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FreeMockTestforJAIIB&CAIIB

FreeMockTestforJAIIB&CAIIB
FacilitiesforExportersandImportersCont'd...
DiscrepanciesofDocuments
LateShipment,LCexpired,Latepresentationofshippingdocuments,BillofLadingnotsignedproperly,
IncompleteBillofLading,ClauseBillofLading,ShortBillofLadingorInadequateInsurance.
AdvanceagainstUndrawnBalance
UndrawnbalanceistheamountlessreceivedfromImporters.Bankcanfinanceupto10%undrawn
amount.
AdvanceagainstDutyDrawback
DutydrawbackisthesupportbyGovernmentbywayofrefundofExcise/Customdutyincasethe
domesticcostoftheproductishigherthanthePricechargedfromtheimporter.Thisisdonetoboost
exportsdespiteinternationalcompetition.BankcanmakeloantoexporteragainstDutyDrawback.
CrystallizationofOverdueBills
Consequentuponnonrealization,ConversionofForeignExchangeliabilityintoRupeesiscalled
crystallization.Itisdoneon30thdayafternotionalduedateatprevailingTTsellingrateorOriginalBill
BuyingRate(Whicheverishigher).
DABills
NotionalduedateiscalculatedinDABillbyaddingnormalperiodoftransitsay25daysinthe
Usanceperiod.30thdayistakenfromnotionalduedate.
DPBills
30thdayafterNormalTransitPeriod.If30thdayhappenstobeholidayorSaturday,liabilitywillbe
crystallizedonthefollowingworkingday.
Policyhasbeenliberalizedandcrystallizationperiodwillbedecided.
Exportofservices
Creditcanbeprovidedtoexportersofall161tradableservicescoveredunderGATS(General
AgreementonTradeinservices)wherepaymentforsuchservicesisreceivedinForex.Theprovisions
applicabletoexportofgoodsapplytoexportofservices.
GoldCardScheme
AllexportersinSmallandMediumSectorwithgoodtrackrecordareeligibletoavailGoldCardScheme.
Theconditionsare:
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AccountshouldbeclassifiedasStandardassetsforthelast3years.
Limitissanctionedfor3yearsandthereafterautomaticrenewal.
Thereisprovisionof20%Standbylimit.
PackingCreditisallowedinForeigncurrency.
Concessionalrateisallowedfor90daysinitiallywhichcanbeextendedfor360days.
BankmaywaivecollateralandprovideexemptionfromECGCGuaranteeschemes.
FactoringandForfaiting
FactoringisfinancingandcollectionofExportReceivables.TheclientsellsReceivablesatdiscountto
FactorinordertoraisefinanceforWorkingCapital.Itmaybewithorwithoutrecourse.Factorfinances
about80%andbalanceof20%ispaidaftercollectionfromtheborrower.BillshouldcarryLR/RR.
MaximumDebtperiodpermittedis150daysinclusiveofgraceperiodof60days.Debtsareassignedin
favourofFactor.Thereare2factorsinInternationalFactoring.OneisExportFactorandtheotheris
ImportFactor.ImporterpaystoImportfactorwhoremitsthesametoExportFactor.
ForfaitingisFinanceofExportReceivablestoexporterbytheForfaitor.Itisalsocalleddiscountingof
TradeReceivablessuchasdraftsdrawnunderLC,B/EorPN.ItisalwaysNoRecourseasis(i.e.
withoutrecoursetoexporter).ForfaitoraftersendingdocumentstoExportersBank,makes100%
paymenttoexporterafterdeductingapplicablediscount.
PeriodforwhichconcessionalRateofInterestischargedonDPbillsfromdateofpurchase.
Ans25days
WhatwillbeamountofPostshipmentFinanceunderForeignBillPurchasedforUSD45000whenBill
Buyingrateon31.3.2015(dateofsubmissionofExportdocuments)is63.50
Solution
45000X63.05=2857500Ans.
Iftheabovesaidbillremainsoverduefor2months,whatwillbedateofcrystallization?
DueDateofBillwillbe31.3.15+25days=25.4.2015
Thebillwillbecrystallizedon24.5.2015i.e.on30thdayfromduedate.
On8thSep,anexportertendersademandbillforUSD100000drawnonNewYork.TheUSD/INRquote
isasunder:
SpotUSD1=34.3000/3500
SpotSep6000/7000
SpotOct8000/9000
SpotNov10000/11000
TransitPeriodis20daysandExchangemargin0.15%
CalculateRupeepayabletothecustomer.Customerwantstoretain15%inDollars
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Solution
Since,thecurrencyisatpremium,thetransitperiodwillberoundedofftothelowermonth(i.e.NIL).And
theratetothecustomerwillbebasedonSpotRate.Ifinterestrateis13%,howmuchinterestwillbe
recoveredfromtheexporter.
SpotBuyingrate=34.3000
LessExchangeMargin=0.0515
34.2485or34.25perdollar.
AmountinIndianRupee=85000(85%of100000)x34.25=2911250/
Interestwillbechargedon2911250/@13%for20days=20738/.
Q.6.On26thAug,anexportertendersforpurchaseabillpayable60daysfromsightanddrawnon
NewYorkforUSD25650.Thedollarrupeerateisasunder:
Spot1USD=34.6525/6850
SpotSep1500/1400
SpotOct2800/2700
SpotNov4200/4100
SpotDec5600/5500
ExchangeMarginis0.15%,TransitPeriodis20days.RateofInterestis13%.
WhatwillbetheexchangeratepayabletothecustomerandRupeeamountpayable?
Solution
NotionaldueDate=20+60daysfrom26thAugi.e.14thNov.Since,thecurrencyisatdiscount,the
periodwillberoundedofftothesamemonth(higherofOctorNov).Obviously,thediscountofNovwill
bemoreanditwillmaketheBuyRateLower.
Dollar/RupeemarketspotBuyingRate=34.6525
LessDiscountforAugusttoNovember=0.4200=34.2325
LessExchangeMargin@.15%.0513=34.1812
RupeeAmountpayabletoexporter=25650X34.18=876717.00
LessInterestfor80days@13%=24980.00
Lessoutofpocketexpenses=500.00=851237.00
Imports
ImportsPrerequisites
AD1banksaretoensurethatImportsareinaccordancewith:
EximPolicy
RBIGuidelines
FERARules
GoodsareasperOGL(OpenGenerallist).
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ImporterishavingIEC(ImportExportCode)issuedbyDGFT.
ImportsFormalities&Timelimitforimportpayment
ThefollowingareessentialelementsofImports:
AnimporterbeforeremittingproceedsexceedingUSD500mustsubmitapplicationonFormA1tothe
AuthorizedDealer.
ADbankscanissueLConthebasisofLicenseandExchangeControlCopy.
Remittanceagainstexportsshouldbecompletedwithin6monthsfromdateofshipment.
Anydelaybeyond6monthswillbetreatedasDeferredPaymentarrangementandthesamewillbe
treatedasTradeCredituptotheperiodlessthan3years.
AdvanceRemittances
ADBanksmayremitadvancepaymentofImportssubjecttofollowingconditions:
UptoUSD2,00,000orequivalentaftersatisfyingaboutnatureoftransaction,tradeandstandingof
Supplier.
Inexcessof2,00,000USD,anirrevocableStandbyLCorGuaranteefromabankofinternationalrepute
oraguaranteefrombankinIndia,ifsuchguaranteeisissuedagainstCounterguaranteeof
InternationalbankoutsideIndia.
TherequirementofguaranteemaynotbeinsisteduponincaseofremittancesaboveUSD200000upto
USD50,00,000(5million)subjecttosuitablepolicyframedbyBODofbank.
TheADshouldbesatisfiedwithtrackrecordoftheexporter.
ApprovalofRBIisrequiredonlyifAdvanceremittanceexceedsUSD50,00,000orequivalent.
AdvanceremittancewillbemadedirecttoOverseassupplierorhisbank.
Physicalimportsmustbemadewithin6monthsfromdateofRemittance.ForCapitalgoods,theperiod
is3years.
EvidenceofImports
ImportermustsubmitEvidenceofImportsi.e.ExchangecontrolcopyofBillOfEntry.TheADwill
ensurereceiptofBillOfEntryinallcaseswhereValueofForexexceedsUSD100000,within3months
fromdateofremittance.Otherwise,onemonthsnoticewillbeserved.Ifthereisstilldefaultof21days
afterservingnotice,AdwillforwardStatementtoRBIonHalfyearlybasisonBEFForm.
ImportFinanceImportercanavailfinancefrombanks/FIsintheshapeof:
LetterofCredit
ImportLoansagainstPledge/Hypothecationofstocks.
TradeCreditSupplierCreditorBuyerCredit
TradeCreditIftheImportproceedsarenotremitted,within6months,itistreatedasTradeCreditupto
theperiodlessthan3years.Forperiod3yearsandabove,thecreditiscalledECB(External
CommercialBorrowings).

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SuppliersCredit
ItiscreditextendedbyOverseassupplierstoImporternormallybeyond6monthsuptoperiodof3
years.
Upto1yearforCurrentAccountTransactions
Upto3yearsforCapitalAccountTransactions
MonetaryLimitisUSD20millionpertransaction.
BuyersCredit
ItiscreditarrangedbyImporterfromBanks/Fisoutsidecountries.Bankscanapproveproposalsof
BuyersCreditwithperiodofMaturity:
Upto1yearforCurrentAccountTransactions
Upto3yearsforCapitalAccountTransactions
MonetaryLimitisUSD20millionpertransaction.
CrystallizationofForeignCurrencyLiabilityintoINR
Incasetheimporterfailstomakepayment,
crystallizationofForeignExchangeliabilityintoIndianRupeesisdoneon10thdayatTTselling
Rate.
IncaseofRetirementofImportBill
ThecrystallizationisdoneatcurrentBillSellingRateorContractedBillSellingRate(Whichever
ishigher).
DPBill:On10thDayfromdateofreceiptofImportBill.
DABill:OnActualDueDate.
AllinCostCeiling
ThepresentCeilingsforallincost,includinginterestforbuyers/supplierscredit,asfixedby
RBIisasunder:
Upto365daysLIBOR+350bps
Above1yearupto3yearsLIBOR+350bps
Theseceilingsincludemanagementfees,arrangementfeesetc.
ExampleOn12thFeb,acustomerhasreceivedanImportbillforUSD10000/.Heasksyoutoretire
thebilltothedebitoftheaccount.ConsideringExchangemargin0.15%forTTsalesand0.20%onBill
SellingRate.Whatamountwillbedebitedtotheaccount.Spotrateis34.6500/34.7200
Spotmarch=5000/4500
RateappliedwillbeBillSellingRate
SpotRate=34.7200
AddMarginforTTselling(0.15%)=0.0520
TTsellingRate=34.7720
AddmarginforBillselling@0.20%=0.0695
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BillSellingRate=34.8415
CustomersaccountwillbedebitedwithRs.348400/(10000X34.84)

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