Meaning of devaluation of a currency

Devaluation of a currency means the official lowering of value of a country’s currency within a fixed exchange rate system. In devaluation, the monetary authority of the country deliberately make downward adjustment of the value of a country’s money and sets a new fixed rate with respect to a foreign reference currency (currency of other…

What are currency derivatives?

Currency derivatives are exchange-based futures and options contracts that allow those with a significant exposure to imports or exports, use these contracts to hedge against their exposure to a certain currency. In India, one can use such derivative contracts to hedge against currencies like US Dollar, Euro, U.K. Pound and Yen so as to manage…

Forward Contract explained

A forward contract is a customized contract between two parties to buy or sell an asset at a price agreed upon today on a specified future date. Under forward contract, there is an obligation for the buyer to pay for what has been bought and receive delivery thereof as per the contract, and for the…

Foreign exchange remittance limit available to residents for non-trade current account transactions

Section 2(j) of FEMA states that ‘Current Account Transaction’ means a transaction other than a capital account transaction. Non-trade current account transaction refers to   transactions not related to foreign trade transactions (such as exports and imports of goods and services of a country). Effective 1 June 2015, under the Liberalised Remittance Scheme (LRS) made available…

Bank Guarantee for Import of service

The AD Category-I banks are permitted to issue Bank Guarantee to non-resident service provider on behalf of resident customer of the bank. The maximum limit for issue of such guarantee is fixed up to USD 500,000 (increased from previous limit of USD 100,000) or its equivalent. The above limit is not applicable in the case…