Important FEDAI Rules

FEDAI prescribes rules regarding trading hours, Exchange rate, Crystallization, of foreign currency, extension/cancellation of contracts etc. The FEDAI rules govern all Authorised Dealers of foreign exchange in India. Some of the important rules of FEDAI are as under.

Trading Hours of Authorised Dealers (Rule 1):

Exchange trading hours for interbank forex market in India would be 9a.m to 5 p.m.  As per the trading rule, ADs shall not take customer transactions after 4.30 pm on all working days.  However, in the cases of cross currency transactions cut-off time limit of 5 p.m. is not applicable, but the management of the concerned bank shall lay down the timings for extended dealing hours. Saturday will not be treated working day for foreign exchange dealings.

Application of Exchange Rate on export bills (Rule 2.1.a):

The post-shipment bill will be purchased/discounted/negotiated by AD at current bills buying rate. The interest for the normal transit period and/ or usance bills will be recovered by the AD upfront. Rate of interest and overdue interest will be charged as per RBI guidelines from time to time.

Crystallization of foreign currency export bills (Rule 2b):

Authorised Dealers have the freedom to formulate their own policy for crystallisation of foreign currency liability into rupee liability, when an export bill is not paid on due date. The policy of the bank in this regard should be transparently available to their customers.

Dishonour of export Bill(Rule 2d): In case of dishonour of bills before crystallisation, the AD bank shall recover Rupee equivalent amount of the bill including foreign currency charges if any arrived at the current spot TT selling rate or amount originally advanced whichever is higher along with appropriate interest and rupee denominated charges.

Early realization of an export bill (Rule 2.2.c):

In the case of early realisation of export bill interest collected by the bank 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.

Exchange rate on Collection Bills (Rule 2.5)

The realisation proceeds of export bill in foreign currency sent on collection or goods sent on consignment basis will be converted at TT buying rate. The conversion will take place only after the foreign currency amount is credited to the nostro account of the bank.

Crystallization of import bill (Rule 3.3):

The unpaid foreign currency import bills under Letters of credit shall be crystallised (click: crystallization of import bills)  as per the stated policy of the bank in this respect.

Early delivery, extension, and cancellation of forex contracts (Rule 6)

If a bank accepts or gives early delivery, the bank shall recover/pay swap difference, if any. In the case of extension is sought by the customer, the contract shall be cancelled at appropriate (buying/selling) rate and rebooked simultaneously at the current exchange rate.

Cancellation of purchase and sale contracts:

In the case of cancellation of contract at the request of the customer, cancellation is to be effected at following rate;Purchase contract shall be cancelled at TT selling rate. Sale contract shall be cancelled at TT buying rate. Where the contract is cancelled before maturity, Forward TT rate shall be applied. In the absence of any instruction from the customer, a contract which is matured shall be cancelled by the bank on the 7th working day after maturity date. In such cases the customer is entitled to the exchange difference if any. However, the customer is liable to pay exchange difference, swap cost if any shall be recovered from the customer under advice to him.

Read following articles related to FEDAI rules

1. What is the role of FEDAI?
2. Important FEDAI Rules
3. FEDAI rules regarding Foreign Exchange Contracts
4. FEDAI rule: Transfer of funds between Vostro Accounts with two banks explained
5. FEDAI rules related to clean instruments/ inward remittance
6. FEDAI rules related to import transactions
7. FEDAI RULEs related to export transactions
8. FEDAI Rule: Export Bills sent for collection
9. FEDAI rules: Interest/Swap charges in case of Substitution/Change in Tenor of a bill
10. FEDAI rules related to Normal Transit Period and the notional due date
11. FEDAI RULES: Business Hours for quoting FX rates