiscal 1998, an equity offering in the form of ADRs listed
on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura
Limited in an all-stock amalgamation in fiscal 2001, and secondary market
sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI
was formed in 1955 at the initiative of the World Bank, the Government of
India and representatives of Indian industry. The principal objective was to
create a development financial institution for providing medium-term and
long-term project financing to Indian businesses.

In the 1990s, ICICI transformed its business from a development financial

institution offering only project finance to a diversified financial services
group offering a wide variety of products and services, both directly and
through a number of subsidiaries and affiliates like ICICI Bank. In 1999,
ICICI become the first Indian company and the first bank or financial
institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the

context of the emerging competitive scenario in the Indian banking
industry, and the move towards universal banking, the managements of
ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI
Bank would be the optimal strategic alternative for both entities, and
would create the optimal legal structure for the ICICI group's universal
banking strategy. The merger would enhance value for ICICI shareholders
through the merged entity's access to low-cost deposits, greater
opportunities for earning fee-based income and the ability to participate in
the payments system and provide transaction-banking services. The
merger would enhance value for ICICI Bank shareholders through a large
capital base and scale of operations, seamless access to ICICI's strong
corporate relationships built up over five decades, entry into new business
segments, higher market share in various business segments, particularly

26

fee-based services, and access to the vast talent pool of ICICI and its
subsidiaries.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved
the merger of ICICI and two of its wholly-owned retail finance subsidiaries,
ICICI Personal Financial Services Limited and ICICI Capital Services Limited,
with ICICI Bank. The merger was approved by shareholders of ICICI and
ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in
March 2002, and by the High Court of Judicature at Mumbai and the
Reserve Bank of India in April 2002. Consequent to the merger, the ICICI
group's financing and banking operations, both wholesale and retail, have
been integrated in a single entity.

ICICI Group Companies

ICICI Group
http://www.icicigroupcompanies.c

ICICI Securities

om

http://www.icicisecurities.com
ICICI Lombard General Insurance

ICICI Prudential Life Insurance

Company

Company

http://www.icicilombard.com

http://www.iciciprulife.com/public/
default.htm

27

ICICI Prudential AMC & Trust

http://www.icicipruamc.com

ICICI Foundation
http://www.icicifoundation.org

ICICI Venture
http://www.iciciventure.com

Disha Financial Counselling

http://www.icicifoundation.org

ICICI Direct
http://www.icicidirect.com

Board of Directors
Mr. K. V. Kamath, Chairman

..............................................

..............................................

Mr. V. Sridar

Mr. Dileep Choksi

..............................................

..............................................

Mr. Alok Tandon

Mr. Homi R. Khusrokhan

Ms. Chanda Kochhar,

..............................................

Managing Director & CEO

Mr. M.S. Ramachandran

...........................................

..............................................

Mr. N. S. Kannan,

Dr. Tushaar Shah

Executive Director

..............................................

...........................................

Mr. V. K. Sharma

Mr. K. Ramkumar,

28

Awards - 2014
ICICI Bank

Ms. Chanda Kochhar received an honorary Doctor of Laws from

Carleton University, Canada. The university conferred this award on Ms.
Kochhar in recognition of her pioneering work in the financial sector,
effective leadership in a time of economic crisis and support for engaged
business practices.

Ms Chanda Kochhar featured in The Telegraph (UK) list of '11 most

important women in finance'.

ICICI Bank has been recognised as one of the 'Top Companies for
Leaders' in India in a study conducted by Aon Hewitt.

IDRBT has given awards to ICICI Bank in the categories of 'Social

Media and Mobile Banking' and' Business Intelligence Initiatives'.

ICICI Bank won the award for the Best Bank - Global Business
Development (Private Sector) in the Dun & Bradstreet - Polaris Financial
Technology Banking Awards 2014.

ICICI Bank was awarded the Certificate of Recognition as one of the

Top 5 Companies in Corporate Governance in the 14th ICSI (The Institute
of Company Secretaries of India) National Awards for Corporate
Governance.

ICICI Bank has been honoured as The Best Service Provider - Risk
Management, India at The Asset Triple A Transaction Banking, Treasury,
Trade and Risk Management Awards 2014.

Mr Rakesh Jha has been ranked as the Best CFO in India at the 14th
Annual Finance Asia's Best Managed Companies Poll.

ICICI Bank has won The Corporate Treasurer Awards 2013 in the
categories of 'Best Cash Management Bank in India' & 'Best Trade Finance
Bank in India'.

30

ICICI Bank has been awarded the 'Best Retail Bank in India', 'Best

Microfinance Business' and Best Retail Banking Branch Innovation' under

the 'Excellence in Retail Financial Services awards 2014' by The Asian
Banker.
Ms Chanda Kochhar, MD & CEO, ICICI Bank, has been named among

Fortune's 50 most powerful women in business for the fourth consecutive

year.
Ms. Chanda Kochhar, MD and CEO received the 'Mumbai Women Of

The Decade' award by ASSOCHAM.

ICICI Bank, Indias largest private sector bank, today announced the
launch of Indias only credit card with a unique transparent design and a
distinctive look. The ICICI Bank Coral American Express Credit Card is the
latest addition to the Banks exclusive Gemstone Collection of credit
cards.

Speaking at the launch, Mr. Rajiv Sabharwal, Executive Director,

ICICI Bank said, "At ICICI Bank, it is our constant endeavour to deliver
innovative, powerful and distinctive value propositions to our discerning
customers. We are delighted to launch the ICICI Bank Coral American
Express Credit Card, the only card in the country with a youthful,
transparent design. Aimed at providing significant lifestyle benefits, this
card re-affirms our commitment to bring forth innovative services to our
customers. We are also introducing a host of exciting privileges including
an introductory extended credit period offer and bonus reward points on
online transactions. We believe this card will be yet another compelling
addition to our Gemstone collection of credit cards."

Ms. Siew Choo Ng, Senior Vice President, Head of Global Network
Partnerships, Asia, American Express International, Inc. said, "We
are delighted to have further strengthened our long and cherished

31

relationship with ICICI Bank with the launch of the new ICICI Bank Coral
American Express Credit Card. Designed to appeal to value seeking
customers, the Card reinforces our consistent endeavor to provide
differentiated products and services to our customers. The Card offers a
wide array of exclusive privileges and features including additional
PAYBACK points on online spend and an innovative transparent design. At
American Express, we always strive to work closely with our partners to
develop the most relevant and compelling products for our valued card
members."

Mr.

Sanjay

Rishi,

President,

South

Asia,

American

Express,

said, This launch marks a further strengthening of the relationship

between ICICI Bank and American Express. We already partner with ICICI
Bank on customer loyalty programs, insurance services, retail banking
services as well as initiatives to expand card accepting merchants. The
launch of the ICICI Bank Coral American Express Card combines the
strengths and capabilities of both organizations to offer an exciting new
payment choice to customers.

The ICICI Bank Coral American Express Credit Card offers a wide range
of attractive benefits to its card members:

Extended Credit Period; a unique proposition offering card members

ability to carry over the retail purchase balances in first two billing
statements by simply paying the minimum amount due. No interest shall
be charged in such cases and the total amount due shall be payable as
per the third billing statement. TnC apply, for complete details please
visit www.icicibank.com.

4 PAYBACK points per Rs.100 spent on dining, groceries and at

supermarkets, 3 PAYBACK points per Rs.100 of online spends and 2
PAYBACK points per Rs.100 on other spends

Complimentary movie tickets with 'buy one get one free' offer
on www.bookmyshow.com

32

Complimentary visits to Altitude lounges at Mumbai and Delhi

airports

Minimum 15% discount on dining bills at leading restaurants across

India with the ICICI Bank Culinary Treats programme

No fuel surcharge on fuel transactions at HPCL fuel stations

OVERVIEW ICICI Group
ICICI Group offers a wide range of banking products and financial services
to corporate and retail customers through a variety of delivery channels
and through its specialized group companies and subsidiaries in the areas
of personal banking, investment banking, life and general insurance,
venture capital and asset management. With a strong customer focus, the
ICICI Group Companies have maintained and enhanced their leadership
positions

in

their

respective

sectors.

ICICI Bank is India's second-largest bank with total assets of Rs. 4,736.47
billion (US$ 93 billion) at March 31, 2012 and profit after tax Rs. 64.65
billion (US$ 1,271 million) for the year ended March 31, 2012. The Bank
has a network of 2,791 branches and 10,021 ATMs in India, and has a
presence

in

19

countries,

including

India.

ICICI Prudential Life Insurance is a joint venture between ICICI Bank, a

premier financial powerhouse, and Prudential plc, a leading international
financial services group headquartered in the United Kingdom. ICICI
Prudential Life was amongst the first private sector insurance companies
to begin operations in December 2000 after receiving approval from
Insurance Regulatory Development Authority (IRDA). ICICI Prudential Life's
capital stands at Rs. 47.91 billion (as of March 31, 2012) with ICICI Bank
and Prudential plc holding 74% and 26% stake respectively. For FY 2012,
the company garnered Rs.140.22 billion of total premiums and has

33

underwritten over 13 million policies since inception. The company has

assets held over Rs. 707.71 billion as on March 31, 2012.
ICICI Lombard General Insurance Company, is a joint venture between
ICICI Bank Limited, India's second largest bank with consolidated total
assets of over USD 91 billion at March 31, 2012 and Fairfax Financial
Holdings Limited, a Canada based USD 30 billion diversified financial
services company engaged in general insurance, reinsurance, insurance
claims management and investment management. ICICI Lombard GIC Ltd.
is the largest private sector general insurance company in India with a
Gross Written Premium (GWP) of Rs. 5,358 crore for the year ended March
31, 2012. The company issued over 76 lakh policies and settled over 44
lakh claims and has a claim disposal ratio of 99% (percentage of claims
settled against claims reported) as on March 31, 2012.
ICICI Securities Ltd is the largest integrated securities firm covering the
needs of corporate and retail customers through investment banking,
institutional broking, retail broking and financial product distribution
businesses. Among the many awards that ICICI Securities has won, the
noteworthy awards for 2012 were: Asiamoney `Best Domestic Equity
House for 2012; 'BSE IPF D&B Equity Broking Awards 2012' under two
categories:- Best Equity Broking House - Cash Segment and Largest EBroking House; the Chief Learning Officer Award from World HRD Congress
for Innovation in Learning category. IDG India's CIO magazine has
recognized ICICI Securities as a recipient of CIO 100 award in 2009, 2010,
2011 and 2012. I-Sec won this awards 4 times in a row for which the CIO
Hall of Fame award was additionally conferred in 2012.

ICICI Securities Primary Dealership Limited (I-Sec PD) is the largest

primary dealer in Government Securities. It is an acknowledged leader in
the Indian fixed income and money markets, with a strong franchise
across the spectrum of interest rate products and services - institutional
sales and trading, resource mobilisation, portfolio management services
and research. One of the first entities to be granted primary dealership
license by RBI, I-Sec PD has made pioneering contributions since inception
to debt market development in India. I-Sec PD is also credited with

34

pioneering debt market research in India. It is one of the largest portfolio

managers in the country and amongst PDs, managing the largest AUM
under
I-Sec

discretionary
PDs

leadership

position

portfolio
and

research

management.
expertise

have

been

consistently recognized by domestic and international agencies. In

recognition of our performance in the Fixed Income market, we have
received the following awards:

Best Domestic Bond House in India - 2007, 2005, 2004, 2002

by Asia Money

Best Bond House - 2009, 2007, 2006, 2005, 2004, 2001 by

Finance Asia

Best Domestic Bond House 2009 by The Asset Magazines

annual Triple A Country Awards

Ranked volume leader - by Greenwich Associates in 2010 Asian

Fixed-Income Investors Study. Ranked 5th in Domestic Currency
Asian Credit with market share of 4.5%, Only Domestic entity to be
ranked.

Best Debt House in India 2012 by EUROMONEY

ICICI Prudential Asset Management is the third largest mutual fund with
average asset under management of Rs. 688.16 billion and a market share
( mutual fund ) of 10.34% as on March 31, 2012. The Company manages a
comprehensive range of mutual fund schemes and portfolio management
services to meet the varying investment needs of its investors through117
branches and 196 CAMS official point of transaction acceptance spread
across

the

country.

ICICI Venture is one of the largest and most successful alternative asset
managers in India with funds under management of over US$ 2 billion. It
has been a pioneer in the Indian alternative asset industry since its

35

establishment in 1988, having managed several funds across various

asset classes over multiple economic cycles. ICICI Venture is a wholly
owned subsidiary of ICICI Bank
GROUP PHILOSOPHY
As India transforms into a key player in the global economic arena,
multiple opportunities for the financial services sector have emerged. We,
at ICICI Group, seek to partner the country's growth and globalization
through the delivery of world-class financial services across all crosssections of society.
From providing project and working capital finance to the buoyant
manufacturing and infrastructure sectors, meeting the foreign investment
and treasury requirements of the Indian corporate with increasing levels of
international engagement, servicing the India linked needs of the growing
Indian diaspora, being a catalyst to the consumer finance story to serving
the financially under-served segments of the society, our technology
empowered solutions and distribution network have helped us touch
millions of lives.
Vision:
To be the leading provider of financial services in India and a major global
bank.
Mission:
We will leverage our people, technology, speed and financial capital to:

be the banker of first choice for our customers by delivering high

quality, world-class products and services.

expand the frontiers of our business globally.

play a proactive role in the full realisation of Indias potential.

maintain a healthy financial profile and diversify our earnings across

businesses and geographies.

36

maintain high standards of governance and ethics.

contribute positively to the various countries and markets in which

we operate.
create value for our stakeholders.

Towards Sustainable Development

As India's fastest growing financial services conglomerate, with deep

moorings in the Indian economy for over five decades, ICICI Group of
companies have endeavored to contribute to address the challenges
posed

to

the

community

1) ICICI Foundation for Inclusive

in

multiple

ways.

Growth: ICICI Foundation for

Inclusive Growth (ICICI Foundation) was founded by the ICICI Group in

early 2008 to carry forward and build upon its legacy of promoting
inclusive growth. ICICI Foundation works within public systems and
specialised grassroots organisations to support developmental work in four
identified focus areas. We are committed to investing in long-term efforts
to

support

inclusive

growth

through

effective

interventions.

2) Disha Counselling: Disha Financial Counselling services are free to all

in

areas

like

financial

education,

credit

counselling

and

debt

management.
3) Technology Finance Group: TFG's programmes are designed to
assist industry and institutions to undertake collaborative R&D and
technology

development

projects.

4) Read to Lead campaign: ICICI Bank has pledged to educate 1,00,000

children through the 'Read to Lead initiative. Because education today
means

better

life

tomorrow.

5) Go Green. Each one for a better earth: ICICI Bank, is a responsible

corporate citizen and believes that every small 'green' step today would

37

go a long way in building a greener future and that each one of us can
work

towards

better

earth.

Go Green' is an organisation wide initiative that moves beyond moving

ourselves, our processes and our customers to cost efficient automated
channels to building awareness and consciousness of our environment, our
nation and our society.

PERSONAL BANKING
Deposits
ICICI Bank offers wide variety of Deposit Products to suit your
requirements. Convenience of networked branches/ ATMs and facility of Echannels like Internet and Mobile Banking, Select any of our deposit
products and provide your details online and our representative will
contact you.

Loans
ICICI Bank offers wide variety of Loans Products to suit your requirements.
Coupled with convenience of networked branches/ ATMs and facility of Echannels like Internet and Mobile Banking, ICICI Bank brings banking at
your doorstep. Select any of our loan product and provide your details
online and our representative will contact you for getting loans.
Cards
ICICI Bank offers a variety of cards to suit your different transactional
needs. Our range includes Credit Cards, Debit Cards and Prepaid cards.
These cards offer you convenience for your financial transactions like cash
withdrawal, shopping and travel. These cards are widely accepted both in
India and abroad. Read on for details and features of each.
Wealth Management

38

Wealth is the result of a recognized opportunity. We understand this and

we work with you to plan and manage your financial opportunities
prudently. Not just that, we also extend a host of services so you can
remain focused on immediate objectives while we take care of all your
wealth management requirements.

Products

39

Forex Buy and Sell

Travel Card

Travelers Cheques

Western Union

40

RBI Guide Lines

(updated as per Master Circular dated 01.07.2012)

* this is only a brief extract and for details kindly refer to above Master Circular and Amendments,
if any, thereto in RBI website www.rbi.org.in
Authorized Dealer Category-II Money Changers can undertake

Purchase from Residents / Non- Residents

Sales to Residents for Private Travel and Business Travel.

AD-Category II can undertake specified Non- Trade Current A/C

Transactions in addition to the above.

For limits and conditions kindly refer to the table under "Forex Limits"

Bringing in and taking out of Foreign Exchange

Foreign Exchange can be brought into India without limit;

Declaration in form CDF necessary if the Amount > USD 10,000 (FC notes +
TCs) and / or FC notes exceed USD 5000;

Taking out Foreign Exchange other than that obtained from AD/AMC prohibited;

Non- residents can take out Foreign Exchange up to the amount originally
brought in;

Purchases of Foreign Currency from Public /Foreign Nationals:

Purchase from Residents / Non Residents/foreign nationals FC Notes/ Coins/

TC's subject to submission of CDF (wherever applicable) to be taken;

Facility to avail INR against International Credit Cards by foreign tourists

Encashment Certificate to be issued in all cases of Encashments;

No limit for encashment is prescribed, if declared on the Currency Declaration

Form (CDF) on arrival to the customs authorities.

41
FOREIGN EXCHANGE MANAGEMENT ACT

42