1.RESERVE BANK OF INDIA
FOREIGN EXCHANGE DEPARTMENT
2.Eligibility
All resident individuals are eligible to avail of the facility under the scheme. The
facility will not be available to corporates, partnership firms, HUF, Trusts, etc.
3. Purpose
3.1 This facility is available for making remittance up to USD 25,000 per calendar
year for any current or capital account transactions or a combination of both.
3.2 Under this facility, resident individuals will be free to acquire and hold immovable
property or shares or any other asset outside India without prior approval of the Reserve
Bank. Individuals will also be able to open, maintain and hold foreign currency accounts
with a bank outside India for making remittances under the scheme without prior
approval of Reserve Bank. The foreign currency account may be used for putting
through all transactions connected with or arising from remittances eligible under this
scheme.
3.3 It is further clarified that the facility under the scheme is in addition to those
already available for private travel, business travel, gift remittances, donations, studies,
medical treatment etc as described in Schedule III of Foreign Exchange Management
(Current Account Transactions) Rules, 2000. (Annexure B).
3.4 The remittance facility under the scheme is not available for the following:
i) Remittance for any purpose specifically prohibited under Schedule-I (like
purchase of lottery/sweep stakes, tickets proscribed magazines etc) or any
item restricted under Schedule II of Foreign Exchange Management (Current
Account Transactions) Rules, 2000. (Annexure B).
ii) Remittances made directly or indirectly to Bhutan, Nepal, Mauritius or
Pakistan.
iii) Remittances made directly or indirectly to countries identified by the Financial
Action Task Force (FATF) as “non co-operative countries and territories” viz
Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria,
Philippines and Ukraine.
iv) Remittances directly or indirectly to those individuals and entities identified as
posing significant risk of committing acts of terrorism as advised separately by
the Reserve Bank to the banks.
4. Remittance Procedure
Requirements to be complied with by the remitter
4.1 To avail of this facility, the individual will have to designate a branch of an AD
through which all the remittances under the scheme will be made.
4.2 The resident individual seeking to make the remittance should furnish an
application letter cum declaration in the format as indicated in Annexure–A regarding
the purpose of the remittance and declaration that the funds belong to the remitter and
will not be used for the purposes as detailed above.
Requirements to be complied with by the Authorised Dealers
4.3 While allowing the facility to resident individuals, Authorised Dealers are required
to ensure that the "Know Your Customer" Guidelines have been implemented in
respect of these accounts. They should also comply with the Anti-Money Laundering
Rules in force while allowing the facility.
4.4 The applicants should have maintained the bank account with the bank for a
minimum period of one year prior to the remittance. If the applicant seeking to make the
remittance is a new customer of the bank, Authorised Dealers should carry out due
diligence on the opening, operation and maintenance of the account. Further the AD
should obtain bank statement for the previous year from the applicant to satisfy
themselves regarding the source of funds. If such a bank statement is not available,
copies of the latest Income Tax Assessment Order or Return filed by the applicant may
be obtained.
4.5 The AD should ensure that the payment is received out of funds belonging to the
person seeking to make the remittance, by a cheque drawn on the applicant's bank
account or by debit to his account or by Demand Draft / Pay Order.
4.6 Authorised dealer should certify that the remittance is not being made directly or
indirectly by /or to ineligible entities and that the remittances are made in accordance
with the instructions contained herein.
5. Reporting of the transactions
The remittances made under this Scheme will be reported in the R-Return in the
normal course. The ADs may also prepare and keep on record dummy Form A2, in
respect of remittances exceeding USD 5000. Authorised Dealers may arrange to
furnish on a quarterly basis, information on the number of applicants and total amount
remitted to the Chief General Manager, External Payment Division, Foreign Exchange
Department, Reserve Bank of India, Central Office, Mumbai-400001.
6. Necessary amendments to the relevant Foreign Exchange Management
Regulations, 2000 as also the relevant Notifications, issued under FEMA, 1999 are
being issued separately.
7. Authorised Dealers may bring the contents of this circular to the notice of their
constituents concerned.
8. The directions contained in this circular have been issued under Sections 10(4) and
11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).
FOREX MARKET HOURS
At 7:00 pm Sunday, New York time, trading begins as markets open in Tokyo, Japan. Next, Singapore and Hong Kong open at 9:00 pm EST, followed by the European markets in Frankfurt (2:00 am), and then London (3:00 am). By 4:00 am, the European markets are in full swing, and Asia has concluded their trading day. The U.S. markets open first in New York around 8:00 am Monday, as Europe winds down. Australia will take over around 5:00 pm, and by 7:00 pm Tokyo is ready to re-open.
All times are quoted in Eastern Standard Time (New York).
FX or Forex, currency trading is the trading of one currency against another. In terms of trading volume, the currency exchange market is the world's largest market, with daily trading volumes in excess of $1.5 trillion US dollars. This is orders of magnitude larger than the bond or stock markets. The New York Stock Exchange, for example, has a daily trading volume of approximately $50 billion.
Currencies are traded for hedging and speculative purposes. Various market participants such as individuals, corporations, and institutions trade forex for one or both reasons.
Corporate treasurers, private individuals and investors have currency exposures during the the regular course of business. The FXTrade Platform is an ideal platform to hedge any such exposure. An investor, who has bought a European stock and expects the EUR exchange rate to decline, can hedge his currency exposure by selling the EUR against the USD.
Currency markets are ideally suited for speculative trading. The foreign exchange market
has a daily volume in excess of 1.5 trillion USD, which is 50 times the size of the transaction volume of all the equity markets taken together. This makes the foreign exchange market, by far, the most liquid and efficient financial market of the world. Thanks to its efficiency, there is little or no slippage of market price for the execution of even large buy and sell orders. Traders are able to take advantage of intra-day volatility thanks to the low spreads and enter positions for short time periods, such as minutes and hours. Unlike equity trading, where restrictions limit a trader's ability to profit from a market down turn, there are no such constraints on currency trading. Currency traders can take advantage of both up and down trends thus increasing their profit potential.
The most commonly traded currencies are: USD, EUR, JPY, GBP, CHF, CAD and AUD.
The most commonly traded currency pair is EUR/USD.
Forex Symbol Guide
Symbol Currency Pair Trading Terminology
GBP/USD British Pound / US Dollar "Cable"
EUR/USD Euro / US Dollar "Euro"
USD/JPY US Dollar / Japanese Yen "Dollar Yen"
USD/CHF US Dollar / Swiss Franc "Dollar Swiss", or "Swissy"
USD/CAD US Dollar / Canadian Dollar "Dollar Canada"
AUD/USD Australian Dollar / US Dollar "Aussie Dollar"
EUR/GBP Euro / British Pound "Euro Sterling"
EUR/JPY Euro / Japanese Yen "Euro Yen"
EUR/CHF Euro / Swiss Franc "Euro Swiss"
GBP/CHF British Pound / Swiss Franc "Sterling Swiss"
GBP/JPY British Pound / Japanese Yen "Sterling Yen"
CHF/JPY Swiss Franc / Japanese Yen "Swiss Yen"
NZD/USD New Zealand Dollar / US Dollar "New Zealand Dollar" or "Kiwi"
USD/ZAR US Dollar / South African Rand "Dollar Zar" or "South African Rand"
GLD/USD Spot Gold "Gold"
SLV/USD Spot Silver "Silver"
CURRENCY PAIRS
All currencies are assigned an International Standards Organization (ISO) code abbreviation. In currency trading, these codes are often used to express which specific currencies make up a currency pair. For example, USD/JPY refers to two currencies: the US Dollar and the Japanese Yen.
SPOT FOREX
Spot foreign exchange is always traded as one currency in relation to another. So a trader who believes that the dollar will rise in relation to the Euro, would sell EUR/USD. That is, sell Euros and buy US dollars. The following is guide for quoting conventions:
What does it mean to be "long" or "short" a currency?
Being long means buying a currency. Being short means selling a currency.
If a trader goes long USD/JPY, he or she buys US Dollars and sells Japanese Yen. Buying a currency is synonymous with taking a long position in that currency. A trader takes a long position in a currency if he or she believes it will appreciate in value.
If a trader goes short USD/JPY, he or she sells US Dollars and buys Japanese Yen. Selling a currency is synonymous with shorting that currency. A trader would short a currency if he or she believes it will depreciate in value.
CURRENCY TRADING: BUYING AND SELLING CURRENCIES
All Forex trades result in the buying of one currency and the selling of another (currency trading), simultaneously.
Buying ("going long") the currency pair implies buying the first, base currency and selling an equivalent amount of the second, quote currency (to pay for the base currency). It is not necessary to own the quote currency prior to selling, as it is sold short. A trader buys a currency pair if he/she believes the base currency will go up relative to the quote currency, or equivalently that the corresponding exchange rate will go up.
Selling ("going short") the currency pair implies selling the first, base currency, and buying the second, quote currency. A trader sells a currency pair if he/she believes the base currency will go down relative to the quote currency, or equivalently, that the quote currency will go up relative to the base currency.
An open trade or position is one in which a trader has either bought or sold one currency pair and has not sold or bought back an adequate amount of that currency pair to effectively close the trade. When a trader has an open trade or position, he/she stands to profit or lose from fluctuations in the price of that currency pair.
Forex is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge profits are generally produced in a matter of minutes form minor currency market movements. Some banks generate 60% of their profits from trading currency aggressively.
Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency market is one of the world fastest growing industries. What used to require days to accomplish in Europe or Asia now oly takes a few minutes. Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day by major banks through computers and for the average investor, with the touch of a computer key.
Foreign exchange is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge profits are generally produced in a matter of minutes from minor currency options market movements. Some banks generate up to 60% of their profits from trading currency aggressively.
Transactions in foreign currencies take place when one country's currency is purchased (exchanged) with another country's currency. The price agreed upon or negotiated for the currency purchased is referred to as the foreign exchange rate. Major commercial banks in the money market centers throughout the world are responsible for the majority of foreign currencies bought and sold.
Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency options is the world\'s fastest growing industry. What used to require days to accomplish in Europe or Asia now only takes a few minutes. Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day by major banks through computers and for the average investor, with the touch of a phone.
FOREX BASICS - What's a PIP
A "pip" is the smallest increment in any currency pair. In EUR/USD, a movement from .8951 to .8952 is one pip, so a pip is .0001. In USD/JPY, a movement from 130.45 to 130.46 is one pip, so a pip is .01.
CALCULATING THE WORTH OF A PIP
How much in dollars is this movement worth, for example, per 10,000 Euros in EUR/USD? How much is one pip worth per 10,000 Dollars in USD/JPY? We will refer to the size, in this case 10,000 units of the base currency, as the "Notional Amount". The formula for calculating a pip value is therefore:
(one pip, with proper decimal placement / currency exchange rate) x (Notional Amount)
Using USD/JPY as an example, this yields:
(.01/130.46) x USD 10,000 = $0.77 or 77 cents per pip
Using EUR/USD as an example, we have:
(.0001/.8942) x EUR 10,000 = EUR 1.1183
But we want the pip value in USD, so we then must multiply EUR 1.1183 x (EUR/USD exchange rate): EUR 1.1183 x .8942 = $1.00
This is in fact a phenomenon you will see with any currency in which the currency is quoted first (such as EUR/USD or GBP/USD): the pip value is always $1.00 per 10,000 currency units. This is why pip (or "tick") values in currency futures, where the currency is quoted first, are always fixed.
Approximate pip values for the major currencies are as follows, per 10,000 units of the base currency:
USD/JPY: 1 pip = $.77 (i.e. a change from 130.45 to 130.46 is worth about $.77 per $10,000)
EUR/USD: 1 pip = $1.00 (.8941 to .8942 is worth $1.00 per 10,000 Euros)
GBP/USD: 1 pip = $1.00 (1.4765 to 1.4766 is worth $1.00 per 10,000 Pounds)
USD/CHF: 1 pip = $.59 (1.6855 to 1.6866 is worth $.59 per $10,000)
Spread
The spread is the difference between the price that you can sell currency at ( Bid) and the price you can buy currency at ( Ask). The spread on majors is usually 3 pips under normal market conditions.
Market Hours
The spot Forex market is unique to any other market in the world; trading 24-hours a day. Somewhere around the world a financial center is open for business and banks and other institutions exchange currencies every hour of the day and night, only stopping briefly on the weekend. Foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their trading day and the ability to take advantage of global economic events.
FOREX or The Foreign exchange rate market is an international market where various currency exchange transactions take place; this is in the shape of simultaneously buying one currency and selling another. The most commonly traded currencies are referred to as “Majors”; over 85% of daily transactions on Forex trading involve the Majors. These seven currencies are the US Currency (Dollar, USD), Japanese Yen (JPY), Euro (EUR), British Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD) and Australian Dollar (AUD). The Forex system in operation today was established in the 1970s when free currency exchange rates were introduced, this period also saw the US Dollar overtake the British Pound as the benchmark currency. Prior to this and in particular during World War II, exchange rate remained more stable.
Forex trading in simplest terms is the buying of one currency and the selling of another. Forex trading, also referred to, as “FX” is open to corporations, small businesses, commercial banks, investment funds and private individuals, it is the largest financial market in the world averaging a daily turnover of over $1 trillion dollars, making it a diverse and exciting market. It is a 24-hour market enabling it to accommodate constant changing world currency exchange rates . According to New York time, trading begins at 2.15pm on Sunday in Sydney and Singapore and progresses through to Tokyo at 7pm, London at 2am and reaches New York at 8am. This leaves investors free to respond to global political, economic and social events when they take place, day or night.
Unlike trading on the stock market, the forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the forex market is a 24-hour market.
All times are quoted in Eastern Standard Time (New York).
FX or Forex, currency trading is the trading of one currency against another. In terms of trading volume, the currency exchange market is the world's largest market, with daily trading volumes in excess of $1.5 trillion US dollars. This is orders of magnitude larger than the bond or stock markets. The New York Stock Exchange, for example, has a daily trading volume of approximately $50 billion.
Currencies are traded for hedging and speculative purposes. Various market participants such as individuals, corporations, and institutions trade forex for one or both reasons.
Corporate treasurers, private individuals and investors have currency exposures during the the regular course of business. The FXTrade Platform is an ideal platform to hedge any such exposure. An investor, who has bought a European stock and expects the EUR exchange rate to decline, can hedge his currency exposure by selling the EUR against the USD.
Currency markets are ideally suited for speculative trading. The foreign exchange market
has a daily volume in excess of 1.5 trillion USD, which is 50 times the size of the transaction volume of all the equity markets taken together. This makes the foreign exchange market, by far, the most liquid and efficient financial market of the world. Thanks to its efficiency, there is little or no slippage of market price for the execution of even large buy and sell orders. Traders are able to take advantage of intra-day volatility thanks to the low spreads and enter positions for short time periods, such as minutes and hours. Unlike equity trading, where restrictions limit a trader's ability to profit from a market down turn, there are no such constraints on currency trading. Currency traders can take advantage of both up and down trends thus increasing their profit potential.
The most commonly traded currencies are: USD, EUR, JPY, GBP, CHF, CAD and AUD.
The most commonly traded currency pair is EUR/USD.
Forex Symbol Guide
Symbol Currency Pair Trading Terminology
GBP/USD British Pound / US Dollar "Cable"
EUR/USD Euro / US Dollar "Euro"
USD/JPY US Dollar / Japanese Yen "Dollar Yen"
USD/CHF US Dollar / Swiss Franc "Dollar Swiss", or "Swissy"
USD/CAD US Dollar / Canadian Dollar "Dollar Canada"
AUD/USD Australian Dollar / US Dollar "Aussie Dollar"
EUR/GBP Euro / British Pound "Euro Sterling"
EUR/JPY Euro / Japanese Yen "Euro Yen"
EUR/CHF Euro / Swiss Franc "Euro Swiss"
GBP/CHF British Pound / Swiss Franc "Sterling Swiss"
GBP/JPY British Pound / Japanese Yen "Sterling Yen"
CHF/JPY Swiss Franc / Japanese Yen "Swiss Yen"
NZD/USD New Zealand Dollar / US Dollar "New Zealand Dollar" or "Kiwi"
USD/ZAR US Dollar / South African Rand "Dollar Zar" or "South African Rand"
GLD/USD Spot Gold "Gold"
SLV/USD Spot Silver "Silver"
CURRENCY PAIRS
All currencies are assigned an International Standards Organization (ISO) code abbreviation. In currency trading, these codes are often used to express which specific currencies make up a currency pair. For example, USD/JPY refers to two currencies: the US Dollar and the Japanese Yen.
SPOT FOREX
Spot foreign exchange is always traded as one currency in relation to another. So a trader who believes that the dollar will rise in relation to the Euro, would sell EUR/USD. That is, sell Euros and buy US dollars. The following is guide for quoting conventions:
What does it mean to be "long" or "short" a currency?
Being long means buying a currency. Being short means selling a currency.
If a trader goes long USD/JPY, he or she buys US Dollars and sells Japanese Yen. Buying a currency is synonymous with taking a long position in that currency. A trader takes a long position in a currency if he or she believes it will appreciate in value.
If a trader goes short USD/JPY, he or she sells US Dollars and buys Japanese Yen. Selling a currency is synonymous with shorting that currency. A trader would short a currency if he or she believes it will depreciate in value.
CURRENCY TRADING: BUYING AND SELLING CURRENCIES
All Forex trades result in the buying of one currency and the selling of another (currency trading), simultaneously.
Buying ("going long") the currency pair implies buying the first, base currency and selling an equivalent amount of the second, quote currency (to pay for the base currency). It is not necessary to own the quote currency prior to selling, as it is sold short. A trader buys a currency pair if he/she believes the base currency will go up relative to the quote currency, or equivalently that the corresponding exchange rate will go up.
Selling ("going short") the currency pair implies selling the first, base currency, and buying the second, quote currency. A trader sells a currency pair if he/she believes the base currency will go down relative to the quote currency, or equivalently, that the quote currency will go up relative to the base currency.
An open trade or position is one in which a trader has either bought or sold one currency pair and has not sold or bought back an adequate amount of that currency pair to effectively close the trade. When a trader has an open trade or position, he/she stands to profit or lose from fluctuations in the price of that currency pair.
Forex is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge profits are generally produced in a matter of minutes form minor currency market movements. Some banks generate 60% of their profits from trading currency aggressively.
Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency market is one of the world fastest growing industries. What used to require days to accomplish in Europe or Asia now oly takes a few minutes. Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day by major banks through computers and for the average investor, with the touch of a computer key.
Foreign exchange is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge profits are generally produced in a matter of minutes from minor currency options market movements. Some banks generate up to 60% of their profits from trading currency aggressively.
Transactions in foreign currencies take place when one country's currency is purchased (exchanged) with another country's currency. The price agreed upon or negotiated for the currency purchased is referred to as the foreign exchange rate. Major commercial banks in the money market centers throughout the world are responsible for the majority of foreign currencies bought and sold.
Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency options is the world\'s fastest growing industry. What used to require days to accomplish in Europe or Asia now only takes a few minutes. Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day by major banks through computers and for the average investor, with the touch of a phone.
FOREX BASICS - What's a PIP
A "pip" is the smallest increment in any currency pair. In EUR/USD, a movement from .8951 to .8952 is one pip, so a pip is .0001. In USD/JPY, a movement from 130.45 to 130.46 is one pip, so a pip is .01.
CALCULATING THE WORTH OF A PIP
How much in dollars is this movement worth, for example, per 10,000 Euros in EUR/USD? How much is one pip worth per 10,000 Dollars in USD/JPY? We will refer to the size, in this case 10,000 units of the base currency, as the "Notional Amount". The formula for calculating a pip value is therefore:
(one pip, with proper decimal placement / currency exchange rate) x (Notional Amount)
Using USD/JPY as an example, this yields:
(.01/130.46) x USD 10,000 = $0.77 or 77 cents per pip
Using EUR/USD as an example, we have:
(.0001/.8942) x EUR 10,000 = EUR 1.1183
But we want the pip value in USD, so we then must multiply EUR 1.1183 x (EUR/USD exchange rate): EUR 1.1183 x .8942 = $1.00
This is in fact a phenomenon you will see with any currency in which the currency is quoted first (such as EUR/USD or GBP/USD): the pip value is always $1.00 per 10,000 currency units. This is why pip (or "tick") values in currency futures, where the currency is quoted first, are always fixed.
Approximate pip values for the major currencies are as follows, per 10,000 units of the base currency:
USD/JPY: 1 pip = $.77 (i.e. a change from 130.45 to 130.46 is worth about $.77 per $10,000)
EUR/USD: 1 pip = $1.00 (.8941 to .8942 is worth $1.00 per 10,000 Euros)
GBP/USD: 1 pip = $1.00 (1.4765 to 1.4766 is worth $1.00 per 10,000 Pounds)
USD/CHF: 1 pip = $.59 (1.6855 to 1.6866 is worth $.59 per $10,000)
Spread
The spread is the difference between the price that you can sell currency at ( Bid) and the price you can buy currency at ( Ask). The spread on majors is usually 3 pips under normal market conditions.
Market Hours
The spot Forex market is unique to any other market in the world; trading 24-hours a day. Somewhere around the world a financial center is open for business and banks and other institutions exchange currencies every hour of the day and night, only stopping briefly on the weekend. Foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their trading day and the ability to take advantage of global economic events.
FOREX or The Foreign exchange rate market is an international market where various currency exchange transactions take place; this is in the shape of simultaneously buying one currency and selling another. The most commonly traded currencies are referred to as “Majors”; over 85% of daily transactions on Forex trading involve the Majors. These seven currencies are the US Currency (Dollar, USD), Japanese Yen (JPY), Euro (EUR), British Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD) and Australian Dollar (AUD). The Forex system in operation today was established in the 1970s when free currency exchange rates were introduced, this period also saw the US Dollar overtake the British Pound as the benchmark currency. Prior to this and in particular during World War II, exchange rate remained more stable.
Forex trading in simplest terms is the buying of one currency and the selling of another. Forex trading, also referred to, as “FX” is open to corporations, small businesses, commercial banks, investment funds and private individuals, it is the largest financial market in the world averaging a daily turnover of over $1 trillion dollars, making it a diverse and exciting market. It is a 24-hour market enabling it to accommodate constant changing world currency exchange rates . According to New York time, trading begins at 2.15pm on Sunday in Sydney and Singapore and progresses through to Tokyo at 7pm, London at 2am and reaches New York at 8am. This leaves investors free to respond to global political, economic and social events when they take place, day or night.
Unlike trading on the stock market, the forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the forex market is a 24-hour market.
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