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…

Risks in Foreign Exchange dealings

The business of foreign exchange dealing is confronted with multiple numbers of risks viz. Rate risk, Open Position risk, Maturity Mismatches risk, overtrading risk, Cash Balance Risk, Counterparty risk, Country risk,  Fraud Risk, and so on. Nevertheless, like in any other business, risk taking in forex dealing is also inevitable as it also presents possibilities…